ASEAN Finmins Agree Outline Deal On Forex Swaps

They have agreed to set up a multilateral swap fund totalling $120 billion rather than the $80 billion mooted last year.

Asian finance officials agreed in principle on Sunday to expand a currency swap agreement as a way of bolstering their currencies at a time when some are coming under pressure because of the global economic crisis.

They have agreed to set up a multilateral swap fund totalling $120 billion rather than the $80 billion mooted last year, Surin Pitsuwan, secretary-general of the Association of South East Asian Nations (ASEAN), told reporters at a meeting on the Thai resort island of Phuket.

The agreement will be put to an ASEAN summit in Hua Hin, Thailand, from Feb. 27 to March 1, he said.

The 10 members of ASEAN plus Japan, China and South Korea pledged last year to pool bilateral currency swap arrangements under the so-called Chiang Mai Initiative (CMI) in a multilateral fund that could be tapped in emergencies.

Suparut Kawatkul, permanent secretary at the Thai finance ministry, told reporters on Saturday that the ministers would look at details for expanding the CMI and that it would be "formalised" at an ASEAN+3 finance ministers' meeting in Bali, Indonesia, in May.

ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, countries with vastly different political and economic systems. ASEAN+3 comprises those 10 plus Japan, China and South Korea.

Japan's new finance minister, Kaoru Yosano, was not in Phuket, sending a senior government official to represent him.

Singapore's finance minister was also absent. According to some reports, Singapore, a relatively wealthy ASEAN country badly hit by the crisis, was reluctant to contribute much to the currency fund, but ASEAN's Surin said it was happy with the deal.

He said Japan, China and South Korea would contribute 80 percent of the funding and ASEAN countries the rest. He did not give a more detailed breakdown.

PROTECTIONISM

On the sidelines of the meeting, Japan and Indonesia agreed to double their existing bilateral swap agreement to $12 billion and Tokyo also said it would guarantee up to $1.5 billion of yen-denominated Samurai bonds that Indonesia might issue.

Thai Prime Minister Abhisit Vejjajiva was due to address Sunday's meeting, which will also discuss economic cooperation and the message Asian countries want to send to a Group of 20 finance ministers' meeting in March and a G20 summit on April 2.

Speaking in Indonesia on Saturday, Abhisit said ASEAN countries, most of them heavily reliant on exports, were worried about protectionism as countries around the world tried to stop their economies sliding deeper into recession.

He noted that despite pledges, "we do detect a creeping protectionism in various countries and regions".

"What I hope the ASEAN countries would do at our meeting next week is to send a powerful message to the rest of the world that despite the global financial crisis, we will not be tempted to resort to any kind of protectionism," he added.

Asian currencies have been battered in recent months, adding urgency to getting the currency swaps agreement.

The idea is to allow countries hit by short-term liquidity shortages to borrow foreign reserves from other countries to absorb selling pressure on their currencies.