ISTANBUL, May 4 (AFP) – Finance
ministers from China, Japan, South Korea and the Association of
Southeast Asian Nations (ASEAN) agreed Wednesday to expand their system
of bilateral currency swaps under the Chiang Mai Initiative to a more
multilateral system. The ministers, meeting as the “ASEAN-plus-3″ on the
sidelines of the Asian Development Bank (ADB) annual meeting in
Istanbul, said this would make the Chiang Mai Initiative a “more
effective and disciplined framework.” Under the currency swaps, an Asian
country hit by a foreign exchange crisis like the one in 1997 could
borrow borrow foreign currency — usually US dollars — from another
country to bolster its reserves until the crisis had passed. An ADB
analyst remarked that Wednesday’s accord was a step towards setting up
an “Asian Monetary Fund,” although such an institution might never
actually be created.
In a joint press
conference, the 1O ASEAN and three East Asian financial ministers also
called for a review of the quota of Asian countries in the International
Monetary Fund (IMF) “to properly reflect the current realities and
their relative positions in the world economy.” The 13 ministers said an
economic surveillance system would be put into place along with the
Chiang Mai Initiative framework, to detect irregularities early and
apply swift remedies. They also said a collective decision-making
mechanism would oversee the current system of bilateral swap
arrangements “as a first step towards multilateralization.”
This
would make it easier to activate the bilateral swap arrangements in
case of an emergency, the ministers said in a joint statement read after
their three-hour meeting. Crisis-hit countries would also be able to
draw down as much as 20 percent of the money under the bilateral swap
arrangements without having to go through the IMF. Under the current
arrangements, countries that draw more than 10 percent under their swap
arrangements must have an IMF-supported program in place. The decisions
of the ASEAN-plus-3 group apparently followed recommendations made
during a meeting of the Chinese, Japanese and South Korean ministers a
day earlier. Previously, the initiative launched in Chiang Mai,
Thailand, in May 2000 involved only bilateral swaps but the Chinese,
Japanese and South Korean ministers said they would look towards
expanding this into multilateral swaps involving three or four
countries. Asian countries had earlier proposed the creation of an Asian
Monetary Fund after the 1997 fiscal crisis but the United States and
the IMF had strongly opposed this. Chinese minister Renqing Jin said his
country had already agreed to “double the scale of its currency swap,”
from its current level.
However, when
asked if they were setting up an Asian Monetary Fund, Japanese minister
Sadakazu Tanigaki replied, “only the Chiang Mai Initiative was
discussed”. The ministers said the initiative had been very helpful in
maintaining the financial stability of Asian countries even if there had
been no repeat of the 1997 crisis. Masahiro Kawai, special adviser to
the ADB president, who monitored the ASEAN-plus-3 meeting, said the
ministers wanted to increase the effectiveness of the Chiang Mai
Initiative which now covers 16 bilateral swap arrangements. He called it
a “step towards multilateralization,” adding that a “de facto Asian
Monetary Fund,” may eventually be created. He said the United States and
the IMF had opposed such a fund in the past partly due to fears it
would increase the risk of moral hazard. But Kawai said this was why the
ministers wanted to increase the surveillance function of the Chiang
Mai Initiative. He remarked that in the past, China had not joined the
move to create an Asian Monetary Fund and that if it joined with the
other Asian countries, they might be more successful. mm/wai
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