PHUKET, Thailand (Reuters) - Asian finance officials said on Sunday they would expand a currency swap agreement to help bolster their currencies in the global economic crisis and they hoped to have a full agreement ready by May.
The ministers and senior officials agreed to set up a multilateral swap fund totaling $120 billion, up from the $80 billion proposed last year.
An independent regional economic surveillance unit would be set up to help determine when the mechanism should be activated, according to a statement issued after the meeting on the Thai resort island of Phuket.
“Building on the basis of the progress made thus far, with a view to making our financial cooperation more responsive and effective, we strive to reach agreement on the main components (of the fund) by our next meeting in 2009, in Bali, Indonesia,” the ministers said.
That meeting is scheduled for May, possibly timed to coincide with the annual meeting of the Asian Development Bank (ADB).
The 10 members of ASEAN plus Japan, China and South Korea — known as ASEAN+3 — pledged last year to pool bilateral currency swap arrangements under the so-called Chiang Mai Initiative (CMI) within a multilateral fund that could be tapped in emergencies.
Asian currencies have been battered in recent months and analysts said that made the swaps pact all the more urgent.
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.
It is not clear when the fund will be operational, but a senior ADB official said the meeting had already sent a strong signal that should boost confidence in the countries involved.
“The Chiang Mai Initiative is important because it gives a signal to everybody in Asia and outside Asia that if there was a big crisis, there is financing available,” Jean-Pierre Verbiest, ADB country director for Thailand, told reporters in Phuket.
ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, countries with vastly different political and economic systems.
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 Secretary-General Surin Pitsuwan said Singapore was happy with the deal.
Japan, China and South Korea will contribute 80 percent of the funding and ASEAN countries the rest, the statement said.
Disbursement of funds under the existing bilateral agreements depends largely on a country’s adherence to IMF programs. That link will be reduced once the regional surveillance mechanism is fully effective, the statement said.
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.
The meeting discussed the message Asian states wanted to send to the upcoming Group of 20 meetings, including an April 2 summit.
Speaking in Indonesia on Saturday, Thai Prime Minister Abhisit Vejjajiva said ASEAN countries, most of them heavily reliant on exports, were particularly worried about protectionism as countries around the world slid into recession.
Additional reporting by Olivia Rondonuwu in Jakarta; Editing by Anshuman Daga and Jon Loades-Carter