MADRID (AFP) — Finance ministers of 13 Asian nations agreed here on Sunday to set up a foreign exchange pool of at least 80 billion dollars (52 billion euros) to be used in the event of another regional financial crisis.
China, Japan and South Korea will provide 80 percent of the funds, with the rest coming from the 10 members of ASEAN, they said in a joint statement issued after talks on the sidelines of an Asian Development Bank meeting in Madrid.
The 13 nations agreed after the 1997-98 Asian financial crisis to set up a mainly bilateral currency swap scheme known as the Chiang Mai Initiative (CMI) to protect their currencies from turmoil in the future.
At the ADB's last annual meeting in Japan in May 2007, they decided to set aside part of their foreign reserves for a multi-nation system of reserves for use in emergencies, but did not decide on the size of the pool.
"We are committed to further accelerate our work in order to reach consensus on all of the elements which include concrete conditions eligible for borrowing and contents of convenants specified in borrowing arrangements," the statement said.
The foreign exchange pool would be self-managed and be governed by a single contract that will be legally binding, it added.
Vietnam's Finance Minister Vu Van Ninh, who co-chaired the Madrid meeting, said the 13 nations would now work to develop a way of monitoring the fund.
"We think it is very important to have a rigorous surveillance system, especially in the context that regional economies have made an important and big integration into the world economy," he told reporters.
Japanese Finance Minister Fukushiro Nukaga, the other meeting co-chair, did not give a timeline for the the creation of the fund when asked, saying only that it "should be achievable in terms of its objectives."
The creation of the pool is a big step towards the creation af an Asian equivalent of the Washington-based International Monetary Fund (IMF).
During the 1997-1998 Asian financial crisis Indonesia, Thailand and South Korea had to borrow heavily from the IMF to boost their finances as investors sold their currencies.
The IMF forced the governments of the three nations to make unpopular spending cuts, sell state-owned firms and raise interest rates in exchange for the loans of over 100 billion dollars.
Asian economies are being challenged by rising energy and commodity prices as well as the vulnerability of financial markets, the finance ministers said in the statement.
"The regional economy has continued its strong growth and is forecast to remain robust although somewhat weaker," it said.
"We confirmed the importance of taking appropriate actions to ensure that economic activity continues at a sustained pace by balancing policies to deal with these risks," it added.
The ADB predicts Asia's developing economies will expand by 7.6 percent in 2008, its lowest level in five years, after surging ahead 8.7 percent last year.
Inflation in the region should hit 5.1 percent this year, its highest level since the 1997-1998 financial crisis.
The 13 countries are China, Japan, South Korea and the Association of Southeast Asian Nations (ASEAN), made up of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
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