Asian nations commit to US$80 billion crisis

The Jakarta Post | Fri, 10/24/2008 3:25 PM  

Asian nations on Friday recommitted themselves to establishing an US$80 billion emergency fund, as leaders from across Asia and Europe gathered in Beijing to discuss the global financial meltdown. 

The pledge by South Korea, China, Japan and the 10-country Association of Southeast Asian Nations was reached at a breakfast meeting, according to the office of South Korean President Lee Myung-bak, who attended the meeting. 

Few details were given, although a preliminary agreement reached in May stated that Japan, South Korea and China would contribute 80 percent of the fund, to be set up by next June, with ASEAN countries covering the remainder. ASEAN consists of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. 

The deal would enable countries to borrow from the fund when facing a liquidity crunch. 

It builds on the so-called Chiang Mai Initiative, in which the 13 nations set up bilateral contracts to supply funds through currency swap lines. 

The summit later Friday of 43 Asian and European nations hopes to establish a consensus on a common approach to the global crisis. 

The meltdown has injected a new sense of urgency into the normally plodding biennial Asia-Europe Meeting, known as ASEM, with EU Commission President Jose Barroso saying "unprecedented levels of global coordination" are needed to deal with the crisis. 

"It's very simple: We swim together, or we sink together," Barroso said at a news conference Thursday in Beijing ahead of meetings with top Chinese leaders. 

ASEM has no mandate to issue decisions, but participants hope it will build momentum toward a common stance ahead of a Nov. 15 meeting of the world's top economies in Washington to discuss the worst financial crisis since the 1930s. 

However, ASEM's members differ widely on their views toward international cooperation and intervention by global bodies. Free-trading Singapore and economic powerhouse Germany are attending, along with isolated, impoverished Myanmar and landlocked, authoritarian Laos. 

French President Nicolas Sarkozy has pledged to use the ASEM meeting to persuade Asian nations to back a plan to redraw the rule book for international capitalism, calling for a global system of regulation. 

Chinese Foreign Ministry spokesman Liu Jianchao echoed the need for changes to the current system. 

"We need to explore the possibilities of reforming the international economic structure ... (to) stabilize the international financial markets, and ensure the stable operation of the international economy," he said. 

Europe has already approved a plan under which the 15 euro countries and Britain put up a total of 1.7 trillion euros (US$2.3 trillion) in guarantees and emergency aid to help banks. 

China's financial system had less direct exposure to the toxic sub-prime mortgages that are wreaking havoc on U.S. and European markets, although it and other Asian economies are expected to take a major hit from a drop in exports and foreign investment. 

The vice president of one of China's main state-owned lenders said Thursday he expected the crisis to start to bite over the next six months. 

"We shouldn't think this is going to be over soon. The key issue for Asian countries is to prevent the banking crisis from turning into a currency crisis," the Bank of China's Zhu Min said in remarks to the Asia-Europe Business Forum in Beijing.