Fund marks new era

The global nature of the ongoing economic turmoil underlines the importance of cooperation between nations. Asian economies have, in this regard, taken a big step forward by finalizing a sizable regional reserve pool plan.

Finance ministers of the 10-member Association of Southeast Asian Nations, China, Japan and South Korea (ASEAN+3) reached an agreement "on all main components" of the Chiang Mai Initiative Multilateralization (CMIM) on May 3 and pledged to implement it by the end of this year.

China and Japan are the biggest contributors to the $120 billion pool, which will act as a de facto Asian monetary fund. The two countries each committed $38.4 billion.

The agreement sends a strong message to the world that Asia is willing to cooperate and act responsibly in the face of the daunting tasks ahead.

The pool was proposed after Asian nations suffered the 1997-98 financial crisis, when the region sank into a deep recession after currencies collapsed in Thailand, Indonesia and South Korea. Those losses could have been greatly reduced had there been an anti-crisis emergency fund.

But turning the idea into a reality - and agreeing on the details - has taken Asia almost a decade. State leaders and finance ministers have engaged in several rounds of talks on developing the fund, trying to iron out details such as how much individual countries should contribute, borrowing accessibility and how the fund should make decisions.

Now the talk is over. All the major disputes have been settled, and obstacles cleared.

According to a statement the ASEAN+3 ministers issued on May 3, the reserve pool will be set up with two objectives - "to address short-term liquidity difficulties in the region and to supplement existing international financial arrangements."

The fund will certainly help Asia achieve the first objective; in times of the financial turmoil, the sizable reserve will greatly enhance member nations' abilities to defend their currencies and maintain financial stability.

The fund will boost smaller Asian economies in particular.

The CMIM is also a foundation-laying step for more profound changes in Asia's financial cooperation and reform, such as the possibility of a unified Asian currency in the future, which some economists have suggested.

Xinhua

(China Daily 05/11/2009 page2)