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Asean wants to intensify forex pooling


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October 24, 2008

Asean wants to intensify forex pooling

The ten member states of the Association of South East Asian Nations (Asean) agreed on Thursday to intensify efforts to pool some of their foreign exchange reserves for a regional scheme of credit lines, as they seek to guard themselves against the global financial crisis, reported AFP.

The group's current chair, Thailand, said in a statement that the countries' leaders, who met in Beijing on the eve of the biennial Asia-Europe Meeting (Asem), were confident that Asean's financial sector remained "solid and sound" in the face of the current turmoil.

"Nevertheless, precautionary actions are needed to send a clear and unequivocal signal that Asean is resolute and better prepared than 10 years ago when the financial crisis hit the region in 1997," it said in a statement.

"The Leaders agreed that the multi-lateralised reserve pooling arrangements under the Chiang Mai Initiative (CMI) should be intensified and expedited."

That system of mainly bilateral currency swaps was set up following the Asian financial crisis to help stave off similar problems in the future. In May, finance ministers agreed to create $80 billion in swaps to replace those arrangements.

Thailand has proposed developing a much bigger emergency financial fund for the region, and it also wants countries around Asia to pool part of their vast holdings of foreign exchange reserves to facilitate trade, investment and tourism.

The leaders agreed on Thursday that the group's finance ministers and central bank governors should set up a working group to study unspecified proposals from the Philippines, Thailand and the ASEAN Secretary-General on confronting the global financial crisis.

The Philippines had offered to host such a meeting with the aim of coming up with recommendations for action when an ASEAN summit is held in Thailand in December, it said.

Philippines President Gloria Macapagal Arroyo last week floated the idea of a $10 billion fund to buy toxic debt and recapitalise banks around the region hit by the financial crisis.

Asean said it hoped its three dialogue partners of Japan, China and South Korea, with whom it will meet on Friday morning ahead of the ASEM summit, would support its efforts on multilateral pooling of reserves and join the working group.

The three North Asian neighbours were likely to endorse the urgency of beefing up the existing web of central bank credit lines by the first half of 2009, diplomats said.

But they said the three, which have the biggest holdings of currency reserves in Asia, were opposed to putting part of their currency hoards into a common pot.

The two-day Asem meeting of the 27 European Union member states and 16 Asian countries will cover the global downturn, climate change and international security.

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