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 2 Mar 2009

14th Asean Summit:
Expanded forex swap may be launched earlier

Leaders of Southeast Asian nations want to see a $120 billion currency swap pact put in place in April, a month earlier than their finance ministers had agreed, a top Asean official said on Sunday.

"I have detected some sense of impatience among the leaders at the summit. Why is it taking so long?" Surin Pitsuwan, secretary-general of the Association of South East Asian Nations, told Reuters in an interview.

Asian finance officials agreed last weekend in Thailand to enlarge a foreign currency pool to $120 billion from $80 billion proposed last year, to help defend their currencies from the fallout of the global economic crisis.

The 10 Asean nations would participate in the fund, which was to be operational by May along with China, South Korea and Japan. Surin said leaders of the 10 Southeast Asian nations would prefer to see remaining issues resolved and the pact to be signed at an April summit between Asean and leaders from China, South Korea and Japan in Thailand.

But Surin said Asean finance ministers and their counterparts from South Korea, China and Japan would need to meet earlier and sort out their difference before May. 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.

Surin said among the issues remaining were the circumstances under which a country would be qualified to draw from the pool. Asean groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, countries with vastly different political and economic systems.

Japan, China and South Korea will contribute 80 percent of the funding and Asean countries the rest. Disbursement of funds under the existing bilateral agreements depends largely on a country's adherence to IMF programmes.




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