Tokyo, Aug 8: Three months after they launched an ambitious plan to forge closer monetary ties, Asian governments are making sturdy progress fleshing out a scheme they hope will prevent a repeat of the region's 1997 currency meltdown.Finance ministries are actively examining the technicalde tails of a web of central bank swap lines and repurchase agreements with the aim of unveiling an initial blueprint by the end of the year, according to a Japanese financial official. In an important related move, he said Japan, China and South Korea intended to work more closely on sharing information and monitoring economic and financial trends as a stepping stone toward an Asian surveillance process to underpin the swap scheme.
"We have to think more about deepening our understanding and communications among ourselves in the very near future," the official said. The currency safety net, which idealists see as the germ of an Asian monetary bloc, was hatched by finance ministers of ASEAN plus Japan, China and South Korea during the annual meeting of the Asian Development Bank in Chiang Mai, Thailand, in May.
The idea is that a country that finds itself short of foreign reserves would be able to borrow from its partners in the network to absorb unjustified selling pressure on its currency without having to resort, as in 1997, to a damaging devaluation. The "Chiang Mai Initiative" initially envisages three steps:
Beefing up an existing $200 million swap scheme among five of ASEAN's founding states - Indonesia, Thailand, Malaysia, Singapore and the Philippines - and extending it first to Brunei, the sixth founder. The group's newer members - Vietnam, Laos, Cambodia and Myanmar - would not come on board till later.
Establishing bilateral swap lines among Japan, China and South Korea. Tokyo already has a $5 billion line with Seoul.
Setting up 15 bilateral pacts between the five ASEAN swap-web countries and their big three Northeast Asian neighbours. Japan already has a $2.5 billion line with Malaysia."What I expect is that those three components will be resolved by the end of the year," the Japanese official said. Yung Chul Park, a professor at Korea University in Seoul and a long-standing advocate of Asian monetary integration, said Seoul's draft swap pact with Beijing was already well-advanced. He also said South Korea had submitted proposals to the ASEAN five, while China had decided in principle what it would propose.
Park, who has been hired by the ASEAN secretariat in Jakarta to review the various arrangements and prepare a report for a finance ministers' meeting in November, said he was quite encouraged by the rush of activity.
"I think they are making progress. They are serious about this plan," he said.
The momentum behind the Chiang Mai Initiative is evidence of the growing clout of the embryonic ASEAN+3 group, which many analysts say is filling a void created by ASEAN's failure to tackle pressing economic and political issues in the region. Mindful of Europe's half-century slog to a single currency, advocates of closer monetary ties in Asia admit they face a very long haul knitting together a disparate group of countries which includes an absolute monarchy and communist dictatorships and has an equally broad span of living standards.
-- (Reuters)
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