A cash transaction is performed at an unofficial market in HCMCThanhnien News
Monday, April 28, 2008
Vietnam and Japan will co-chair the meeting of the Association of South East Asian Nations in Madrid next month to discuss the region’s inflation control and risks from the US economic woes.
Asian finance leaders will aim to upgrade a regional scheme to ward off any future financial crisis when they meet next month, boosting currency-swap deals in a new pooling arrangement and tightening economic surveillance, Japan’s top financial diplomat has said.
Finance ministers from the Association of South East Asian Nations (ASEAN) member nations along with China, Japan and South Korea (ASEAN+3) will also discuss how to balance the need to control inflation and risks from a slowdown in the US when they meet in Madrid on May 4, Naoyuki Shinohara, vice finance minister for international affairs, said.
At their last meeting a year ago, they agreed to set up a self-managed reserve pooling mechanism governed by a legally binding single contract as a way to transform the existing web of bilateral currency swaps, called the Chiang Mai Initiative (CMI), into a more powerful multilateral scheme.
Ministers agreed last year to set aside part of their US$3.4 trillion foreign reserves for emergencies, without deciding the size and when they would start the fund.
Shinohara told reporters that all the details for the reserve pooling scheme would not be finalized at this year’s meeting as there were “complicated” factors to negotiate, such as how to activate currency swaps while making sure borrowing countries would return the money after a crisis is over.
“We don’t want it to be a mechanism to give out easy money,” Shinohara said.
“The most important issue is how to strengthen surveillance,” he added.
Japan, along with Vietnam, will chair the meeting of the Association of South East Asian Nations in Madrid and Shinohara said he wanted to maintain the momentum for creating a more powerful regional scheme to avoid a repeat of the 1997/98 financial crisis.
The existing bilateral swap arrangement network under the CMI totals $84 billion.
But that includes two-way pacts, under which both countries in the deal would come to each other’s aid to prevent a financial crisis.
Shinohara said, however, that if one side were in trouble, that country would not be able to provide the amount earmarked for the bilateral currency swap arrangement.
That means that in reality about $58 billion would be available under the current initiative, he said.
“We aimed to create the multilateral pooling arrangement to be bigger than $58 billion,” he said, adding that $80 billion was one figure to keep in mind.
None of these CMI credit lines has been tapped so far.
The pool will be between $80 billion and $100 billion, State Bank of Vietnam Deputy Governor Phung Khac Ke said earlier this month at the 4th ASEAN Governors Meeting in Vietnam’s Da Nang City.
Ke added members’ contributions would depend on the size of their economies and their ability to pay.
The basic idea is to replace the currency bilateral currency swap network with the new multilateral mechanism, but Shinohara said some countries could still have bilateral frameworks as needed.
Having a “self-managed” reserve pooling arrangement means member countries would still manage their funds at home, rather than having one place to pool their reserves.
The multilateral framework could be a stepping stone to a regional monetary fund, but it would take time before mapping up such ambitious goals, officials say.
Even if the ministers agree on the skeleton of the pooling mechanism next week, it would take at least another year to nail down details to make it as a single contractual agreement, a Japanese finance ministry official told Reuters.
The pooled reserves would still be counted as part of participating countries’ own foreign reserves, he added.
Other sticking points include how much funds from the new multilateral arrangement could be withdrawn without using the IMF-supported program or how to include countries with immature markets, such as Laos, and Cambodia in the scheme.
Source: Reuters, Bloomberg
Monday, April 28, 2008
Vietnam and Japan will co-chair the meeting of the Association of South East Asian Nations in Madrid next month to discuss the region’s inflation control and risks from the US economic woes.
Asian finance leaders will aim to upgrade a regional scheme to ward off any future financial crisis when they meet next month, boosting currency-swap deals in a new pooling arrangement and tightening economic surveillance, Japan’s top financial diplomat has said.
Finance ministers from the Association of South East Asian Nations (ASEAN) member nations along with China, Japan and South Korea (ASEAN+3) will also discuss how to balance the need to control inflation and risks from a slowdown in the US when they meet in Madrid on May 4, Naoyuki Shinohara, vice finance minister for international affairs, said.
At their last meeting a year ago, they agreed to set up a self-managed reserve pooling mechanism governed by a legally binding single contract as a way to transform the existing web of bilateral currency swaps, called the Chiang Mai Initiative (CMI), into a more powerful multilateral scheme.
Ministers agreed last year to set aside part of their US$3.4 trillion foreign reserves for emergencies, without deciding the size and when they would start the fund.
Shinohara told reporters that all the details for the reserve pooling scheme would not be finalized at this year’s meeting as there were “complicated” factors to negotiate, such as how to activate currency swaps while making sure borrowing countries would return the money after a crisis is over.
“We don’t want it to be a mechanism to give out easy money,” Shinohara said.
“The most important issue is how to strengthen surveillance,” he added.
Japan, along with Vietnam, will chair the meeting of the Association of South East Asian Nations in Madrid and Shinohara said he wanted to maintain the momentum for creating a more powerful regional scheme to avoid a repeat of the 1997/98 financial crisis.
The existing bilateral swap arrangement network under the CMI totals $84 billion.
But that includes two-way pacts, under which both countries in the deal would come to each other’s aid to prevent a financial crisis.
Shinohara said, however, that if one side were in trouble, that country would not be able to provide the amount earmarked for the bilateral currency swap arrangement.
That means that in reality about $58 billion would be available under the current initiative, he said.
“We aimed to create the multilateral pooling arrangement to be bigger than $58 billion,” he said, adding that $80 billion was one figure to keep in mind.
None of these CMI credit lines has been tapped so far.
The pool will be between $80 billion and $100 billion, State Bank of Vietnam Deputy Governor Phung Khac Ke said earlier this month at the 4th ASEAN Governors Meeting in Vietnam’s Da Nang City.
Ke added members’ contributions would depend on the size of their economies and their ability to pay.
The basic idea is to replace the currency bilateral currency swap network with the new multilateral mechanism, but Shinohara said some countries could still have bilateral frameworks as needed.
Having a “self-managed” reserve pooling arrangement means member countries would still manage their funds at home, rather than having one place to pool their reserves.
The multilateral framework could be a stepping stone to a regional monetary fund, but it would take time before mapping up such ambitious goals, officials say.
Even if the ministers agree on the skeleton of the pooling mechanism next week, it would take at least another year to nail down details to make it as a single contractual agreement, a Japanese finance ministry official told Reuters.
The pooled reserves would still be counted as part of participating countries’ own foreign reserves, he added.
Other sticking points include how much funds from the new multilateral arrangement could be withdrawn without using the IMF-supported program or how to include countries with immature markets, such as Laos, and Cambodia in the scheme.
Source: Reuters, Bloomberg
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