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MADRID,
Spain—Finance
ministers of the Association of Southeast Asian Nations
(Asean) with China, Japan and the Republic of Korea (Asean+
3) have approved the multilateralization of the Chiang
Mai Initiative (CMI) worth at least $80 billion.
In a
briefing after its three-hour 11th Ministerial Meeting
here Sunday, the Asean+3 also announced the fund will be
operational by next year after a regulatory framework is
developed.
The CMI
aims to create a network of bilateral swap arrangements
(BSAs) among Asean+3 countries. The CMI was created as a
response of these countries to the Asian financial
crisis.
“We
reiterated our commitment to maintain the two core
objectives of the CMI: to address short-term liquidity
difficulties in the region and to supplement the
existing international financial arrangements,” the
Asean+3 said in a statement.
“We
agreed that the CMI multilateralization will be
underpinned by rigorous principles to govern its key
aspects, including economic surveillance, borrowing
accessibility, activation mechanism, decision-making
rules and lending covenants, while keeping to timely
disbursement,” the statement said.
The
finance ministers also agreed that the proportion of
contribution of the Asean and the Plus Three countries
is 20:80. This meant that if the CMI will be pegged at
$80 billion, $16 billion will be pitched in by Asean
countries and $64 billion will come from the Plus Three.
For its
part, the Department of Finance told the BusinessMirror
that the fund will be useful in case the country
experiences a similar situation like the Asian financial
crisis (AFC) in 1997.
While
there is no indication that a crisis similar to the AFC
is looming, Finance Undersecretary Roberto Tan said
crises like those are hard to predict and having the CMI
will significantly improve the country’s chances of
coping with these financial turmoils.
The
Asean+3 Ministers said that while the group does not
cast doubt on the long-term resilience of the global
economy to shocks, the approval of the CMI certainly
comes at a time when the world’s short-term economic
prospects have weakened.
“Risks
to the outlook come from the still-unfolding events in
financial markets, the potential worsening of housing
and credit cycles, and inflationary pressures driven by
high energy and food prices,” the Asean+3 said.
The
approval of the CMI, said the Asean+3, highlighted the
importance of taking appropriate actions to ensure that
economic activity continues at a sustained pace by
balancing policies to deal with these risks.
The
finance ministers also said that with financial markets
in Asia becoming more interdependent as evidenced by
increased cross-border financial transactions, it has
become imperative to enhance communication between
authorities responsible for macroeconomic policies and
financial supervision in the region.
The 1st
Asean+3 Finance Ministers’ Meeting was held in Manila in
1999 to discuss how countries will cope with to the
Asian financial crisis. But it was in the 2nd Asean+3
Meeting in Chiang Mai that the finance ministers decided
to adopt the CMI.
Last
year in Kyoto, the finance ministers unanimously agreed
in principle that a self-managed reserve pooling
arrangement governed by a single contractual agreement
is an appropriate form of CMI multilateralization.
Finance
ministers instructed the deputies to carry out further
in-depth studies on the key elements of the
multilateralization of the CMI including surveillance,
reserve eligibility, size of commitment, borrowing quota
and activation mechanism, while reiterating their
commitment to maintain the two core objectives of the
CMI. |
