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Historic financial accord likely at Asean Summit
The Nation – 18 November
THANONG KHANTHONG
Leaders at the Asean Summit in Chiang Mai next month are likely to reach a historic accord by embracing closer financial cooperation through the institutionalisation of a regional fund, with China emerging as new political and economic powerhouse.
Olarn Chaipravat, the deputy prime minister, said the Asean Summit would follow up on the AsiaEurope meeting in Beijing last month, at which it was agreed that a US$80billion (Bt2.8 trillion) regional fund would be set up by the middle of next year.
"We shall be moving from bilateral financial cooperation to multilateral financial cooperation with the establishment of the regional fund. Once we have agreed on this [in the joint statement of the leaders], it follows that we would need an institution to run it," said Olarn, an architect of Asia's new regional financial order.
"There will also be an element of reservepooling among Asian countries," he added.
Leaders and top economic and finance ministers from the 10 Asean countries plus China, Japan and South Korea will meet in Chiang Mai between December 13 and 18 to work on establishing closer economic, social, political and financial cooperation amid the global financial crisis.
At the top of the agenda is how Asia can chart its own course to build up a new regional financial order while the US and European financial systems are collapsing from the worst financial crisis since the Great Depression in the 1930s.
At this point, Olarn said, officials are circulating ideas and opinions on how to reach a consensus on the joint stated objectives of the Asean Summit. China is still hesitant over a regional leadership role entrusted on it by global circumstances, while other Asean members still need time to ponder impending closer financial cooperation.
Olarn said the summit could share some of the elements of the Group of 20 Summit, which met in Washington at the weekend.
However, at the G20 Summit, both Japan and China agreed to commit themselves to supporting an increase in capital for the International Monetary Fund, which will be providing bailout packages for countries facing a financial crisis.
In 2000, Chiang Mai played host to the Asean Plus Three meeting, where then finance minister Tarrin Nimmanahaeminda and Kiichi Miyazawa, the Japanese finance minister, played a key role in creating bilateral currencyswap agreements as one of the three pillars of regional cooperation. The other pillars are economic cooperation and surveillance cooperation.
The bilateral currencyswap agreement, which has now expanded to reach $86 billion, was put in place to help Asian countries ward off currency turmoil when facing a balanceofpayments crisis. Through the bilateral currencyswap agreement that has come to be known as the Chiang Mai Initiative, member countries can borrow foreign reserves from each other when their currencies come under attack.
Next month, Chiang Mai will play host to an even more important event. Leaders are expected to agree on a more ambitious scheme to build up a new regional financial order by moving away from bilateral financial agreements and adopting a multilateral approach and institutionalising a regional fund that could rival the IMF.
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