Any number of Asian economies are feeling the pinch as the global economic slowdown wends its way across the globe. Featuring many economies highly reliant on exports, East Asia is vulnerable to slowdowns in demand elsewhere. Importantly, these countries still bear memories of the trauma inflicted by the IMF at the height of its Washington Consensus phase involving liberalization, privatization, and deregulation. During that crisis, the US was keen on shooting down any incipient Asian economic cooperation as it wanted to maintain influence in the region. Somewhat famously, the ever-controversial Larry Summers went ballistic when the Japanese proposed an Asian Monetary Fund to shield fellow Asian countries from the IMF's harsh austerity measures. He awoke then-Japanese Finance Ministry bigwig Eisuke Sakakibara (known in financial circles as "Mr. Yen") late at night and yelled "I thought you were my friend!"Nowadays, of course, the Great White Master cannot poke his nose so menacingly into others' affairs as the US embarks on an orgy of deliberalization, nationalization, and reregulation. As I've said, in the hypocrite's game called geopolitics, the Washington Consensus was for everyone else except Washington itself. Which brings me to today's story. Bloomberg reports that ASEAN+3 (the +3 being China, Japan, and South Korea) have drawn up plans to expand pooled reserves to $120 billion from $80B. Do note that this will be a pooled fund, not just a series of bilateral swaps alike the Chiang Mai Initiative:
Japan, China, South Korea and 10 Southeast Asian nations agreed to form a $120 billion pool of foreign-exchange reserves that can be used by countries to defend their currencies amid the deepening global recession.Don't expect Larry Summers circa 2009 to be yelling over the phone about this. But will it be enough to deliver the region from further turmoil?
The amount is 50 percent more than the $80 billion proposed last May, and an expansion of the current arrangement called the Chiang Mai Initiative that allows only bilateral currency swaps. The nations’ finance ministers and government officials jointly announced the decision at a meeting in Phuket, Thailand, today.
“The pool will shore up confidence and provide support for these nations in any kind of emergency,” said Alvin Liew, an economist at Standard Chartered Plc in Singapore. “We cannot rule out that some countries will need to tap the fund in this crisis.”
Many Asian currencies have weakened in the past year, threatening to undermine regional stability, as fallout from the global credit crunch ripples through their export-dependent economies. The fund is aimed at ensuring central banks have enough to shield their currencies from speculative attacks such as those that depleted the reserves of Indonesia, Thailand and South Korea during the 1997-1998 financial crisis...
Japan, China and South Korea will provide about 80 percent of the currency pool with the 10 Asean members contributing the remainder, the statement said, in line with last year’s proposal. How much each country will contribute is still under discussion and no date was set for completion of the new arrangement.
