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Asia commits to $80 bln reserve pool start by mid-2009

BEIJING- East Asian recommited to form an $80 billion multilateral swap scheme by mid-2009 to shield the region from financial turmoil and agreed to aggressively pursue a regional surveillance agency, South Korea said on Friday.

Thirteen Asian economies, comprising the so-called ASEAN+3, also agreed to develop Asian bond markets by boosting a regional bond settlement mechanism as the region has been seeking to reduce dependence on Western buyers of their debt.

'Leaders at the meeting agreed to hold a gathering of finance ministers and central bank governors before December ASEAN+3 meeting to draw up detailed measures for financial cooperation within the region,' South Korea's presidential office said in a statement.

'They also shared the view of expanding the existing bilateral currency swaps to prepare against various financial crises, and the need of nursing Asian bonds markets.'

Leaders of the Association of Southeast Asian Nations, grouping 10 Southeast Asian nations, held a breakfast meeting with China, Japan and South Korea just ahead of the Oct 24-25 Asia-Europe summit in Beijing.

A Japanese government official said separately that the leaders largely agreed that Asian economies were coping relatively well with the global financial crisis.

'But they said since the global financial turmoil could continue, they will need to continue monitoring closely whether there will be further impact on Asia,' the official added.

At the informal gathering, called ad-hoc because of growing concerns about the worldwide financial crisis, Asian leaders agreed to speed up cooperation to form the widened pooling scheme by the first half of next year, South Korea said.

The 13 nations agreed in May to expand the reserve pooling scheme, taking them a step closer to creating a full-scale Asian monetary fund, which has gained support in the region as the financial sector turmoil dampens Asian growth.

The multilateral scheme will replace the existing arrangement of mainly bilateral currency swaps, called the Chiang Mai Initiative.

The agreement would give participating nations access to a foreign exchange reserves pool of at least $80 billion in the event of a financial emergency.

Under the new scheme, South Korea, China and Japan had agreed to provide 80 percent of the total, with ASEAN taking the remainder. They are discussing each country's contribution ratio and how to manage it.

ASEAN groups Cambodia, Malaysia, Indonesia, Singapore, Vietnam, Philippines, Laos, Thailand, Myanmar and Brunei.

BIGGER ASIA ROLE

Asian countries have been considering measures to protect themselves from the financial crisis, amid doubts how well global monitoring agencies have dealt with Asian crises.

The ASEAN+3 agreed on Friday to work together to form a monitoring body that would improve surveillance of the region's economies, and strengthen Asia's role by aggressively participating in international collaboration, South Korea said.

South Korean President Lee Myung-bak urged that future discussions to reform international financial systems should reflect the interests and positions of emerging economies.

The world's eight major countries, including Russia, have been leading the coordination effort.

Separately, Japanese Prime Minister Taro Aso said at a bilateral meeting with Lee that global cooperation of late would differentiate the current crisis from the Great Depression in late 1920s and the 1930s when each country resorted to protectionist trade policies, according to South Korean presidential spokesman Lee Dong-gwan.

Leaders of China, Japan and South Korea will meet in Fukuoka, Japan in mid-December to intensify regional efforts to fight global financial woes and to discuss issues involving North Korea's nuclear programme, South Korea's spokesman added.