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Logo of Phnom Penh Post newspaper Phnom Penh Post - Asean set to expand fund

Asean set to expand fund

PHUKET - Finance officials from Southeast Asia, China, Japan and South Korea agreed in principle Sunday to expand a regional emergency reserve fund to US$120 billion, a statement said.

The credit line known as the Chiang Mai Initiative - aimed at helping Asean members weather global financial turmoil - was originally touted at $80 billion.

But the gathering in Thailand of Asian finance ministers and other top officials agreed the fund should be expanded as economic woes hit Asia's key trading partners in Europe and the United States.

"The total size of the Multilateralised Chiang Mai Initiative will be increased from the initially agreed level of $80 billion to $120 billion," said the official statement issued after the meeting.

It said the move aimed "to ensure regional market stability and to foster confidence in the markets" and would be finalised at another meeting of Asian finance officials later this year in Bali.

The proposal will also likely be discussed at the annual Asean summit, which will be held from Friday in the Thai resort town of Hua Hin.

Asean's 10 member states plus China, Japan and South Korea agreed after the 1997-98 Asian financial crisis to set up the Chiang Mai Initiative bilateral currency scheme to prevent a repeat of the turmoil.

The Asian nations are now planning to expand that agreement into a multilateral reserve, as the current economic climate threatens millions of jobs as well as the recent robust growth in Asia's developing economies.

Thai Prime Minister Abhisit Vejjajiva said earlier the fund would "serve as a cushion against future weaknesses at the time of the crisis".

Asean Secretary General Surin Pitsuwan said the long-discussed regional fund would be used to help members "badly affected" as the global economic downturn hits Asia's key trading partners in the United States and Europe.

"It is one of the mechanisms - it is not to replace or compete with the IMF [International Monetary Fund], but it will be an alternative for Asian countries," Surin said on Thai television.

"Unfortunately our region is currently facing enormous challenges including global economic slowdown and ... financial turbulence," said South Korean Finance Minister Yoon Jeung-hyun. "The environment calls for stronger cooperation among the Asean countries."

After the morning session, Surin said the meeting was "good and positive", adding that Asean members would make up 20 percent of the pool, with the remaining 80 percent from the big three Asian economies - Japan, China and South Korea.

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