In an act of solidarity at a time of crisis, East Asian nations agreed Friday to create an 80 billion dollar joint fund by June 2009 (end of first half) to manage the economic downturn.
Initial details indicate that the Northeast Asian powerhouses South Korea, Japan and China would provide 80 percent or 64 billion dollars while ASEAN members providing the remaining 16 billion.
They have also agreed to establish an independent regional financial market surveillance organisation.
This crisis fund is as historical as it is significant. The deal between South Korea, China, Japan and the 10 members of the Association of Southeast Asian Nations is the first major coordinated regional East Asian action.
It also moves one step forward from the past as this "ASEAN Plus Three" fund would supersede the Chiang Mai Initiative (circa year 2000) in the wake of the 1997/98 East Asian financial crisis to ease mainly bilateral currency swaps. It also represents one major step forward from the 2006 talks on transforming the Chiang Mai Initiative into a more powerful and multilateral reserve pooling mechanism.
But practical limitations of such crisis fund are apparent immediately.
In fact, right after the solidarity was shown, a massive sell-off came as Asian leaders meeting in Beijing agreed to set up an 80-billion-dollar fund to fight the global economic crisis. Japanese shares fell sharply after a profit warning from technology giant Sony.
In addition, some expect disagreements between South Korea, China and Japan on cost-sharing and the way the fund would be managed to be future obstacles.
Nevertheless, the action of setting up the fund is symbolic of collective action by East Asians to exert ownership of their future regional financial destiny in their own hands.
AFP, "East Asian nations to create 80 bln dlr fund by next June: official" dated 24 Oct 2008 in the Yahoo Singapore website
AFP, “East Asia to create 80 bln dlr fund, US sees deeper woes” dated 24 Oct 2008 in the Yahoo Singapore website [downloaded on 27 Oct 2008], available athttp://sg.news.yahoo.com/afp/20081024/tts-finance-economy-world-c1b2fc3....