Asian nations brace for economic crisis

Asian countries led by economic powerhouses China and Japan want an expanded regional emergency fund in place next year to better shield the region from the impact of the global financial crisis, officials said.

Senior finance officials of the Association of Southeast Asian Nations (Asean) and their counterparts from China, Japan and South Korea discussed in a one-day Manila meeting Thursday the details of the scheme, which will be finalized by their heads of state during an annual summit in Thailand next month.

The 10-nation ASEAN bloc comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

The scheme calls for allowing all ASEAN countries, along with China, Japan and South Korea, to use emergency funds under the so-called Chiang Mai Initiative – an arrangement forged by Asian nations after the 1997 financial crisis to address foreign reserve deficits through bilateral currency swaps, ASEAN official Nathan Sundram told reporters.

During the meeting, financial officials from the Philippines and Thailand also proposed a separate Asian regional facility that could be tapped by any country to deal with short-term liquidity problems, Sundram said.

Details of expanding the Chiang Mai scheme’s coverage, along with the Philippine and Thai proposal, will be discussed further in a Nov. 27 meeting of finance officials in Japan, before Asian heads of state take them up next month, Sundram said.

Aside from the establishment of a quick-disbursing regional emergency fund, Asian nations should work to establish a surveillance system to detect signs of an emerging problem set off by the global crisis, said Philippine Finance Secretary Margarito Teves.

Teves noted there was no clear warning before the United States was battered by the subprime mortgage crisis.

“Even the rating agencies were not able to detect that major institutions... were having problems. They were rating them very, very high,” Teves said on the sidelines of the Manila meeting.

Asian financial systems had less direct exposure to the toxic subprime mortgages that are wreaking havoc on U.S. and European markets, but their export-driven economies are expected to take a major hit from a drop in exports and foreign investment.