East and Southeast Asian countries said on Monday it will launch a $120 billion emergency fund in March, the first such alliance in the region to shield itself from a financial crisis. Under the scheme, known as the Chiang Mai Initiative Multilateralization (CMIM), Japan, China, South Korea, Hong Kong and the 10 members of the Association of Southeast Asian Nations (ASEAN) can each swap its own currency into US dollars in case of a liquidity crunch.
"The core objectives of the CMIM are to address balance of payment and short-term liquidity difficulties in the region and to supplement the existing international financial arrangements," a joint statement said. The four non-ASEAN members committed the bulk of money to the fund, which will be launched on March 24.
The move comes as Asian economies have been leading the world out of the worst economic downturn in several decades and amid increasing calls for global economic diplomacy, especially within the Group of 20 arena. Policymakers in Asia, home to seven of the world's top 10 holders of foreign reserves, have agreed on the need to pursue a stronger alliance within the region to avert the repeat of the 1997-98 Asian financial crisis.
But analysts say the region is nowhere close to setting up a full equivalent of the International Monetary Fund (IMF) or a European Union-style regime. Some also say the CMIM is partly hamstrung as access to 80 percent of the available funds is tied to conditions set by the IMF, which is seen in Asia to have mismanaged the 1997/98 crisis.
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