Finance ministers from the Association of Southeast Asian Nations plus China, Japan and South Korea agreed Sunday to upgrade the existing network of bilateral currency swap schemes to a multilateral operation by the end of this year.
The ministers also agreed to be vigilant over the possible impact on the regional economy of a new strain of influenza, according to a statement issued after the ASEAN-plus-three finance ministerial meeting on the Indonesian resort island of Bali.
''We are pleased to announce that we have reached agreement on all main components of the Chiang Mai Initiative Multilateralisation or CMIM and decided to implement the scheme before the end of the year,'' Thai Finance Minister Chatikavanijn, who co-chaired the meeting along with his South Korean counterpart Jeung Hyun Yoon, told a press conference after the one-day meeting on the sidelines of the 42nd annual meeting of the Asian Development Bank.
According to the joint statement, Japan will commit $38.4 billion (about 3.8 trillion yen) to the $120 billion CMIM regional currency swap framework formed by China, Japan, South Korea and the 10 Southeast Asian countries.
China, which has the world's largest foreign reserves, will provide the same amount as Japan to the enlarged swap arrangement and South Korea will offer $19.2 billion.
ASEAN's four larger economies -- Indonesia, Malaysia, Singapore and Thailand -- will make equal allocations of $4.77 billion each, while the Philippines will provide $3.68 billion.
The allocations do not exceed 10 percent of each country's foreign reserves.
Allocations by the five smaller economies -- Brunei, Cambodia, Laos, Myanmar and Vietnam -- will be 5 percent of their foreign reserves.
After the 1997-1998 financial crisis spread in Asia, the Chiang Mai Initiative network of bilateral swap deals was launched in 2000 as part of regional efforts to avert financial turmoil in Asia.
The combined deals, which were on a bilateral basis, reached $83 billion.
Calls to upgrade the arrangements have been increasing amid the current financial crisis, which has led to a plunge in the value of South Korea's won against the dollar.
Earlier in the day, ADB President Haruhiko Kuroda told a seminar that Asian governments have responded quickly to the global economic crisis with appropriate financial, monetary and fiscal policies, so the impact on financial stability has been limited.
He warned, however, that the ''longer and deeper'' the crisis becomes, the greater the risk to the region's financial sector.
''This grave situation needs more vigorous and concerted efforts by all concerned to bring growth in the region back to its higher trajectory and support the global recovery,'' Kuroda said.
The Asian Development Outlook 2009, released by the bank on March 31, forecasts that economic growth in developing Asia will slide to just 3.4 percent in 2009, down from 6.3 percent last year and a record 9.5 percent in 2007.
The global economic downturn has also been worsened by the outbreak of the new influenza spreading around the world.
''The spread of the new health threat of influenza A (H1N1) requires us to stay vigilant on the possible impact,'' the joint ministerial statement said.
Cases of the new flu have been reported in nearly 20 countries following an outbreak in Mexico that left at least 16 dead.
The ASEAN-plus-three ministers also endorsed the establishment of the Credit Guarantee and Investment Mechanism, a pool of funds intended to guarantee corporate bonds to further develop bond markets in Asia and avoid capital outflows.
The CGIM will be managed by the ADB, with preliminary capital of $500 million.
Also earlier in the day, Japan expressed readiness to offer support measures worth 10 trillion yen to other Asian countries if they fall into severe difficulties amid the deepening impact of the economic crisis.
Of the l0 trillion yen, according to Japanese Finance Minister Kaoru Yosano, about 6 trillion yen will be provided from its foreign reserves using a currency swap deal.
Under the framework, a crisis-hit Asian country could change the Japanese currency into dollars or other major currencies, if necessary, to pay, for example, external debts.
In addition, the Japan Bank for International Cooperation will start providing a guarantee of up to 500 billion yen when a country in the region issues yen-denominated Samurai bonds, Yosano said.
''We would be happy very happy if this program will be able to ease somewhat the difficulties that the countries might face in issuing their bonds,'' Yosano told a press conference.
The 13 Asian finance ministers agreed to meet again in Tashkent next year during which China and Vietnam will be co-chairs.
