Creation of an Asian IMF

ASEAN + 3 agree to set it up to defend against financial crisis: Group also decides to create Asian bond market

ASEAN and Korea, Japan and China agreed to create funds to be ready against any financial crises among member countries. They agreed that the joint fund will be created with funds provided by the central banks of member countries and the funds will be managed by the central banks.
The Ministry of Finance and Economy made the announcement following Deputy Minister and Minister of Finance and Economy Kwon O-kyu's participation in the 10th ASEAN + Three Finance Ministers Meeting held in Kyoto on May 5.
The meeting denoted the 10th anniversary of the financial crisis that swept the Asian region in 1997, which created the ASEAN plus Three Meeting in its wake aimed at financial cooperation among the member countries through a steadfast cooperation to make the joint body stronger, creating a new momentum in financial cooperation among Asian countries to prevent an outbreak of another financial crisis that visited the region.
In particular, the meeting has agreed on the first stage of the three-stage road map by agreeing on the basic direction for the multinational meeting on the Chiang Mai Initiative(CMI), which was created to facilitate bilateral swap of funds in the times of a financial crisis among member countries.
The existing CMI was meant to be used for a member country getting short-term foreign currency loans in exchange for its currency during a financial crisis agreed among the central banks.
Member countries strengthened the CMI by agreeing to set up a joint fund, creating a stronger and firm support system. Each member country will make a contribution to the joint fund from its foreign exchange reserves and contributed funds will be managed by the central bank of each country.
The meeting also agreed to turn the multinational fund into a legally binding one among parties to the agreement. The move shows that the agreement to create the joint fund is legally effective for member countries, a change from a loose form that it had at the beginning.
Member countries will start talks on establishing the decision-making process, the fund contribution by member countries, and the supervisory system for the joint fund as part of the second-stage of the three-stage roadmap for the creation of the joint fund. The first-stage measures have been completed in a meeting in Kyoto. The Kyoto meeting of the ASEAN + Three also took up the issue of setting up an international bond market in Asia similar to the Euro bond market.
They shared the need for the bond market in Asia because most of the foreign exchange reserves build-up by many Asian countries to defend against another foreign exchange crisis if happens are used to invest in bonds of countries outside the region, mainly the United States and U.S. investors in turn invest those funds in Asian stocks and funds for portfolio investment, creating an awkward circulation of funds.
Since 2003, East Asian countries started talks on measures to secure funds for corporate investment from Asia and one of the measures is the creation of the Asian bond market as discussed by the ASEAN + Three.
In February of 2003, Korea proposed the creation of the Asian bond market by stages involving trade of stocks and credit guarantee and the matter is being handled by experts in the six areas of the proposal to set up the bond market in Asia.
At the Tokyo meeting, they agreed to speed up the moves to see the results from their talks to create the bond market, based on the assessment of the moves taken to that direction by the members of the ASEAN + 3.
They agreed to make the Asian bond market to be a global financial market like the Euro bond market by speeding up the establishment of a joint cooperative system for credit evaluation organizations, the creation of depository settlement unit and the establishment of credit guarantee and investment facilities in the Asian region. nw

(Photos from above) Deputy Prime Minister and Minister of Finance and Economy Kwon O-kyu at the ASEAN+3 Meeting held May 5 in Kyoto, Japan.
(Below) Finance Ministers of the ASEAN+3 attending the joint press conference following its meeting in Kyoto May 5.