BANGKOK - THAILAND will propose that Asian countries pool US$350 billion (S$524 billion), or 10 per cent of their foreign- exchange reserves, to help protect financial systems from a looming global recession, Bloomberg news reported on Wednesday.
Under the proposal the Asean members, Japan, China and South Korea would pool US$$150 billion to be tapped in case they need to protect their currencies and another US$200 billion would be set aside to buy equities, bonds and fund infrastructure projects, Olarn Chaipravat, Thailand's deputy prime minister, said in an interview with Bloomberg in Bangkok.
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The global economic woes are set to dominate the Asia Europe Meeting (ASEM), a summit of 43 nations held every two years, with the forum offering the first opportunity for Asian countries to discuss the financial crisis as a group.
The proposal by Thailand, which holds the chair of the 10- member Asean, comes as Asian governments struggle to find a unified approach to the global financial crisis. Central banks across the continent have already cut interest rates and guaranteed bank deposits to boost confidence.
'It is time for Asia to turn this financial sector crisis into real sector opportunity,' Mr Olarn said. 'Asia together would have to find ways and means and try to coordinate and implement the right policies.'
The Thai plan differs from one proposed by Philippine President Gloria Arroyo last week that suggests Asian governments set up a facility to lend to financial institutions facing liquidity problems or holding distressed assets. She didn't recommend how big that would be.
Part of the cash would be used to buy either Treasury bills or bonds denominated in yen, Singapore dollars and Chinese yuan provided China's government eases restrictions on converting its currency, Olarn said.
'The message of this initiative is for China to consider whether or not it would open up its banking system,' and offer a new convertible world currency, said Olarn, who will head to Beijing on Wednesday night for the Asia-Europe Meeting of government leaders.
'If this concept is accepted, it will be a new chapter in international finance.'
Mr Olarn's plan builds on an existing discussion between Asean, Japan, China and South Korea about creating a pool of about US$80 billion in Asian foreign-exchange reserves, said Bloomberg. Talks on this have been help up by dispute about how much each country should contribute.
Once the pooled reserves in the Asian currencies are put in place, Asia would be assured enough funds to facilitate 'intra- Asia trade, investment and tourism to help cushion the expected deep recession coming from the US and Europe,' Mr Olarn said.
The currency-pool idea is an expansion of an existing arrangement called the Chiang Mai Initiative that only allows for currency swaps between two nations. It is designed to ensure central banks have enough to shield their currencies from speculative attacks like those that depleted the reserves of Indonesia, Thailand and South Korea during the 1997 crisis.
In the decade since the Asian financial meltdown of 1997, the region's governments have accumulated about US$4.4 trillion of reserves, almost two-thirds of the global total. Of that, Asean nations, along with China, Japan and South Korea, own about US$3.6 trillion, according to Bloomberg.
Mr Olarn also proposed that Asian sovereign wealth funds pool as much as US$200 billion to invest in the region's equities and bonds, as well as to finance infrastructure projects across the continent.
