At the Asian Development Bank’s (ADB) annual meeting, held today and yesterday, finance ministers from the Association of the Southeast Asian Nations (ASEAN) and Japan, South Korea, and China (collectively, with ASEAN, known as ASEAN+3) have announced their agreement on an emergency $120 billion liquidity fund that the 13 Asian nations can draw upon to combat damaging effects of the global financial crisis. Under the terms of the liquidity fund, which is part of the Chiang Mai Initiative (CMI), Japan, South Korea and China will contribute 80 percent of the total $120 billion, with Japan and China contributing $38.4 million each and South Korea contributing $19.2 million. ASEAN members will contribute the remaining 20 percent, with smaller Asian economies being able to borrow greater amounts from the fund in proportion to their contributions than the more-developed economies.
ASEAN+3 has agreed to implement the CMI before the end of this year, as its members continue “to work out the operation details and implementation plan, particularly the legal documents that will govern” the CMI. Furthermore, ASEAN+3 unveiled a $500 million credit-guarantee and investment mechanism, in an effort to encourage the issuance of local currency-denominated corporate bonds and stimulate the development of a regional bond market.
In an unrelated development, the ADB announced that it would boost lending to the region’s most impoverished nations by $10 billion over the next two years, following a vote by ADB’s Board of Governors to triple ADB’s capital base from $55 billion to $165 billion.