ASEAN Plus Three Sign Financial Support Agreement

by Mary Swire, LawAndTax-News.com, Hong Kong

31 December 2009

The Association of Southeast Asian Nations (ASEAN) Plus Three countries have announced the signing of a USD120bn currency swap program, under the auspices of the Chiang Mai Initiative Multilateralization (CMIM) agreements.

The CMIM will provide financial support through multilateral currency swap transactions to any ASEAN countries (Thailand, Malaysia, Indonesia, Singapore, the Philippines, Cambodia, Brunei, Laos, Vietnam and Myanmar), plus South Korea, Hong Kong-China and Japan, facing balance-of-payments and short-term liquidity difficulties.

Each CMIM participant is entitled, in accordance with procedures and conditions set out in the agreement, to swap its local currency with United States Dollars for an amount up to its contribution multiplied by a purchasing multiplier.

Of the non-ASEAN countries, South Korea has committed USD19.2bn (or 16% of the fund), while China and Japan have each contributed USD38.4bn (or 32% each).

The 10 ASEAN countries have committed the remaining USD24bn (or 20%), with the five largest nations (Thailand, Malaysia, Indonesia, Singapore and the Philippines) contributing almost 19% in total.

According to a statement issued by Bank Negara Malaysia, the CMIM is intended to strengthen the region's capacity to safeguard against increased risks and challenges in the global economy.

The core objectives of the CMIM are to address balance-of-payments and short-term liquidity difficulties in the region, and to supplement the existing international financial arrangements, particularly through the International Monetary Fund.

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