ASEAN to up defence against crisis

Don Weinland
Phnom Penh Post
Tuesday, 20 March 2012

Cambodia and other members of ASEAN were in talks to double a regional currency swap to US$240 billion as a source of funds in the event of a future economic crisis, officials and experts said yesterday.

Discussion on increasing the fund, which began with multilateral swaps in 2010 and is known as the Chiang Mai Initiative, would continue at ASEAN meetings next week, National Bank of Cambodia chairman and spokeswoman Nguon Sokha said.

“It is a goal, and it will be an objective at the meeting,” she said yesterday by phone.

“This discussion started before the debt crisis in Europe and is more associated with the global financial crisis.”

Doubling the swap would increase Cambodia’s contribution to $240 million, and likely lift the amount the country is entitled to borrow to $1.2 billion, Jayant Menon, lead economist at the Asian Development Bank’s Office of Regional Economic Integration, said yesterday in an email.

The increase was likely to happen, and would be announced formally in May, Menon said.

“The doubling is designed to address the concern that the fund was too small at $120 billion, especially if [several] members needed liquidity in a contagious crisis,” he said.

Up to 20 per cent of each country’s entitlement can be borrowed without taking a loan from the International Monetary Fund, another figure Menon said could change.

The IMF might loosen this restriction to 30 per cent or beyond, he said.

China, Korea and Japan – so-called ASEAN+3 members – contribute more than 70 per cent to the current $120 billion swap.

Cambodia contributes 0.1 per cent, and countries such as Indonesia, Singapore, Malaysia and Thailand nearly four per cent each.

“The main purpose is to build a resilient regional grouping in coping with future financial crises,” Chheang Vannarith, executive director of the Cambodia Institute for Cooperation and Peace, said yesterday, adding that the increased access to funds would help both private and government sectors deal with financial uncertainty and instability.

Cambodia had about $3 billion in dollar-denominated foreign reserves during the first half of 2011, the Post reported.

The Kingdom has significant exposure to US and EU markets via its garment-manufacturing industry, which was worth $4.25 billion and accounted for about 32.1 per cent of gross domestic product last year.

Garment and textile shipments to the US and Europe composed about three-quarters of the trade, or $3.14 billion, the Post reported.