By Na Jeong-ju
Staff Reporter
MADRID ― South Korea has agreed with China, Japan and 10 other Asian nations, Sunday, to raise at least $80 billion of capital to set up the Asian version of the International Monetary Fund (IMF), which is tasked to rescue crisis-hit countries by providing them with emergency funds.
At the 41st annual meeting of the Asian Development Bank (ADB)'s board of governors here, finance ministers of the 10 Southeast Asian countries plus South Korea, China and Japan endorsed an agreement by working-level officials to raise a minimum capital of $80 billion to create the fund and advance their previous currency swap accords.
Seoul, Beijing and Japan will share 80 percent of the fund's seed capital, while 10 member nations of the Association of Southeast Asian Nations (ASEAN) will contribute the rest of the money. The countries have increased their currency reserves since the 1997-98 financial crisis, which forced Seoul to borrow some $40 billion in bailout funds from the IMF and follow its instructions of economic restructuring.
``For the past year, concerned nations have discussed the amount of seed capital for the anti-crisis fund and contributions by each country and how the fund should be managed,'' said Shin Je-yoon, deputy minister of South Korea's Ministry of Strategy and Finance. ``There is still a long way to go until Asia will be able to launch the fund. Opinions are still varied among participating nations on diverse topics, such as how to operate it and how much stake should be given to respective nations.''
In addition, the United States and the IMF have long shown a skeptical attitude to the ``Asian Monetary Fund'' modeled after the IMF.
The countries agreed on the minimum amount of the capital and the interest rates that will be charged on the bailout funds. Seoul, Beijing and Tokyo have offered to contribute 80 percent of the seed money to become major shareholders of the fund and other nations are not opposed to it, according to South Korean officials. This means, if the fund has $80 billion in capital, Seoul, Beijing and Tokyo will share $64 billion.
The fund will set the borrowing rates of the bailout funds based on the LIBOR, or London Inter-bank Offered Rates. The fund can charge additional rates of 1.5 to 3 percentage points.
Under the Chiang Mai Initiative adopted in 2000, the ASEAN+3 nations agreed to set up the so-called Asian Monetary Fund to prevent a recurrence of a financial crisis in the Asian region. The system is aimed at helping crisis-hit countries use a common pool of currency reserves to overcome a financial disaster.
In line with the agreement, concerned nations signed bilateral currency swap agreements. Last year in Kyoto, Japan, they agreed to turn the bilateral system to a multilateral one.
``We reached an agreement on several key elements for the multilateralization of the Chiang Mai Initiative,'' according to a statement signed by financial ministers of Seoul, Beijing and Tokyo following their meeting. ``We will expedite our efforts to reach consensus on all of the elements, particularly through the enhanced internal discussion among the three countries.''
Japan is the largest shareholder of the ADB, along with the United States, with a 15.6 percent stake, while South Korea and China have 5 percent and 6.4 percent, respectively.
The ASEAN+3 nations will hold working-level meetings in the coming months to find the common ground on some sensitive issues. Separately, Seoul will talk with Beijing and Tokyo to decide on their stakes of the fund.
jj@koreatimes.co.kr
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