Thread: Thailand Proposes Asia Pool $350 Billion for Crisis

Thailand Proposes Asia Pool $350 Billion for Crisis (Update1)
By Daniel Ten Kate and Shamim Adam



Oct. 22 (Bloomberg) -- Thailand will propose that Asian countries pool $350 billion, or 10 percent of their foreign- exchange reserves, to help protect financial systems from a looming global recession.

Under the plan the Association of Southeast Asian Nations and Japan, China and South Korea would pool $150 billion to be tapped in case they need to protect their currencies and another $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 in Bangkok today.

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,'' 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.

Yuan Conversion

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 tonight for the Asia-Europe Meeting of government leaders. ``If this concept is accepted, it will be a new chapter in international finance.''

Olarn's plan builds on an existing discussion between Asean, Japan, China and South Korea about creating a pool of about $80 billion in Asian foreign-exchange reserves. Talks on this have been help up by dispute about how much each country should contribute.

Pooled Reserves

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 U.S. and Europe,'' 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 $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 $3.6 trillion.

Olarn also proposed that Asian sovereign wealth funds pool as much as $200 billion to invest in the region's equities and bonds, as well as to finance infrastructure projects across the continent.

``Assuming the plan goes through, there could be a positive reaction in financial markets,'' said Tai Hui, head of Southeast Asian economic research at Standard Chartered in Singapore. ``The next question would be: how would they make decisions on which key markets and companies to invest in?''

The Asian financial crisis, set off by plunging currencies, led to the collapse of companies as they buckled under billions of dollars of debt, forcing Indonesia, Thailand and South Korea to turn to the International Monetary Fund for bailouts.

``We must do this for our own survival,'' Olarn said. ``The situation forces people to make decisions they have stalled for a long, long time.''

bloomberg.com

How much is Thailand going to put in?

Which will Thailand say - "I will gladly pay you on Tuesday" or "the check is in the mail"?

^Quite. The only reason they would propose this is to disguise the fact that they would be contributing little or nothing to the pot.

Why they think they can get away with such larceny on all levels is a mystery no non-Thai will ever comprehend.

The nations affected by the tsunami couldn't even agree which of them would host the new disaster HQ. Each felt they should be the honoured hub.

No way they'll trust each other on this.

'Fund infrastructure projects'.....nice little earner for all the people tendering and approving the tenders.

not a bad effort for a bunch of punters who where recently crowing about how they wouldn't be affected due to their markets being mainly China , Asean and those rich English ................

I also read somewhere that they were hitting the US for billions in free money as well.

What a time to ask!!!

Originally Posted by chitown

How much is Thailand going to put in?

Which will Thailand say - "I will gladly pay you on Tuesday" or "the check is in the mail"?

or 10 percent of their foreign- exchange reserves

It's not exactly clear far as I can tell; is that 10% of all foreign exchange reserves or 10% of each nations?

Why doesn't Thailand just pay in frozen chickens as usual?

They could use Taksin's money for starters.

Originally Posted by EmperorTud

Why doesn't Thailand just pay in frozen chickens as usual?

With shrimps in reserve?

Originally Posted by JoGeAr

They could use Taksin's money for starters.

A good solution...

Olarn to woo China, Japan, ASEAN to set up forex reserve pooling fund
24 October 2008

The Thai deputy premier will encourage China, Japan, and ASEAN to jointly establish a 150 billion dollar fund from parts of their foreign exchange reserves to ensure sufficient liquidity to prevent untowards financial crisis in Asia.

Dr. Olarn Chaipravat, Deputy Prime Minister, told National News Bureau of Thailand that the Thai Government, as chairman and host of ASEAN summit meeting to be held in December this year, will propose at ASEM summit meeting in Beijing between October 23-25 to establish foreign exchanges reserve pooling jointly with other ASEAN member nations, East Asian nations including China, Japan, and South Korea, to be prepared for untowards incidents economically.

The move is part of the Thai Cabinet-endorsed six measures Thai economy stimulus package

Dr. Olarn joined Prime Minister Mr. Somchai Wongsawat to attend the Asia-Europe Meeting (ASEM) in Beijing.

The proposal calls for all member nations to pool parts of their foreign exchanges’ reserves, currently dominated by US dollars, to be established as separate fund initially worth 150 billion dollars to strengthen Asian financial community. The size would be amplified from earlier agreed amounting to 80 billion dollars so as to boost members’ nations financial liquidity in case of untowards situation, said Dr. Olarn.

He noted, however, that all member nations must jointly ensure that there would be no collapse among big Asian financial institutions any longer.

Each respective government must also implement proper levels of deposit guarantee for general public. They must also encourage private sector to invest more in their respective capital markets.

Regarding earlier implemented six measures Thai economy stimulus package plan, Dr. Olarn said that although all the measures may involve some 1.2 trillion baht altogether, the national budget would be a mere 180 billion baht. It was an ongoing budget already allotted in fiscal 2008. While the remaining money was already available in the local financial markets, including that belonging to investors, and credit lines from local financial institutions.

“We just want to speed up distribution process to ensure that the money will be effectively and swiftly distributed to concerned agencies to further stimulate local economy,” he said.

The other four measures included:

1. Funds established to shoring up good return and cheap Thai stocks. This was immediate short term measure regarded as being successful to shore up investors’ confidence, especially following some 10% plunges of Thai stocks and elsewhere on October 10 which have somewhat regained grounds up til now, said the Deputy Prime Minister.

The shoring up funds included : five matching funds amounting to two billion baht jointly established by local securities firms and the Stock Eexchange of Thailand (SET), matching funds amounting to 10 billion baht jointly set up by financial institutions and SET, funds buying back stocks amounting to 30 billion baht established by about 20-25 listed companies, and amplifying long term equity funds and retirement mutual funds from 500 billion baht to 700 billion baht.

2. Specific state-owned banks to extend loans amounting to a combined about 50 billion baht or about 5% increase from their existing loan portfolios to general public, coupled with encouraging private commercial banks to increase their credit extension to general public.

3. Ministries of Commerce and Tourism and Sports will team up as “Team Thailand” to jointly host road shows to expand new export markets in the Middle East, Australia, Africa, and America, coupled with sufficient credits for exports and local market’s trade.

And 4. Investment acceleration for mega infrastructure projects will be done. An additional 100 billion baht to 350 billion baht will be spent, including additional 60 billion baht from sky train projects, 10 billion baht from nationwide logistics system, and 30 billion baht from PTT Plc’s energy project.

thainews.prd.go.th

East Asian nations to create 80 bln dlr fund by next June: official
3 hours ago

SEOUL (AFP) — East Asian nations agreed Friday to create an 80 billion dollar joint fund by next June to avert regional financial crises, a South Korean official said.

Leaders of South Korea, China, Japan and the 10 members of the Association of Southeast Asian Nations (ASEAN) reached the agreement at a meeting in Beijing, said the spokesman for South Korean President Lee Myung-Bak.

"Lee, Chinese Premier Wen Jiabao, Japanese Prime Minister Taro Aso and 10 ASEAN leaders held an informal breakfast meeting in Beijing and agreed on the need to strengthen regional cooperation and policy coordination in the face of the global financial crisis," said the spokesman in a statement.

"The East Asian leaders agreed to accelerate multilateral cooperation to create an 80 billion dollar fund by the end of next year's first half and establish an independent regional financial market surveillance organisation."

The spokesman said the leaders also agreed actively to take part in international efforts to stem the spread of the US-originated financial crisis.

The "ASEAN Plus Three" fund would supersede the Chiang Mai Initiative, which came into being in 2000 in the wake of the 1997/98 East Asian financial crisis to ease mainly bilateral currency swaps.

The East Asian countries began talks in 2006 on transforming the Chiang Mai Initiative into a more powerful and multilateral reserve pooling mechanism.

In May they reached preliminary agreement to create a foreign exchange reserve pool of 80 billion dollars.

The initial agreement called for South Korea, Japan and China to provide 80 percent or 64 billion dollars, with ASEAN members providing the remaining 16 billion.

However disagrements continued between South Korea, China and Japan on cost-sharing and the way the fund would be managed, Yonhap news agency quoted a top aide to President Lee as saying.

"However, the three countries have now ironed out their differences in Beijing, paving the way for an early creation of the new Asian monetary fund," said the unidentified aide.

ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

The ASEAN Plus Three leaders were meeting in advance of the Asia-Europe Meeting (ASEM) summit to begin in Beijing later Friday.

afp.google.com


so 350 becomes 80 ...............

.

So thats about $6BN per nation, including nations that are the 2nd and 3rd biggest economies in the world. That amount is less than half the amount given to Lloyds bank alone in the UK to shore up its Teir 1 capital.

Put another way, the entire pot is just 8% of the UK bank bailout plan. And the jury is out on whether that was enough...

Is this the same thailand that wanted to set up a rice cartel a few months ago?

Originally Posted by Mid

Thailand will propose that Asian countries pool $350 billion,

Can only mean Thailand is going to run short. Thailand wouldn't put up 1 baht to help another country.