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ECONOMY
PARISTA YUTHAMANOP
The upcoming summit among the leaders of Asean, China, Japan and South Korea should work to eliminate obstacles in financial co-operation and establish a groundwork for regional integration, according to local economists.
Chalongphob Sussangkarn, a former finance minister and distinguished fellow at the Thailand Development Research Institute, said progress on regional co-operation remained in doubt until Asean nations solve existing obstacles.
One obstacle is a requirement that countries borrowing funds in excess of 20% of their foreign reserves must accept conditions set by the International Monetary Fund.
Dr Chalongphob said the recent move by South Korea to accept a bilateral swap line with the US Federal Reserve rather than tapping existing facilities under the "Asean plus three" grouping further highlighted the problems of strengthening regional co-operation.
"We should ask the question why regional co-operation cannot help in the case of Korea. Unless something is done soon, by the next year, the whole process of East Asian co-operation could disintegrate," he said at a conference held by Thammasat University.
Regional co-operation will be a major topic for discussion at next month's Asean plus Three summit in Chiang Mai.
But Dr Chalongphob said plans to increase existing swap facilities by another $80 billion could be problematic, including issues on the amount of contributions required by each country."The question is who will contribute by how much. There is a political issue as to which criteria we will use. Will we benchmark using the size of existing foreign reserve or by GDP (gross domestic product.)," he said.
"My preference would be to use a single formula, with China and Japan contributing $40 billion each and Korea $20 billion."
Takatoshi Ito, professor at the University of Japan, said the so-called Chiang Mai Initiative was heavily linked to the IMF and should be resolved so that the group help monitor one another's economic problems and set their own economic policies.
But Asean secretary-general Surin Pitsuwan said the plan to expand the Chiang Mai Initiative swap facilities into a multilateral arrangement and increase the credit pool to $80 billion showed Asia's determination to respond to the global financial crisis in a co-operative manner.
As well, the East Asia Summit which expands from Asean plus three to include Australia, India and New Zealand showed that the regional economic co-operation has broadened.
The fact that Asean has ratified its charter for the first time since inception ahead of the summit next month would upgrade its operation to a rules-based one.
"This time around, there is a sense of solidarity emerging in Asia. We are reacting as a group. We are thinking as a group instead of running for cover individually," Mr Surin said, comparing the current crisis response with that a decade ago during the 1997 crisis.
He added that Asean countries could consider earmarking $300 billion in foreign reserves to finance infrastructure development in the region, instead of simply investing in US treasury bills as in the past.
Rajiv Kumar, chief executive of the Indian Council of Research on International Economic Relations, said regional economic integration should expand in countries in central and south Asia because of their rich natural resources.
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