Financial officials from the major East Asian countries say they will cooperate on a major new initiative to insure the region against financial crises. The countries have agreed to form a "pool" of foreign currency reserves, which members could potentially draw on in the event of future economic shocks. VOA's Kurt Achin has more from Kyoto, Japan, where the officials are attending the annual meeting of the Asian Development Bank.
Finance ministers from the so-called "ASEAN plus three" nations announced they would increase the region's ability to help itself out of financial emergencies by pooling some of their vast foreign currency reserves.
The ten members of ASEAN - the Association of Southeast Asian Nations - will be joined in the pooling arrangement by South Korea, China and Japan. They announced the agreement on the sidelines of the Asian Development Bank's annual conference, here in Kyoto.
As a region, Asia boasts more than three trillion dollars in foreign currency holdings, mainly garnered during the last decade of intense growth, from exports to wealthy nations like the United States. China alone holds more than a trillion dollars of reserves.
Thai Finance Minister Chalongphob Sussangkarn says the nations agreed it is time to put those reserves to work.
"There was unanimous agreement on the appropriate form of the mechanism, which is that is be a self-managed reserve pooling arrangement, governed by a single contractual arrangement," he said.
The most likely use for the funds would be for a country in economic trouble to borrow enough for immediate needs.
Asian finance ministers say the arrangement is aimed at preventing the type of Asian financial crisis that began ten years ago, when the Thai baht collapsed, and other regional currencies followed. Thailand's finance minister says the risks today are different, but just as serious as they were ten years ago.
"The difference is that at that time, the risk… was on capital outflow, while the risk today is on rapid capital inflow," he said. "The volatility of capital flow, the size of capital flows, are even bigger than ten years ago."
The Asian Development Bank is expected to have a strong role in deciding how the currency pool is used. The ADB's director for regional integration, Lee Jong-wha, says the pooling announcement is a major step forward for finance ministers, who rarely are unanimous about anything.
"They made some political commitment... It's not a treaty, but it's a binding commitment," he said.
However, analysts like Gregory Fager, Asia/Pacific director for the Institute of International Finance, are not impressed.
"Who's going to need these reserves? What do they expect is going to happen? There's really no weak link anymore. They're all running current account surpluses," he said. "I don't see why all the attention is on pooling reserves. I'm not sure what they're pooling them for."
Fager says the ministers should concentrate on making Asia a more unified trading bloc - saying trade, not currency swaps, is what produces growth.
Details of the pooling arrangement announced have yet to be worked out, including how much each country will contribute to the pool and whether all of ASEAN's 10 member nations will participate.