East Asia has made a small, but significant step. The signing by the Association of Southeast Asian Nations, China, Japan and South Korea of a US$120 billion pact upgrading bilateral currency swap arrangements to a multilateral scheme by the end of the year is a first. It comes more than a decade too late to help countries battered by the Asian financial crisis. And because of the nature of the present downturn, it would seem of little immediate use to governments. The scheme's worth lies in symbolism: a region long divided by cultural and political diversity has finally overcome differences to work together.
The so-called Chiang Mai Initiative was agreed to in Bali on the sidelines of the 42nd meeting of the Asian Development Bank. Talks have been centred on ways to tackle the economic turmoil. Japan said it was ready to offer 10 trillion yen (HK$782 billion) in support measures to other Asian countries if they faced severe difficulties. The ADB last week announced a tripling of its capital base to US$165 billion; more measures are likely to be announced today.
Many of the region's exporters have seen shipments halved as a result of the crisis. Businesses are struggling. Unemployment is rising along with poverty. It is impossible to say whether the steps being taken are enough. That the region has joined forces to find a way forward and put in place guarantees is obviously good.
The resurgence of Asia will be key to the global economic recovery. Domestic stimulus packages will compensate for the loss of business with developed countries. Ensuring poverty reduction programmes continue through boosting demand and consumption will place the region in a strong position to take a global lead. East Asian economies do not presently need to call on the arrangements offered by the multilateral scheme. Their currencies are generally in good shape. Its value is as a deterrent; governments are unlikely to panic and cause a crisis if resources are on hand.
Asean and its partners are working towards a free-trade zone, an idea that is some years from fruition. The co-operation fostered by the Chiang Mai pact has immense value in moving nations closer to attaining such goals. More immediately, it must serve as impetus for the region to better tackle the current financial turmoil.