Meeting in Manila on ASEAN+3 Crisis Fund

UNCLAS MANILA 002605

STATE FOR EAP/MTS, EAP/EP/ EEB/IFD/OMA
STATE PASS EXIM. OPIC, AND USTR
STATE PASS USAID FOR AA/ANE, AA/EGAT, DAA/ANE
TREASURY FOR OASIA

SENSITIVE

SIPDIS

E.O. 12958: N/A
TAGS: EFIN ECON ECIN RP CN XE XD
SUBJECT: Meeting in Manila on ASEAN+3 Crisis Fund

SENSITIVE BUT UNCLASSIFIED

A) Manila 2340, B) Manila 2370


1. (SBU) Summary: A November 20 special meeting of ASEAN+3 Finance
and Central Bank officials in Manila discussed a regional funding
facility to help regional economies weather the global financial
crisis. The meeting achieved consensus to expand the Chiang Mai
Initiative rather than create a new facility and to include
liquidity assistance outside of balance of payments difficulties.
Although launch of the expanded facility is not likely before
mid-year 2009, ASEAN+3 is determined to put such a facility into
place, with or without the support of international financial
institutions. Our contacts noted that the Chinese are particularly
supportive of the proposal. End Summary.


2. (U) The Philippine government hosted a meeting of ASEAN+3 (i.e.,
the 10 ASEAN countries plus China, Japan, South Korea) officials in
Manila on November 20 to continue discussions on the creation of a
fund to assist regional economies to weather the global financial
crisis. Philippine President Arroyo and members of her economic
team hoped to move forward with operational details for the proposed
facility, building on Thai and Philippine proposals made during a
special meeting of ASEAN+3 leaders on the sidelines of the
Asia-Europe Meeting in Beijing in October 2008.


3. (SBU) In a meeting with econoffs on November 25, senior
Philippine Department of Finance officials said the meeting in
Manila was attended mainly by ASEAN+3 assistant
secretaries/ministers and assistant central bank governors and
provided an opportunity for further brainstorming, but did little in
terms of operational details. The group did agree, however, to
propose "multilateralization" of the decade-old Chiang Mai
Initiative (CMI, an $84 billion network of ASEAN+3 bilateral
currency-swap agreements launched in 1998 to assist economies
experiencing balance of payments problems during the Asian financial
crisis). The group proposed, rather than creating a separate
facility altogether, to expand the Chiang Mai Initiative's scope and
resources to provide liquidity support beyond balance of payments
difficulties.


4. (U) According to Finance officials, the meeting in Manila
produced "general" recommendations to pursue the establishment of a
regional facility in response to the global financial crisis; to
multilateralize and expand the Chiang Mai Initiative; and to
officially create a technical working group to study proposals and
craft recommendations to get the regional facility up and running.
No consensus was reached on critical operational matters, such as
the level of funding; a formula for determining respective
commitments; conditions for access; financing terms; the role of
international financial institutions; the scope of assistance;
establishment of a surveillance and monitoring system; and
logistical and administrative support. Officials expect the ASEAN+3
Finance and Central Bank Deputies Meeting in Japan on November 27-28
to adopt these general recommendations as a deliverable for the
mid-December ASEAN+3 Leaders Summit in Chiang Mai.


5. (SBU) Finance officials expect the spade work on the regional
fund's mechanics to begin in earnest only after the ASEAN+3 heads of
state jointly approve the proposal for the creation of a technical
working group at the mid-December Leaders Summit. They consider a
first-quarter 2009 launch ambitious and unlikely. Depending on how
quickly consensus can be reached on complicated operational and
legal issues, they estimate the facility may be up and running in
mid-2009, at the earliest.


6. (SBU) ASEAN+3 nations are determined to establish the regional
facility with or without the support of international financial
institutions, according to our contacts. The impetus for a
"self-help" plan partly reflects concerns that international
financial institutions may not have adequate resources and partly
the sentiment that they were not particularly flexible and
supportive during the Asian financial crisis (a sentiment especially
strong among the Thais, who will chair ASEAN in 2009). Philippine
officials noted the desire among ASEAN+3 economies for a facility
that could provide "comprehensive, coordinated, and timely
assistance" and described China as "highly supportive" of the
proposed regional fund. They expect China to take a major role in
promoting this initiative during its upcoming term as ASEAN+3
co-chair.

Kenney