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Free trade pledge and US$40b more to swaps

ASIAN finance ministers pledged yesterday to uphold free trade and investment in the midst of the global economic slowdown and said that they would allocate an additional US$40 billion to protect falling currencies.

The ministers from 10 Southeast Asian nations as well as China, Japan and South Korea agreed to boost funding for the Chiang Mai Initiative, an arrangement forged after the 1997 Asian financial crisis to address foreign reserve deficits through bilateral currency swaps, from US$80 billion to US$120 billion.

The Association of Southeast Asian Nations will provide 20 percent of the funding, with 80 percent from China, Japan and South Korea.

The plan is expected to be approved at a three-day ASEAN summit in Hua Hin, Thailand, at the weekend.

"We reaffirm our determination to dedicate ourselves to increasing the free flow of trade and investment, to standing firm against protectionist measures which would worsen the economic downturn," the ministers said in a statement.

The commitment to free trade echoed comments made earlier in the day by Thai Prime Minister Abhisit Vejjajiva.

"I hope that ASEAN will send a signal that in this economic downturn it will not favor protectionism," Abhisit said. "ASEAN will not survive alone while causing trouble to other countries."

In October, ASEAN finance ministers expressed confidence that the group would weather the global downturn, noting its economic fundamentals remained sound even though growth might not match last year's 6.7 percent.

But recently, many countries have begun to feel the effects of the downturn on their export-driven economies.

Thailand reported on Thursday that exports posted their steepest fall in 12 years in January as demand for the country's cars, hard drives and electrical goods evaporated amid the global slump.

Thailand, Singapore, Malaysia and the Philippines have all announced multibillion-dollar stimulus packages which include a combination of infrastructure projects, cash handouts or tax reductions aimed at creating jobs and giving consumer demand a boost.


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