Ktetaichinh’s Blog

April 12, 2009

Multinationals take a longer view of Vietnam

Filed under: châu Á,khủng hoảng,kinh tế — ktetaichinh @ 12:24 pm
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Companies scale back as they confront limitations in Vietnam’s workforce and other issues.
By Don Lee
April 11, 2009

Reporting from Ho Chi Minh City — Just a couple of years ago, this city was among the hottest investment zones in Asia.

Multinationals as large as chip maker Intel Corp. and smaller firms such as Ampac Packaging, a Cincinnati-based maker of shopping bags for Gap and Target, flocked here and to other parts of Vietnam. They set up plants to complement or, in some cases, replace facilities in China that were becoming increasingly expensive to operate. “China plus one,” they called it.

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Now, with the global downturn and China reasserting itself as the low-cost producer, Vietnam is feeling the effects of a different trend: “China minus one.”

In central Ho Chi Minh City, also known as Saigon, an apartment tower that would have been one of the city’s tallest buildings has been draped in green for months. Pinched for cash, its owner, Daewon Group of South Korea, stopped work on the development even after reaching the top floor. It’s one of many foreign projects in the region that have been halted or put off indefinitely.

Taiwan’s Wistron Corp. had planned to plow millions into building a laptop factory in Vietnam last winter, to supplement its main plant in the Shanghai area.

“Right now it’s just more or less on hold,” spokesman John Collins said.

Taiwanese investment in Vietnam in the first two months of this year was just one-fifth of what it was a year ago, said Catherine Chi, a senior director at Taiwan’s Chamber of Commerce, one of the largest foreign groups here. The government in Hanoi is expecting foreign capital inflows to fall by more than half this year.

Japanese companies such as Sony Corp. and Canon Inc. have closed or reduced operations in Vietnam. Chinese automaker Lifan Group suspended plans to make cars here.

By other measures, Vietnam’s economy is faring better than most in the region. Thanks to a rise in trade of consumer goods, government spending on infrastructure and numerous plant openings in the past, the country’s gross domestic product, or total economic output, is likely to grow by 5.5% this year. That would be the second highest in East Asia after China, according to the World Bank.

Vietnam’s comparative advantages include its motivated workforce, political stability and young population.

But the last couple of years also have been sobering to foreign managers. They’ve learned that Vietnam, with a population of about 87 million, isn’t a smaller version of China.

Though it shares East Asia’s Confucian values of education and family, Vietnam doesn’t have China’s command-and-control way of getting things done quickly. Businesses complain that, even after several years, workers still haven’t finished the highway from Ho Chi Minh City’s airport to downtown. Unlike China, relocation of families is painstakingly slow.

Nor does Vietnam have the depth of skilled labor that some thought. While young Vietnamese show a penchant for learning, universities tend to be heavily theoretical. Many of their graduates lack the practical and technical training needed for careers at multinational companies.

Intel found that out recently when it screened new hires for a $1-billion chip assembly and testing facility that it’s building here. The Santa Clara-based company managed to recruit enough engineering and skilled labor for its first wave of staffing, but realized it would need to build a talent pipeline if it wanted to grow in Vietnam, said people familiar with the situation. Intel is now trying to help local universities develop curriculum and programs.

Intel didn’t respond to a request for comment, but other Western companies also have begun to take a longer-term view of Vietnam.

“There’s been some rethinking,” said Sesto Vecchi, an attorney and consultant in Ho Chi Minh City for the last two decades. Although most foreign investors remain bullish on Vietnam over the long haul, he said, “there’s probably a more realistic sense now of how many people are available to support a fast high-tech industry.”

In some ways, Vietnam’s recent troubles have as much to do with China’s improved business climate than with any particular failing of its own.

Over the last decade, Vietnam had looked more appealing as the U.S. imposed anti-dumping duties on Chinese-made products such as furniture and plastic bags. At the same time, Chinese wages soared, as did raw material costs. Labor laws stiffened. The Chinese yuan surged in value. And authorities thumbed their noses at labor-intensive businesses, eliminating export tax rebates and cracking down on environmental and safety laws.

“The era of China as a low-cost, manufacturing-for-export market has come to an end,” the Shanghai American Chamber of Commerce declared in March 2008, noting that nearly one out of five companies surveyed had concrete plans to relocate some of their China operations to other countries, notably Vietnam.

But the global credit crisis and ensuing recession changed all that. The Chinese government revived export tax rebates and has beefed up infrastructure. China’s commodity prices fell, the yuan stabilized and officials backed away from pressing employers too hard, lest more plants close and jobs disappear.

The same chamber survey a year later found that the percentage of companies planning to relocate out of China had dropped by half, as had the number of respondents expressing concern about China losing its competitive edge.

“The larger companies that have had the experience of looking elsewhere have returned to China,” said Dean Ho, the Shanghai-based vice president of Unison International, an investment and consulting firm. Some of them couldn’t find enough good workers, he said. Others found rival countries had their own challenges.

Liu Guizhong, deputy director of foreign trade for China’s Galanz Group, the world’s largest microwave oven producer, remembers visiting Vietnam last April. He and his colleagues liked what they saw.

They got visas easily upon arrival. Ho Chi Minh City boasted several port facilities. Liu said production wages in Vietnam would be around $60 a month per worker, about half that of rural China and about one-third what Galanz pays workers in China’s coastal cities.

Galanz was considering three sites in Vietnam to build a $25-million plant, including the sprawling suburbs around Ho Chi Minh City near the Saigon River. Then Vietnam’s economy went into a tailspin. Inflation soared to 28% last summer, fueled by soaring commodity prices and rampant speculation in real estate and stocks. Vietnam’s currency sank. A series of labor strikes at garment and footwear plants added to the turmoil.

Galanz retreated. Like others, it now wants to wait until the global financial storm passes. Vietnamese authorities have rolled out new tax relief and other incentives to lure back investors, but Galanz remains noncommittal.

“Many companies are evacuating, so we decided to hold our plans,” Liu said. At the moment, “there are too many negative aspects.”


March 29, 2009

Asians of the Century

Filed under: châu Á,kinh tế — ktetaichinh @ 6:20 pm
Tags: ,

A combination of towering individuals and societies that played down individualism helped liberate, ravage and resurrect the vast, protean region

Worlds do not go gently. When the kings of Bali saw in 1906 that they could no longer fend off the Dutch army, they chose an ending both glorious and horrific–the now legendary puputan. They ordered their palaces set alight. Then, clad in ritual white and armed only with spears and sacred knives, the ranks of the nobility hurled themselves against Dutch rifles until a thousand Balinese lay dead against the soft, green earth. Much else was shed with their blood: one of the last obstacles to full Dutch mastery of the Indies, but also, more imperceptibly, a world beholden to rajahs and viziers, and an Asia that could not but appear to the world as magical and archaic and doomed.

For the young, Westernized narrator of Pramoedya Ananta Toer’s Buru Quartet, something, too, is born: “I bowed my head,” he says after hearing of Bali’s fall, “went back to my desk. I took out my diary and wrote these words: ‘Today I begin.'”

For Asia what started that day, in many ways, was the 20th century. Kings would last longer: in ancient China the Qing dynasty would cling to power for another five years, and as late as 1955 the French still sought to foist the hapless Bao Dai upon Vietnamese who scoffed at that parody of an emperor. But after that moment–not everywhere, and not at the same time–new élites would guide the struggle for freedom, demanding more than the right to continue the old ways undisturbed. They chose words like liberty and equality whose pitch and force had been determined elsewhere. But more importantly, they clamored for the full independence of communities, nations, that were brought into being by their call.

What we now know as Asia followed from their actions. If the lands that stretch from the Hindu Kush to the East Sea share more than geography, that conceptual unity is in large measure a product of the 20th century. In that time guns and European mapmakers carved the boundaries that most countries now accept. Wars, trade and the wildfire ideologies of nationalism and communism shook the region while knitting together its parts. What those nations share, really, is a record of transformation–and a roll call of singular individuals who charted, often violently, that dizzying change.

Perhaps more than any other region of the world in the past 100 years, Asia can paint its modern history as a series of portraits. The style is hardly fashionable; even the region’s many and sycophantic “official biographers” would admit, to paraphrase Nietzsche, that most great men are only agents of a great cause. Yet nowhere else have the actions and foibles of individuals so thoroughly marked the fates of mass populations, for good or ill. Taken singly, the life stories of most of these titans are as familiar as fairy tales to their countrymen (and often equally fabulist). Together, however, they tell a more complex tale: the story of the century itself.

Early on, that narrative seemed destined to have more faceless authors. The late 19th century–the heyday of the Raj and a period when Western domination of Asia appeared unassailable–did bear its share of visionaries: in Siam, King Chulalongkorn helped fend off both British and French by modernizing his administration; in the Philippines, José Rizal was executed even while championing reform rather than revolution. Yet more often the crucial sea change welled up from a class rather than an individual. In lands like India and Indonesia, the opening of Western education to local students created an élite familiar with the ideals of European political thought–and their disregard in the colonies. Those wealthy few who could travel to Europe usually returned less awed by its citizens. By 1905, when British officials hacked the state of Bengal in two, India’s middle-class intelligentsia could lead a boycott so successful that, three years later, the bales of Lancashire cotton on Bombay docks had dwindled by more than 25%.

Japan had already set the course–a task the archipelago nation would play throughout the century. Its reformers were fired by the same thought as those in China and India–to blend Eastern ethics with Western science–and though they issued orders in the name of a teenaged emperor, their leaders were several. None could dispute the scale of their success: when Admiral Togo’s warships sank the Russian Baltic Fleet in 1905, Japan claimed a seat at the table of world powers. A generation of Asian nationalists would draw succor from that example of what could be achieved in their struggle.

To reach that point, however, would require more of colonized (or, like China, subdued) Asia. Champions of reform could organize, educate, even negotiate for greater responsibilities within the colonial system. But the boast of Dutch governor-general Bonifacius de Jonge–“We have ruled here for 300 years with the whip and the club”–would not fall to a debating society. (In tragic Vietnam, the French built 83 prisons and precisely one university.) “Give me 10 youths who are fired with zeal and with love for our native land, and with them I shall shake the earth,” thundered Indonesia’s spellbinder, Sukarno. He would need more. And his people would need him to draw out the challenge lying within their vast numbers.

Spoken now, that challenge seems almost self-evident. “Let the government then, to carry on its rules, use guns against us, send us to prison, hang us,” said Mohandas K. Gandhi in 1930, as he walked to the sea to make salt–and thus to doom the Raj. “But how many can be given such punishment? Try and calculate how much time it will take of Britishers to hang 300 million of persons.”

Given the temper of the times, though, the rhetoric of Gandhi and his ilk struck like a hammer blow. The Great War had both fueled the economies of the region and shown their populations the spectacle of a Europe weakened and base. The Great Depression wiped out the markets for colonial Asia’s treasures–rice, rubber, minerals. From those elements would emerge peoples more confident, and angry. By focusing that discontent Gandhi transformed the Indian National Congress into a truly mass organization, rallying India’s millions to awesome displays of civil disobedience.

Like all national struggles, those waged in Asia encouraged the writing of heroic myths. At least some of Sukarno’s later reputation would rest on an active self-aggrandizement, while Ho Chi Minh during this period still skulked in the shadows, trying to foment revolution from Moscow and Hong Kong. In China the death grip in which Chiang Kai-shek and Mao Zedong held each other would meet all the needs of epic: the Long March–begun by nearly 100,000 and finished by fewer than a tenth that number–still stands as the quintessence of struggle, both inside and outside the People’s Republic. Yet China would also typify the perils of forcing so much upon single, charismatic leaders, as the loathing each felt for the other began to undermine the alliance they had formed against Japan.

Perhaps only the century’s most transformative event could have pushed them together in the first place. World War II dismantled in weeks a colonial edifice that had been built over centuries. Japan slogged through China for four years before the attack on Pearl Harbor; its forces overran nearly all of Southeast Asia in barely three months. Outside of the Indian subcontinent, the misnamed “Co-Prosperity Sphere” that resulted was the closest thing to a unified Asia the world had yet seen.

To a certain extent that would stand as Japan’s legacy, but not in the way the occupiers intended. Their lightning advance not only knocked down the West’s defenses, but also its equally flimsy myth of white superiority. The locals who watched haggard British and Dutch marched off to internment camps could well believe that the colonizers’ day had passed. At the same time, Japanese officials gave a forum to precisely those figures who could seize that audience. Sukarno, allowed to establish a nationalist umbrella group in Jakarta, turned his mellifluous voice to recruiting coolie laborers for the war machine, some 200,000 of whom may have died in the jungles of Malaya and Burma. (“I shipped them to their deaths. Yes, yes, yes, yes, I am the one,” he would admit, a peacock to the end.) Yet he could also use the occupiers’ “singing trees”–loudspeakers wired to radio sets–to pound home the nationalist message. For those, like Ho, who took advantage of crumbling Japanese control at war’s end to lay claim to their countries, the occupation served as a means to a long-sought goal.

By that point, the combination of leaders and led had grown too powerful for returning colonizers to subdue.

Pressure from the United States, which kept its promise of independence to the Philippines in 1946, helped sway European governments, as did the weariness of their home populations. But the post-colonial moment ultimately demanded an individual touch–whether of warrior, statesman, braggart or showman. “I am the natural ruler of the country, and my authority has never been questioned,” boasted Cambodia’s god-king, Sihanouk. Paris believed him enough to sign over the nation in 1954. Next door, Ho and his genius general, Vo Nguyen Giap, forged Vietnam’s peasants into a force capable of annihilating a garrison of legionnaires at Dien Bien Phu (though aided by Chinese artillery and with frightful casualties of their own). Jinnah delivered a bloodstained Pakistan. Aung San promised the possibility of unifying Burma’s fractious tribes. Mao plowed through the rottenness at the core of the Kuomintang. When Nehru celebrated India’s “tryst with destiny,” his high-flown speechifying was as suited to the tenor and need of the times as Sukarno’s loopy, inventive acronyms.

Those various triumphs in turn brought the region closer to a sense of shared destiny. In Asia’s two largest countries, the ambitious, top-down economic plans imposed from New Delhi and Beijing produced stellar returns: in the decade between 1951 and ’61, the national income of India rose 42%; in China it grew at an average rate of 8.9% a year between 1953 and ’57. When a panoply of Third World leaders gathered in Bandung in 1955 to declare they would follow a path unmarked by either the U.S. or the Soviet Union, their bravado seemed less far-fetched than one might now imagine. Only a decade later once-bereft India would boast of a Green Revolution, fuelled by high-yield strains of rice and wheat that raised food-grain production to nearly 100 million tons in 1968-69–and the country to agricultural self-sufficiency by the 1970s.

The fellowship displayed at Bandung would, of course, prove as gossamer as the rhetoric. Only seven years later, Mao would make a mockery of Nehru‘s blithe Hindi Chini bhai bhai (“Indians and Chinese are brothers”) by sending the Red Army over the Himalayas in the same week as the Cuban missile crisis. “Nonalignment is no ideology,” an editor in New Delhi would complain. “It is an idiosyncrasy.”

The cold war not only did not bypass Asia, as its propagandists might have imagined; it fed hungrily upon the region’s predilection for single, domineering leaders. The Korean War, which flared barely six months after the Dutch left Jakarta, began both the shooting and the trend. In Seoul, Syngman Rhee hardened into the unbending patriarch who would be ousted by student demonstrators in 1960. His northern counterpart, Kim Il Sung, would butcher his way to infamy as one of the century’s most paranoid, omnipotent heads of state. On the far banks of the Yalu River, the fanning of anti-U.S. sentiment would help Mao bend his young republic to his will.

All across Asia, leadership that once drew its legitimacy from the national struggle would henceforth be enshrined, linked inextricably to the nation itself. The shift fueled a welter of coups and cults of personality. Sukarno could no longer be satisfied as Great Leader of the Revolution, Mouthpiece of the Indonesian People, Father of the Farmers; in 1957, he would replace democracy with Guided Democracy–and name himself guide. Park Chung Hee and Suharto made few excuses for their iron rule, and fellow soldiers Ne Win in Burma and Phibun in Thailand even fewer. But the less obvious breaches of the national contract could, if anything, sting more. Part of the horror Indians felt at Indira Gandhi‘s imposition of emergency rule in 1975-77 drew from a recognition of how far the nation had traveled from the rectitude of that other, martyred Gandhi.

The same factors that had brought the original generation of nationalists to power–and their nations into being–made this, too: a continent of strongmen. The U.S. served as a handy foil for some regimes, a banker for others (Ngo Dinh Diem’s in Saigon, Ramon Magsaysay’s in Manila). Peoples haunted by war and deprivation often welcomed the firm hand of those, like Singapore’s unflappable Lee Kuan Yew, who promised a more comfortable future. They also lent themselves as fodder for yet more mass campaigns. “China’s 600 million people have two remarkable peculiarities,” Mao liked to claim–poverty and blankness. “A clean sheet of paper has no blotches, and so… the newest and most beautiful pictures can be painted on it.”

Most often Asia’s new emperors would only deepen the poverty. The salaries of Filipinos were, in real terms, half as much in 1985 as they had been in 1956; the share of the national income held by the wealthiest tenth of the country increased from 27% to 37% in the same period. Sukarno, who dashingly told the West to “go to hell with their aid,” also told his citizens to cross out the zeros on their banknotes when inflation turned their rupiah into tissue paper. What the titans had wrought seemed so diametrically the opposite of their promise as to be darkly comic: the visions of shiny, virile factories gave way to the stubble of backyard blast furnaces that blanketed China after the horrors of Mao’s Great Leap Forward. As many as 30 million Chinese may have died of starvation and disease between 1958 and 1962–not least because no cadres had the strength to challenge the Helmsman’s faith in himself.

In time, that failure of will would devour entire societies. The combination of fervent populaces and unchecked leaders gave rise to the law of the mob, writ frighteningly large. While Suharto eased Sukarno off the stage he had held for so long, he also unleashed a bloodbath that began with suspected communists and continued through village grudges. An estimated half-million Indonesians were killed between late 1965 and early 1966, sometimes at the behest of army troops, more often by vigilantes. In China, Mao rallied 10 million Red Guards to the streets of Beijing in 1966; at his command–spoken or implied–they would mutilate in a decade the millennia of history that China had always used to define herself. Most gruesome, though, was the picture painted in Cambodia, where famine and repression and the sledgehammer pounding of U.S. bombers brought a society face-to-face with its opposite. The movement had a leader–the violin-playing schoolteacher Saloth Sar. But for years the Khmer Rouge underscored their malevolence by pretending not to have a Brother Number One, issuing orders in the name of an Angkar–“organization”–as blank as the slate they tried to make of their green, haunted land.

As at the dawn of the century, Japan would argue for a different path. For the bloodied nation struggling to remake itself under strict occupation reforms, the Korean War heralded a “miracle,” not a nightmare. Over the next two decades, heavy industries transformed the boost received from American purchases during the war into an export machine, and the country racked up 10% growth rates year after year. Observers would turn to cliché to explain the boom, envisioning a population of loyal drones devoting their lives to the bottom line of Japan Inc. But the critical role played by the country’s vaunted bureaucrats was at least equally apparent. Many in the West would cry foul over their strict management of imports and support of targeted industries; much later, critics would blast a financial policy that encouraged companies to run up a terrifying mountain of debt, implicitly backed by the state.

Those in the East would find more to appreciate in the Japanese system. Asia’s authoritarian rulers could still push and pull levers when they liked: when South Korea’s Park wanted a steel mill, he overrode his advisers and built what would become the world’s biggest, at Pohang. The $800 million in Japanese aid he won for normalizing relations with Tokyo did not hurt either–any more than the flood of Japanese investment that would later revive the former subject economies of Southeast Asia. And the fundamentals of the Japanese success story required precisely what much of Asia had in abundance, high savings and cheap labor. The Tigers’ replication of that success seems, in hindsight, almost as preordained as the victory of Asia’s prewar nationalists. In China, still dizzied by the Cultural Revolution, Deng Xiaoping had only to unchain the entrepreneurial spirit of his people–and the country doubled its per-capita income in a decade.

The revolution inspired by those riches rivaled anything that came before. In countries like Indonesia, a powerful and corrupt few would gobble up a large share of the wealth; still, between 1970 and 1990, the number of Indonesians living in absolute poverty dropped from 60% to 14% of the population. As the ranks of the middle class swelled–in Thailand, Taiwan, India–so too did the scope of their demands. Refrigerators and TVs became attainable, even expected goals–then cars, computers, mobile phones. One could well imagine that the Asia envisioned by an élite few at the turn of the century had arrived.

Boosters made the logical leap and suddenly an Asian Century, too, seemed inevitable. “Asia” itself had gained a sort of currency–as a region that shared one of the most extensive and speedy transformations the world had ever seen, and not a little smugness at that accomplishment. Leaders would loudly hail the deference of their hard-working, high-saving peoples.

Spoken more quietly was the threat: that without the strongmen (and they were almost always men), the masses would be reduced to an older, more familiar want.

That those leaders would be the ones reduced stands as the great irony of the century’s close. Too much can be laid on the wave of democratization that has swept East Asia in the past decade, but the fact of it is nonetheless startling. The People Power revolution that brought down Philippine dictator Ferdinand Marcos in 1986 wrote a script almost too perfect: a nation quiescent for more than a decade would rise and, relatively peacefully, replace their leader with his assassinated rival’s widow. Reforms elsewhere would still depend upon central figures: Chiang‘s son Ching-kuo in Taiwan, Roh Tae Woo in South Korea, and in Thailand the revered King Bhumibol, who curbed Bangkok’s generals in 1992. But everywhere they reflected the pressure of a spreading individualism–of populations emboldened by new influences and more stable living conditions to demand a say in their governing.

Not only strongmen would decry the change. Traditionalists would seize on an influx of usually alliterative evils–MTV, McDonald’s, miniskirts–to prove that the region had not come into its own, only sold out to a West bent once again upon conquest. But they ignored the timbre of the transformation, the way in which Western culture was morphed by contact with the East. Cultures are both less permeable and more resilient than their defenders usually think. That Asia’s have changed does not mean they are any less Asian. It is no accident, after all, that karaoke has become the region’s most visible cultural element outside the subcontinent and one of its few unifying factors: instead of isolating the singer as a star, the microphone actually confirms him or her, reassuringly, as a member of the group.

On the other hand, neither has the region found a singularly “Asian” way of being (not even Japan’s). In fact, talk of Asian values and an Asian Century has fallen to a whisper since the cascading devaluations of 1997 shamed the region’s economic model. Those few patriarchs who cling to such rhetoric–Singapore’s Lee, Malaysia’s Mahathir Mohamad–now seem out-of-step, for such predictions ignore the fact that the history of Asia this century has been one of becoming. Towering figures may have helped that process along. But if the century heralded by the great men does come, the “Asia” thus ushered in, after 100 years of making and unmaking and remaking, will almost certainly not be what they once imagined.

TIME staff writer Nisid Hajari covers Asian politics and culture

February 27, 2009

Asian nations cooperate to defend currencies- 23 February, 2009

Filed under: châu Á,ngân hàng,Uncategorized — ktetaichinh @ 9:37 pm

the Banker

A group of 14 Asian nations are to form a $120bn foreign exchange pool that could be used to defend currencies hit by the fallout from global financial crisis. Finance ministers from Japan, China, South Korea and 10 Southeast Asian nations agreed to the fund at a summit in Phuket, Thailand.

The fund is 50% bigger than the one proposed last May, and represents a significant expansion of the current Chiang Mai Initiative, which allows only bilateral currency swaps.

The fund is part of a strategy to shield currencies from the sorts of speculative attack that depleted the reserves of Thailand, South Korea, and Indonesia in the Asian financial crisis a decade ago. Eight out of the 10 most regularly traded Asian currencies (ex-Japan) have fallen against the dollar in the past 12 months: the Korean won has plummeted by 37% and the Indonesian rupiah by 24%.

Affected currencies are at risk of further losses as developed nations cut overseas investment and investors sell down their holdings of emerging markets stock and bond holdings. Ministers at the meeting admitted that capital flows into the region have already decreased due to global de-leveraging, and many are worried that this will significantly undermine growth prospects.

During the Asian financial crisis, Indonesia, Thailand and South Korea were forced to spend most of their currency reserves trying to prop up exchange rates, and then to turn to the IMF for $100bn bailout. As a result, the three governments were forced to cut spending, raise interest rates and sell state-owned companies.

Since then, Japan, China and South Korea together with the Asean economies have amassed more than $3,600bn of foreign-currency reserves, about half of the global total. But many are already dipping into reserves to support their currencies. Malaysia’s gold and foreign-currency reserves fell to $91.3 billion in January from $123.7 billion last August. Indonesia’s reserves have fallen by $10 billion to $50.9 billion between July 2008 and the end of January 2009.

No date has been set for the completion of the new pool, and many fear that ironing out the final details will take some time – it has taken 10 years for the nations in question to reach this point. In the interim, many are expanding or establishing new bilateral currency swap agreements. For example, this month, China and Malaysia agreed on a three-year 80 billion-yuan ($11.7 billion) currency swap and Japan and Indonesia agreed to boost their existing bilateral agreement from $6bn to $12bn.

It is thought that the new currency pool may break the link between borrowings and the conditions built into IMF lending programs, which currently applies to 80% of borrowing under existing bilateral currency swaps. Under the new initiative, more funds may be tapped before the borrower is subject to such measures, the finance ministers said.

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