Page last updated at 09:48 GMT, Friday, 24 October 2008 10:48 UK

East Asia set to start $80bn fund

People walking in front of a Japanese shareprice board
Leading Japanese shares have been hit recently

East Asian nations have pledged to set up an $80bn (51.2bn; 63.6bn euros) swap scheme by mid-2009 to help protect the region from financial turmoil.

The move by the 10-member Association of Southeast Asian Nations (Asean) is backed by South Korea, China and Japan.

Countries could borrow directly from the fund in times of emergency, to boost liquidity.

The meeting comes as 43 European and Asian leaders meet in China to discuss how to tackle the financial crisis.

Risks

There are concerns that as Western economies slow, demand for goods made in Asia, which are heavily reliant on exports, could be sharply hit.

Electronics giant Sony has halved its full-year profit forecasts, while chip maker Samsung announced a 44% fall in its third-quarter profits.

On Thursday, Chinese President Hu Jintao said: "The current world economic situation is grim and complicated."

"The emerging markets and developing countries are confronted with financial risks, weak foreign demand and mounting inflation," he added

Earlier Asian shares fell sharply, with the Nikkei closing around 9.6% down, Singapore's leading index falling more than 8% and Hong Kong's Hang Seng declining 8.3%.

EU Commission President Jose Barroso said "unprecedented levels of global co-ordination" were needed to deal with the world financial crisis.

There is increasing evidence that leading countries are entering or have entered a recession.

While few details of the $80bn fund were available, earlier plans mooted in May said 80% of the capital would come from Japan, South Korea and China.

Asean nations comprise Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

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