SEOUL: Asian countries must cooperate more closely to prevent excessive capital flows damaging financial market stability and overall economic growth, South Korea's finance minister said Friday.
Yoon Jeung-Hyun said it was urgent policymakers find policy measures "to mitigate the risk of excessive volatility in capital flows facing many emerging economies without negating the benefits of capital flows".
He was speaking at a meeting of financial officials from the 10-member Association of Southeast Asian Nations plus South Korea, Japan and China, convened to discuss cooperation and other issues in the post-crisis era.
Yoon said the 13 Asian countries should more than double the size of the Chiang Mai Initiative, to help the fund deal more effectively with any financial crisis that could follow sudden capital outflows.
"I believe we should expand (the initiative) to more than twice its current volume to an amount over $240 billion," he said.
The Chiang Mai Initiative currently draws upon a pool of $120 billion in foreign reserves to support a multilateral system of currency swaps that can be triggered if any member faces a currency crisis.
Foreign investors have piled huge sums of money into emerging markets in Asia -- which are seeing strong growth after the downturn -- as they are more likely to find better returns for their money than in the West.
The inflows have led Asian governments to take a series of steps to curb the flood of capital from the United States and elsewhere, which is pushing up their currencies.
South Korea in December announced plans for a levy on foreign borrowing by banks.
And in November it said it would restore a tax on foreigners buying Seoul government bonds, warning that excessive capital flows could destabilise the economy and push the won higher.
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