Thirteen East and Southeast Asian countries are expected to endorse on Sunday an emergency $120 billion liquidity fund that the three largest of them finalized hours earlier to counter the economic downturn.

Japan, China and South Korea announced they had agreed on how to structure the fund and submitted the details to the full 13-country meeting.

Separately, Japan unveiled a scheme to supply up to 6 trillion yen ($61.54 billion) to support nations hit by economic crisis. These were announced on the Indonesian island of Bali, on the sidelines of the Asian Development Bank's annual meeting.

Japanese and South Korean finance ministers told reporters after their meeting with their Chinese counterpart that Beijing and Tokyo would each contribute 32 percent to the regional fund, known as the Chiang Mai Initiative.

South Korea would provide 16 percent while the rest would come from the 10-member Association of South East Asian Nations (ASEAN). The fund will give emergency balance of payments support in case any of the countries experienced the kind of capital flight that marked the Asian financial crisis of 1997/98.

The three countries have reached an agreement today, recognizing the importance of our cooperation in the region, South Korean Finance Minister Yoon Jeung-hyun told reporters.

Another South Korean finance ministry official said the ASEAN countries, which will contribute 20 percent to the fund, were likely to endorse the details and that the fund would be launched near the end of the year at the earliest.

ASEAN includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

A copy of a document being reviewed by the 13 countries, which Reuters saw, showed the three north Asian nations proposed to hold a combined 71.59 percent voting power, smaller than their 80 percent share in the fund contribution.

South Korea's finance ministry also said in a statement the 13 countries would decide on a proposed creation of a $500 million credit guarantee agency intended to help boost demand for cross-border bond issues within the region.

DEBT INITIATIVES

Recognizing the importance of the Asian regional bond market, Standard & Poor's announced on Sunday it was launching an ASEAN credit rating scale that provides additional transparency about the credit risk of borrowers active in the region.

ADB President Haruhiko Kuroda also told the bank's annual meeting on Sunday that Asia needs to develop its debt markets to better channel the region's massive savings into investments and stave off another crisis.

No discussions have yet been held on what currency the regional fund will be based on, but Japan's separate plan, announced by Finance Minister Kaoru Yosano, is aimed at promoting the use of the yen in the ASEAN region, Tokyo said.

This brings our contribution to supporting regional liquidity to about $100 billion, Yosano said.

In addition to the two initiatives, Yosano said Japan will introduce a framework to guarantee samurai bonds, yen-denominated debt issued in Japan by foreign governments and firms, up to 500 billion yen ($5.13 billion).

The ADB itself also plans to ramp up lending to about $33 billion in 2009-2010, almost a 50 percent increase over 2007-2008, to counter the crisis. The Manila-based multilateral lender is funded by donations mainly from Japan, the United States and European nations.

The economic crisis in Asia has had much more severe impact than probably we have reckoned, ADB Managing Director General Rajat Nag told Reuters.

The ADB can only be a part player in this but the impact of the crisis is very real. It's more than just economic numbers, it's a social crisis, Nag said.

The concern we have is that the crisis is putting at risk the hard-won gains of the fight against poverty.

Jong-Wha Lee, the ADB's acting chief economist, said Asian economies had probably reached the bottom of the crisis but a major recovery still hinged on the revival of demand in developed nations.

It is almost impossible for the region to return to the boom seen until 2007 before demand from the advanced economies fully regains strength, Lee said.

The ADB has forecast that Asian economies will grow only 3.4 percent in 2009, the slowest pace since the Asian financial crisis a decade earlier. It sees growth recovering to 6.3 percent next year.

(Additional reporting by David Dolan)

(Writing by Raju Gopalakrishnan; Editing by Tomasz Janowski)

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