MANILA, Philippines -- (UPDATE 4) Southeast Asian nations, backed by Japan, China and South Korea, have agreed to set up a multibillion-dollar fund to buy toxic debt and help the region's banks hit by the financial crisis, President Gloria Macapagal-Arroyo said Wednesday.

Arroyo said the World Bank has committed to initially provide $10 billion to the fund.

In a speech Wednesday before the oath-taking of the officers of the Union of Local Authorities of the Philippines, Arroyo said the fund could be used to "recapitalize troubled financial institutions and private companies."

"The facility can be used to purchase what the bankers call toxic assets and recapitalize troubled financial institutions and private companies," she said.

Arroyo said the 10-member Association of South East Asian Nations (ASEAN), its so-called dialogue partners of Japan, China and South Korea, the Asian Development Bank (ADB) and the International Monetary Fund (IMF) could also contribute to the fund.

Arroyo said the plan was drawn up in Washington last week where Finance Secretary Margarito Teves met with ASEAN economic ministers on the sidelines of the annual IMF and World Bank meetings. Representatives from the ADB also attended the meetings.

"They reached an understanding to establish a standby facility to assist ASEAN countries who had severe liquidity problems. Thank God we're not one of them yet," said Arroyo.

She said the World Bank and the IMF, with the help of ASEAN finance ministers and central bank governors, would draft the implementing mechanism for disbursing funds, hopefully with minimal conditionalities.

But analysts said there was no immediate need to recapitalize banks or companies in Asia as few were exposed to the crisis in the West, although Asian financial markets have been badly hit by contagion.

Still, an emergency fund could help avert any potential crisis and could also provide a boost to confidence, they said.

"We are not forecasting a crisis scenario where governments will have to recapitalize," said Ritesh Maheshwari, a primary credit analyst at Standard & Poor's rating agency, told Reuters in Singapore.

"There is no such pressing need in Asia yet for such a fund. But it is a good development as it will prepare Southeast Asian nations to better take care of any banking problems that may occur."

Meanwhile, the Philippine government will accelerate infrastructure projects and provide an "expatriate livelihood support fund" that will "serve as buffer fund for expatriates who might be displaced" by the economic slowdown, the President said.

Arroyo also said the "comprehensive infrastructure program" would expand the existing development plans and would be funded by the national government, official development assistance, local governments, government proceeds provided by laws like the Electric Power industry Reform Act, and public-private sector partnerships.