CEBU, Philippines, Jan. 13 (Xinhua) -- Leaders of the Association of Southeast Asian Nations (ASEAN) endorsed to the Paris Club of world lenders Saturday the Philippine proposal for debt-equity arrangements to fund projects in the pursuit of the Millennium Development Goals (MDG) of the United Nations.

    In a statement to this effect, the ASEAN leaders cited the need to formulate measures for debt management in relation to the global war on poverty "while recognizing the legitimate rights and prerogatives of lenders".

    "We agreed that subject to mutual consent of creditors and debtors, formulating modes to temporarily deploy debt service payments to finance social overhead capital may at times be necessary and beneficial," the statement said.

    Under the Philippine proposal which will involve 102 of the world's poorest countries, borrowers may deploy half of their debt service payments to fund reforestation, pollution control, mass housing, information technology, health care, clean water or other UN MDG projects.

    The projects would then issue equity to the original creditors in lieu of the debt service payments.

    "The loans would still effectively be honored while the debt service resources would be kept available for funding the war on poverty," the statement explained.

    In a unanimous decision last December, the UN General Assembly took note of the Philippine proposal at the Asian Inter-parliamentary Organization (AIPO) and similarly endorsed it to the Paris Club for consideration.

    The Paris Club is an informal group of official creditors whose role is to find coordinated and sustainable solutions to the payment difficulties experienced by debtor nations.

    Paris Club creditors agree to rescheduling as a means of providing a country with debt relief through a postponement and, in the case of concessional rescheduling, a reduction in debt service obligations.

    The ASEAN leaders noted in their statement that the concept of the Philippine proposal has been put into practice in the case of the recent Pakistan-Norway debt-for-MDG program.

    "We, therefore, issue this call for creative and responsible international debt management in the context of the UN MDG," the statement said.