Part 1 of 2: Lessons from E. Asian Financial Cooperation<\/p>\n
Makmur Keliat, Jakarta<\/p>\n
There are two official documents we could refer to in tracing
\nthe idea of financial cooperation in Southeast and East Asia. The
\nfirst document can be seen in the Terms of Understanding on the
\nEstablishment of the ASEAN Surveillance Process (ASP), signed in
\nNew York in October, 1998.<\/p>\n
The second appeared in May 2000 after the ASEAN+3 Finance
\nMinisters Meeting in May 2000 in Chiang Mai, Thailand. Popularly
\nknown as the Chiang Mai Initiative, ASEAN+3 (Japan, China and
\nSouth Korea) reached an agreement to establish a regional
\nfinancing arrangement to supplement existing international
\nfacilities and expand ASEAN Swap Arrangements (ASA) by including
\nthe members of the plus three group.<\/p>\n
In essence, the basic objective of the ASP was to provide a
\nforum for policy makers to exchange information on macroeconomic
\npolicy and to improve transparency. The ASP was designed to
\nprevent a recurrence of the financial crisis and to enhance the
\nsurveillance process already employed by the IMF.<\/p>\n
The mechanisms for surveillance are conducted on the basis of
\npeer review during the twice yearly ASEAN Finance Ministers
\nMeeting. After the establishment of the ASEAN+3 process in 1999,
\nthere have been ongoing efforts to expand the surveillance
\nprocess by including Japan, China and South Korea.<\/p>\n
Different from the ASP, the Chiang Mai Initiative has been
\nprimarily aimed at providing liquidity support for countries
\nfacing insolvency problems (countries with insufficient foreign
\ncurrency to meet their obligations). It is estimated that the
\ntotal amount of financial resources available through the ASA
\nframework has expanded to US$50 billion from the level of $200
\nmillion in 1997. Member countries facing insolvency can utilize
\nup to twice their contributions unconditionally, to be repaid
\nwithin six months and with the possibility of rolling over for a
\nmaximum of six months.<\/p>\n
However, this financial support facility cannot be utilized
\nfreely. The conditionality has already been put in place that
\nonly 10 percent of the agreed amount can be utilized without any
\nlinkage to IMF assistance for 180 days. To put it in other words,
\nif member countries want to utilize more than 10 percent, then
\nthey have to be put under the IMF program first.<\/p>\n
In addition to the ASP and ASA schemes, Japan has also taken a
\nleading role in evolving financial cooperation in East Asia. In
\nSeptember 1997, the country raised the idea of establishing an
\nAsian Monetary Fund (AMF) with proposed total funding of $100
\nbillion.<\/p>\n
The idea of establishing an AMF was seen as vital to protect
\nregional currencies from speculative attacks in the future. Japan
\nwas designed to become the main financial provider since the
\ncountry had pledged to contribute half of its original proposed
\nfunding, with the rest provided by China and Singapore. However,
\nthe proposal was never realized because of U.S. opposition. One
\nyear later, in 1998, Japan again put forward the idea of
\nfinancial cooperation with the so-called Miyajawa initiative.<\/p>\n
Distinct from the AMF, however, the Miyajawa initiative was an
\naid package designed specifically for countries badly affected by
\nthe financial crisis in Southeast Asia. The total figure of aid
\ndesigned to be channeled through the Miyajawa plan amounted to
\n$30 billion.<\/p>\n
Another difference is that while the AMF was opposed by the
\nU.S., the Miyajawa plan gained strong support from the U.S.,
\nother G-7 countries and international economic agencies such as
\nthe IMF. The reason behind this support is not difficult to
\nexplain. While the AMF was to be funded primarily by Japan on a
\nbilateral basis, the Miyajawa plan involved multilateral
\ncooperation, including from the U.S.<\/p>\n
The writer is head of the Center for East Asian Cooperative
\nStudies at the Department of International Relations, School of
\nSocial and Political Sciences, University of Indonesia.<\/p>",
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