IMF backs Asean regional cooperation

The International Monetary Fund (IMF) is supportive of the Chang Mai Initiative and similar forms of regional cooperation but it stopped short of endorsing the proposed creation of the Asian Monetary Fund (AMF).

IMF director for external affairs Thomas Dawson said the idea of creating regional funds were generated in the context of the 1997 financial crisis which demonstrated the need for regional cooperation.

According to Dawson, however, much of the aspects of the envisioned regional cooperation were already moving forward under the auspices of the Chang Mai Initiative.

"There are other forms of regional financial cooperation outside of Asia, usually in the context of common currency," Dawson said. "This is something that we can support."

The so-called Chang Mai Initiative was an offshoot of the Asean Swap Arrangement to include China, Japan and Korea with the intention of assisting member countries experiencing difficulties with their balance of payment.

In order to access funds from the facility, however, the borrower has to be under the auspices of the IMF.

There have been tentative moves to formalize the Chang Mai Initiative and create the AMF, a move largely spearheaded by Japan. However, the proposal was almost immediately rejected especially by the US and the rest of the G-7 countries due to fears that it would undermine the leadership of the IMF.

Subsequent proposals expanded the AMF to include the US and other countries to form an Asia Pacific Monetary Fund (APMF) intended to provide a regional complement for the IMF.

According to Dawson, however, the IMF did not support the thinking that any region had unique requirements that would necessitate the creation of a regional monetary fund.

"While there are important differences between regions and even countries within regions, the basic elements of economic development are not unique. They are the same elements in any economy, the only differences are in the degree in which they are present or not," Dawson pointed out.

The criticisms against the IMF, especially during the 1997 crisis, on the other hand, stemmed from its inability to anticipate the contagion and wield its gigantic bureaucracy to be able to act quickly.

The AMF was seen as a possible institution that would be more immediately responsive to the region’s concerns, especially in the institution of an early warning system.

In the meantime, Japan has concluded several currency swaps under the Chang Mai Initiative, concluding a dollar-won swap arrangement with South Korea of up to $2 billion on July 4, 2001, in addition to the $5 billion swap arrangement under the New Miyazawa Initiative.

Japan also concluded a dollar-baht swap arrangement of up to $3 billion with Thailand; a dollar-peso swap arrangement of up to $3 billion with the Philippines; a dollar-ringgit swap arrangement of up to $1 billion with Malaysia and a yen-renminbi swap arrangement up to the equivalent of $3 billion with China.