Regional Financial Cooperation among ASEAN+3


Background

 

The Asian financial crisis of 1997-98 caused extensive damage in East Asia. This experience made the East Asian countries acutely aware of the need to promote regional financial cooperation to prevent resurgence of a crisis and to attain stable economic growth. Since then, Japan has been vigorously promoting regional financial cooperation together with the other ASEAN+3 countries. With the rapid increase in economic interdependency in East Asia, regional financial cooperation is becoming all the more important.

*ASEAN+3: 10 countries of Association of Southeast Asian Nations (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam), China, Japan, and the Republic of Korea

 

1. Chiang Mai Initiative (CMI)

Objective

 

The Chiang Mai Initiative aims to create a network of bilateral swap arrangements (BSAs) among ASEAN+3 countries to address short-term liquidity difficulties in the region and to supplement the existing international financial arrangements.

Background

 

After the Asian financial crisis, East Asian countries shared the need to promote regional financial cooperation. At the ASEAN+3 Summit in November 1999, ASEAN+3 leaders agreed to enhance “self-help and support mechanisms in East Asia” through the ASEAN+3 framework. At the ASEAN+3 Finance Ministers’ Meeting in May 2000, finance ministers agreed to promote the Chiang Mai Initiative to establish a regional financial arrangement to supplement the existing international facilities.

(Brief Chronology)

 

 1997-1998

 December 1997

 April 1999

Asian financial crisis

The 1st ASEAN+3 Summit (Kuala Lumpur, Malaysia)

The 1st ASEAN+3 Finance Ministers’ Meeting (Manila, Philippines)

 

 November 1999

The 3rd ASEAN+3 Summit (Manila, the Philippines)
−Leaders agreed to enhance “self-help and support mechanisms in East Asia.”
(Joint Statement on East Asia Cooperation)

 

 May. 2000

The 2nd ASEAN+3 Finance Ministers’ Meeting (Chiang Mai, Thailand)
−Finance ministers agreed to promote the Chiang Mai Initiative.
(Joint Ministerial Statement of the Second ASEAN+3 Finance Ministers’ Meeting)

 

 May. 2004





 May 2005
 

 

 

 


 
 May 2006

The 4th ASEAN+3 Finance Ministers’ Meetings in May 2004 (Jeju, Korea) −Finance ministers agreed to explore the ways of enhancing its effectiveness of CMI.
(Joint Ministerial Statement of the Seventh ASEAN+3 Finance Ministers’ Meeting)

The 8th ASEAN+3 Finance Ministers’ Meeting in May 2005 (Istanbul, Turkey)
−Finance ministers agreed to take the following measures to enhance the effectiveness of the CMI: (1) integration and enhancement of ASEAN+3 economic surveillance into the CMI framework, (2) clear - defining of the swap activation process and the adoption of a collective decision-making mechanism, (3) significant increase in the size of swaps, and (4) improvement of the drawdown mechanism.
(Joint Ministerial Statement of the Eighth ASEAN+3 Finance Ministers’ Meeting)

The 9th ASEAN+3 Finance Ministers’ Meeting (Hyderabad, India)
Finance ministers agreed to complete the strengthening of the regional liquidity support network; Substantial progress of the CMI has been made such as adoption of collective decision-making procedure for the swap activation and launch of the Group of Experts (GOE) and the Technical Working Group on Economic and Financial Monitoring (ETWG) to explore the ways for further strengthening surveillance capacity in East Asia.
Also, finance ministers agreed to task the Deputies to set up a “new task force” to further study various possible options towards an advanced framework of the regional liquidity support arrangement (CMI multilateralization or Post-CMI).
(
Joint Ministerial Statement of the Ninth ASEAN+3 Finance Ministers’ Meeting)

 

Network of BSAs under the CMI (after inurement of the 3rd BSA between Japan and Thailand)  【PDF

 

 Total amount: US$83 billion (16 arrangements)

 

 BSAs were concluded among eight countries: China, Indonesia, Japan, the Republic of Korea, Malaysia, the Philippines, Singapore, and Thailand.
 

 

 Japan’s BSAs under the CMI

Recent Progress

 

At the 10th ASEAN+3 Finance Ministers’ Meeting in May 2007 (Kyoto, Japan), finance ministers unanimously agreed in principle that a self-managed reserve pooling arrangement governed by a single contractual agreement is an appropriate form of CMI multilateralisation, proceeding with a step-by-step approach. Finance ministers instructed the Deputies to carry out further in-depth studies on the key elements of the multilateralisation of the CMI including surveillance, reserve eligibility, size of commitment, borrowing quota and activation mechanism, while reiterating their commitment to maintain the two core objectives of the CMI, i.e., (i) to address short-term liquidity difficulties in the region and (ii) to supplement the existing international financial arrangements.
(Joint Ministerial Statement of the Tenth ASEAN+3 Finance Ministers’ Meeting)

 

2. Economic Review and Policy Dialogue (ERPD)

Objective


 

Effective economic review and policy dialogue would contribute to the prevention of financial crises through the early detection of irregularities and the swift implementation of remedial policy actions. It will also lay a foundation for providing immediate assistance, such as the CMI, in the event of a crisis.
ASEAN+3 countries have been conducting Economic Review and Policy Dialogue (ERPD) at the Ministers’ level annually and at the Deputies’ level twice a year to discuss economic and financial developments in the region.

Recent Progress


 

At the 9th ASEAN+3 Finance Ministers’ Meeting in May 2006 (Hyderabad, India), finance ministers agreed to launch the Group of Experts (GOE) and the Technical Working Group on Economic and Financial Monitoring (ETWG) to explore the ways for further strengthening surveillance capacity in East Asia. While welcoming the initial progress made by the GOE and the ETWG, finance ministers at the 10th Meeting in May 2007 (Kyoto, Japan) further agreed to explore ways on how to link these activities with strengthened surveillance within the region.
(Joint Ministerial Statement of the Tenth ASEAN+3 Finance Ministers’ Meeting)
 

3. Asian Bond Markets Initiative (ABMI)
 

Objective

 

The Asian Bond Markets Initiative aims to develop efficient and liquid bond markets in Asia, enabling better utilization of Asian savings for Asian investments. Activities of the ABMI focus on the following two areas: (1) facilitating access to the market through a wider variety of issuers and types of bonds, and (2) enhancing market infrastructure to foster bond markets in Asia.

Background

 

Because of the underdevelopment of capital markets, Asian countries have depended on short-term foreign currency-denominated financing. This causes “maturity” and “currency” mismatches, making the region vulnerable to volatility in short-term capital movements. These risks were brought to the surface by the Asian financial crisis in 1997-98. Developing bond markets in the region is a very effective way to solve such problems and to significantly reduce “currency” and “maturity” mismatches in regional financing. At the 6th ASEAN+3 Finance Ministers’ Meeting in August 2003 (Manila, the Philippines), finance ministers agreed to promote the Asian Bond Markets Initiative. 

 

(Joint Ministerial Statement of the Sixth ASEAN+3 Finance Ministers’ Meeting)
(Chairman’s Press Release on the Asian Bond Markets Initiative)
 

Recent Progress

 

 

Issuance of Korean Collateralized Bond Obligations (CBO) (“Pan-Asia Bond”) with guarantee by the Japan Bank for International Cooperation (JBIC) and the Industrial Bank of Korea (IBK).
(Press release: Joint Efforts by the Ministry of Finance of Japan and the Ministry of Finance & Economy of the Republic of Korea to Promote Collateralized Debt Obligations Markets in Asia)

 

 

Issuance of  local currency-denominated bonds by Japanese subsidiaries in Thailand, Malaysia and Indonesia with a partial credit guarantee from the JBIC and Nippon Export and Investment Insurance (NEXI).

 

 

Issuance of local currency-denominated bonds by the Japan Bank for International Cooperation (JBIC), World Bank, Asian Development Bank (ADB) and the International Finance Corporation (IFC) in Malaysia, Thailand, China, and the Philippines.

 

 

Information dissemination through  the Asian Bonds Online (ABO) at the ADB.

 

(Progress in the ABMI is outlined in the ABMI progress reports which are submitted by the ABMI Working Groups. Those progress reports are available at the the Asian Bonds Online (ABO) .)

 

At the 10th ASEAN+3 Finance Ministers’ Meeting in May 2007 (Kyoto, Japan), finance ministers endorsed undertaking of the following new studies: Exploring New Debt Instruments for Infrastructure Financing, Promotion of Securitisation of Loan Credits and Receivables, and Promotion of Asian Medium Term Note (MTN) Programme.

(Joint Ministerial Statement of the Tenth ASEAN+3 Finance Ministers’ Meeting)


 

4. Research Group

Objective

 

The Research Group was proposed by Japan at the Informal ASEAN+3 Finance and Central Bank Deputies’ Meeting in November 2002, and agreed among ASEAN+3 in August 2003.The Research Group aims to explore the ways to further strengthen financial cooperation and promote financial stability in the region by soliciting academic input from researchers and research institutes in ASEAN+3 countries. (Reports of ASEAN+3 Research Group [2003/2004 – 2005/2006], all reports are available at the official website of the ASEAN Secretariat)

Research Themes

 

-

In 2006/07:

(1)

(2)

Toward Greater Financial Stability in the Asia Region: Exploring Steps to Create Regional Monetary Units
Financial Conglomeration in the East Asian Region: Recent Trends and Implications for Regional Financial Market Development
 

 

-

New themes for 2007/08:

(1)
(2)

Development of Database on Corporate Credit Information
Development of Capital Market to Widen and Diversify Small-Medium Enterprises (SME) Financing in the East Asian Region

5. Monitoring of Short-Term Capital Flow

 

At the 4th ASEAN+3 Finance Ministers’ Meeting in May 2001 (Honolulu, USA), finance ministers agreed to exchange data on capital flows bilaterally among ASEAN+3 on a voluntary basis to facilitate effective policy dialogue. Japan has been exchanging data with the Republic of Korea, the Philippines, Thailand, Indonesia, and Viet Nam.
(Joint Ministerial Statement of the Forth ASEAN+3 Finance Ministers’ Meeting)


Minstry of Finance [International Finance]

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