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Regional Financial Cooperation among ASEAN+3


Background

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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

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1. Chiang Mai Initiative (CMI)

Objective

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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

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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 gself-help and support mechanisms in East Asiah through the ASEAN+3 framework. At the ASEAN+3 Finance Ministersf 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)

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 1997-1998

 December 1997

 April 1999

Asian financial crisis

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

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

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 November 1999

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

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 May. 2000

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

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 May. 2004





 May 2005
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 May 2006

The 4th ASEAN+3 Finance Ministersf 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 Ministersf Meeting)

The 8th ASEAN+3 Finance Ministersf 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 Ministersf Meeting)

The 9th ASEAN+3 Finance Ministersf 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 gnew task forceh to further study various possible options towards an advanced framework of the regional liquidity support arrangement (CMI multilateralization or Post-CMI).
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Joint Ministerial Statement of the Ninth ASEAN+3 Finance Ministersf Meeting)

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

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@Total amount: US$83 billion (16 arrangements)

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

Recent Progress

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At the 10th ASEAN+3 Finance Ministersf 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 Ministersf Meeting)

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2. Economic Review and Policy Dialogue iERPDj

Objective


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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 Ministersf level annually and at the Deputiesf level twice a year to discuss economic and financial developments in the region.

Recent Progress


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At the 9th ASEAN+3 Finance Ministersf 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 Ministersf Meeting)
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3. Asian Bond Markets Initiative (ABMI)
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Objective

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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

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Because of the underdevelopment of capital markets, Asian countries have depended on short-term foreign currency-denominated financing. This causes gmaturityh and gcurrencyh 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 gcurrencyh and gmaturityh mismatches in regional financing. At the 6th ASEAN+3 Finance Ministersf Meeting in August 2003 (Manila, the Philippines), finance ministers agreed to promote the Asian Bond Markets Initiative.@

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(Joint Ministerial Statement of the Sixth ASEAN+3 Finance Ministersf Meeting)
(Chairmanfs Press Release on the Asian Bond Markets Initiative)
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Recent Progress

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Issuance of Korean Collateralized Bond Obligations (CBO) (gPan-Asia Bondh) 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)

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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).

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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.

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

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(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) .)

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At the 10th ASEAN+3 Finance Ministersf 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 Ministersf Meeting)


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4. Research Group

Objective

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The Research Group was proposed by Japan at the Informal ASEAN+3 Finance and Central Bank Deputiesf 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

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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
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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

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At the 4th ASEAN+3 Finance Ministersf 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 Ministersf Meeting)


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