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Asian Monetary Fund (AMF) PowerPoint PPT Presentation

Asian Monetary Fund (AMF) Presented by Yun Michelle Wang Xiong Zhang Bob Hai-Yuan Cheah Asian Monetary Fund (AMF ) Background Lessons from East Asia crisis IMF is not countable. International financial rescue is not dependable. Regional financial co-operation is important

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Asian Monetary Fund (AMF)

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Asian monetary fund amf l.jpg

Asian Monetary Fund(AMF)

Presented by

Yun Michelle Wang

Xiong Zhang

Bob Hai-Yuan Cheah


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Asian Monetary Fund (AMF)Background

  • Lessons from East Asia crisis

    • IMF is not countable.

    • International financial rescue is not dependable.

    • Regional financial co-operation is important

    • Self-help is necessary

    • Determine our own destiny

    • Get prepared


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Asian Monetary Fund(AMF)Background

  • Initial proposal

    • Aug. 1997, Japan, and several ASEAN (Association of Southeast Asian Nations) countries, proposed AMF.

    • To take up some IMF activities, e.g., surveillance.

  • Step to AMF: ASEAN Surveillance Process

    Established in Manila, 1998

    ASEAN plus Three: China, Japan, and South Korea.

    • Strengthen policy dialogues and information sharing

    • Monitor economic and financial developments.

    • Enhance self-support.

    • Provide closer economic peer review.


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Asian Monetary Fund(AMF)Background

  • IMF reaction for AMF

    • Strong opposition

      • moral hazard

      • competing with the IMF , double standards.

    • AMF never takes off


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Asian Monetary Fund (AMF)Background

  • Why ? –It’s premature

    • Controversial opinions

      • AMF was aimed at complementing IMF.

      • AMF should operate separately. 

    • Lack essential elements

      • Expertise—it takes a long time to build up.

      • Clout – it’s not easy to actually solve problems.

      • Credibility -- financial market is global.

    • Government’s interests differ

      • It’s important to increase voting power at the IMF.

      • It’s doubtful to contemplate a United States of Asia.


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Asian Monetary Fund (AMF) Background

  • Activities to promote AMF

    • June 2003, The ABF (Asian Bond Fund) was launched in Bangkok.

    • May, 2005, China, Japan, the Republic of Korea and ASEAN have agreed to expand their network of bilateral currency swaps.

    • The Chiang Mai Initiative has the potential to become an AMF


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Asian Monetary Fund (AMF)Chiang Mai Initiative

  • The Asian Development Bank annual meeting in Northern Thai city on May 6, 2000

  • Asean + 3 figure out Asian regional framework for financial cooperation

  • An expanded Asean Swap Arrangement

    • Total amount of the facility was $1 billion

  • The agreement to set up a web of bilateral pacts to swap and repurchase central-bank reserves

    • Bilateral Swap Arrangement can be drawn for 90 days

    • The first BSA drawing may be renewed seven times


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Asian Monetary Fund (AMF)CMI (Continued)

  • Bilateral Swap Agreement enables parties to borrow the equivalent of between $1 billion and $3 billion in foreign exchange reserves from partners

  • The currency swaps are in principle to be done between US dollar and local currencies

    • Swap between Japan and China is done in yen and renminbi and is two-way

    • Swap between China and Korea is done in renminbi and won and is two-way

  • 90% are linked to IMF conditionality


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Asian Monetary Fund (AMF)CMI (Continued)

  • The first step of monetary integration in East Asia

  • Their own liquidity fund would provide the region with its own emergency finance facility


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Asian Monetary Fund (AMF)Roadblocks

  • Opposition by United State, European Union, and IMF

  • Uneasy relationship between China and Japan complicates political and security issues

  • The ambitions of Asia’s two largest economies prevent either one from taking the lead on financial issues.

  • South Korea is unwilling to play second fiddle to either Japan or China


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Asian Monetary Fund (AMF)Roadblocks (Continued)

  • Japan wishes to maintain its status in the region, while at the same time not provoking criticism in Washington

    • Not a widely accepted player in Asia

  • Unclearly ultimate objectives of CMI arrangement

  • Difficult to coordinate the activities of the CMI with other regional arrangements

    • Such as APEC

  • The regional actors still face a number of difficulties in transforming the BSA’s in to an AMF


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Asian Monetary Fund (AMF)Other efforts

  • Mushrooming of bilateral free-trade agreement

  • In Nov. 2000 China suggested an integration: An Asean-China Free-trade area.

  • East Asian nations are growing their foreign reserves

    • South Korea’s reserves increased $20 Billion in 2000

    • China’s reserves increased $40 Billion in 2000

  • Common Asian Bond Market


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Asian Monetary Fund (AMF)The Vision

  • Creation of a European Union-type regional monetary union and common market

  • Single currency, like the Euro

    • Note: Europe needed more than 40 years of regional cooperation to realize a common currency, the Euro

  • An Asian currency unit could be realized in the next 15 years


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Asian Monetary Fund (AMF)The Question

  • Do Asian nations have the strong political will for economic integration and cooperation?

  • Yes. The Chiang Mai Initiative demonstrates a political will to forge greater financial cooperation

  • Ultimately, can China and Japan be economically integrated to provide the economic leadership? Yes/Maybe


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Asian Monetary Fund (AMF)The Plan: A Step at a Time

  • Expand network of bilateral currency swaps into an ASIAN MONETARY FUND

  • Initial step: turn bilateral agreements into multilateral accord to pool resources

  • Multilateralization of BSA, potentially become de facto Asian Monetary Fund

  • AMF pave the way for birth of an Asian Central Bank and set up of an Asian currency unit


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Asian Monetary Fund (AMF)The Challenges & Barriers

  • Political tensions derailing cooperation; perceptions of Asia as source of conflicts

  • Agreement on procedures for collective decision-making mechanism

  • Economic surveillance system to detect irregularities early and apply swift action

  • Bureaucratic structure to conduct detailed economic surveillance and policy dialogue


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Asian Monetary Fund (AMF)More Challenges & Barriers

  • Improvement in the quality, openness, transparency, and usefulness of economic data in the region

  • Reforms of lax banking supervision

  • Strengthen capital-market regulation

  • Uniform accounting standards

  • Restructure corporate governance

  • Deal with corruption issues


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Asian Monetary Fund (AMF)Meanwhile: Other Initiative

  • Creation of the Asian Bond Market

    • Ensure Asia collects more of its own savings and channels these into local investments instead of relying on borrowing from outside the region

      • Asia has one of the highest rate of savings which at present are funneled into global markets and then back to the region in the form of higher premium loans


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Asian Monetary Fund (AMF)

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