ECON 490
Cary Chan
Lynna Pham
Association of Southeast Asian
Nations
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Established in August 8, 1967
First summit in Feb 1976
ASEAN Free Trade Area in 1992
First meeting of ASEAN + 3 in Dec 1997
ASEAN charter to give 10 member
states a legal identity in Nov 2007
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Members
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Official language: English
10 different currencies
Original members (‘67): Indonesia,
Malaysia, the Philippines, Singapore
and Thailand
Newer members: Brunei (’84),
Cambodia (’99), Laos (’97),
Myanmar(’97), and Vietnam (’95)
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ASEAN+3 Background
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Affected by the Asian Financial Crisis of
1997
Goal of meetings:
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Accelerate the development of regional growth
Encourage private sector participation
Continue structural reform
Improve monetary and financial cooperation
Strengthen coordination and cooperation
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Formation of ASEAN + 3
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Realization of the need for policy
coordination
Rejection of proposed Asian Monetary
Fund by the US and the IMF
Initially for “balance of payments
support” to broader goal of “short-term
liquidity problems”
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The Chiang Mai Initiative (CMI)
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Network of bilateral swap agreements
between ASEAN + 3
Held over $729 billion in international
reserves
Goals
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1) Monitor capital flow
2) Regional surveillance
3) Develop currency swap networks
4) Train personnel
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Swap Agreements
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Currency swap:
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An exchange of
payment flows
denominated in a
different currency
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Swap Agreements
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Benefits:
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Hedging exchange rate and interest rate
risk
No conversion fees
Contributions:
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$60 million for new members
$150 million for the established members
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Results
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More interdependence
Increase in regional trade and
investment
ASEAN countries and partners were
able to borrow up to 2-5 times the
quoted amount from the IMF (multiple
swaps)
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Shortcomings
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Retaining the IMF link
Moral hazard
No unified system or comprehensive
regional databases
Lack of historical experience in
economic and political integration
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Future
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February 2009: ASEAN+3 agreed to
set $120 billion in funds
ASEAN growth is expected to slow
sharply
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Conclusion
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Need to work on deficiencies
Consensus among members is difficult
Planning for future development and
crisis prevention
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References
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http://news.bbc.co.uk/2/hi/business/7904414.stm
http://www.reuters.com/article/politicsNews/idUSGOR0116702
0071120
http://www.aseansec.org
www.g24.org/ychp0904.pdf
www.aseansec.org/17902.pdf
www.petersoninstitute.org/publications/chapters_preview/345/
3iie3381.pdf
http://www.imf.org/external/pubs/ft/survey/so/2008/car112408a
.htm
Daniels, Joseph P., and David D. VanHoose. Global Economic
Issues and Policies with Economic Applications. New York:
South-Western College Pub, 2003.