Finance ministers from China, Japan, South Korea and the ten
Asean states, yesterday agreed to moves that will make their
$120 billion multilateral currency swap mechanism
More than ten years after the system was first established,
the finance ministers agreed to set up an Asean+3 Macroeconomic
Research Office (Amro) in Singapore to provide monitoring and
analysis of regional economies to the Chiang Mai Initiative
Multilateralized (CMIM). This has been the missing link in the
CMIM process up to now.
This is an important step in the implementation of the
CMIM, said Chinas finance minister Xie Xuren who
co-chaired yesterdays talks, held on the sidelines of the
ADB annual meeting,
The move comes at a time of global financial turbulence
caused by the Greek crisis, and is seen as timely because of
the risks of contagion spreading from the eurozone to Asia and
A network of bilateral currency swaps known originally as
the Chiang Mai Initiative (CMI) was agreed on by the Asean+3
ministers in 1999, two years after Asia was plunged into a
currency crisis, as a buffer against future shocks.
It was multilateralized two years ago, and
became a centrally-operated pool of regional currencies. But it
could not operate without an economic surveillance function,
which it will now have through the Amro.
Thai finance minister Korn Chatikavanij told Emerging
Markets that Asia is now
relatively well insulated from concerns about
the stability of the recovery in the eurozone. He pointed to
the CMIM as a measure that would have helped resolve the
deadlock in Europe over a bailout for Greece.
If a crisis was to occur, we wouldnt need to go
through the long and arduous process that the eurozone has been
going through, in order to find a solution, Korn
The 13 ministers warned meanwhile that, despite the strong
rebound in Asian economies, downside risks to the overall
global economic recovery remain.
Ample liquidity in the global market [is] driving up
asset prices and increasing inflationary pressures, they
noted. Sovereign debt risks have precipitated renewed global
risk and triggered destabilising international capital
flows into Asia, they said.
The activation of Amro was viewed as a major achievement,
Xie indicated. This will enable the CMIM to begin its core
functions of addressing balance of payments and
short-term liquidity difficulties in the region.
Supplementing the work of existing financial institutions
such as the IMF, the CMIM is a multilateral currency swap
arrangement which covers all Asean+3 members, they
Establishment of Amro in Singapore will meanwhile
contribute to the early detection of risks, swift
implementation of remedial actions and effective decision
making of the CMIM, the ministers said in their
post-meeting communique. The unit is expected to begin
operations early next year.
The ministers also announced the setting up of a $700
million Credit Guarantee and Investment Facility (CGIF) to
support development of local-currency bond markets in Asia, and
they established a task force to identify future priority
areas of financial cooperation in Asia.