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The Asian Monetary Fund Reborn?Implications of Chiang Mai Initiative Multilateralization William W. Grimes (bio) Keywords Chiang Mai Initiative, Asean +3, Asian Monetary Fund, IMF [End Page 79] Executive Summary This article analyzes the current implications and likely future course of Chiang Mai Initiative Multilateralization (CMIM), which some observers have argued is a major step toward the creation of an Asian monetary fund (AMF) that would be fully autonomous from the IMF. Main Argument Like the previous version of the Chiang Mai Initiative (CMI), CMIM seeks to provide an efficient and credible mechanism for offering emergency liquidity to ASEAN +3 economies in currency crises. "Multilateralization" in this case means the creation of formal reserve pooling arrangements, a weighted voting system for disbursement of funds, and enhancement of surveillance capabilities. CMIM differs in fundamental ways from the AMF concept. Much attention has been given to the establishment of weighted voting for disbursement of funds, but in fact CMIM maintains the CMI's existing "IMF link," whereby crisis countries are able to access the bulk of their line of emergency credit only after having already entered into negotiations with the IMF for a standby agreement. Technocratic advocates of delinking CMIM from the IMF have looked to surveillance measures within ASEAN +3 to replace IMF surveillance and conditionality. In contrast, this article argues that the need for third-party enforcement through the IMF link arises from the politics of Sino-Japanese rivalry and therefore cannot be eliminated through institutional measures. Policy Implications • Though East Asian economies avoided currency crises during the 2008–10 global financial crisis, the crisis offers many lessons. The near-crisis in South Korea, which was managed mainly through a temporary swap agreement with the U.S. Federal Reserve, revealed gaps in CMI and CMIM coverage. The 2010 Greek crisis demonstrated anew the dangers of depending on regional surveillance and enforcement mechanisms for financial and currency stability. • U.S. interests are not threatened by CMIM, even though the process specifically excludes the U.S. from direct involvement, because the institutional need for the IMF link ensures for the time being that CMIM will remain nested within global institutions. • The U.S. should engage ASEAN +3 governments in ongoing regional and global discussions of how currency crises can best be prevented and managed. [End Page 80] Since 2000, East Asia has seen an efflorescence of regionally based economic initiatives touching on trade, investment, financial regulation, and prevention of currency crises. The growing literature on these developments no longer asks whether regionalism is happening or whether it will be consequential. Rather, the debate has shifted to trying to understand the nature of regional cooperation and its political and economic causes and consequences.1 There is considerable variation across issue areas with regard to the shape and membership of regional initiatives. Trade cooperation, with the notable exception of the ASEAN Free Trade Area (AFTA) and assorted AFTA +1 agreements, has been primarily bilateral in nature, leading to a bewildering "noodle bowl" of cross-cutting free trade agreements (FTA) with varied rules of origin.2 Cooperation on cross-border investment, likewise, has been primarily bilateral through investment treaties and frameworks for agreement, many of them attached to FTAs. Limited subregional agreements such as within the Association of Southeast Asian Nations (ASEAN) and the new trilateral investment treaty among Japan, China, and South Korea tend only to confirm the fragmented and competitive nature of "regional" investment cooperation. Only in finance and currency-related issue areas has cooperation among East Asian economies actually developed on a regional basis, with ASEAN +3 as the main arena.3 The Chiang Mai Initiative (CMI), which was designed to provide dollar liquidity for countries experiencing currency crises, is by far the most advanced component of East Asian financial regionalism. The CMI is the only ASEAN +3 initiative that commits participating states to significant and reciprocal financial obligations. Although CMI lending is formally supplemental to International Monetary Fund (IMF) funds, the [End Page 81] initiative's origins in debates over the role of the United States and IMF in crisis management during the 1997–98 Asian financial crisis have led to an active debate among scholars, policymakers, and opinion leaders over...
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