ECON 490 Cary Chan Lynna Pham

Association of Southeast Asian Nations 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 Cary

Members 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) Cary

ASEAN+3 Background Affected by the Asian Financial Crisis of 1997 Goal of meetings:  Accelerate the development of regional growth  Encourage private sector participation  Continue structural reform  Improve monetary and financial cooperation  Strengthen coordination and cooperation Cary

Formation of ASEAN + 3 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” Lynna

The Chiang Mai Initiative (CMI) Network of bilateral swap agreements between ASEAN + 3 Held over $729 billion in international reserves Goals  1) Monitor capital flow  2) Regional surveillance  3) Develop currency swap networks  4) Train personnel Lynna

Swap Agreements Currency swap:  An exchange of payment flows denominated in a different currency Lynna

Swap Agreements Benefits:  Hedging exchange rate and interest rate risk  No conversion fees Contributions:  $60 million for new members  $150 million for the established members Lynna

Results 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) Lynna

Shortcomings Retaining the IMF link Moral hazard No unified system or comprehensive regional databases Lack of historical experience in economic and political integration Lynna

Future February 2009: ASEAN+3 agreed to set $120 billion in funds ASEAN growth is expected to slow sharply Lynna

Conclusion Need to work on deficiencies Consensus among members is difficult Planning for future development and crisis prevention Lynna

References iie3381.pdf a.htm Daniels, Joseph P., and David D. VanHoose. Global Economic Issues and Policies with Economic Applications. New York: South-Western College Pub, 2003.