AMF by xiaopangnv

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									        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
     Self-help is necessary
     Determine our own destiny
     Get prepared
                                  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.
                             Asian Monetary Fund(AMF)
      Background

 IMF reaction for AMF
     Strong opposition
       moralhazard
       competing with the IMF , double standards.

     AMF never takes off
                                  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.
                             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
                                    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
                                 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
                              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
                             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
                                  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
                                  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
                                 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
                              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
                            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
                             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
                      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
                                   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
 Asian Monetary Fund (AMF)




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