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53. ASEAN and the Idea of an "Asian Monetary Fund"
- ISEAS–Yusof Ishak Institute
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254 Shaun Narine By: ROS Size: 7.5" x 10.25" J/No: 03-14474 Fonts: New Baskerville 53. ASEAN AND THE IDEA OF AN “ASIAN MONETARY FUND” SHAUN NARINE Reprinted in abridged form from Shaun Narine, “ASEAN and the Idea of an ‘Asian Monetary Fund’: Institutional Uncertainty in the Asia-Pacific”, in Non-Traditional Security Issues in Southeast Asia, edited by Andrew T. H. Tan and J. D. Kenneth Boutin (Singapore: Select Publishing and the Institute of Defence and Strategic Studies, 2001), pp. 227–54, by permission of the author and the publishers. EVALUATING THE CASE FOR AN ASIAN MONETARY FUND There are a number of crucial questions to address when considering the idea of an AMF. First, what would be the purpose of such a fund? Should it be a supplement to the IMF, or should it support a particular “Asian” approach to economic development ? Which country or countries would lead such an organisation? What role would ASEAN play within an AMF, and how would the establishment of such a regional economic instrument affect ASEAN’s institutional development? There are no definitive answers to these questions, but the possible answers can be analysed on the basis of political and historical evidence. First, what should be the relationship of the AMF to the IMF? The most common response to this question is that an AMF should complement the IMF, rather than compete with it. It would be, essentially, an Asian arm of the IMF — better able to act quickly, not dependent on the American Congress for its funds, but still guided by, and subordinate to, the principles and policies articulated by the IMF. The second response is more militant: the AMF should replace the IMF in Asia. It should promote and defend a model of “Asian developmental capitalism” that is more appropriate for Asia than the Anglo-American model promoted by the IMF. The following discussion addresses each of these views in turn, then considers the political obstacles that stand in the way of either AMF model becoming a reality. It also examines how the issues surrounding the AMF affect the institutional evolution of ASEAN. AMF and IMF: Working Together in Asia An AMF could fulfil various stabilising functions in an unstable world economy. An AMF would be better placed than the IMF as an early warning mechanism and watchdog over Asian economies. Most important, an AMF would be well capitalised and able to 053 AR Ch 53 22/9/03, 12:50 PM 254 ASEAN and the Idea of an “Asian Monetary Fund” 255 By: ROS Size: 7.5" x 10.25" J/No: 03-14474 Fonts: New Baskerville provide financial support to Asian states without going outside the region. However, this capacity has profound implications. How an AMF disburses its funds and its relationship to the IMF is of critical importance in determining its effect on the world economy. The argument that an AMF should complement and be subordinate to the IMF is widely promoted by analysts in and outside the region.1 Ramakishen Rajan notes at least six good reasons to create an AMF (beyond those noted above), although there is some overlap among the six.2 First, past economic crises have been regional in nature, and the bailout packages organised by the IMF have been heavily financed by regional powers. Thus having a regional body to coordinate such rescue is not a great departure from established practice and increases efficiency. Second, there is an East Asian demand for a regional economic facility, and the resources to fulfil this demand are available. Third, an AMF can complement other East Asian efforts to facilitate regional economic development and interaction. Fourth, a regional economic facility can improve the East Asian voice in the international financial architecture . Fifth, there is no strong regional hegemony in Asia or regional monetary institution, in contrast to the dominant role of the United States in the Americas, or the European Union in Europe. Sixth, an AMF could deal with the contagious effects of economic crises in one part of the region, which could easily spread to other parts and beyond. An AMF could focus on crisis prevention, leaving the tasks of crisis management and resolution to the IMF. An AMF could protect regional currencies under attack from speculators. To be an effective deterrent, an AMF would have to provide its members access to a large pool of funds, built through appropriate donations from the regional states. The ability to access these funds: ... ought...