ASEAN+3 financial cooperation enters a new phase

The 15th ASEAN+3 Finance Ministers’ Meeting was held on 3–4 May in Manila and resulted in at least two important outcomes that marked a new phase of ASEAN+3 financial cooperation: the involvement of central bank governors at the meeting and the inception of a crisis-prevention facility.

After one and a half decades of cooperation, the ASEAN+3 finance ministers finally welcomed the direct participation of ASEAN+3 central bank governors in the Finance Ministers’ Meeting. Only deputy governors had been invited to attend in previous years. The new arrangement is expected to facilitate better coordination between financial and monetary authorities, as they usually have overlapping and interconnected policies. It also responds to the criticism that monetary authorities take a back seat in ASEAN+3 financial cooperation, given the central bank governors do not have an equal role in the process.

But the close relationship between the finance ministries and the central banks in the regional arrangement must not be allowed to hinder the independence of the central banks, particularly in their work to stabilise their respective economies. Also, it is important to ensure the future contribution of central bank governors so that their involvement is not merely seen as a symbolic gesture, but strengthening ASEAN+3 financial cooperation.

Another development in the ASEAN+3 financial cooperation framework is the commencement of the regional crisis-prevention facility, the Chiang Mai Initiative Multilateralisation Precautionary Line (CMIM-PL). This arrangement will complement the CMIM’s existing functions as a regional crisis-resolution mechanism. It is likely that the CMIM-PL’s operating procedure will adopt aspects of the IMF’s Precautionary Credit Line (PCL), since ASEAN+3 finance ministers have agreed to engage with the IMF’s financial safety net arrangement. There are two similarities between the schemes. First, there is the possibility of applying ex-post conditionality for accessing the CMIM-PL, which is also applied to the PCL scheme. Second, the CMIM-PL’s qualification criteria imitate those of the IMF. In addition, the CMIM-PL’s decision-making process will be based on country-specific economic reports and analysis produced by the ASEAN+3 Macroeconomic Research Office, the Asian Development Bank and the IMF.

For the ASEAN+3 member countries, adopting the IMF’s credit line model may ease their efforts to meet the CMIM-PL’s qualification criteria, as many member countries may find it relatively easier to follow the IMF’s scheme, given that it is internationally recognised. The creation of different or new requirements for accessing the regional prevention facility may result in another burden for member countries, especially during times of crisis.

In this new phase of financial cooperation, the ASEAN+3 states are still finding it difficult to forge a new path toward a self-determining regional financial arrangement. On the one hand, they have tried to strengthen the regional decision-making process by introducing central bank governors into the policy-making process. The ASEAN+3 states have also tried to reduce the role of international financial institutions in the regional self-help mechanism by reducing the IMF-linked portion of the CMIM from 80 per cent to 70 per cent. On the other hand, ASEAN+3 financial cooperation has shown its dependence on other institutions by drawing on the IMF’s safety net model and utilising other institutions’ analysis as the basis for its decisions, and has not been confident enough to maximise its own capacity to determine regional arrangements. Hence the future of ASEAN+3 financial cooperation may largely still be influenced and directed by the dynamic of international organisations such as the IMF.

Eko Saputro is a PhD candidate at the School of Humanities and Social Sciences, Deakin University.