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ECON 490 Cary Chan Lynna Pham
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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
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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
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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
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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
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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
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Swap Agreements Currency swap: An exchange of payment flows denominated in a different currency Lynna
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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
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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
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Shortcomings Retaining the IMF link Moral hazard No unified system or comprehensive regional databases Lack of historical experience in economic and political integration Lynna
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Future February 2009: ASEAN+3 agreed to set $120 billion in funds ASEAN growth is expected to slow sharply Lynna
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Conclusion Need to work on deficiencies Consensus among members is difficult Planning for future development and crisis prevention Lynna
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References http://news.bbc.co.uk/2/hi/business/7904414.stm http://www.reuters.com/article/politicsNews/idUSGOR0116702 0071120 http://www.aseansec.org www.g24.org/ychp0904.pdf www.aseansec.org/17902.pdf www.petersoninstitute.org/publications/chapters_preview/345/ 3iie3381.pdf http://www.imf.org/external/pubs/ft/survey/so/2008/car112408 a.htm Daniels, Joseph P., and David D. VanHoose. Global Economic Issues and Policies with Economic Applications. New York: South-Western College Pub, 2003.
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