Can Asia Free Itself from the IMF?

Since 2000, Asian countries, traumatized by the IMF's handling of the 1997-98 financial crisis, have sought to establish a regional alternative to the Fund. But, despite recent progress, making this vision a reality requires further bold thinking.

BERKELEY – There has never been a question about the ultimate purpose of the Chiang Mai Initiative (CMI), the system of Asian financial supports created in 2000 in that Thai city. That purpose, of course, is to create an Asian Monetary Fund, i.e., a regional alternative to the International Monetary Fund, whose tender ministrations during the 1997-98 financial crisis have not been forgotten or forgiven.

So far, however, the CMI has been all horse and no saddle. Its credits and swaps have never been activated. The distress following the failure of Lehman Brothers would have been an obvious occasion. Yet, revealingly, the Bank of Korea, the central bank hit hardest, negotiated a $30 billion foreign-currency swap with the United States Federal Reserve, not with its ASEAN+3 partners.

Now, we are told, ASEAN+3 has achieved another great breakthrough, the so-called Chiang Mai Initiative Multilateralization (CMIM), aimed at turning its bilateral swaps and credits into a regional reserve pool. The goal was set in 2005, and last month ASEAN+3 finance ministers negotiated the details. They specified contributions to their $120 billion pool, set down borrowing entitlements, and allocated voting shares.

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