By Bhumika Muchhala, Third World Network
At a conference in Penang, Malaysia in August, officials, academics and members of civil society from the Asian region sought to chart a way towards greater regional cooperation that would insulate them from the IMF and financial crises.
The conference on effects of the global financial crisis on Asian developing countries, organised by Third World Network and the Consumers Association of Penang, brought together present and former central bankers, finance ministry officials, researchers and civil society organisations. A strong theme was the need to develop regional consumption, trade and investment rather than relying on debt-laden consumers in the developed world.
painfully clear that the IMF solution is bankrupt
Looking at the recent developments to the Chiang Mai Initiative (see Update 66) and the prospect of reviving the idea of an Asian Monetary Fund, Andrew Sheng, former chairman of the Hong Kong Securities Commission and now a chief advisor to China’s Banking Regulatory Commission, said there are three choices for Asia: to stick to the status quo; take defensive measures and cooperate to avoid damage; or take an offensive approach including forcing international reforms. He said Asia is now somewhere between the status quo and the defensive approach. While the Asian financial crisis made it painfully clear to Asian countries that the IMF solution is bankrupt, the present crisis has also shown the lack of creative and collective thinking at the regional level.
Former governor of India’s central bank, YV Reddy, agreed with Sheng that Asia should not be defensive, as the region has 67 per cent of the world’s currency reserves, 55 per cent of the world’s population and a significant share of global production. He suggested that an influential Asian think-tank be established to provide advice on finance to policymakers, and that Asia should act to rebalance the global financial system. For example, there are only two credit rating agencies and two financial news agencies with global influence, all of which are Western-owned. Similar agencies should be set up by Asians, using the perspective of developing countries, he said.
Pitchaya Sirivunnabood, from the Fiscal Policy Research Institute in the Thai Ministry of Finance, felt that Asia’s financial clout from trade surpluses and high reserve holdings inspired more aggressive ideas for financial cooperation, for example an Asian currency unit. She noted that one of the priorities of the Chiang Mai Initiative is the development of a surveillance system, independent of the IMF. This would support the decision-making of the initiative’s secretariat and could facilitate the eventual de-linking from IMF programmes. Currently, Chiang Mai Initiative funds are still linked to IMF programmes beyond an initial amount of financing.
Yilmaz Akyüz, special economic advisor to the South Centre, an intergovernmental body based in Geneva, said that Asia meets the criteria for developing a common currency just as much as the European Union at the time of the initial work on the euro. Akyüz said that in the past, financial integration in Asia had been stifled by the unconstructive intervention of the IMF and other international actors. “But this time Asia is really serious,” he said, “The European Monetary Union took years to create, and Asia has to move in a similar direction.”