ATTACHMENT 1

Emerging markets, particularly in Asia, have been exposed to large inflows of capital over thepast several years, intermittent with sudden slowdown in times of international financial
instability. These large swings have posed difficult policy challenges for emerging markets inAsia. With the major advanced countries likely to continue aggressive monetary easing, andwith the uncertainties in the euro-zone persisting, managing capital flows and coping with theireffects on the economy will continue to be pressing policy issues.
The IMF has recently published an ‘institutional view’ that provides a framework guiding its
policy advice and surveillance. The view provides a clear and consistent framework, whereby
intervention, monetary and fiscal policies, and prudential/capital control measures arerecommended depending on exchange rate over/undervaluation, the level of international
reserves, and the cyclical position of the economy and other country specific circumstances.
While macro-prudential measures are acknowledged to be useful in containing financial sector
vulnerabilities, capital controls, while possible useful/necessary in certain circumstances, arediscouraged to use as substitute for warranted macroeconomic adjustment, due to theirdistortionary effects and potential negative spillovers.
While intellectually clear-cut, the framework raises challenges in implementation. Whether theexchange rate is undervalued or not, whether there is excess accumulation of reserves, andwhether the economy is overheated or not, are questions whose answers are subject touncertainties. Moreover, while capital control measures are potentially distortionary, othermeasures also not free from problems: volatility in exchange rates, fiscal policies (in that it
influences resource allocation), monetary policies (in influencing inflation and inflationary
expectations), and macroprudential policies are all potentially distortionary and/or impose costson the economy.
At the same time, individual polices, including foreign exchange market intervention,sterilization policy, monetary and fiscal policy, prudential and capital control policies may notalways be effective in achieving their desired goals. Different institutional settings and external
environment could also make the same measures more or less effective as well as more or lesscostly, depending on the country circumstance. Moreover, depending on whether theapparently excessive capital inflows are ‘push’ driven or result from domestic economy ‘pull’factors, different responses could be required. Thus, the relevant policy question is what polices
work best with minimal costs for a country at that specific point in time facing some specificcircumstances.
Our understanding and the ability to make better judgment could be enhanced by learning fromother countries’ experiences. Thus, the seminar will focus on individual policies taken by Asian
governments over the last several years to manage capital flows, in order to understand themotivations and considerations driving the choice of policies, and to determine whether they
were effective in achieving intended policy goals, what were the factors that contributed totheir effectiveness, and whether there were any side effects. The review of these experiences
should help countries when considering policy options.
The one-and-half day seminar will begin with a short review of developments in capital flows
and their impact, and a review of the IMF framework regarding the management of capital
flows. It will then have an extensive discussion of the individual measures that were taken invarious countries, focusing on the why and how the measures were designed, whether it had theintended effect, and what were the critical factors that affected its effectiveness or noneffectiveness. The country experience will highlight countries where some sort ofmacroprudential/capital control related measures were adopted, but the discussion should cover
why alternative polices were not adopted (or were not effective/feasible, leading to theadoption of the measures), in order to understand the overall setting in which policy decisions
were made. The seminar will end with a panel discussion to review the lessons from thecountry experiences and the applicability of the IMF capital flow management framework inthe light of possible risks that the countries in the region now face.

2PROVISIONAL AGENDA
Thursday, March 14, 2013
9:00 am

Registration

9:30 amWelcome Remarks
Shogo Ishii, Director, Regional Office for Asia and the Pacific,
International Monetary Fund

9:40 amKeynote Address
Tatsuo Yamasaki, Director General, International Bureau, Ministry of Finance

10:15 am

Session 1-1: Recent Developments in Capital Flows and AssociatedChallenges
Presentation: Giovanni Ganelli, Senior Economist, Regional Officefor Asia and the Pacific, International Monetary Fund
Presentation: Veerathai Santiprabhob, Former Chief Strategy Officer,
Thai Stock ExchangeThis session will review the recent developments in global capital flows
and its implications for Asia.

11:15am

Session 1-2: Managing Capital Flows:
Presentation: Marshall Mills, Deputy Division Chief, Trade, Institutions, and Policy
Review Division, Strategy, Policy, and Review Department, International
Monetary Fund
Comments: Akira Ariyoshi, Program Director and Professor, Asian
Public Policy Program, School of International and PublicPolicy, Hitotsubashi University
The IMF will present the thinking behind the recently published‘institutional view’, focusing on management of capital flows, followedby comments and general discussions.

12:15 pm

Photo Session

12:30 pm

Lunch

1:45 pm(1:45 pm)

Session 2: Country Experiences with Managing Capital Flows
Participants from selected countries will be asked to give a brief initial
explanation of the policies taken, touching on the reasons for adopting
the measures, how the measures were implemented, and what were theeffects, including any recognized side effects. A fifteen-minutepresentation will be followed by Q&A and open discussion.
2-1: Indonesia (2010~) [Minimum holding period for central bank paper]
Aida S. Budiman, Director, International Department, ASEAN Cooperation andStudies Group, Bank Indonesia

3(2:30 pm)

2-2 : Thailand (2006~2008) [Unremunerated reserve requirements for capital inflow]
Alisara Mahasandana, Senior Director, Financial Markets Department,
Bank of Thailand(3:15 pm)

Coffee Break(3:35 pm)

2-3: Korea (2009~) [Prudential measures to limit banks’ foreignexchange liquidity risks]Jun Il Kim, Deputy Governor and Chief Economist, Director of the Economic
Research Institute, Bank of Korea(4:20 pm)

2-4: Malaysia [Non-internationalization policy for the ringgit]
Sukhdave Singh, Assistant Governor, Economic Sector, Bank Negara Malaysia(5:05 pm)

Round up Discussions

5:30 pm

End of First Day Seminars

6:30 pm

Cocktail Reception

7:00 pm

DinnerFriday, March 15, 2013

10: 00 am

Panel Discussion
Moderator: Shinji Asanuma, Visiting Professor, Asian Public Policy
Program, School of International and Public Policy, Hitotsubashi University
Panelists: Akira Ariyoshi, Hitotsubashi University
Jun Il Kim, Bank of Korea
Marshall Mills, International Monetary Fund
Veerathai Santiprabhob, ex-Thai Stock Exchange
Sukhdave Singh, Bank Negara Malaysia
The panel will begin with a review of the discussions of the previous day’s session,in particular the country experiences, and will discuss the following issues, as wellas any other important issues that are raised as a result of the discussions.
(1) Is the IMF policy framework applicable, and in what way?
(2) What are the implications of the evolution of the structure of global capital markets
on the policy choices confronting emerging market authorities? What are the main risks
confronting Asian economies? What policies have recently been or should be
implemented by Asian countries in response to the challenges posed by capital flows?
(3) To what extent are experiences transferrable across countries?
(4) Is there a role for a coordinated effort in Asian countries?

12: 00 pm

Concluding Remarks
Akira Ariyoshi, Hitotsubashi University

12:15 pm

Lunch

2:00 pm

End of Seminar

This seminar is funded by the Government of Japan through its JSA trust fund at the IMF.
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