The 38th Policy Plenary Meeting on“The Recent Development and Future Challenges
in the Regional Cooperation in Finance”
February 19, 2010
The 38th Policy Plenary Meeting of the Council on East Asian Community (CEAC)
was held on February 19 at the conference room of the Japan Forum on International
Relations, to discuss ʺThe Recent Development and Future Challenges in the RegionalCooperation in Finance.ʺ Prof. KAWAI Masahiro, Member of CEAC and Dean of AsianDevelopment Bank Institute, made keynote report, which was followed by an active
exchange of views among members of CEAC. Prof. KAWAI stated as follows:
The Asian financial crisis of 1997‐98 was a major catalyst thataccelerated regional
financial cooperation efforts among the East Asian authorities to prevent a recurrence ofsuch a crisis in the region and promote regional financial stability. These efforts haveresulted in the establishment of the Chiang Mai Initiative (CMI), regional economic
surveillance, and the Asian Bond Markets Initiative (ABMI) and Asian Bond Funds. With
the outbreak of the global financial crisis in the fall of 2008, East Asia has entered a newphase where the effectiveness of such regional financial cooperation efforts is being tested.
The Economic Review and Policy Dialogue (ERPD) process is one of the mostimportant frameworks for regional economic surveillance among ASEAN+3 countries. In
order to enhance the effectiveness of economic surveillance, it is imperative that “apermanent secretariat” for ERPD be established, which is bestowed with sufficientauthority and capability to monitor and analyze regional economies and interdependence.
Besides, the region is in need of a forum where senior officials—from the Ministry ofFinance, Central Bank, and Financial Supervisory Authority—of all the member countries
meet together regularly and discuss effective ways to develop deeper and more stable
Asian financial markets.
The CMI has of late been undergoing the multilateralization process in a step bystep manner to: (1) integrate CMI with EPRD; (2) introduce a common decision making

mechanism; (3) establish a ʺregional reserve poolʺ of US$120 billion under a single contract;(4) decide the contribution shares of all ASEAN+3 countries and Hong Kong; and (5)prepare for gradual de‐linking of CMI multilateralization (CMIM) from IMF programs. AsCMIM can be mobilized only in time of a crisis under the current framework, we should
explore ways to use CMIM for preventive purposes just as IMF’s Flexible Credit Line (FCL)does.
The ABMI has made remarkable progress as well. Issuance of local‐currency
denominated bonds has expanded significantly. The ASEAN+3 authorities have agreed toset up a Credit Guarantee and Investment Facility with the initial fund of US$700 million.
A future challenge of ABMI would be the creation of an ʺAsian Clearʺ in whichcross‐border transactions of Asian currency bonds can be cleared and settled within theAsian time zone.
Though there has been no agreement among policymakers in East Asia on adesirable exchange rate regime, it is necessary to start some process for adopting similar
exchange rate regimes and, thereby, stabilizing intra‐regional exchange rates. As the global
financial crisis seems to settle, capital has again begun to flow into East Asia. Thus, it isdesirable to take coordinative steps to establish a system in which the value of eachcurrency can float upward against the US dollar in a coordinated manner. This will help
maintain regional macroeconomic and financial stability and prevent divergent movementsof regional exchange rates.
In response to the above reports, 22 members of CEAC joined in an active exchangeof views on the topic.