quasi - government authorities, and to show the way with a modest amount of central bank money. this is painstaking work. it involves such things as the development of customised bond market indexes, and efforts to remove the various small impediments that individual countries have managed, perhaps unintentionally, to put in the way of investors. as just one example, the pan - asia index fund component of the abf2 is domiciled in singapore, but listed in hong kong, the first time that has been done in asia. this involved the relevant authorities working towards mutual recognition of their respective regulatory frameworks. abf2 is a good example of the way a regional initiative can put the spotlight on local barriers to wellfunctioning local markets and exert some pressure for their removal. 2 indeed, to my mind, the value of these initiatives has been less the'integration'aspect than the progress made in enabling eight local bond markets to function more effectively for foreign and domestic investors and, not least, for the governments and other borrowers of those countries. a well - functioning local - currency bond market allows a government much more economic policy flexibility than can be experienced when tied to foreign currency borrowing. 3 and eight well - functioning, modest - sized, local bond markets amount to the same thing as a'regional market'for most practical purposes. so in terms of developing the resilience of the region to the vagaries of international markets, there is value in increasing the capacity to provide financial support once a crisis hits. but i would argue there is more value in building financial infrastructure, through the activities in type 3 co - operation, which can make national systems more resilient in the face of shocks. where to from here? what then of the future? in particular, what about steps 4 to 6? is there any serious prospect of countries undertaking these higher levels of co - operation, or more correctly co - ordination and even integration, any time soon? there have been various calls for a common exchange rate policy, usually based around targeting a common basket, though to my knowledge there is no action plan currently available. one problem is that the interests of the countries are in some respects still rather divergent, not least because of the very different levels of economic development around asia. there are a number of countries – china not least among them – whose prospective rates of productivity growth over the decades ahead will surely mean a substantial increase in their real exchange

officials, policy - makers, academics and so on to develop the sort of constructive and frank sharing of information that is really the foundation for genuine engagement. sharing of information is more than just the exchange of facts and figures ; it is learning about how other economies work, about how other policy - makers think, and about which approaches in the other countries have worked, which did not, and why. in a crisis, there must be timely sharing of market intelligence. most important, if there is ever to be any prospect of collective action in response to regional problems, there has to be a shared analysis of what the problem is. the capacity to form that sort of analysis does not exist naturally ; it has to be developed. the second degree of co - operation is having a set of arrangements to lend money in times of trouble. when one or more countries face the pressure of capital outflow, with associated downward pressure on their exchange rates, the idea is that these agreements provide a sense of mutual support which could increase market confidence. generally, such arrangements increase the availability of resources to a country under pressure, though by a limited amount. funds are usually available with conditions, at the discretion of the lender and with most of the risk remaining with the borrower. going the next step involves joint work on improving the operation of local financial infrastructure. this can be viewed as harmonisation ( i. e. as a mild form of co - ordination ) which facilitates people managing their affairs across national boundaries more efficiently. this could potentially involve everything from listing requirements, tax treatment, arrangements for supervision of financial institutions, and so on. but policies are still made at national level and it is not necessary to have a 1 / 4 goal of harmonisation per se to think this sort of work is useful : it might simply be an effective device for improving the functioning of the individual local economies. the fourth degree of co - operation would be based on some agreed common goals, most likely some sort of regional effort to stabilise exchange rates. here we are definitely talking about a form of policy co - ordination. in the pre - emu european context, there was a mutual obligation to defend regional parities. this system was silent, notably, about the situation where all european currencies rose or fell together against the dollar. in principle, this would leave monetary policy remaining focussed on domestic objectives. one can then distinguish a fifth degree, in which that constraint is dropped and it is explicit that domestic policies will