AMF AMRO APEC ASA ASEAN ASEAN+3 BSAs CMI CMIM EC ERPD EU GDP IMF MSA WTO Asian Monetary Fund Asia Pacific Economic Cooperation ASEAN+3 Macroeconomic Research Office ASEAN Swap Arrangement Association of Southeast Asian Nations Association of Southeast Asian Nations and Plus Three Bilateral Swap Arrangements Chiang Mai Initiative Chiang Mai Initiative Multilateralization European Community Economic Review and Policy Dialogue European Union Gross Domestic Product International Monetary Fund Multilateral Swap Arrangement World Trade Organization Abstract
Chapter II. Overview of Asian Economic Integration Process 1. From the 1997 Asian Financial Crisis to the CMIM Actually the ASEAN cooperation started before the 1997 financial crisis, but it didn’t work to help member countries to cushion the impact of the crisis at that time. Right after the 1997 crisis happened, Japanese Vice Finance Minister, Sakakibara Eisuke, proposed a creation of $100 billion in the name of Asian Monetary Fund (AMF). But his proposal failed to bring other Asian countries into a debate about the creation, because of serious opposition from the United States backing the IMF and China’s fears regarding the expectation of the Japan’s regional leadership. Nevertheless, Asian countries continued to discuss the regional cooperation against fears of reiterating the financial shocks domestically and internationally. After the finance ministers’ meeting started in 1999, ASEAN and
Figure 2. Imports of Goods and Services [Billion US$] SOURCE: UNCTADstat Database (Search date: Nov. 11, 2013) Figure 3. Nominal GDP [Billion US$] SOURCE: UNCTADstat Database (Search date: Nov. 11, 2013) NOTE: In Figure to 3, right after the 1997 crisis, in 1998 ASEAN and Plus Three countries recorded decreases in exports, imports and nominal GDP. Foreign Reserves Accumulation It was obvious that the financial crisis resulted from various reasons including liquidity issues, structural problems, or large current deficits. Among them, according to some studies, if the countries—South Korea, Thailand and Indonesia—suffering from liquidity crises were guaranteed to be aided prior to sudden shocks, a series of bankruptcies in 1997-98 might have been avoided. Those countries in liquidity crises were forced to be under later bailout packages with IMF bailout and its conditionality: in South Korea $57 billion, in Thailand $20.1 billion, and in Indonesia $40.1 billion. One of primary indicators showing the liquidity crisis was a high
In addition, South Korea has been traditionally an export-led country, which is highly likely to be influenced by outside impacts (see Figure 10). The total trade volume including imports and exports has been over 50 percent of Gross Domestic Product (GDP). The trade volume continues to increase and in 2008 starts to reach over 100% of GDP, which means that the Korea’s economy highly relies on external economies, thereby likely to be more vulnerable to potential external shocks than before. Out of total trades, the volume of exports has been bigger than that of imports. However, considering the ratio of exports to GDP, say, less than 50% of GDP in the late 2000s, extra safety net would be required. Moreover, even though Korea continues to increasingly accumulate foreign reserves, the degree of the reserves has been ranging from 20 to 30 percent of GDP. Given less than a half share of exports of GDP, self-help efforts to counter potential external shocks would be limited. Figure 10. Trade Volume and Foreign Reserves of GDP in South Korea [%] SOURCE: UNCTADstat Database (Search date: Nov. 3, 2013) NOTE: The graph shows the ratio of exports, imports, total trades of exports and imports and foreign reserves compared with GDP from in 1997 to in 2012.