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ECON 490 Cary Chan Lynna Pham

ECON 490 Cary Chan Lynna Pham. Association of Southeast Asian Nations. Established in August 8, 1967 First summit in Feb 1976 ASEAN Free Trade Area in 1992 First meeting of ASEAN + 3 in Dec 1997 ASEAN charter to give 10 member states a legal identity in Nov 2007. Cary. Members.

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ECON 490 Cary Chan Lynna Pham

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  1. ECON 490 Cary Chan Lynna Pham

  2. Association of Southeast Asian Nations • Established in August 8, 1967 • First summit in Feb 1976 • ASEAN Free Trade Area in 1992 • First meeting of ASEAN + 3 in Dec 1997 • ASEAN charter to give 10 member states a legal identity in Nov 2007 Cary

  3. Members • Official language: English • 10 different currencies • Original members (‘67): Indonesia, Malaysia, the Philippines, Singapore and Thailand • Newer members: Brunei (’84), Cambodia (’99), Laos (’97), Myanmar(’97), and Vietnam (’95) Cary

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  8. ASEAN+3 Background • Affected by the Asian Financial Crisis of 1997 • Goal of meetings: • Accelerate the development of regional growth • Encourage private sector participation • Continue structural reform • Improve monetary and financial cooperation • Strengthen coordination and cooperation Cary

  9. Formation of ASEAN + 3 • Realization of the need for policy coordination • Rejection of proposed Asian Monetary Fund by the US and the IMF • Initially for “balance of payments support” to broader goal of “short-term liquidity problems” Lynna

  10. The Chiang Mai Initiative (CMI) • Network of bilateral swap agreements between ASEAN + 3 • Held over $729 billion in international reserves • Goals • 1) Monitor capital flow • 2) Regional surveillance • 3) Develop currency swap networks • 4) Train personnel Lynna

  11. Swap Agreements • Currency swap: • An exchange of payment flows denominated in a different currency Lynna

  12. Swap Agreements • Benefits: • Hedging exchange rate and interest rate risk • No conversion fees • Contributions: • $60 million for new members • $150 million for the established members Lynna

  13. Results • More interdependence • Increase in regional trade and investment • ASEAN countries and partners were able to borrow up to 2-5 times the quoted amount from the IMF (multiple swaps) Lynna

  14. Shortcomings • Retaining the IMF link • Moral hazard • No unified system or comprehensive regional databases • Lack of historical experience in economic and political integration Lynna

  15. Future • February 2009: ASEAN+3 agreed to set $120 billion in funds • ASEAN growth is expected to slow sharply Lynna

  16. Conclusion • Need to work on deficiencies • Consensus among members is difficult • Planning for future development and crisis prevention Lynna

  17. References • http://news.bbc.co.uk/2/hi/business/7904414.stm • http://www.reuters.com/article/politicsNews/idUSGOR01167020071120 • http://www.aseansec.org • www.g24.org/ychp0904.pdf • www.aseansec.org/17902.pdf • www.petersoninstitute.org/publications/chapters_preview/345/3iie3381.pdf • http://www.imf.org/external/pubs/ft/survey/so/2008/car112408a.htm • Daniels, Joseph P., and David D. VanHoose. Global Economic Issues and Policies with Economic Applications. New York: South-Western College Pub, 2003.

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