Japanese finance minister Sadakazu Tanigaki yesterday stressed the importance of the so far untapped regional network of currency swaps known as the Chiang Mai Iniatiative (CMI), and hinted that new moves could come today to enhance the size and scope of the scheme. This is expected to happen when Tanigaki joins
counterparts from the Asean+3 group to discuss the future of the CMI and of official initiatives to launch an Asian bond market.
Speaking at a seminar on regional economic cooperation and integration, which has become the key theme of ADB president Haruhiko Kuroda's first 100 days in office, Tanigaki several times referred to the importance of the currency swap scheme. Although it was launched five years ago at the ADB annual meeting in Chiang Mai, the CMI has yet to be invoked and moves to launch a more ambitious version are believed to be imminent.
The size of the scheme – about $35 billion – is felt to be inadequate to meet the region's needs for a financial stability fund, especially in the light of the fact that foreign exchange reserves in Asian now exceed $2 trillion, officials said. More important, the CMI is a series of country-to-country swaps and cannot be invoked on a collective basis in the event of another financial crisis such as that which struck Asia in 1997, they added.
Speculation was strong at last year's ADB annual meeting in Jeju, South Korea, that the Asean+3 finance ministers meeting there would take the opportunity to multilateralize the CMI and thereby convert it into a kind of Asian Monetary Fund. They opted to delay any decision, however, because of the political nature of any move towards a more ambitious form of monetary cooperation.
There is speculation that the new office of regional integration which Kuroda created within the ADB could take over responsibility for developing the Chiang Mai Initiative. The new office is headed by Tokyo University professor Masahiro Kawai, a former deputy of Kuroda at the Japanese ministry of finance. This would provide new impetus to the CMI because it would acquire the necessary backup in economic surveillance needed to make it function as a kind of quasi-regional monetary fund, officials said.
Tanigaki also stressed the importance of the Asian Bond Market initiative being conducted by Asean+3 governments to create the infrastructure for a pan-regional market that would cater for cross-border issuance and trading of sovereign and other local currency bonds in Asia. Development of this initiative could also be integrated into the work of the ADB's office on regional integration, some sources suggested.