Asean watch Process

In 1997 there was a financial emergency in Asian countries. There was lack of financial committees. So, they did not get enough number of financial support. So, saving is not enough to calm the market.This emergency demonstrated that how investor's belief can erode and spread panic. This panic affects other neighbouring countries. Japan proposed an idea of Asian Monetary Fund.

As a result, Japan came send to solve the problem. In August 1997, Japan proposed the idea of an Asian Monetary Fund (Amf) to supply financial sustain for Thailand. It targeted to raise Us billion to Us billion from six Asean countries, Korea, China, Hong Kong, and Taiwan, and someone else Us billion from Japan. It was designed to be independent and would take up some Imf activities. However, the Amf proposal never got off the ground due to strong opposition from the United States and the International Monetary Fund. It was argued that such an arrangement would both originate a problem of moral hazard and, in competitive with the Imf, a duplicate standard.

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A similar idea with recognition of the Imf's central role in the international monetary system--emerged a few months later when ministry of finance and central bank deputies of fourteen Asia-Pacific economies met on 18-19 November 1997 in Manila to discuss a concerted advent to restoring financial stability in the region. They came up with new initiatives under the so-called Manila Framework.

At Meeting in Kuala Lumpur a few weeks later, the Asean finance ministers concurred with the proposals of the Manila Framework and decided to implement it. The first initiative of the Framework--a mechanism for regional surveillance--was deliberated additional at the Second Asean Finance Ministers Meeting on 28 February 1998 in Jakarta, where it was agreed that the Asean lookout mechanism should be established immediately, within the normal framework of the Imf and with the assistance of the Asian development Bank.

Since the Asp was designed to complement Imf surveillance, we could portion its effectiveness to the extent to which it fills a gap in the Imf lookout process. It inform about the emergency and thus forestall a financial crisis. The shortcoming, noted by Crow, Arriazu, and Thygesen (1999), is not the (poor) potential of policy advice, but rather the reluctance of the recipient government to implement the Fund's recommendations, particularly on transfer rate policy, which is a extremely political issue. It was additional observed in the same article that "the policy advice did not come early enough in the case of Thailand where in other cases the advice, early or not, was not nearly as strong".

Asean watch Process

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