March 10 (Reuters) - Asia's success in weathering last year's
deep economic downturn with barely any financial strains is sapping
the momentum of an initiative to sling a safety net under the
region's currencies, officials and analysts say. Nearly two years
since 13 countries agreed to weave a web of central bank currency
swap lines in case of a re-run of Asia's 1997 balance-of-payments
crisis, progress in fleshing out the so-called Chiang Mai Initiative
(CMI) has been steady rather than spectacular.
the sixth of a series of bilateral swaps under the CMI umbrella,
China and Japan are expected to sign an agreement worth $3 billion
later this month when Chinese central bank governor Dai Xianglong
visits Tokyo, officials in the region said. The signing will give
a boost to the CMI, named after the northern Thai resort where
it was agreed in May 2000 by the 10 members of the Association
of South East Asian Nations (ASEAN) plus three northern neighbours
-- Japan, China and South Korea. The pact between the two regional
heavyweights will be symbolically important for the CMI but Japanese
officials are frustrated that the deal has not already been signed.
It was approved by the Bank of Japan several months ago.
officials, who attributed the delay in part to Beijing's preoccupation
with its entry to the World Trade Organisation, insist the CMI
is on track and say Japan hopes to complete negotiations next
on a bilateral agreement with Singapore. Japanese officials visited
Singapore last week, but an official close to the talks said a
deal would not be ready before ASEAN Plus Three finance ministers
meet in May on the sidelines of the Asian Development Bank's (ADB)
annual meeting in Shanghai.
- Pradumna Rana, head of the ADB's Regional Economic Monitoring
Unit in Manila, called the CMI and the fledgling economic surveillance
process that underpins it watersheds for Asian economic cooperation.
But he acknowledged that regional integration was in its early
days and the pace would depend in part on perceptions of how serious
problems were at any given time. After all, the original impetus
for a self-help strategy stemmed from the 1997 crisis, which plunged
most of the region into deep recession, and the resentment many
governments felt over the International Monetary Fund's response
to the meltdown.
things take time. Countries move two steps ahead, one step back,"
Rana said. "These are the initial years when the foundations and
institutions are being built. What happens in future will depend
on how the ministers see their economies going and the global
surveillance process developing."
in the KWR International
Advisor newsletter, Jean-Marc Blanchard said the prospects
for deepening regional economic arrangements were positive, partly
because East Asia's foreign policy elites appear to have learned
that multilateral institutions are an essential part of statecraft
in the region. But Blanchard said the short-term outlook was dismal
for ventures such as ASEAN Plus Three, the ASEAN Free Trade Area
(AFTA) and the Asia-Pacific Economic Cooperation forum (APEC).
there is an absence of a pressing threat, either political or
economic, that might create the imperative or cooperation in the
realm of economic affairs and/or generate the political will to
make concessions," Blanchard wrote.
from key constituencies that feel threatened by closer ties, like
Japan's farmers, and domestic political instability in countries
such as the Philippines and Indonesia would also act as a brake
on integration, he argued. Japan is party to four of the five
bilateral CMI swaps signed so far -- with South Korea ($2 billion),
Thailand ($3 billion), the Philippines ($3 billion) and Malaysia
($1 billion). The fifth, worth $2 billion, was signed in December
between China and Thailand.
Japan's other swaps under the CMI, the China scheme is likely
to be denominated in yen, not dollars. China opted for a yen-yuan
pact because it already has plenty of dollars in its foreign reserves,
according to Japanese officials. The Japan-China swap line is
primarily symbolic as neither is expected to experience liquidity
or balance-of-payment problems in the foreseeable future. Both
have huge stockpiles of foreign reserves.
ADB's Rana, whose unit contributes to the ASEAN Plus Three economic
surveillance process, said South Korea should be in a position
soon to sign pacts with China ($2 billion) and Thailand ($1 billion)."The
steps that have been taken are more than symbols, but at the same
time we don't have an Asian economic bloc as yet. It took Europe
40 or 50 years. I think we're somewhere in between," he said.
((Tokyo newsroom, +81-3 3432-8453, email@example.com))s.