Integration in the Global Economy
New Horizons in Money and Finance series
Edited by Suthiphand Chirathivat, Emil-Maria Claassen and Jürgen Schroeder
Chapter 11: Singapore and Brunei: lessons for monetary clusters within East Asia
Ngiam Kee Jin 11.1 EAST ASIA’S MONETARY COOPERATION East Asia’s currencies and economies have just recovered from the Asian financial crisis that began in Thailand in July 1997. The immediate and important tasks ahead for many of them are to make themselves more resilient and more able to respond quickly and effectively when financial crises strike again. They have begun work at two levels (national and regional) to deal with future financial crises. At the national level, East Asian countries, especially those badly affected by the crisis, have undertaken painful but necessary corporate restructuring and financial reforms. In addition, many have moved from a largely US dollar peg prior to the crisis to a more flexible exchange rate system, making them less vulnerable to currency attacks. At the regional level, East Asian countries have made excellent progress with regional financing facilities. Their two boldest moves thus far were the ASEAN Swap Arrangement (ASA) and the Chiang Mai Initiatives (CMI). In March 1997, the original five ASEAN member countries – Indonesia, Malaysia, the Philippines, Singapore and Thailand – set up the ASA under which a central bank in need of financial support simply exchanges domestic currency for US dollars, but agrees to buy back the domestic currency with US dollars after a predetermined period. Unfortunately, the total amount committed under the ASA was a modest US$100 million (but later expanded to a total of US$200 million for the five countries) which could hardly act as an effective deterrence against currency speculators.1...
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