Financial Cooperation and Integration in Pacific Asia: The Role of Multilateral and Regional Organisations

Whereas in recent years most studies on the regional cooperation in Pacific Asia were devoted to matters of the so-called “real economy”, since the East Asian financial crisis of 1997/98 set in, interest in monetary and financial matters has immensely increased. This paper is about the question whether cooperation on financial matters is primarily a multilateral issue, or whether there is some scope for regional action . In answering this question, it is important to discuss under which institutional frameworks such cooperation could - and does - take place. The paper is organised as follows: In the first section, we will discuss experiences made during the Asian financial crisis on whether apart from multilateral international organisations (MIOs) like IMF and World Bank, regional international organisations (RIOs) played a role. We will do this by analysing three principal aspects: <li>Pre-crisis schemes aimed at the financial sector<li>Crisis management and immediate reaction (in particular, agreements with the IMF)<li>Follow-up, mitigation of effects This will lead us in section 2 to discuss the principal areas for IO activity in financial cooperation: <li>Regional surveillance of financial system reform<li>(Additional) financial assistance scheme<li>Technical Assistance for banking reform and supervision, management of currency policy, etc.<li>Analytical capability. We do not intend to explicitly discuss currency cooperation here. The Asian area clearly seems to be decades away from anything similar to European currency cooperation and unification. The question of an optimal currency policy (currency board, peg, floating and their relative merits) needs a more technical analysis of the mechanisms involved (see the contributions in ADB Institute (ed.) 1998 and some remarks by Estanislao in this book) than would be sensible and possible for this paper, which is concerned with institutional issues. Discussing the areas of possible policy activiy, we will have the following considerations in