East Asian financial cooperation is at a crossroads. The Chiang Mai Initiative Multilateralisation (CMIM) and its surveillance unit — the ASEAN+3 Macroeconomic Research Office (AMRO) — are continuing to grow in size and importance. But the structure of these two entities must change to accommodate this growth.

The CMIM is a currency swap agreement among the finance ministries and central banks of the ASEAN+3 states (including the Hong Kong Monetary Authority). The scheme, which evolved from the earlier Chiang Mai Initiative (CMI) bilateral currency swap network in 2000, aims to provide financial support for short-term liquidity problems. To manage macroeconomic difficulties, each member can swap its local currency with US dollars up to the amount of its financial contribution to the reserve pool times its borrowing multiplier.

After an amended agreement that came into effect on 17 July 2014, the size of the CMIM was doubled from its initial value of US$120 billion to US$240 billion, and a crisis-prevention mechanism — the CMIM Precautionary Line (CMIM–PL) — was introduced. The IMF delinked portion was raised to 30 per cent, meaning that members could draw up to 30 per cent of their maximum borrowing amount without requiring IMF lending conditions.

… Kaewkamol Pitakdumrongkit is an assistant professor at the Centre for Multilateralism Studies, S. Rajaratnam School of International Studies, Nanyang Technological University.