At the time of the 1997/98 Asian financial crisis, Japan suggested creating an "Asian Monetary Fund". The US instantly put a stop to this idea. The world is after all ruled from Washington. Also, the timing was not good, with Asia down on its knees.
So, the International Monetary Fund led the crisis management. But the IMF made a big mess, and is still person non grata in Asia. Even countries in need of finance to help them in the current global financial crisis are doing everything they can to avoid the IMF. This is one of the consequences of democracy in many Asian countries.
But today might be the occasion for Asia to stand up, and take a more leading role in international co-operation. While Washingston has ruled the world for over 60 years, it has made a giant mess of global politics and economy these past eight years. At the same time, Asia has gone through a period of record economic growth.
Asia is of course being affected by the crisis. With developed countries in recession, Asian exports are crashing. External finance is also drying up. And migrants' remittances will soon start shrinking, with sharp impacts on the Philippines, Indonesia and India.
Despite the crisis, the Asian economy is still in rude health. It is the only part of the world economy that is growing. And the rest of us, particularly the Americans, need Asia's healthy foreign exchange reserves to keep us afloat.
For the most part, Asian banks are in solid shape with limited exposure to toxic assets -- particularly in Japan where they have finally pulled through after more than a decade of crisis. Looking further ahead Asia will need to switch from an export-led growth model to one based on domestic demand (should not be much of a problem, as Asians love shopping). This will be necessary as Americans will have to start saving again, which means consuming less.
So, what does Asia need to do to play a more leading role in international co-operation. In short, it needs to learn how to play "team Asia".
What does playing "team Asia" mean? Right now in the midst of crisis, it means several things. Governments throughout the region are seeking to pump up their economies through fiscal stimulus. Since this government spending has beneficial spill-over effects on neighbouring countries, it should be co-ordinated to ensure that there are no free riders. Monetary and exchange rate policy should also be co-ordinated. No one country should be looking to get a competitive advantage over others.
Looking further ahead, playing team Asia also means making serious progress towards creating a free trade and investment area. Although Asia does not have the same dominance of intra-industry trade as Europe, most Asian countries are hooked up in supply chains that feed US and European markets. And these supply chains can work more competitively when trade and investment is free.
Deeper monetary and exchange co-operation is necessary for the same reasons, with the ultimate goal being a single currency for East Asia. (Bythweay, if rapid progress is not made to a single currency, before no time the Chinese yuan will become the dollar of Asia!) And even if an Asian Monetary Fund does not see the light of day, strengthening Asian monetary co-operation through, for example, the Changmai Initiative can enable Asia to find local Asian solutions to international financial problems.
Asia should be able to take on Washington as an equal partner in international negotiations at the G20, IMF and World Bank. The result would be a more balanced global governance, which would be beneficial to everyone.
But playing team Asia means each country giving up something to be part of a powerful team. Will Asian countries be willing to do this? Looking across to Europe, we do not find much inspiration. Europeans are having more and more difficulty playing team Europe.
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