Regional Financial CooperationRegional Financial Cooperationin East Asiain East Asia
Hisashi OnoRegional Financial Cooperation Division
International BureauMinistry of Finance, Japanese Government
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Chiang Mai Initiative (CMI)Chiang Mai Initiative (CMI)
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Chiang Mai Initiative (CMI)Chiang Mai Initiative (CMI)
■Core Objectives– Enhancement of foreign exchange reserve
through bilateral swap network to address short-term liquidity difficulty in the region
– Supplement for the existing international financial arrangements
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Network of Bilateral Swap Arrangements (Network of Bilateral Swap Arrangements (BSAsBSAs))under the Chiang Mai under the Chiang Mai Initiative(CMIInitiative(CMI))
Thailand
Indonesia
Philippines
Total: US$ 80.0 bil6/
Vietnam
Brunei
Cambodia
Myanmar
Lao PDR
Singapore
Malaysia
Republicof Korea
Japan
China
ASEAN Swap Arrangement (ASA)US$ 2 bil
US$ 4 bilKorea⇒Indonesia $2 bilIndonesia⇒Korea $2 bil
US$ 3 bilKorea⇒Malaysia $1.5 bilMalaysia⇒Korea $1.5 bil
US$ 2 bilKorea⇒Thailand $1 bilThailand⇒Korea $1 bil
US$ 6 bil(Japan⇒Indonesia $6 bil)
US$ 4 bilJapan⇒Singapore $3 bilSingapore⇒Japan $1 bil
US$ 3 bilKorea⇒Philippines $1.5 bilPhilippines⇒Korea $1.5 bil
US$ 4 bil(China⇒Indonesia $4 bil )
eq. US$ 2 bil 3/
(China⇒Phlippines $2 bil)
US$ 1.5 bil(China⇒Malaysia $1.5 bil )
US$ 2 bil(China⇒Thailand $2 bil)
eq. US$ 6 bil2/
Japan⇒China eq. $3 bilChina⇒Japan eq. $3 bil
eq. US$ 8 bil4/
China⇒Korea eq. $4 bilKorea⇒China eq. $4 bil
eq. US$ 21 bil①Japan⇒Korea $10 bil Korea⇒Japan $ 5 bil②Japan⇒Korea eq. $3 bil Korea⇒Japan eq. $3 bil
US$ 1 bil1/
(Japan⇒Malaysia $1 bil)
US$ 6 bilJapan⇒Thailand $3 bilThailand⇒Japan $3 bil
Total: US $ 36.5 bilAs of end of April, 2004
1/ In addition to the BSAs under the CMI, there exists other BSA under the New Miyazawa Initiative between Japan and Malaysia (US$ 2.5 bil).2/ Local currency swap between Japanese YEN and Chinese YUAN3/ Local currency swap between Chinese YUAN and Philippine PESO4/ Local currency swap between Chinese YUAN and Korean WON5/ Local currency swap between Japanese YEN and Korean WON6/ The sum of US$ 80.0 bil does not include the BSA under the New Miyazawa Initiative and the ASEAN Swap Arrangement (ASA).
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US$ 6.5 bilJapan⇒Philippines $6 bilPhillipines⇒Japan $0.5 bil
Ministry of Finance, JapanAs of end of April, 2007
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CMI CMI ＭＭultilateralizationultilateralization(Post (Post -- Chiang Mai Initiative) Chiang Mai Initiative)
““New Task ForceNew Task Force”” was established under ASEAN+3 was established under ASEAN+3 (November, 2006)(November, 2006)
Establishment of single arrangement Enhancement of regional surveillance capacities
Progress at ASEAN+3 Finance MinistersProgress at ASEAN+3 Finance Ministers’’ Meeting Meeting in Kyoto (May 5, 2007)in Kyoto (May 5, 2007)Agreed on the basic direction of the PostAgreed on the basic direction of the Post--CMICMI
・・SelfSelf--managed reserve pooling arrangement managed reserve pooling arrangement ・・Single contractual agreementSingle contractual agreement・・Maintaining the Maintaining the two core objectives of the CMItwo core objectives of the CMI
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The Joint Ministerial Statement The Joint Ministerial Statement of the 10th ASEAN+3 Finance Ministersof the 10th ASEAN+3 Finance Ministers’’ Meeting Meeting
5 May 2007, Kyoto, Japan5 May 2007, Kyoto, Japan=Excerpt=
・ On the Chiang Mai Initiative, we were pleased to note that the Bilateral Swap Arrangement (BSA) network has increased to US$ 80 billion, consisting of 16 BSAs among 8 countries.
・ We noted the substantial progress made in the activities of the new Taskforce on CMI Multilateralisation. Proceeding with a step-by-step approach, we unanimously agreed in principle that a self-managed reserve pooling arrangement governed by a single contractual agreement is an appropriate form of multilateralisation. We recognised the consensus reached as a significant achievement towards an advanced framework of regional liquidity support mechanism. We instructed the Deputies to carry out further in-depth studies on the key elements of the multilateralisation of the CMI including surveillance, reserve eligibility, size of commitment, borrowing quota and activation mechanism. Meanwhile, we reiterated our commitment to maintain the two core objectives of the CMI, i.e., (i) to address short-term liquidity difficulties in the region and (ii) to supplement the existing international financial arrangements.
・ We reaffirmed the importance and necessity of strengthening cooperation on regional surveillance alongside the CMI multilateralisation process based on the Economic Review and Policy Dialogue (ERPD). We welcomed the initial progress made by the Group of Experts (GOE) and the Technical Working Group on Economic and Financial Monitoring (ETWG) on ways to strengthen regional surveillance capacity since their launches after our last meeting in Hyderabad. Further, we agreed to explore ways on how to link these activities with strengthened surveillance within the region.
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Establishment of CMI Establishment of CMI –– Bilateral Swap Bilateral Swap Agreement (BSA) NetworkAgreement (BSA) Network
Supplement to IntSupplement to Int’’l Financial Arrangementsl Financial ArrangementsAddress ShortAddress Short--term Liquidity Difficultiesterm Liquidity Difficulties
Agreed on the basic direction of the PostAgreed on the basic direction of the Post--CMICMI
SelfSelf--managed reserve pooling arrangement managed reserve pooling arrangement Single contractual agreementSingle contractual agreementMaintaining the Maintaining the two core objectives of the CMItwo core objectives of the CMI
To Be Discussed in To Be Discussed in ““New Task ForceNew Task Force””under ASEAN+3under ASEAN+3
Surveillance Surveillance Size of commitmentSize of commitmentBorrowing quota and activation Borrowing quota and activation mechanism, etc.mechanism, etc.
Further Discussion on Further Discussion on PostPost--CMI CMI
2007.5 Kyoto, Japan2007.5 Kyoto, Japan1010thth ASEAN+3 Finance MinistersASEAN+3 Finance Ministers’’MeetingMeeting
2000.5 Chiang Mai, 2000.5 Chiang Mai, ThailandThailand22ndnd ASEAN+3 Finance ASEAN+3 Finance MinistersMinisters’’ MeetingMeeting
Advancement of Chiang Mai Initiative (CMI)Advancement of Chiang Mai Initiative (CMI)
Significant increase in the BSA network Significant increase in the BSA network
Aimed at prevention and mitigation of Aimed at prevention and mitigation of future currency crises by enhancing future currency crises by enhancing crisis management and surveillance crisis management and surveillance capacities capacities –– designed to supplement designed to supplement existing international financial existing international financial arrangements such as IMF.arrangements such as IMF.
Failure of Asian Monetary Fund (AMF) ProjectFailure of Asian Monetary Fund (AMF) Project
19971997--98 Asian Currency Crisis98 Asian Currency Crisis
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Asian Bond Markets Initiative (ABMI)Asian Bond Markets Initiative (ABMI)
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Asian Bond Markets Initiative (ABMI)Asian Bond Markets Initiative (ABMI)
■ Main Objectives– Mobilization of regional savings through
local bond markets– Reduced mismatches in funding and
investment (currency and duration)
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Activities under the ABMI(1)Activities under the ABMI(1)
1. Credit Guarantee and Investment Mechanisms1. Credit Guarantee and Investment Mechanisms• Research on the regional guarantee and investment
mechanism which provides credit enhancement and enables Asian companies with low credit rating to issue bonds in the market.
2. Self2. Self--Assessment Report Assessment Report • ASEAN+3 member countries update progress reports on
their bond market development by their self-assessment.
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3. Creating New Securitized Debt Instruments3. Creating New Securitized Debt Instruments• Explore the measures to facilitate the issuance of local currency bonds from
the viewpoint of diversification of local currency bonds in the region.
4. Foreign Exchange Transactions and Settlement Issues4. Foreign Exchange Transactions and Settlement Issues• Explore the desirable bond clearing and settlement system in the region.
5. Rating Systems5. Rating Systems• Improve the capability of domestic credit rating agencies in the region.
Activities under the ABMI(2)Activities under the ABMI(2)
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High growth of local currency bond markets in AsiaHigh growth of local currency bond markets in Asia
65.9 (35.9)58.1 (35.5)43.4 (24.6)Hong Kong
4.3 (8.1)－－Vietnam*
95.0 (50.4)48.2 (38.0)10.5 (6.7)Thailand
82.0 (66.8)56.3 (63.6)23.8 (24.8)Singapore
40.2 (37.7)27.4 (35.7)16.7 (20.2)Philippines
135.0 (96.4)84.4 (88.6)57.1 (56.5)Malaysia
942.1 (113.7)538.2 (98.0)153.3 (29.5)Korea
68.5 (21.8)58.1 (29.6)4.6 (1.9)Indonesia
8,739.1 (197.3)6,416.8 (155.7)4,202.5 (107.1)Japan
2,415.7 (62.0)1,154.9 (44.1)353.8 (16.3)Subtotal
Total 11,220.7 (130.0)7,629.8 (113.7)4,599.7 (69.5)
1,048.6 (43.5)342.3 (23.5)87.8 (9.2)China (excl. Hong Kong）
June 200620021997
1.5-fold 2.4-fold ASEAN+3
2.1-fold 6.8-fold ASEAN+3(excl. Japan, Hong Kong)
2002→
June 2006 1997→
June 2006
(Note) All figures are the sum of amount outstanding of government bonds and corporate bonds. Percent of GDP in parenthesis. * Vietnam: as of December 2005.
(Source) Asian Development Bank “Asian Bonds Online”
（Unit : Billions of USD, % of GDP）Table 1Table 1
Table 2Table 2
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New Studies under ABMINew Studies under ABMI
Promotion of Securitisation of Loan Credits and Receivables Exploring New Debt Instruments for Infrastructure FinancingPromotion of Asian Medium Term Note (MTN) Programme.
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Promotion of Securitization Promotion of Securitization of Loan Credits and Receivablesof Loan Credits and Receivables
Further securitization of loan credits and receivables would contribute to enhance the volume of bond markets, as well as to a further development of various types of collateralized debt obligations.
It is expected that the study under the ABMI will explore the measures to support a further promotion of securitization of these assets. Major impediments, standards and best practices for realization of these instruments will also be identified.
（Securitization of Account Receivables)
Client Originator SPC/SPV Investors
Notes /Bonds
proceedsproceeds
Transfer of A/R
Goods/Services
Account Receivables
Ｓｏｕｒｃｅ：”East Asian Finance” (World Bank), METI,Japan
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Exploring New Debt Instruments Exploring New Debt Instruments for Infrastructure Financingfor Infrastructure Financing
Bonds issued for infrastructure investments with source of repayments stemming from the proceeds of the projects (Infrastructure Bonds).
InvestorsUsersInfrastructure
Project
Insurance company
Usage fees
Benefit
Payment(interest and principal)
Guarantee for default
Investment decisions do not depend on credit ratings of issuers, but on the profitabilities of the projects.It is expected that the study under the ABMI will suggest new types of debt instruments and associated infrastructure project.
Source :“Research on the utilization of Revenue Bond”Policy Research Institute for Land Infrastructure and transportation (Revised.)
Insurance premium
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Promotion of Asian Medium Term Note (MTN)Promotion of Asian Medium Term Note (MTN)ProgrammeProgramme
Issuer
Dealer(as primary subscriber)
Programme Offering Circular/Documents
(English Law)
Respective domestic clearing documents will be documented
under local laws
MTN Programme is the framework which enables companies to issue bonds/notes with various maturity and rates under certain simple procedures and is a major source of funding in the US and European market.
It is expected that the study under the ABMI will find the way for the development and expansion of MTN program in the region utilizing the modality of the ADB’sAsian Currency Note Programme launched last year.
Source：ADB
Local currencybonds
Local currencyproceeds
Home localcurrency bonds
Home localcurrency
Investors(Singapore・Hong Kong・
Malaysia・Thailand)
（ADB’s Asian Currency Note Programme)
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The Joint Ministerial Statement The Joint Ministerial Statement of the 10th ASEAN+3 Finance Ministersof the 10th ASEAN+3 Finance Ministers’’ Meeting Meeting
5 May 2007, Kyoto, Japan5 May 2007, Kyoto, Japan=Excerpt=
・ On the Asian Bond Markets Initiative, we encouraged collective efforts of ABMI Working Groups in prioritising the work plans and setting clear deliverables to move forward. We welcomed the diversification of issuers and types of local currency denominated bonds, and endorsed undertaking of the following new studies: Exploring New Debt Instruments for Infrastructure Financing, Promotion of Securitisation of Loan Credits and Receivables, and Promotion of Asian Medium Term Note (MTN) Programme. We also recognised noticeable progress of studies on regional credit guarantee and investment mechanism, settlement system, credit rating harmonisation as well as technical assistance coordination. Furthermore, we were also pleased to see the strengthened public and private sector cooperation under the ABMI.
