Chiang Mai Initiative signed finally

I first learnt of Chiang Mai Initiative (CMI)  via a Barry Eichengreen paper.

Wikipedia offers some light:

The Chiang Mai Initiative (CMI) is an initiative under the ASEAN+3 framework which aims for creation of a network of Bilateral Swap Arrangements (BSAs) among ASEAN+3 countries. After 1997 Asian Financial Crisis member countries started this initiative to manage regional short-term liquidity problems and to facilitate the work of other international financial arrangements and organizations like IMF.

Chiang Mai is a city in Thailand and this initiative was first established here. Just like Bretton Woods, the initiative was named on the place where it was first thought and established.

ASEAN was formed on 8 August 1967 by Indonesia, Malaysia, the Philippines, Singapore and Thailand. Since then, membership has expanded to include Brunei, Burma (Myanmar), Cambodia, Laos, and Vietnam.

Asean + 3 includes ASEAN countries + China, Japan and  South Korea. They were included to lend more weight to ASEAN.

So after the Asian Crisis in 1997-98, ASEAN+ 3 formed CMI to prevent currency and liquidity crisis. Each member would contribute part of capital and the fund would then work like IMF preventing crisis.

But the agreement could not be signed as a multilateral pact. As Eichengreen pointed the CMI never picked up because of political reasons with China wanting bigger share and Japan being weary of China.

Ministry of Finance, Bank of Japan has a timeline of CMI and a list of bilateral swaps signed between Japan and other ASEAN+3 economies.

Now, the members have signed on the CMI agreement. It is now called as Chiang Mai Initiative Multilateralization (CMIM). There are joint press releases from the member central banks.

The key features:

  • It is initially a USD 120 billion fund with equal China (China + Hong Kong) and Japan share. Japan, China and Korea form 80% of the fund. Hence, the problem of China seems to be resolved. Am wondering how Japan was persuaded?
  • Another feature is of purchasing multiple. The larger economies like Japan, China would only be able to draw 0.5 of the capital they have paid as emergency funds. Whereas smaller economies like Vietnam, Myannmar, Cambodia etc would get 5 times of the capital as emergency funds.  This is done to ensure the smaller economies are given bigger protection from the crisis

A good boost for South East Asian economies.

I was just wondering why isn’t India a part of this? I am sure there must be discussions on this in the past. I will have to check them out. In case the readers have some know-how please let me know.

One Response to “Chiang Mai Initiative signed finally”

  1. dorsay Says:

    A great post! Simple and clear summary! I like it! I am also going to write an article about CMI soon. I think your post will help a lot. I will keep coming here. My blog deals with issues in the finance sector relating South Korea. Please visit if you are interested in. It’s

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