Author: Joel Rathus, East Asia Forum
On 30 January, the ASEAN+3 Macroeconomic Research Office (AMRO) opened for business.
This new facility is mandated to provide surveillance for, and ensure compliance with, the Chiang Mai Initiative Multilateralisation (CMIM), a US$240 billion fund aimed at preventing a regional financial crisis in East Asia. But, how effective will it be?
It must be noted that the first round of country-level surveillance reports, which were tabled at the Sendai Deputy Finance Ministers’ Meeting late last year, have not yet been released publicly. On that basis, it is still too early to judge AMRO’s actual effectiveness. But there are several other indications of how AMRO will function and what this will mean for the effectiveness of the CMIM.
First, AMRO was negatively affected by Sino–Japanese relationship. The term of its first director, for example, has been split between a Chinese and a Japanese national, as an alternative agreement was unable to be reached. Negotiations to select the first director occurred at a time when the Sino–Japanese relationship was at a low due to tensions over the Senkaku/Diaoyutai territorial dispute. Indeed, this appears to have been the catalyst in moving China away from supporting a Japanese director. It would have been preferable for either Wei Benhua or Yoichi Nemoto to have stayed in the director’s chair for a full three-year term, overseeing both the set-up and initial operation of AMRO rather than have split it.
Second, AMRO has been established not as an international governmental organisation (IGO) but as a corporation under Singaporean law, meaning it will operate as a private entity. How much does this matter? In the first instance it means that AMRO staff will have to pay tax, lowering the attractiveness of careers at the institution — especially in Singapore where AMRO will have to compete with major international banks for the best and brightest economic minds. Furthermore, without IGO status, staff at AMRO will not be government officials for the purposes of travel and will not be afforded diplomatic immunity. In the long term, this lack of independence may result in AMRO’s staff taking a more cautious line when reporting on the countries for which they provide surveillance. Clearly, the office will need greater legal status in the future.
Third, surveillance procedures themselves remain underdeveloped. The comparative advantage of AMRO as a regional process was supposed to include better access to regional policy makers and a closer focus on the economic conditions of member nations. The current procedure of having country reports and AMRO presentations at the ASEAN+3 Deputy Finance Ministers’ Meeting is a good start. But problems still remain and are similar to those experienced at the IMF: members are not yet providing more or better quality data, thus complicating the very starting point for AMRO’s analysis. This is in part because the guidelines for the alternate surveillance process, the Economic Review and Policy Dialogue, are found on a single page of voluntary requests — and AMRO has yet to establish the authority to extract and analyse details from key sectors in member economies, especially the banking and housing markets. A related point is that AMRO’s focus at this stage remains limited to Southeast Asia. Still, this is a logical focus in many ways, as it is these smaller economies which will seek to activate the CMIM to draw down funds and help manage any potential balance-of-payments crisis.
But the elephant in the room, of course, is the Chinese economy. For most in East Asia, choices about how they manage their economy must take into account changes and risks in the Chinese economy. At some time in the future, AMRO will be required to address deficiencies in the macroeconomic performance of the larger Northeast Asian economies and it is still an open question as to how successful that enterprise will be.
As the CMIM has been expanded to US$240 billion at the 3 May meeting of ASEAN+3 Finance Ministers and as the fund becomes further de-linked from the IMF (up to 40 per cent of funds will be independent of the IMF by 2012), it will become increasingly important for AMRO to provide not only high-quality and independent economic analysis, but also to formulate advice that is different from the IMF and other surveillance processes. Resolving the issues highlighted here will go a long way to making AMRO, and hence the CMIM, a functional part of the region’s economic governance.
Joel Rathus works at the Australian Department of Prime Minister and Cabinet. All views in this article are his own, and do not reflect the position of the Department of the Prime Minister and Cabinet or the Australian Government.
This article draws from Joel Rathus’s recent book Japan, China and Networked Regionalism, now available here.