Effectiveness of Regional Mechanisms for Multilateral and Regional Governance

Abstract

The Asian Financial Crisis of 1997–1998 revealed that Asia should have its own regional mechanism to mitigate systemic risk and crisis contagion. This resulted in the formation of several regional organizations, such as the Association of Southeast Asian Nations, the People’s Republic of China, Japan, and the Republic of Korea (ASEAN+3) Macroeconomic Research Office (AMRO) whose work supports regional macroprudential schemes and which provides macroprudential surveillance and assistance in financial crisis resolution. Given its small size and lack of authority to enforce its policy recommendations, AMRO is not in a position to replace the dominance of international organizations with more ample resources in resolving financial crises. AMRO can be more effective in early warning than in crisis resolution. Its work should be supported and expanded, while increasing coordination with other international organizations to strengthen the macroprudential ability of the Asian region. The Southeast Asian Central Banks Research and Training Centre (SEACEN) provides training to central bankers, research on central banking, and fosters networking among members. Its work contributes indirectly to macroprudential schemes through upgrading the capabilities and relationships of members’ central banking staff. SEACEN can become more effective if it streamlines its work focus and collaborates more with other organizations. The Executives’ Meeting of East Asia-Pacific Central Banks (EMEAP) organizes meetings for governors and deputy governors of its members’ central banks in order to dialogue and exchange ideas. These meetings have indirect and long-term benefits as they help to enhance regional macroprudential schemes by fostering relationships and interactions among the top decision makers. EMEAP may become more effective and prominent if it makes its work and plans more transparent. In addition, several other high-level meetings such as ASEAN+3 Finance Ministers and Central Bank Governors’ Meeting, Asia-Pacific Economic Cooperation and Asia–Europe Meeting provide opportunities for policy dialogues for their members, which indirectly enhance their macroprudential efforts. But, due to the nature of the work objectives, and/or relatively small sizes of these regional organizations, they should be viewed as useful supplements to existing international organizations rather than their replacements.