THE EFFECTIVENESS AND CHALLENGE OF CHIANG MAI INITIATIVE MULTILATERALIZATION AS A PLATFORM FOR MANAGING ASEAN REGIONAL FINANCIAL ARRANGEMENT

Abstract

Chiang Mai Initiative Multilateralization was developed from Chiang Mai Initiative or CMI which has started since 2000 due to the economic crisis in Asia in 1997. It was the first step in developing mechanism to stabilize the economic stability in Asia. It was designed for the purpose of strengthening the economy and financial services in the region.

There are a lot of restrictions on CMIM such as the size of CMIM which is only 240 billion US dollars. It is still relatively small which will be restricted in providing assistance to member countries. Another challenge is that IMF-Delinked Portion is smaller than the maximum amount that member countries can receive for the assistance from IMF or other fund. CMIM itself is standby facility or can be called as earmarking which is the agreement without putting real money into the fund and this will cause the problem in terms of confidence over the mechanism. However, the mechanism of CMIM has been much developed compared with the mechanism of the CMI. It was developed under the aim to enhance crisis-Prevention with more specific modalities for providing assistance to member countries experiencing economic crisis and facing the problem of lack of liquidity or difficulties in balance of payments. CMIM will add more channels to provide assistance to member countries through new facilities and also extend duration of assistance (Maturity), due to the economic crisis that may be protracted.

This analysis aims to analyze the development of CMIM as a mechanism to stabilize the financial stability in the ASEAN and plus three countries and how it serves as a mechanism to promote financial integration in ASEAN countries, as well as offering guidance on how to enhance the effectiveness. In this regard, comparative analysis will be conducted to calibrate the effectiveness of the mechanism as well as to analyze the challenge and future implications especially for ASEAN countries.

Keywords: CMIM, ASEAN, FINANCIAL ARRANGEMENT, CHIANGMAI INITIATIVE MULTILATERALIZATION, FINANCIAL SURVEILANCE MECHANISM