Breakthrough with the AMF

The Asian Monetary Fund will soon be launched. The total size of the fund will be $120 billion, with ten Asean countries sharing $24 billion. Korea, Japan and China will contribution $96 billion for the Chiang Mai Initiative as agreed to at the finance ministers’ meeting. Korea will contribute 20 percent of the funds from the three countries, while China and Japan will contribute 40 percent each.

Asia’s financial system has struggled through difficulties. The $120 billion will be spent to help Asian countries facing an economic downturn tide over a future crisis. It will play the same role as the International Monetary Fund.

What remains now is to establish a body to monitor whether subsidized countries will properly implement support conditions. The manner of operation and the location for the establishment are the final issues that we should agree on. When they are set, the establishment of the AMF will be complete.

AMF is Asia’s long-cherished project, launched with an idea of helping economically stricken Asian countries using Asia’s co-sponsored fund.

Asia was deeply distrustful of the IMF, which is led by the United States and Europe, and the harsh terms imposed on Asia during the Asian Financial Crisis 12 years ago. Since then, Asia endeavored to launch the AMF, but has yielded no tangible result.

The Chiang Mai Initiative, launched in 2000, ended up being a bilateral monetary swap. However, as the global economic meltdown deepens, Asia is once again inspired with a strong community spirit.

The “Asean+3” financial ministers agreed to establish a fund of up to $120 billion last February. China and Japan began to compete with each other to assume a larger share of contributions, insisting that the criteria for contributions should be foreign currency reserves, which favored China, or gross national product, which favored Japan. Amid this, they made a huge compromise, an ambitious determination from a broader point of view. We have great expectations for the agreement on establishing a bond investing body. Asia has bought dollar and euro bonds using their trade deficits.

Asia’s money has been used for economic development in the United States and Europe. But if Asia’s bond market is boosted, everything will change. Asia’s funds will be used for Asia’s sake, also contributing to Korea’s economic development. During this economic crisis, our economy was harassed with fear of yet another crisis lurking around the corner.

The AMF will eradicate the root causes for such concerns. We would like to say that the Korean government should strive to get the monitoring and investment bodies headquartered in Korea. This is the fastest way to promote Korea’s financial industry.