AMF is welcome newsThe Asia Monetary Fund (AMF), often called the Asian version of the International Monetary Fund, will soon materialize. Thirteen countries, including Korea, China, Japan and member countries of the Association of Southeast Asian Nations (Asean), have agreed to establish a shared monetary fund to support countries in case of financial crises in the region.
The initial amount of the fund is expected to be $80 billion, collected from the foreign exchange reserves of each country. It is welcome news, since the existence of such a fund will likely contribute to stabilizing currencies. The increase of short-term investment funds in the international financial market is speculative by nature and fluctuates constantly, often causing a detrimental effect on currency. A shared effort by each country is required to cope with the venture capital.
The financial crisis we had a decade ago was dire enough to teach us the importance of having an international monetary fund. Indeed, we received a lot of help from the International Monetary Fund. We have no reaston to refuse one more safety net, such as the AMF, other than the IMF, especially considering that the IMF mainly represents the U.S.-European voice. Asia now has an economy big enough to build an independent regional monetary fund. China holds $1.202 trillion in its foreign exchange reserves, which ranks it at the top of foreign reserves in the world. Japan is second at $909 billion and Korea is fifth at $243.9 billion. In total, seven countries in Asia rank in the top 10 in foreign exchange reserves.
To be sure, many obstacles are expected before the AMF actually launches. Most likely is opposition from the United States, which has exercised tremendous influence in the international financial market via the IMF.
An emotional response does not do good, such as a response that Asia created a fund to stand against the United States. Nor is it a good idea to criticize the previous policies of the IMF, i.e., that it was too cruel to recipients of IMF assistance or that it tends to neglect Asia.
Instead, a different argument will have more persuasive force. Since the global financial market is so insecure, the sole performance of the IMF cannot effectively cope with the likely dangers in the market.
The Korean government should take the initiative to coordinate opinions in the persuasion process. In our view, this is a good opportunity to become a central force in Asia, coordinating the differences between China and Japan.