Author: Toshinori Doi, AMRO Director
In the three months that I have served as the Director of AMRO, the global economic outlook has become gloomier, dragging down the growth prospects of the ASEAN+3 region. Intensifying U.S.-China trade and technology tensions, along with growing uncertainty in financial markets, pose significant risks to the region’s economic growth. A sharper-than-expected slowdown in major economies could further undermine the region’s already weakening export sector.
In this context, AMRO’s role in contributing to securing regional macroeconomic and financial stability has become more crucial and relevant than ever. As the head of the organization, my vision is to create a region that is able to withstand financial crises, by strengthening AMRO’s role as a capable and trusted “family doctor” to its members.
The big question is: ‘How can we get there?’ In the next three years, I would like to build on AMRO’s achievements and continue strengthening its three core functions—conducting macroeconomic surveillance, supporting the implementation of the Chiang Mai Initiative Multilateralisation (CMIM), and providing technical assistance to members to strengthen their capacity and institutions.
Robust and Vigilant Surveillance
Vigilant monitoring of members’ economies by AMRO is essential for identifying risks to growth that may require remedial policy adjustments. We recognize that in an increasingly integrated world, when one economy sneezes, others may catch a cold or worse, the ‘flu’. Hence, as the key surveillance organization for the ASEAN+3 region, AMRO plays the vital role of conducting both bilateral surveillance of individual economies, and multilateral surveillance of the region as a whole. This will assist with the identification of key vulnerabilities and provision of timely and appropriate policy advice to authorities to address them. In turn, authorities will be able to mitigate any negative spillover within or from outside the region.
AMRO has made tremendous progress in the area of macroeconomic surveillance following its transition to an international organization in 2016. Its surveillance capacity, frameworks and toolkits have been strengthened and plans are in place to continue developing its capacity to undertake comprehensive and relevant macro-financial analyses to support policy advice to its members. We will also leverage on our location right in the heart of Asia’s financial markets and increase our dialogue with market participants in order to learn what is driving their asset allocation decisions, which underpin international capital flows.
Based on Asia’s past experience, it is imperative for AMRO and its members to get a better handle on the role of capital flow management and macro-prudential measures in supporting financial stability. AMRO will look into “international best practices” in applying such tools, and their effectiveness, which will then feed into staff’s surveillance work.
Enhance the CMIM’s Operational Readiness
The CMIM is a multilateral currency swap arrangement among ASEAN+3 members, which aims to help members address balance of payment and/or short-term USD liquidity difficulties. The CMIM currently comprises a crisis prevention facility – the CMIM Precautionary Line (CMIM-PL), and a crisis resolution function – the CMIM Stability Facility (CMIM-SF). Persisting global uncertainties and the region’s continued integration with the global economy imply that the demand for CMIM’s insurance and defense function will become more important going forward. In light of this, my top priority is to assist our members in enhancing the operational readiness of the CMIM.
In the past few years, AMRO has supported members in conducting the first CMIM periodic review and several CMIM test runs. It is in the process of developing a CMIM Conditionality Framework to define the conditions for the use of CMIM facilities, and further enhancing the Economic Review and Policy Dialogue (ERPD) Matrix as a tool to support the activation of the CMIM-PL.
Going forward, AMRO will focus on supporting members to finalize work on the remaining CMIM policy issues; this includes making the best use of the ERPD Matrix in identifying countries that pre-qualify for the CMIM-PL facility, and completing the Conditionality Framework. The 10th test run will also be conducted with support from AMRO to address administrative capacity issues across all members in what is a complex operation. AMRO will also strengthen the necessary skills and know-how, such as putting together a financing package accompanied with appropriate policy advice if warranted.
Expand the Scope of Technical Assistance
The heterogeneous nature of the ASEAN+3 region means that our member economies are at different stages of economic development and financial market maturity. In order to cater to the diversity of our member economies, AMRO will continue strengthening its Technical Assistance function to provide technical support tailored to members’ needs and circumstances. We will consider various capacity issues, identified during our Annual Consultation Visits to member economies and the CMIM test runs.
Reflect on the Past and Prepare for the Future
It is said that major financial crises occur every 10 years. The dawn of the year 2018 was worrisome—given what transpired in the 1997/98 Asian Financial Crisis and the 2008 Global Financial Crisis—but the year passed without any major crisis event. Although we are more than half-way into 2019, a prolonged period of uncertainty in the world economy means we should all stay vigilant.
During my interactions with member authorities as well as other stakeholders in my first three months at AMRO, I have been inspired by the strong commitment and collaborative spirit within the region towards attaining the common goal of having a region free of international financial crises, and ensuring strong, sustainable, balanced and inclusive growth for all. I am humbled and encouraged to have the opportunity to lead AMRO at this important juncture and I look forward to working with all of you.
I would very much like to hear from you, and welcome your comments in the section below.
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