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70 - Enhancing the Effectiveness of CMIM and AMRO: Selected Immediate Challenges and Tasks
- from ASEAN Processes
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- By Reza Siregar, University of Adelaide, Akkharaphol Chabchitrchaidol, Singapore
- Edited in consultation with Kee Beng Ooi, Sanchita Basu Das, Terence Chong, Malcolm Cook, Cassey Lee, Michael Chai Ming Yeo
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- Book:
- The 3rd ASEAN Reader
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 22 June 2017
- Print publication:
- 17 August 2015, pp 367-370
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Summary
Recent crises, particularly the on-going sovereign debt crisis in the euro area economies, has provided momentum to greater regional financial cooperation in the region. Through the establishment of the Chiang Mai Initiative Multilateralisation (CMIM) and the ASEAN+3 Macroeconomic Research Office (AMRO) in March 2010 and May 2011, respectively, substantial headway has been made in this regard. The role of AMRO as a surveillance office for the CMIM is vital to the overall success of regional financial cooperation; without a credible and qualified surveillance capacity, it is difficult to envision an effective CMIM.
RECENT COMMITMENTS
The CMIM
During the Annual AFMGM+3 Meeting in May 2012, several other major new commitments were announced. Responding to the potential need for a larger swap facility, the CMIM Executive Committee announced the doubling of the swap facility to $240 billion in May 2012. Given the adjusted contribution, while keeping the “purchasing multiples” unchanged, major ASEAN economies (Indonesia, Malaysia, Philippines, Thailand, and Singapore) now have access to approximately $22.76 billion each, an increase from $4.55 billion previously.
At the same meeting, an increase in the IMF de-linked portion from 20% to 30% was also announced. A number of ASEAN+3 economies in fact proposed a higher de-link portion, but as a group eventually agreed to review the issue again in 2014, with the intention of further increasing the de-linked portion to 40%. During their deliberations, it was acknowledged that one of the key factors behind the doubling of the total swap facility and the rise in the de-linked portion is the recognition of the speedy establishment of the ASEAN+3 Macroeconomic Research Office (AMRO) and the timely delivery of well-received AMRO surveillance reports by the Executive Committee during the Deputies Meeting in Sendai, Japan in December 2011 and in Phnom Penh, Cambodia in March 2012. Furthermore, reflecting their appreciation of the urgency in anticipating and preventing future financial crisis, the ASEAN+3 Finance Ministers and Central Bank Governors approved the establishment of an additional function for the CMIM — a crisis prevention function, in addition to the crisis resolution function.
Under the current framework of the CMIM, a detailed set of operational guidelines was established, which would enable any swap requests to be processed efficiently and in a timely manner, typically within seven days of a request being made.
2 - Fragile Balance of Payment in Indonesia under Global Economic Uncertainties
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- By Reza Y. Siregar, Group Head and Lead Economist at ASEAN+3 Macroeconomic Research Office (AMRO), Maria Monica Wihardja, Researcher at the Centre for Strategic and International Studies (CSIS), Indonesia
- Edited by Suthiphand Chirathivat, Chayodom Sabhasri, Aekapol Chongvilaivan
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- Book:
- Global Economic Uncertainties and Southeast Asian Economies
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 22 July 2017
- Print publication:
- 04 May 2015, pp 22-55
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Summary
INTRODUCTION
Amid the global financial turbulence, the economy of Indonesia posted an annual average growth of above 6 per cent between 2008 and 2012, except in 2009. This was arguably among the most stable growth performance among the regional economies of East and Southeast Asia. The strength of domestic demand has indeed been a primary driver of the stable growth performance. In contrast to the major ASEAN (Association of Southeast Asian Nations) economies, exports of Indonesia amounted to less than 25 per cent of its GDP, compared to Malaysia at more than 80 per cent and Thailand at more than 60 per cent in recent years. Private consumption contributed between 44 and 49 per cent of the quarterly year-on-year GDP growth in 2012 (see Figure 2.1). Indonesia has also seen investment pick up in recent years, and the country's resilient growth in 2008–12 can also be attributed to high commodity prices and capital inflow surges.
Despite the large domestic demand base, the uncertainties with the advanced economies, particularly the United States and the European Union, had negatively affected and exposed a number of apparent weaknesses with the Indonesian economy. A couple of these vulnerabilities are worth highlighting as they are arguably structural in nature. First is the country's banking sector's exposure to cross-border bank-lending activities. Like the rest of the ASEAN economies, the banking sector assumes a vital role in overall financing activity in the local economy. Among the major ASEAN economies, Indonesia arguably adopts the most open banking sector regulation. Majority foreign ownership, as high as 100 per cent, has long been adopted following the 1997 East Asian crisis. Furthermore, foreign banks are allowed to enter the local industry both as a branch or a subsidiary. The high interconnectedness of the local banking sector to the global banks exposed the local economy to increasingly volatile cross-border bank-lending flows as evident during the deleveraging of the European banks in 2011.
The second is current account weaknesses. The persistent current account deficits in recent years have raised concerns over macroeconomic stability, causing depreciation pressures on the local currency. The root cause of the current account deficit has been attributed to costly long-standing energy subsidies and the heavy reliance on commodity exports.
Indonesia: Setting the Stage for Soeharto's Re-election
- from Indonesia
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- By Leonard C. Sebastian, Institute of Southeast Asian Studies, Reza Y. Siregar, Institute of Southeast Asian Studies
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- Book:
- Southeast Asian Affairs 1996
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 21 October 2015
- Print publication:
- 22 February 1997, pp 166-194
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Summary
For Indonesians in general, the year 1995 marked a memorable milestone at the fiftieth anniversary of the country's independence from colonial rule. Viewed from the Pesta Rakyat (Celebrations for the People) occurring everywhere in the country, with an obvious highlight in its capital city of Jakarta, one could not help but appreciate the past accomplishments of the country and yet, at the same time, be aware of the challenges to come.
The President's current term ends in 1998. His achievements are well documented. He succeeded where Soekarno failed because he used his power to nurture a consistent economic policy suited to local conditions, yet founded on a managed opening of the economy to international investment and trade. Government investment in infrastructure and the improvement of educational and social standards have been among the legacies of the Soeharto era. These successes, coupled with a formidable system of state power used periodically to curb dissent, have delivered to Indonesia internal stability and given it the credibility to play a pivotal role in international organizations like the Association of Southeast Asian Nations (ASEAN), the Asia-Pacific Economic Co-operation (APEC) forum and the Non-Aligned Movement (NAM).
The underlying theme in this article is that in 1995, rather than contemplating the end of the Soeharto era, Indonesia was indeed preparing itself for the likelihood of the President continuing to a seventh term in 1998. The article also provides an overview of important developments in the fields of politics, the economy and international affairs which impacted on the nation during the year.
Preparing the Way for Soeharto's Re-election
President Soeharto probably wants his final legacy to the Indonesian people to be a smooth transition of power. For this reason, it is likely that, health permitting, he will seek a seventh term of office. There have been implicit and explicit indicators to support this view. Implicitly, the once rampant speculation about the presidential succession quietened down considerably in the second half of 1995, suggesting a growing acceptance that the President will stand again in the next presidential election in March 1998.