Possibilities and Challenges for Financial Integration in East Asia: Lessons from a Comparative Regional Perspective

The 997 Asian crisis was a rude awakening for the hitherto complacent East Asian countries. Slowly but steadily, a region-wide consensus has been emerging that the East Asian (ea, henceforth) countries need to collectively oversee regional economic issues in a coordinated way or to move a step up for concrete regional arrangements to forestall the outbreak of future financial crises. Before then, the prevailing concerns for many ea countries were with overseas markets outside the region. The export-oriented drive had worked well as the main contributing factor for the region’s spectacular economic growth. Amidst the Asian crisis, Japan attempted the first initiative to develop intra-regional measures for circumventing future financial crisis. Its ambitious proposal was to create an Asian Monetary Fund (aMF), which would be equivalent to a region-based iMF. The Japanese proposal included such a significant sum of facility that crisis-hit countries welcomed it and even envisioned a long-term regional goal of creating a more ambitious, alternative Asian Monetary Union (aMu, henceforth), which would be modeled after the European Monetary Union (eMu).