Financial Regionalism in East Asia: Regional Surveillance Cooperation and Enforcement Problem *

Since the Asian financial crisis in 1997, many financial cooperative arrangements among the ASEAN + 3 countries have been formed to facilitate policy coordination and to prevent another crisis from adversely affecting East Asia. This paper focuses on regional surveillance cooperation, which has been regarded as a pre‐requisite for deeper financial cooperation including bilateral swap arrangements under Chiang Mai Initiatives. Although East Asian states have acknowledged the significance of the regional surveillance mechanism in the midst of the crisis, which could facilitate information sharing and frank discussion of potential risks in the region, it showed little progress until very recently. What explains this unsuccessful regional surveillance cooperation given the initial enthusiasm and widely‐acknowledged need for it? This article takes seriously domestic implementation capacities and enforcement problems on a regional level. It argues that member states are discouraged from exchanging frank views on other states' financial conditions because they expect that even non‐intrusive policies would not necessarily be successfully implemented in those countries where sufficient domestic regulatory and supervisory capacities are lacking. Moreover, regional surveillance cooperation had troubles in enforcement: the norm of non‐interventionism, lack of independent regional agencies and staff that could monitor and enforce compliance, and lack of transparency. In these circumstances, current surveillance mechanisms are likely to become a stumbling block for deeper financial integration in East Asia until serious efforts are made to tackle problems with enforcement.