This article first appeared in Forum, The Edge Malaysia Weekly on May 8, 2023 - May 14, 2023

If Prime Minister Datuk Seri Anwar Ibrahim’s revived proposal to set up the Asian Monetary Fund (AMF) is to progress, a fine and delicate regional diplomatic strategy has to be shaped towards its realisation.

Asean is the best vehicle for this to show the proposal is needs-based and not a geopolitical gambit.

When the AMF was talked about in the aftermath of the 1998 Asian financial crisis, there was American resistance to its disturbance of the US-crafted international financial order, with the International Monetary Fund (IMF) and the US dollar at its centre.

One generation later, the world has changed with the rise of China and relative American decline, including latterly widespread bursts of de-dollarisation, as significant non-Western countries have chosen slowly but surely for economic and political reasons to trade with each other in their respective currencies.

It might look like this is the moment to strike. But the US is not about to lie down and die with the dollar.

And it is not in Malaysia’s interest to appear to be running at the US with the AMF proposal, especially as it has China’s support. We do not need a poisoned chalice. In the diplomatic effort, it should be shown the initiative is intended to meet Asian needs, which the IMF has not always done.

Actually, after the devastating Asian financial crisis in 1998, even if nothing came of the suggested AMF, Asean launched the Chiang Mai Initiative, which later became, in 2000, the Chiang Mai Initiative Multilateralisation (CMIM), comprising ­Asean+3 (China, Japan and South Korea). Its intention is to assist member states in balance of payments distress with needed foreign exchange.

Subsequently, the Asean+3 Macroeconomic Research Office (AMRO) was set up in Singapore in 2011, with functions, much like some of the IMF’s, as a macro­economic policy surveillance organisation of CMIM member countries.

Although not stillborn, CMIM and AMRO have not quite got the heft to make a difference to the IMF-dominant financial order. The total size of CMIM is only US$240 billion (RM1 trillion). AMRO takes a softly, softly approach and has not stepped on toes, unlike the trampling IMF, mainly of non-Western states.

There has been no call on CMIM support. In fact, right now, if there is one CMIM country in need of such support, it is Laos. Its external debt of about 

US$17 billion is 100% of gross domestic product. Its foreign reserves are well below the three months’ minimum recommended for low-income economies. It faces both a solvency and liquidity crisis. Yet, as it is in China’s orbit and most of the external debt is with China, there is not a thought of other support than China’s.

With Anwar’s AMF proposal, there are already different positions taken, even within Asean. There is no doubt the US-China divide, but Malaysia must work to make it an Asean proposal by getting into the details of its proposal. One way is to use the CMIM and AMRO — for which there already is Asean+3 consensus — as the platform on which to build the rudiments of an AMF.

If it is to be dubbed as supplementary to the IMF, and not a replacement of it (as were the words used by the Asian Development Bank when the CMIM was established), so be it. Otherwise, it would take much longer for the AMF to take root than is desirable.

Asean’s main problem is a lack of leadership. There is no better moment than when Indonesia is in the chair. There is no better time than when there are Asean leaders like Anwar around who can galvanise support — but with details and the different steps leading to something near enough to the AMF and better than the CMIM and AMRO.

The commitment and momentum must be set now. Next year, Laos takes the chair of Asean, which is worrying given it is deeply distracted by its serious financial and economic situation, before Malaysia in 2025. And, heaven forbid, Myanmar the year following.

Yet by 2030, Asean will become the fourth-largest economy in the world with the fourth-largest global population. This is repeated again and again, but Asean’s voice in the world is not commensurate with its size because it does not think and act as one entity, which it claims to be.

Singapore diplomat and former permanent representative to the UN Kishore Mahbubani just recently proposed that Asean takes a hand in getting the US and China to talk to each other instead of sliding into economic and military conflict. I agree with him entirely. What is the meaning and purpose otherwise of Asean centrality, the many summits and meetings it organises — and of course the size and importance it claims?

In regard to the AMF, Asean can explicitly demonstrate its role of being the honest broker by driving a proposition to fulfil financial and economic need without the overlay of geopolitical end.

Asean countries — particularly Indonesia — felt the sharp end of IMF policy imposition that caused untold economic damage and, indeed, political turmoil during the Asian financial crisis of 1998.

Nobody in Asia can forget that picture of IMF managing director Michel Camdessus standing over and getting President Suharto to sign an agreement to a set of draconian policies that brought the Indonesian economy to its knees.

Yet this IMF erroneous and debilitating economic discipline was not to be found any­where during the Western financial crisis of 2008, wrongly always referred to everywhere as the global financial crisis, as Western economies tried to spend their way out of recession with levels of quantitative easing never before seen. The rest of the world saw how the vaunted moral hazard was thrown out of the window as wholly mismanaged banks were rescued with taxpayers’ money.

As Asia’s position in the world economy expands, the US would be losing support in the region, and Asean must impart to the US, if it does not recognise the cross of double standards Asia has had to bear and cannot bear any longer.

Asean is in the best position to let the Americans know that the IMF has not been fair to developing countries that have frequently been denied access to the US dollar through currency swap lines. And that it is only fair that they would want to arrange swap lines through the AMF in whatever currency they can work out.

At the same time, Asean is best placed to show the Americans that the region is not about to throw the baby out with the bath water, that it is not taking China’s side and recognises the importance and size of American investment, which is larger than its investment in India, China, Japan and South Korea put together.

But the Americans must also cooperate and recognise the changing world and adapt if it is not to lose support in the region. The idea of having the AMF is manifestation of the need to protect growing Asian and Asean interests against the caprice of any single power, such as the unquantifiable risk of geopolitical sanction through weaponisation of the US dollar.

Mistakes have been made. Consequences have followed, much of it not to the US’ liking even if caused by it. The Asean strategy should be to get American buy-in for the AMF as an expression of the rise of Asia intended to better protect the economic and financial interests of the countries of the region than has hitherto been the case.

The test is whether Asean can rise to the challenge of fashioning the proposed AMF, and getting it established as a non-antagonistic and geopolitically neutral institution. A tall order, but different regional configurations are forming that will not wait on Asean getting its act together.

Tan Sri Dr Munir Majid is chairman of CARI Asean Research and Advocacy

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