But it was still to EMEAP’s credit that in the second Governors’ meeting in Shanghai in July, the group called for the creation of an Asian facility to supplement the IMF in providing assistance to member economies in Asia to make structural adjustments. That historic decision paved the way for the smooth meeting organized by the Fund in Tokyo two weeks later in August when more than $ billion out of a total package of $ billion facility to Thailand was amassed from EMEAP members with almost no fuss. Meanwhile, the call for an Asian facility is still being considered. Discussions are continuing amongst the interested parties, whenever opportunities present themselves. Asian Monetary Problems 22. It is perhaps one of the ironies of the post-Bretton Woods era that the modern world is no longer generally short of liquidity, and indeed is arguably at present overflush with liquidity. Yet amidst all this liquidity and prosperity, liquidity crunches can even test the solvency of nations. The currency turbulence in Asia has prompted a realization of this irony and consequently much soul searching on the appropriateness of exchange rate and other monetary arrangements, macroeconomic and structural adjustment policies, the adequacy of financial market regulation and banking supervision, the pace of financial liberalization, etc. Many words of wisdom are being offered. While some are critical of the wisdom of fixed exchange rate systems, others blame volatile capital flows and currency speculators for the currency crises in rather strong and emotive terms.
But the down side risk which all of us should be aware of is the possibility that the global financial market may then become segmented into regional blocs which may result in more competition and friction, rather than co-operation. 11. On the form of monetary co-operation, there is a wide spectrum of experience on the basis of current practice. There is on the one extreme the simple exchange of information and expertise amongst monetary authorities helpful to the management of the domestic monetary system generally, covering the whole range of central banking functions in the management of the currency, the supervision of financial institutions, the development of the financial infrastructure, the management of foreign reserves, etc. On the other extreme, there is monetary co-operation to the extent of achieving monetary union or integration. 12. In between the two extremes there are arrangements for policy co-ordination at the macro level initiated on the realization of increasing international, particularly regional, economic interdependence. There are also the more focused schemes for mutual assistance in the provision of liquidity to facilitate effective monetary management, which may or may not involve the assumption of credit risks between governments. There have also been considerable efforts spent in supervisory co-operation towards the standardization of supervisory practices in order to promote international financial stability, again in recognition of the possibility of the damaging contagion effect of financial crises across financial systems.