Towards An Asian "Bretton Woods" for Restructuring of the Regional Financial Architecture

Despite a plethora of programs for increased financial co-operation in Asia, there has been very little real progress in developing a regional architecture for financial co-operation in Asia. While the risks of repetition of 1997-98 style financial crisis in Asia are not high today, there are new risks of financial turbulence originating from sub-prime crisis in the US and new opportunities for using the financial strength of the region for accelerated growth with equity. To guard against these risks and to exploit these opportunities, a bold new initiative in the region is needed. The idea of Asian Monetary Fund proposed by Japan in 1998 needs to be revived, perhaps with a different nomenclature and a different terms of reference. This paper proposes a Reserve Bank of Asia which will be a combination of IMF and the World Bank at regional level. In order to respond to the current crisis, the major players in the region should develop a consensus on the outline of a regional financial architecture and call a conference of EAS countries to prepare Articles of Agreement for the institution much as was done at Bretton Woods some sixty years ago.