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East Asia's Regional Financial Governance: Assessing Korea's Centrality
Region: Asia
Theme: Economics
Location: Korea, South
Published September 12, 2017
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In the aftermath of the Global Financial Crisis, the multilayered international financial governance regime has been strengthened. In East Asia, this regime includes an ASEAN+3 regional layer designed to complement – rather than replace – the global layer. This regional layer has three goals: crisis prevention, crisis management and resolution, and market strengthening. The Chiang Mai Initiative Multilateralization (CMIM), ASEAN+3 Macroeconomic Research Office (AMRO), and Economic Review and Policy Dialogue (ERPD) are the key institutions in the areas of crisis prevention, management, and resolution. South Korea has become increasingly central to this regional financial governance regime over the past few years. Seoul was crucial to the setting up of CMIM, holds top management positions in AMRO, and is involved in the ERPD dialogue process. Three key reasons explain Korea’s centrality. To begin with, the growing role of financial markets in Korea’s domestic economy has made Seoul aware of the need to have a strong regional safety net to offset the negative effects of financial openness. Furthermore, Korea sees itself as a middle power and has therefore become more involved in international governance – particularly at the regional level. Finally, Seoul has been a keen supporter of East Asian regionalism at a time when ASEAN centrality has been weakening. Korean centrality has allowed Seoul to act as a balancer between China and Japan, be perceived as a neutral actor, and bridge the gap between developed and developing countries. At a time when East Asian regional financial governance is being questioned, Korea’s centrality serves as a catalyst for its enduring relevance.

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