BACKGROUND Crisis: IMF - Topic A: Financial Crisis in South- east Asia - IMUNA
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BACKGROUND
GUIDE
Crisis: IMF
Topic A: Financial Crisis in South-
east Asia
2 0 2 1
Email: info@imuna.org
Phone: +1 (212) 652-9992
Web: www.nhsmun.org
Secretary-General Hello Delegates!
Maura Goss
My name is Caleb Kuberiet, and I am very excited to be your director for the International Mon-
Directors-General
etary Fund, session one! I started doing Model United Nations when I was a sophomore in high
Rose Blackwell
school, so the weird combination of angst and excitement is something I know quite well! We have
JJ Packer
been working all summer (and quarantine) long on this fascinating background guide and are look-
Conference Services ing forward to checking out your position papers in the near future. Before continuing with the
Hannah Lilley details of our committee, let me introduce myself.
Alisa Wong
Delegate Experience I am a rising senior at Rutgers University in New Brunswick, New Jersey. I have lived in New Jer-
Akanksha Sancheti sey all my life and love the state’s proximity to New York City, Philadelphia, and the beach! I am
John Wood majoring in English and Political Science on a pre-law track, so I have been studying for the LSATs
all summer! On campus at Rutgers, I am the News Director of WRSU Rutgers Radio and a Site
Global Partnerships
Sofia Fuentes Leader for Rutgers University Alternative Breaks, where I led a service trip to Santa Catalina Island
Salmaan Rashiq in California. This summer, I have been lucky enough to hit the beach, go on runs, and take my two
South African Mastiffs on a lot of walks! Some of my other hobbies include entertainment from
Under-Secretaries-
General Netflix to books, hiking, trying new food, and drinking way too much coffee. My favorite movie is
Jon Basile The Dark Knight, and I just recently finished Avatar: The Last Airbender, which was so good! Have
Ankita Bhat any good recommendations? Let me know!
Beatriz Circelli
Caitlyn Johnson The International Monetary Fund is not usually a Crisis committee, but this NHSMUN we are
Patrick Leong thinking outside the box. Delegates will experience an unprecedented amount of control in the
Kathy Li committee as they learn to deal with financial crises. Now more than ever, people understand that
Pablo Maristany de any historical or momentous situation has a dire effect on our financials and the global economy.
las Casas Ours will be a unique committee that is destined to offer you a unique experience. If you have any
McCall Olliff questions, feel free to contact me!
Abolee Raut
Pranav Reddy Best,
Clare Steiner
Ann Williams Caleb Kuberiet
caleb.kuberiet@imuna.org
Crisis: IMF
Session I
Email: info@imuna.org
Phone: +1 (212) 652-9992
Web: www.nhsmun.org
Secretary-General Hello delegates!
Maura Goss
My name is Carmen Vintro, and I am your director for the second session of NHSMUN’s Inter-
Directors-General
national Monetary Fund Crisis. I’m so excited about the opportunity to direct this committee and
Rose Blackwell
know we will all have such intellectual fun learning via simulation about how a global economic
JJ Packer
institution such as the IMF works (especially in the current pandemic!). I’ve been doing model
Conference Services UN since freshman year of high school, and have continued into college, so I am familiar with the
Hannah Lilley stress (and fun!) of preparing for big conferences. That being said, please reach out if you have any
Alisa Wong
questions at all concerning preparation for the conference, more specific committee details, or just
Delegate Experience college in general!
Akanksha Sancheti
John Wood A brief bit about myself—I am a rising sophomore at Barnard College at Columbia University in
Manhattan, studying philosophy and economics. I’m originally from Portland, Oregon, and am
Global Partnerships
Sofia Fuentes presently taking refuge in DC for the semester/year. At school, I am a delegate of Columbia’s Mod-
Salmaan Rashiq el UN travel team and was a USG of Committees for Columbia’s college conference (CMUNNY)
before it was canceled. In my free time, I am a fervid soccer supporter and love to follow the Pre-
Under-Secretaries-
General mier League and the Portland Timbers, and I am happy to talk about anything soccer related. Over
Jon Basile the summer/quarantine, I interned with Congressman Blumenauer’s district office and freelanced
Ankita Bhat for the Columbia Political Review. I also frequented the numerous hiking areas near Portland, visit-
Beatriz Circelli ed the beaches on the Pacific, lounging in parks, and anything else outdoors. When I’m not outside,
Caitlyn Johnson I watch Sherlock, which I would highly recommend! Please reach out with any TV, movie, or music
Patrick Leong recommendations, I’m always looking for new things to watch or listen to!
Kathy Li
Pablo Maristany de But enough about me! We are here to participate in a simulation of the IMF, the success of which
las Casas depends on each of you coming with an enthusiastic, open-minded attitude and well-researched
McCall Olliff preparation. Of course, I am here to help us all get to that point! I am confident that the unusual
Abolee Raut crisis format will enhance your experiences and can’t wait to dive into this with you all! I sound like
Pranav Reddy
a broken record at this point, but again, please reach out to me with questions or comments you
Clare Steiner
may have!
Ann Williams
All the best,
Carmen Vintro
carmen.vintro@imuna.org
Crisis: IMF
Session II
Crisis: IMF 4| Table of Contents Table of Contents A Note on the NHSMUN Difference 5 A Note on Research and Preparation 7 Committee History 8 Simulation 9 Financial Crisis in Southeast Asia 12 Introduction 13 History and Description of the Issue 13 Current Status 27 Bloc Analysis 38 Committee Mission 40 Committee Representatives 41 Research and Preparation Questions 48 Important Documents 51 Works Cited 52
Crisis: IMF
A Note on the NHSMUN Difference |5
A Note on the NHSMUN Difference
Esteemed Faculty and Delegates,
Welcome to NHSMUN 2021! Our names are Rose Blackwell and JJ Packer, and we are this year’s Directors-General. Thank
you for choosing to attend NHSMUN, the world’s largest and most diverse Model United Nations conference for
secondary school students. We are thrilled to welcome you to our conference in March!
As a space for collaboration, consensus, and compromise, NHSMUN strives to transform today’s brightest thinkers into tomor-
row’s leaders. Our organization provides a uniquely tailored experience for all in attendance through innovative and accessible
programming. We believe that an emphasis on education through simulation is paramount to the Model UN experience, and this
idea permeates throughout NHSMUN.
Debate founded on strong knowledge: With knowledgeable staff members and delegates from over 70 countries, NHSMUN
can facilitate an enriching experience reliant on substantively rigorous debate. To ensure this high quality of debate, our staff
members produce extremely detailed and comprehensive topic overviews (like the one below) to prepare delegates for the com-
plexities and nuances inherent in global issues. This process takes over six months, during which the Directors who lead our
committees develop their topics with the valuable input of expert contributors. Because these topics are always changing and
evolving, NHSMUN also produces update papers intended to bridge the gap of time between when the background guides are
published and when committee starts in March. As such, this guide is designed to be a launching point from which delegates
should delve further into their topics.
Extremely prepared and engaged staff: The detailed knowledge that our directors provide in this background guide through
diligent research aims to spur critical thought within delegates at NHSMUN. Before the conference, our Directors and Assistant
Directors are trained rigorously through copious hours of exercises and workshops to provide the best conference experience
possible. Beyond this, our Directors and Assistant Directors read every position paper submitted to NHSMUN and provide
thoughtful insight on those submitted by the feedback deadline. Our staff aims not only to tailor the committee experience to
delegates’ reflections and research but also to facilitate an environment where all delegates’ thoughts can be heard.
Emphasis on participation: The UN relies on the voices of all of its Member States to create resolutions most likely to make
a dramatic impact on the world. That is our philosophy at NHSMUN too. We believe that to properly delve into an issue and
produce fruitful debate, it is crucial to focus the entire energy and attention of the room on the topic at hand. Our Rules of
Procedure and our staff focus on making every voice in the committee heard, regardless of each delegate’s country assignment
or skill level. However, unlike many other conferences, we also emphasize delegate participation after the conference. MUN
delegates are well researched and aware of the UN’s priorities, and they can serve as the vanguard for action on the Sustainable
Development Goals (SDGs). Therefore, we are proud to also connect students with other action-oriented organizations to en-
courage further work on the topics.
Focused committee time: We feel strongly that interpersonal connections during debate are critical to producing superior com-
mittee experiences and allow for the free flow of ideas. Ensuring policies based on equality and inclusion is one way in which
NHSMUN guarantees that every delegate has an equal opportunity to succeed in committee. We staff a very dedicated team
who type up and format draft resolutions and working papers so that committee time can be focused on communication and
collaboration.
Educational emphasis, even for awards: At the heart of NHSMUN lies education and compromise. As such, when NHSMUN
does distribute awards, we de-emphasize their importance in comparison to the educational value of Model UN as an activity.
Crisis: iMF 6| a noTe on The nhsMUn DiFFerenCe NHSMUN seeks to reward schools whose students excel in the arts of compromise and diplomacy. More importantly, we seek to develop an environment in which delegates can employ their critical thought processes and share ideas with their counterparts from around the world. We always prioritize teamwork and encourage our delegates to engage with others diplomatically and inclusively. In particular, our daises look for and promote constructive leadership that strives towards consensus, as delegates do in the United Nations. Realism and accuracy: Although a perfect simulation of the UN is never possible, we believe that one of the core educational responsibilities of MUN conferences is to educate students about how the UN System works. Each NHSMUN committee is a simulation of a real deliberative body so that delegates can research what their country has said in the committee. Our topics are chosen from the issues currently on the agenda of that committee (except historical committees, which take topics from the appropriate time period. This creates incredible opportunities for our delegates to do first-hand research by reading the actual statements their country has made and the resolutions they have supported. We also incorporate real UN and NGO experts into each committee through our committee speakers program and arrange for meetings between students and the actual UN Permanent Mission of the country they are representing. No other conference goes so far to deeply immerse students into the UN System. As always, we welcome any questions or concerns about the substantive program at NHSMUN 2021 and would be happy to discuss NHSMUN pedagogy with faculty or delegates. Delegates, it is our sincerest hope that your time at NHSMUN will be thought-provoking and stimulating. NHSMUN is an in- credible time to learn, grow, and embrace new opportunities. We look forward to seeing you work both as students and global citizens at the conference. Best, Rose Blackwell and JJ Packer Directors-General
Crisis: IMF
A Note on Research and Preparation |7
A Note on Research and Preparation
Delegate research and preparation is a critical element of attending NHSMUN and enjoying the conference’s intellectual and
cosmopolitan perspective. We have provided this Background Guide to introduce the topics that will be discussed in your com-
mittee. This document is designed to give you a description of the committee’s mandate and the topics on its agenda. We do not
intend to represent exhaustive research on every facet of the topics. We encourage and expect each of you to critically explore
the selected topics and be able to identify and analyze their intricacies upon arrival to NHSMUN in March. Delegates must be
prepared to intelligently utilize your knowledge and apply it to your country’s unique policy.
The task of preparing for the conference can be challenging, but to assist delegates, we have updated our Beginner Delegate
Guide and Advanced Delegate Guide. In particular, these guides contain more detailed instructions on how to prepare a
position paper and excellent sources that delegates can use for research. Use these resources to your advantage—they can help
transform a sometimes-overwhelming task into what it should be: an engaging, interesting, and rewarding experience.
An essential part of representing a state in an international body is the ability to articulate a given state’s views in writing. Ac-
cordingly, NHSMUN requires each delegation (the one or two delegates representing a country in a committee) to write a posi-
tion paper for both topics on the committee’s agenda. In delegations with two students, we strongly encourage each student to
participate in the research for both topics, to ensure that both students are prepared to debate no matter what topic is selected
first. More information about how to write and format positoin papers can be found in the NHSMUN Research Guide. To sum-
marize, position papers should be structured into three sections, described below.
I: Topic Background – This section should describe the history of the topic as it would be described by the delegate’s coun-
try. Delegates do not need to give an exhaustive account of the topic background, but rather focus on the details that are most
important to the delegation’s policy and proposed solutions.
II: Country Policy – This section should discuss the delegation’s policy regarding the topic. Each paper should state the policy
in plain terms and include the relevant statements, statistics, and research that support the effectiveness of the policy. Compari-
sons with other global issues are also appropriate here.
III. Proposed Solutions – This section should detail the delegation’s proposed solutions to address the topic. Descriptions of
each solution should be thorough. Each idea should clearly connect to the specific problem it aims to solve and identify potential
obstacles to implementation and how they can be avoided. The solution should be a natural extension of the country’s policy.
Each topic’s position paper should be no more than 10 pages long double-spaced with standard mar-gins and font size. We
recommend 2-4 pages per topic as a suitable length. The paper must be written from the perspective of the country you are
representing at NHSMUN 2021 and should articulate the policies you will espouse at the conference.
Each delegation is responsible for sending a copy of its papers to their committee Directors via myDais on or before 19 Febru-
ary 2021. If a delegate wishes to receive detailed feedback from the committee’s dais, a position must be submitted on or before
29 January 2021. The papers received by this earlier deadline will be reviewed by the dais of each committee and returned prior
to your arrival at the conference.
Complete instructions for how to submit position papers will be sent to faculty advisers via the email submitted at registration.
If delegations are unable to submit their position papers on time, they should contact us at info@imuna.org as soon as possible.
Delegations that do not submit position papers to directors will be ineligible for awards.Crisis: IMF 8| Committee History Committee History The International Monetary Fund (IMF) is a global organization proposed at the Bretton Woods Conference in New Hampshire in 1944, in which 44 Allied Nations met towards the end of World War II to create the post-war global financial system.1 Seeing the economic devastation caused by both the Great Depression and the war, the Allies sought to create a globalized system to facilitate interaction between countries, ensure economic stability, and encourage economic growth and trade. In 1945, after the IMF established its Articles of Agreement between 29 member states, France was the first country to borrow money from the IMF, beginning a decades-long system of monetary transfer. The IMF and its member states entered into the Cold War period with the Par Value System, an agreement in which all member countries would keep their exchange rates at a stable level and would only adjust for equilibrium permitted by the IMF. This system lasted until 1971 when the United States, as part of the “Nixon Shock,” stopped adjusting the value of the US dollar by gold, making it a floating currency, a system in which financial markets determine exchange rates.2 Many countries followed the US’s lead and floated their own currencies, including many newly independent countries in Africa. In the early 1980s, global debt rose as companies borrowed from commercial banks and “powerhouse” countries caused infla- tion after attempting to control interest rates, forcing the IMF to adjust how they approached the global economy. They helped calm the situation by organizing exchanges between banks to repay debts and prevent further fallout, and to mitigate the effects of the recession on both industrialized and developing countries. In the 1990s and 2000s, the IMF again played an important role in ensuring the security of the global monetary sys- tem. With the fall of the Soviet Union in the early part of the decade, the IMF helped to transform the economies of Eastern Europe from a centrally-planned economy to a market economy.3 They also helped to shore up the banking system in East Asia after the financial crisis of 1997 and reformed its internal economic practices. The turn of the century brought the rise of globalization and the financial problems of the Great Recession of 2007. The IMF sub- stantially increased its fund of lendable money to cope with the global financial downturn and augmented requests for money. In 2009, the IMF increased its lending concessions to low-income countries with several reforms to mitigate financial mistakes in 2008. These reforms included concessional resources, adapted and reform interest rates for lend- ing, and new finances towards infrastructure and a strong emphasis on poverty alleviation4. Presently composed of 189 countries, the IMF has become a central institution in the 21st-century global economy. 1 “About the IMF,” International Monetary Fund, last modified in 2020, https://www.imf.org/en/about; United States. Department of State. “Volume II” in Proceedings and Documents of the United Nations Monetary and Financial Conference, Bretton Woods, New Hampshire, July 1-22, 1944 (July 1-22, 1944). https://fraser.stlouisfed.org/title/430/item/7569, accessed September 7, 2020. 2 “Cooperation and Reconstruction (1944-71),” International Monetary Fund, accessed September 7, 2020, https://www.imf.org/external/ about/histcoop.htm. 3 “Societal Change for Easter Europe and Asian Upheaval (1990-2004),” International Monetary Fund, accessed September 7, 2020, https://www.imf.org/external/about/histcomm.htm. 4 “The IMF Response to the Global Crisis: Meeting the Needs of Low-Income Countries,” International Monetary Fund, last published July 29, 2009, https://www.imf.org/external/np/lic/2009/072909.htm.
Crisis: IMF
Simulation |9
Simulation
This committee will be operating with some modified procedural aspects because of the unique way that delegates will be able
to change the flow of the committee. There will be less of an emphasis on formal debate and, because of the nature of a crisis
simulation, the committee will encourage fast and detailed debate. Because delegates represent individuals tied to areas of gov-
ernment as opposed to the countries in general, roles are more specific, while also giving delegates the task of ensuring that their
actions are appropriate for both who they represent and the governing body as a whole.
Because this crisis simulation has specific responsibilities and mandates, delegates must be aware that each action taken must
follow their representative’s unique policy while also falling in line with actions prescribed in the governing body’s mandate.
If an action is taken outside of its mandate, it will be ruled improper and removed from consideration. The aforementioned
responsibilities require different procedural mechanisms; thus, this committee will use heavily modified procedural rules during
both the mandate review and crisis management portions of debate. Due to the complex nature of this committee, we encour-
age delegates to read the following pages thoroughly.
Individual and Committee Mandates
The committee will be called upon to resolve any financial crises that may take place in Southeast Asia from the perspective of
the IMF. Delegates should be acutely aware of the actors and interests surrounding the issues, the possible causes, and barriers
to solutions.
Delegates must become absolute experts on the background, politics, and past actions of their assigned positions. This excep-
tional knowledge is needed to prepare for updates that will be presented to delegates at an extremely rapid rate. New crises will
emerge throughout committee sessions, and delegates must call upon past actions attempted by the governing body as well as the
current situation to formulate a response that is in line with their assigned character’s policy. If delegates are not aware of their
standing on an issue of their own policy platforms, contradictory and unfeasible policies may arise, slowing down committee
and halting debate. With informed delegates, the committee will make informed decisions. For a more detailed account of the
various roles, their duties, and functions, please refer to the Committee Representatives section of the paper.
Similarly, delegates must be well informed of the powers of the IMF and the types of financing and loans they can issue. For ex-
ample, delegates cannot compel central banks to follow their directives or establish exchange rates between currencies. Anything
outside the mandate of the body will not be accepted. The committee will be tasked with a variety of issues that will encompass
many parts of its mandate, and so prioritizing will be key to ensuring that crises are responded to efficiently. Various actors will
have access to information or resources which the whole committee does not have access to. As a result, individuals will have
to make decisions on whether they want to respond to issues unilaterally, work with other actors, or through the committee as
a whole. Delegates will also have their own agendas, and delegates must consider what they can gain for their countries by ap-
proaching a situation in a certain way.
Special Parliamentary Procedures
To better control the unique powers of this committee, special rules and procedures will be adopted. Three forms of debate
will be used in this crisis simulation: round robin, roundtable, and moderated caucus. When a standard committee ends a cau-
cus with no further motions, debate automatically returns to the speakers list. This is called the “default debate format.” In our
simulation, once another form of debate is exhausted, such as a moderated or unmoderated caucus, the committee will revert
to a non-exhaustible moderated caucus with a speaking time to be decided at the chair’s discretion. This will be this committee’s10|CS risis: IMF
imulation
new default debate format The speaking time can be adjusted by the delegates via a motion.
To modify the default debate style, delegates will have a new procedural motion available to them during debate being a “mo-
tion to change the default debate style.” The motion will require a simple majority to pass and will not require any speakers for
or against. At the start of committee, the chair will accept motions to set the debate style, generally a moderated caucus with
speaking time selected by simple majority; however, the dais understands that it may become necessary from time to time for the
committee to create a speakers list or enter a round robin of speeches to have each delegate elaborate on their respective policies.
If the committee reaches a portion of debate where delegates feel that a more fluid form of procedure is needed, such as a time
elapsing crisis in which delegates will be forced to solve a specific issue in a controlled period, a new form of debate is necessary.
Debate during these segments will need to move much faster than the crisis debate before this period to meet the time require-
ments set by the dais at which the crisis shall be solved. During these situations, the committee can vote for a roundtable discus-
sion. Thus, delegates will openly discuss the crisis at hand without a structured speaking time. This form of debate resembles
an unmoderated caucus that is held at the table to help delegates hear all points of view on the present without a time limit. Of
course, if delegates find that the crisis requires a lot of writing, an unmoderated caucus can be motioned for as well.
The last form of debate style is called “round robin.” During this form of debate, each delegate will be allotted a time to speak
on the topic. Each time this form of debate is used, a different person will start a speech and then move clockwise or counter-
clockwise from that delegate. If a delegate wishes to not speak on the issue, they can merely say “pass” to the chair, and their
speaking time will be absorbed by the dais. In addition, a delegate may also say, “I yield my time to the chair” to skip his/her
speech. To move into this style of debate, a delegate may simply request the following: “motion to change the debate style to a
round robin.”
Final Products
The document output for the crisis portions will be heavily modified as well. Because of the nature of the updates provided
throughout committee, there will be no resolutions used in this committee. Instead, the committee may pass three types of docu-
ments: press releases, communiqués, and directives. Press releases and communiqués are similar documents but have quite
different uses. Press releases are when the committee or individuals wish to make information of any kind available to the public.
On the other hand, communiqués are addressed to particular individuals and will not be released into the public eye. Anyone
who can access a newspaper can subsequently access press releases, but only selected recipients can access communiqués. Thus,
if a cabinet member only wants one other cabinet member to know of their stance on an issue, a communiqué may be issued to
only that one cabinet member.
Directives are of an entirely different nature. Standard resolutions take far too long to write and are very ineffective when dealing
with constant crisis. Thus, the committee will utilize directives as an alternative to resolutions. Directives exercise the executive
power of the committee in any way that it sees fit. For example, delegates of the committee may redirect aid, distribute pam-
phlets about the issues, or anything that delegates can think of as long as it falls under the mandate of this special session of the
IMF. Directives are only comprised of sponsors and operatives, and all perambulatory clauses that a resolution must have are
stripped. Thus, a directive is a less formal resolution, having only the operative needed and sponsors enlisted.
Each of these documents will require a different voting procedure to be passed. Communiqués sent from individuals concerning
a representative’s own organization do not need to come before a public vote. Rather, the communiqué is simply handed to chair
and immediately passed. Similarly, for directives, if it is within the individual powers of your organization then the committee
does not have to pass it for it to go into effect. However, the committee must approve communiqués and directives sent from theCrisis: IMF
Simulation |11
governing body. These documents must have three members as sponsors to be considered, and no signatories are needed. After
the directive or communiqué is presented to the dais, the dais will formally present it to the committee. At this time, the commit-
tee may either vote immediately on the piece, or the committee may continue to debate the proposal. To enter voting procedure,
the committee must approve a motion to vote on the proposals on the floor, and it requires two-thirds to pass. Proposals that
pass will immediately go into effect, and proposals that fail will no longer be recognized by the dais and will be returned to one
of the sponsors. The document may be altered and reintroduced, but it must go through the voting process once again.
Final Notes and Summary
This committee will be moving extremely quickly, especially during crisis situations. There is no formula to provide the real-time
at which a crisis is moving (e.g., 1 crisis minute = 1 simulation hour) since this would make some portions of debate outlandishly
quick and others extremely slow. Instead, crisis times and allotted periods for discussion will be under the chair’s discretion. All
crises will be accompanied by a day, month, and year to keep delegates aware of how the committee is moving. Clearly, this com-
mittee is extremely unique and moves at a much different pace than all other committees at NHSMUN. However, if delegates
come into committee having read this document and already possessing a rudimentary understanding how this secretariat will
function, then the committee shall run smoothly. Delegates will also quickly pick up these concepts as debate moves.
If there are any questions or concerns, please feel free to contact Crisis directors.Crisis: IMF
NHSMUN 2021
Topic A:
Financial Crisis in Southeast Asia
Photo Credit: SomeformofhumanTopic A: Financial Crisis in Southeast Asia
History and Description of the Issue |13
Introduction
A country’s ability to sustain and grow financial capital allows not only for the success and stability
of its global relationships but also a heightened quality of life for its people. The International Mon-
etary Fund (IMF) was created to assist countries in both of these avenues. Since its inception in July
1944, the IMF has been able to lend over USD 1 trillion to its member countries and has offered over
USD 303 million for hands-on technical advice, policy-oriented training, and peer learning.1 As time-
shifted and priorities changed based on different global occurrences, the primary purpose of the
IMF remained the same—to develop a system that allows for countries (and their citizens) to be able
to cooperate economically. Through economic surveillance, lending, and capacity development, the
IMF has been able to create a positive impact both in moments of crisis and long-term restructuring.2
Financial crises are not new to Southeast Asia, nor have past History and Description of the Issue
crises kept the region from developing booming economies
International Monetary System and Bretton
and diversified markets that have allowed them to grow at
Woods
faster rates than projected. More popularly known as the As-
sociation of Southeast Asian Nations (ASEAN), these coun- On July 1, 1944, shortly after the Second World War, the Unit-
ed Nations Monetary and Financial Conference convened to
tries work with one another, following the principles of the
create a new international monetary system that would assist
UN Charter, to promote matters of common interest, mainly
in post-war economic recovery and longevity. This conference
in terms of their economies.3 This institution has shown to be became known as the Bretton Woods conference, as delegates
very beneficial for ASEAN countries’ trade and development. from the 44 allied nations congregated for 21 days in Bret-
However, no matter how strong institutional frameworks are ton Woods, New Hampshire, with the conviction that they
built to be, economies tend to bear the brunt of unexpected would emerge with a new economic and monetary order for
crises. Notably, one crisis that influenced ASEAN countries the world.4
and the rest of the world was the COVID-19 pandemic. Both The Currency Agreements of Bretton Woods were a set of
unexpected and fatal, the pandemic tested not only ASEAN detailed regulations that broke down countries’ responsibili-
countries’ ability to respond in crisis but also highlighted just ties to keep them accountable for how they interacted with
how interconnected these economies truly are. While some one another. More specifically, this agreement functioned re-
countries like Viet Nam and Singapore responded to the CO- garding the payments and payment obligations that countries
had concerning the value of money within each country used
VID-19 crisis quickly, countries like Thailand and Indonesia
when they interacted.5 The three principles that countries were
did not. Even those countries who responded saw their gross
obliged to when entering a financial relationship were the fol-
domestic product (GDP) damaged. As the ministers of the
lowing: the workability of the proposal between the parties in-
IMF, it is this committee’s responsibility to be prepared with volved, the distribution of power and share that was attached
financial tools and recommendations of policy to respond to to regulation, and the actual usefulness of various regulations
the COVID-19 crisis and its economic fallout. from within a financial lens. The agreements themselves were
1 “About the IMF,” International Monetary Fund, accessed August 2, 2020, https://www.imf.org/en/About.
2 “About the IMF.”
3 “Overview - ASEAN,” Association of the Southeast Asian Nations, accessed August 2, 2020, https://asean.org/asean/about-asean/
overview/.
4 Keith Huxon, “Bretton Woods Conference: 75th Anniversary,” last modified November 29, 2019, https://www.nationalww2museum.
org/war/articles/bretton-woods-conference-75th-anniversary.
5 Ernest H. Stern, “The Agreements of the Bretton Woods,” Economica, New Series, 11, no. 44 (1944): 165-79, accessed August 5, 2020,
https://doi.org/10.2307/254935114|TH opic A: Financial Crisis in Southeast
istory and Description of the Issue
Asia
set up to breakdown the mechanics of a financial relation- The significance of this conference is indebted to the work of
ship to optimize cooperation between the parties involved but the 44 countries that established the Articles of Agreement
limit the cooperation concerning the actual payments being for the International Monetary Fund and the International
made.6 It’s important to note that within this system, regard- Bank of Reconstruction and Development. As a result of the
less of if countries sign onto or ratify contracts, they are at agreement, the international community had a platform upon
no point forced to abide by them. A member may withdraw which they could consult and collaborate towards an inter-
at any time without giving notice for its withdrawal. To pre- national economic program.12 This fulfilled a promise by the
vent this from happening, the opportunity for cooperation is United Nations to create sustainable, long term global infra-
presented in three ways. First, the Agreements are built upon structure serve countries for many years. The most tedious
Rules of Conduct that respect the value of payments in current aspect of this agreement (but also a reason for its success) is
transactions, not adhering to the alteration of exchange rate that it must be ratified by all attending parties, setting a high
fluctuation outside of the Fund.7 Second, through the contri- bar to implement any amendments.13 Each attending country
bution of banking facilities for current payments. came paired with their national interests. However, the highly
technical financial landscape put the agreement above any
Another way to look at the idea of banking facilities is as IMF
partisan concerns. Despite the contested time period, econo-
lending. These lending instruments provide countries with
mists agreed that to achieve constructive economic programs,
enough support to implement adjustment policies to restore a
there needed to be a foundation laid down by the IMF and
stable economy after it faces a situation that calls for financial
the IBRD. By providing countries the ability to find financial
assistance.8 For example, a country that sees an unforeseen
footing individually, there would be an increase in the ability
drop in exports might need help to implement a strategy to
to facilitate international trade, allowing for an overall increase
widen its export base. Another example could support chang-
in global financial stability.
ing the interest rate and regulating the banking system after
capital outflows due to drops in investor confidence.9 These
Types of Financial Crises
banking facilities will be provided by the International Mon-
etary Fund, also known in short as the Fund. The Fund is Financial systems allow consumers to store today’s surplus
responsible for dealing with its members’ monetary agencies, income for future use and allow borrowers to access future
reserving the ability to issue money as a World Reserve Bank. earnings today through loans and other financial agreements.14
This would be used as short-term credit, which is used to fa- The financial system is also a safety net, protecting individu-
cilitate global trade and debt issuance. For more long term als, corporations, and governments against unexpected events
facilities, the agreements provide foreign exchange to facilitate that threaten economic stability. However, the financial system
settlement in non-current international payment.10 This would is inherently fragile, making it prone to shocks that can trigger
allow for the facilitation of long term projects with the help financial crises. It is often difficult to narrow the cause of a
from the International Bank for Reconstruction and Develop- financial crisis down to a single event, as crises can originate
ment, also known in short as Bank11 either internally or externally, can often be driven by irrational
6 Ernest H. Stern, “The Agreements of the Bretton Woods.”
7 Henry Morgentau, “Bretton Woods and International Cooperation,” Foreign Affairs 23, no. 2 (1945): 182-94, accessed August 5, 2020,
https://doi.org/10.2307/20029886.
8 “IMF Lending,” International Monetary Fund, last modified March 27, 2020, https://www.imf.org/en/About/Factsheets/IMF-Lending.
9 “IMF Lending,” International Monetary Fund.
10 Ron Sardisco, “How does short-term credit work?” Hearst Newspapers, accessed August 8,2020, https://smallbusiness.chron.com/
shortterm-credit-work-10746.html.
11 Ron Sardisco, “How does short-term credit work?”
12 Henry Morgentau, “Bretton Woods and International Cooperation.”
13 Henry Morgentau, “Bretton Woods and International Cooperation.”
14 “The slumps that shaped modern finance,” The Economist, accessed August 5, 2020, https://www.economist.com/news/
essays/21600451-finance-not-merely-prone-crises-it-shaped-them-five-historical-crises-show-how-aspects-today-s-fina.Topic A: Financial Crisis in Southeast Asia
History and Description of the Issue |15
factors, and spread easily between countries in a phenomenon 1976 British pound crisis, the 1994 Mexican peso crisis, the
called contagion.15 In general, financial crises are character- 1997 Asian crisis, and the 2008 global crisis.19 The 1990s saw
ized by a sudden and widespread decline in asset values—the especially frequent successions of currency crises in emerging
market price of valuable items like real estate, stocks, and market economies, often compounded by the growing inte-
other possessions. Crises typically also involve a severe tight- gration of global markets.20 For example, the Asia crisis of
ening of credit, where a borrower’s ability to take out loans 1997 was largely caused by many countries fixing the value of
becomes severely restricted, leading to an intense contraction their currencies to the US dollar when the USD was gaining
of economic activity.16 These factors ultimately create sharp value compared to the Japanese yen and the Chinese RMB.
deviations from normal financial market functions and call for The values of the currencies of Thailand, Indonesia, and oth-
swift policy responses to mitigate damage. er Asian countries began rising relative to the Japanese yen
and Chinese RMB, thus causing Thai, Indonesian, and other
A major type of financial crisis is a currency crisis, in which
Asian products to become more expensive. As a result, these
a country’s currency experiences extreme devaluation or de-
preciation. In cases of currency depreciation, the government countries lost competitiveness compared to Japan and China,
is subsequently forced to expend large amounts of money or thus putting pressure on many of these Asian currencies to
raise interest rates to save the currency.17 Currency crises often depreciate.21 As the Thai baht began plummeting, foreign in-
originate when governments attempt to maintain a fixed ex- vestors grew wary of other Asian markets, triggering a mas-
change rate regime, which is when the government enacts pol- sive withdrawal of foreign capital from many Asian countries,
icies to manually maintain the value of the domestic currency including Indonesia, Malaysia, and South Korea—a textbook
in terms of foreign currency like the US dollar.18 When this example of financial contagion.22
desire to maintain a fixed exchange rate for a domestic curren-
In the wake of the Asian crisis, the IMF and the United States
cy comes into conflict with a fragile financial sector or other
both intervened, offering aid packages and IMF bailouts for
extenuating policy needs, shocks to the market can trigger a
failing financial institutions in an attempt to stop any further
dramatic depreciation of the currency. A currency crisis, like
spread of financial turmoil.23 While the IMF imposed strin-
other financial crises, can present a slippery slope. As the value
gent conditions such as restrictions on government spending,
of a currency drastically falls, the government significantly in-
increases in tax revenue, and limits on the flow of foreign cap-
creases its spending, often depleting its financial reserves, and
ital, these measures were largely ineffective, and economies
also imposes higher interest rates, thus severely constricting
only stabilized after many years of turmoil.24 As economists
the financial mobility of individuals and corporations.
looked back on the currency crises of the 1990s, the IMF has
Currency crises have long been a feature of the international been widely criticized in its inability to anticipate vulnerabili-
monetary system, including the post-World War II era, the ties in emerging markets through pre-crisis surveillance—an
15 Stijn Claessens and M. Ayhan Kose, “Financial Crises: Explanations, Types, and Implications,” International Monetary Fund Working Paper
(January 2013): 5, https://www.imf.org/external/pubs/ft/wp/2013/wp1328.pdf.
16 Pascal Paul, “Modeling Financial Crises,” Federal Reserve Bank of San Francisco, last modified March 4, 2019, https://www.frbsf.org/
economic-research/publications/economic-letter/2019/march/modeling-financial-crises/.
17 Claessens and Kose, “Financial Crises: Explanations, Types, and Implications,” 12.
18 Itay Goldstein and Assaf Razin, “ Three Branches of Theories of Financial Crises,” Foundations and Trends in Finance 10, no. 2 (2015): 154,
http://finance.wharton.upenn.edu/~itayg/Files/financialcrisestheories-publsihed.pdf.
19 Reuven Glick and Michael Hutchinson, “ Currency Crises,” Federal Reserve Bank of San Francisco Working Paper Series, September
2011, 2, https://www.frbsf.org/economic-research/files/wp11-22bk.pdf.
20 Shinji Takagi, “Responding to Currency Crises in Emerging Market Economies: The IMF Indonesia, Korea, and Brazil,” International
Monetary Fund, November 2004, 1, https://www.imf.org/external/np/leg/sem/2004/cdmfl/eng/takagi.pdf.
21 Glick and Hutchinson, “ Currency Crisis,” 5.
22 CFR Staff, “Currency Crises in Emerging Markets,” Council on Foreign Relations, last modified October 28, 2015, https://www.cfr.org/
backgrounder/currency-crises-emerging-markets.
23 CFR Staff, “Currency Crises in Emerging Markets.”
24 CFR Staff, “Currency Crises in Emerging Markets.”16|TH opic A: Financial Crisis in Southeast
istory and Description of the Issue
Asia
area that delegates should place a heightened emphasis on.25 term deposits to short-term consumers. This inherently puts
Emerging markets and developing countries are especially sus- banks at risk of bank runs because if many depositors want
ceptible to currency crises; analyses of past crises from 1975– their money on short notice, banks must tap into long-term
1997 have found that currency crises reduce economic output investments to procure cash, and they will often do this even
by five to eight percent for up to four years.26 Devastating to if that means incurring a loss.30
any industrialized country, this level of economic shrinkage is
Institutional weakness and financial recklessness create high
an even greater blow to already fragile emerging economies.
Moving forward, the IMF must be prudent to consider that risks for an emerging economy’s banking system. Banks rely
over-reliance on short term borrowing from foreign lenders heavily on accurate information and sound legal and judicial
as it has been cited as a major precursor to currency deprecia- environments to make prudent investment decisions.31 When
tion, and increased focus should be turned towards financial institutional safeguards and informed policies are not in place
reform and sustainable financial practices. to govern the behavior of banking institutions, misinforma-
tion can easily set off banking panics. According to the World
Bank crises are also major types of financial crises. These cri- Bank, several structural problems can lead to banking crises,
ses were central to many major financial crises in history, most including poor market discipline, weak corporate governance,
notably the global Great Depression of the 1930s, the 1997 large state ownership of banks, the dominance of large banks,
Asian crisis, and the 2008 global crisis.27 Fragile economies limited competition in the financial system, and an undiver-
are especially susceptible to banking crises due to the conta- sified financial system.32 Deposit insurance is a preventative
gious nature of immature banking behaviors. A banking crisis measure against bank runs in which the government prom-
is typically catalyzed by a bank run, where clients at a bank ises to provide cash to banks in the event of financial crises
quickly and successively withdraw their money from the bank by increasing tax rates throughout the year.33 Not only does
because they believe that the bank may soon collapse.28 It is this give banks a safety net to fall on, but consumers are also
not difficult to imagine how bank runs can spread at alarming
insured and, if patient enough, will receive their deposits up
rates. Even slight negative shocks or panic behaviors amongst
to a certain amount. It would be remiss, however, to apply
a few depositors can lead to more and more depositors rapidly
deposit insurance policies with one broad stroke. Excessive
attempting to withdraw their deposits from banks, leading to a
application of deposit insurance can create moral hazard,
buckling of the banking system.
where banks may develop perverse incentives to behave more
To craft sound policies to prevent banking crises, it is crucial recklessly to draw more customers, and investors may partake
to understand why they may occur in the first place. Financial in riskier behaviors if there are safety nets in place.34 For ex-
institutions like banks are inherently unstable because they ample, large and dominant banks that are deemed “too big
finance long-term investments with short-term deposits.29 to fail” can rely on governments to bail them out in times
Banks essentially act as intermediaries, circulating deposits to of crisis, and thus exploit deposit insurance policies to act
finance investments through the provision of loans and other recklessly, knowing that taxpayers will bear the consequences.
financial services. In practicality, most banks rely on the as- Ultimately, deposit insurance policies would be most effective
sumption that only a fraction of customers will need to con- if applied in conjunction with increased banking supervision,
sume their deposits early, and thus banks often transfer long- healthy judicial environments, and structural reforms to elimi-
25 Takagi, “Responding to Currency Crises in Emerging Market Economies: The IMF Indonesia, Korea, and Brazil,” 1.
26 Glick and Hutchinson, “Currency Crises,” 17.
27 Claessens and Kose, “Financial Crisis: Explanations, Types, and Implications,” 23.
28 Claessens and Kose, “Financial Crisis: Explanations, Types, and Implications,” 5.
29 Goldstein and Razin, “Three Branches of Theories of Financial Crises,” 21.
30 Goldstein and Razin, “Three Branches of Theories of Financial Crises.”
31 Claessens and Kose, “Financial Crisis: Explanations, Types, and Implications,”18.
32 Claessens and Kose, “Financial Crisis: Explanations, Types, and Implications.”
33 Goldstein and Razin, “Three Branches of Theories of Financial Crises,”132.
34 Goldstein and Razin, “Three Branches of Theories of Financial Crises.”Topic A: Financial Crisis in Southeast Asia
History and Description of the Issue |17
nate shortcomings in the banking system. Emergency Financing and Debt Relief
While widespread economic crises are generally rare, they can The International Monetary Fund (IMF) has a wide range
cause irreparable damage across markets and countries. In of tools to utilize when disaster strikes. When it comes to
general, declines in consumption, investment, industrial pro- the Southeast Asian region, the IMF is not currently assisting
duction, and employment are exponentially higher following a any countries.39 The IMF has three lines of defense against
financial crisis than a normal recession. Declines in economic crises: quotas, multilateral borrowing arrangements, and bi-
consumption after crises are seven to ten times larger than in lateral borrowing arrangements.40 In the absence of a finan-
cial emergency, the IMF will tap into the USD 440 billion
typical recessions.35 The costs of recoveries after banking cri-
obtained from quotas and other quota-based resources.41 If
ses can rise to as high as 57 percent of a country’s GDP, and
more resources are required, the IMF can turn to multilateral
government debt, on average, rises by 86 percent in the three
borrowing arrangements and enact the New Arrangements
years following a banking crisis.36 These are paralyzing rami-
to Borrow (NAB) that can potentially provide USD 196 bil-
fications for emerging markets, but the aftermath of finan-
lion to economic systems.42 The final line of defense is USD
cial crises disproportionately affect disenfranchised segments. 344 billion in the form of bilateral borrowing arrangements to
Those hardest hit are invariably the poorest and those who backup quotas and NAB resources.43
do not have cushions to fall back on.37 Organizations like the
IMF have warned against structural social and market issues The IMF began providing a wide array of financial tools to
support low-income countries with the Poverty Reduction
that imperil emerging countries. Most potently, an intense
and Growth Facility (PRGF).44 States, civil society, and other
political divide often impairs the effectiveness of policies to
development institutions prepare Poverty Reduction Strategy
incentivize banks and businesses to make responsible invest-
Papers (PRSPs) for countries to apply for financial assistance
ment decisions.38 In a similar vein, dramatic growths of indi-
and debt relief to make poverty reduction and growth the
vidual companies and banks create large market imbalances,
main objective of its lending initiatives. 45 Ten years after the
exposing it to devastating crashes. Moreover, rising levels of inception of the PRGF in September 1999, the IMF decided
inequality deeply inhibit wealth redistribution goals, as wealthy to make a more flexible and country-specific program in July
groups that hoard funds can prevent the re-investment of ex- 2009 called the Extended Credit Facility.46 Initially created un-
cess wealth into different parts of the economy. Moving for- der the PRGF and used as the IMF’s main tool, the Extended
ward, the IMF should take lessons learned from past crises Credit Facility provides medium-term support to low-income
and act preemptively to protect emerging markets. countries for about three to five years.47 Countries that agree
35 Claessens and Kose, “Financial Crisis: Explanations, Types, and Implications,” 28.
36 Claessens and Kose, “Financial Crisis: Explanations, Types, and Implications,” 30.
37 Kenneth Rogoff and Ross Chainey, “An economist explains what happens if there’s another financial crisis,” World Economic Forum,
last modified April 30, 2019, https://www.weforum.org/agenda/2019/04/an-economist-explains-what-happens-if-there-s-another-finan-
cial-crisis/.
38 Phillip Inman, “World economy at risk of another financial crash, says IMF,” The Guardian, October 3, 2018, https://www.theguardian.
com/business/2018/oct/03/world-economy-at-risk-of-another-financial-crash-says-imf.
39 “Emergency Financing by Region,” IMF, accessed June 11, 2020, https://www.imf.org/en/Topics/imf-and-covid19/COVID-Lending-
Tracker#APD.
40 “At a Glance: The IMF’s Firepower,” IMF, last modified March 2020, https://www.imf.org/en/About/Factsheets/IMF-Lending.
41 IMF, “At a Glance: The IMF’s Firepower.”
42 IMF, “At a Glance: The IMF’s Firepower.”
43 IMF, “At a Glance: The IMF’s Firepower.”
44 “The Poverty Reduction and Growth Facility (PRGF),” IMF, last modified July 31, 2009, https://www.imf.org/external/np/exr/facts/
prgf.htm.
45 IMF, “The Poverty Reduction and Growth Facility (PRGF).”
46 IMF, “The Poverty Reduction and Growth Facility (PRGF).”
47 “IMF Extended Credit Facility (ECF),” IMF, last modified March 3, 2020, https://www.imf.org/en/About/Factsheets/
Sheets/2016/08/02/21/04/Extended-Credit-Facility.18|TH opic A: Financial Crisis in Southeast
istory and Description of the Issue
Asia
to the Extended Credit Facility submit a letter of intent that Between the medium-term Extended Credit Facility and the
describes how they will examine and track macroeconomic more immediate Rapid Credit Facility and Rapid Financing
policy variables, structural reforms, and regular assessments Instrument, the Standby Credit Facility offers more short-
for the program.48 Member states of the PRGF that face a term assistance to low-income countries.57 Member states that
complicated balance of payment problems can apply for the may be relatively stable and still undergo periodic financial
Extended Credit Facility with a zero percent interest rate difficulties would want to request the Standby Credit Facility
through June 2021, followed by a five and a half year grace program.58 With a letter of intent, countries will implement
period and a maximum length of ten years.49 policies, benchmarks, and scheduled reviews by the IMF Ex-
ecutive Board to guarantee that countries are making progress
For countries facing an immediate need for financial assis-
to be economically stable into the foreseeable future.59 Emer-
tance, the IMF offers the Rapid Credit Facility and Rapid
gency financing and debt relief measures are vital to maintain-
Financing Instrument. Similar to the Extended Credit Facil-
ity, the Rapid Credit Facility is designated for low-income ing a strong, intertwined international economic system. The
countries that may have more specific and complex financial variety of measures available in response to different types of
issues.50 Economic shocks, natural disasters, and political un- crises and financial faults creates a system where responses
rest are possible motives to utilize the Rapid Credit Facility.51 can be shifted and adapted to new economic events.
Countries specifically hit by natural disasters can also turn to
Case Study: The 1997 Asian Financial Crisis
the Catastrophe Containment and Relief Trust that provides
grants for debt relief to struggling countries.52 Used primar- The 1997 Asian financial crisis was one of the most serious
ily for urgent payments, the Rapid Credit Facility issues loans periods of a widespread financial crisis that ravaged most of
to countries based on specific criteria and does not include a Asia, crippling emerging Asian economies and stoking fears of
comprehensive economic program for financial recovery.53 A global economic meltdown. Years later, it remains one of the
repeat of the Rapid Credit Facility is possible within any three most devastating examples of a financial crisis, and a sobering
year period if necessary, but continuous repeated use will pro- reminder of the brutal effects of financial contagion. The five
pel a transition to an Extended Credit Facility program.54 On hardest-hit countries were Thailand, Indonesia, South Korea,
the other hand, the Rapid Financing Instrument is designed Malaysia, and the Philippines, each of which took consider-
for all member countries that require quick financial assis-
able time to recover.60 The result of this crisis still influences
tance.55 Enlisted member states under the Rapid Financing
financial decisions being made, and Asian countries feel the
Instrument still do not need a full economic recovery plan but
ramifications of the crisis more than any other region.
are assisted through direct purchases and cooperation with
the IMF to describe and propose potential solutions to solve Before the crisis, many East Asian countries were long admired
its balance of payment problems.56 as some of the most successful emerging market economies,
48 IMF, “IMF Extended Credit Facility (ECF).”
49 IMF, “IMF Extended Credit Facility (ECF).”
50 “IMF Rapid Credit Facility (RCF),” IMF, last modified April 9, 2020, https://www.imf.org/en/About/Factsheets/
Sheets/2016/08/02/21/08/Rapid-Credit-Facility.
51 IMF, “IMF Rapid Credit Facility(RCF).”
52 “Catastrophe Containment and Relief Trust,” IMF, last modified April 15, 2020, https://www.imf.org/en/About/Factsheets/
Sheets/2016/08/01/16/49/Catastrophe-Containment-and-Relief-Trust.
53 IMF, “Catastrophe Containment and Relief Trust.”
54 IMF, “Catastrophe Containment and Relief Trust.”
55 “The IMF’s Rapid Financing Instrument (RFI),” IMF, last modified April 9, 2020, https://www.imf.org/en/About/Factsheets/
Sheets/2016/08/02/19/55/Rapid-Financing-Instrument.
56 IMF, “The IMF’s Rapid Financing Instrument(RFI).”
57 “IMF Standby Credit Facility (SCF),” IMF, last modified March 27, 2020, https://www.imf.org/en/About/Factsheets/
Sheets/2016/08/02/21/10/Standby-Credit-Facility.
58 IMF, “IMF Standby Credit Facility (SCF).”
59 IMF, “IMF Standby Credit Facility (SCF).”
60 Helen Cabalu, “Ins and Outs of Asia’s Financial Crisis,” Journal of Economic Integration 14, no. 2 (1999): 332, www.jstor.org/stable/23000483.You can also read
