The 1997 Asian Financial Crisis caused various countries in the region to enhance financial cooperation, with different initiatives and mechanism to prevent and resolve economic crisis within the region.
In 1999, ASEAN governments, along with China, Japan, and South Korea (ASEAN+ 3) together resolved to establish a “self-help and support mechanism”. Afterwards, ASEAN+ 3 Finance Ministers held a meeting in Chiang Mai and resolved to establish a regional financial assistance program, also known as “Chiang Mai Initiative” (CMI) as a Regional Financing Arrangement in the form of a network of Bilateral Swap Arrangements (BSAs).
In 2007, ASEAN+ 3 Finance Ministers agreed to elevate the CMI from a bilateral to multilateral cooperation under the name “Chiang Mai Initiative Multilateralisation” (CMIM). CMIM fund was established as a mechanism for regional financial cooperation to provide liquidity in case of Balance of Payment or short term liquidity problems, and acted as additional financial support received from the IMF. CMIM is set up in the form of a Self-Managed Reserve Pooling Arrangement (SRPA), whereby member countries will contribute funding only when distressed countries request financial assistance.
Moreover, ASEAN+ 3 members foresaw the problem with reliance on short term foreign currencies during a crisis. Therefore, they chose to develop the regional bond market to increase funding channels. As such, the Asian bond Markets Initiative (ABMI) was established in August 2003, which focused on local currency bonds and developing the bond market infrastructure.