The Asian crisis was remarkable for the severity, breadth and rapidity with which it spread. It is also widely held that the crisis caught the markets, global and regional institutions, national authorities and society unawares. The perception that the Asian crisis was largely unanticipated has highlighted the urgency of improving and complementing economic and financial surveillance mechanisms.

The expanding literature on the Asian crisis indicates that crises are very complex phenomena. It is therefore very difficult to attribute the occurrence of crises solely to failures of crisis-prevention arrangements. For example, surveillance may have picked up the impending problems and given warnings to policy makers, but political factors prevented the warnings from being heeded. However, the fact that the crisis happened also indicates that there may be gaps in existing surveillance or monitoring mechanisms that need to be addressed in order to minimize the possibilities of recurrence.

This chapter attempts to identify areas for improvement in the existing surveillance mechanisms in the light of the Asian crisis. Such an identification of gaps provides a natural starting point for devising new instruments or more effective implementation modalities for existing instruments of crisis prevention. Tremendous efforts and resources are being poured into conceptualizing and substantiating a new international financial architecture by international financial institutions, regional development banks, investment banks, intergovernmental institutions and national authorities alike.¹ As discussed in the previous chapter, not only are new monitoring instruments being employed but new forums and coordinating modalities are being formed in order to enhance crisis prevention. While the lead roles of IMF and BIS in particular are recognized in several of the initiatives to fill in the gaps of surveillance, there is also an understanding that they need to be complemented by initiatives closer to countries and to be supportive of all countries, especially the more vulnerable ones and not only the systemically important economies. Certainly, this is the case for the countries in Asia, where there is wide disparity in the economic development and state of sophistication in financial systems. The answer is clearly more multilateral cooperation. But of what kind? The second part of the chapter focuses on the ways in which the global surveillance and monitoring mechanisms can be complemented and supported at the regional or subregional levels in the Asian and Pacific region.

International cooperation, such as policy consultation and dialogue, cannot operate in a vacuum. Not only should there be an institutional framework that can guide the process towards attaining the desired outcomes, but there should also be a focus. In surveillance, indicators provide the focus for analysis, discussions and exchange of views. Thus, developing a set of indicators at the national level is a first step in building the capacity of countries to engage in meaningful international cooperation for crisis prevention. To this end, a number of basic indicators are proposed for adoption by countries in the region.

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Footnotes:

¹ The new financial architecture aims to enhance crisis prevention, management and resolution. The diverse proposals under this heading cover a whole spectrum, which includes the setting of exchange rates, establishing standards and codes of best practices for financial institutions and corporate entities, strengthening the supervision of domestic financial sectors, the institution of an international lender of last resort, supervision and regulation of international capital flows, and devising a system of orderly debt work-outs (see Survey 1999).