The broad professional background Dr. Injoo Sohn's in Asian regionalism and his participation of consultancy in the G-24 made him expand his understanding on the legitimacy in Global Financial Governance. In his journal article, Sohn stresses that, regarding the problems of legitimacy in global financial governance, Asian countries have opted to create their own regional financial governance instruments.
In accordance with the Sohn, the IMF decisionmaking is managed by G-7 countries which pursue their own interests. After the Asian financial crisis, the International Monetary Fund IMF gave G-7's medicine that worked out before for Latin American countries; however Asian economies needed different approaches to stabilize their economy. For instance, Thailand, Indonesia and South Korea were asked to increase their interest rates and reduce expenditures. This medicine provoked painful reactions ...view middle of the document...
Considering the strong effect of financial crisis of the new industrialized countries NICs, the G-7 proposed the creation of Financial Stability Forum FSF and the G-20. However, once again the G-7 initiatives followed their own interests and contradicted their own proposals. If emerging markets were the main drivers of global economic dynamism, why were they excluded from FSF? China, India, Indonesia, Thailand and South Korea could not participate in the FSF. Similar case occurred with the G-20 initiative. The G-7 members did not empowered G-20 members to make decisions, instead limited their seats. It seemed that the membership of the G-20 was randomly executed. Malaysia was excluded again while Indonesia was not . Under which parameters were these countries accepted or excluded? In view of the obvious lack of rule-governance and lack of clear procedures, countries, like Malaysia and Thailand, encouraged the creation of new regional financial arrangements.
The political discomfort and the strong economic power of Asian countries have created the path to accomplish financial stability. The Bilateral Swap Arrangements BSAs and the Asian Bond Fund were created to gradually replace the IMF support in crisis management and finance development. However, the current stage of these regional financial arrangements has execution limitations. Additionally, since the Asian monetary cooperation will gain priority for Asian countries, their participation in global financial governance will decrease. This could challenge the United States and G-7 members to oppose to the development of the regional financial governance. In spite of the obstacles that regional financial governance might have to overcome, there is a positive opportunity to success considering the rapid economic development and the strong influence of Asian countries in the global economic growth. Although, it remains in question if these new regional financial arrangements could strengthen Asian voice in decisionmaking of the global financial architecture? What about Latin American countries? Would they accept Asian financial medicine?