Asian policymakers are adamant that they will do whatever it takes to fight financial instability with their own devices rather than seeking the support of the International Monetary Fund as they were forced to do in the 1997 Asian financial crisis.
The memory of that shock is still vivid in the region and mistrust endures despite some rapprochement in recent years.
But, without more financial firepower and cooperation involving countries as different as China, Japan and Indonesia, the region will struggle to rely on its own resources, let alone free itself from the IMF.
Holding this year's annual meetings of the International Monetary Fund and the World Bank in Indonesia was symbolic. Twenty years ago, in the Asian financial crisis, Indonesia was among the countries which had to turn to the IMF.
Now it is seen as a successful economy and a credible member of the international community. Finance Minister Mulyani Indrawati is a strong candidate to take over the fund's leadership in 2021 -- and if this happens, she will be the first managing director from a developing country.
Indonesia epitomizes the trajectory of the emerging markets over the last two decades. These countries have driven almost two-thirds of the world's growth in gross domestic product since 1997. Their share of the total world economy, in purchasing power parity, is now 60%, against 43%. Emerging Asia, and China in particular, has been the major contributor.
But amidst good progress in creating resilience -- through sound economic policies, reforms and increased foreign exchange holdings -- emerging markets remain vulnerable, notably to shocks from developed countries, above all the U.S.
Even if the normalization of the U.S. Federal Reserve's monetary policy has been expected for some time, it remains difficult to manage as short-term capital flows into the American market, attracted by higher rates. Emerging markets are left with exchange rate depreciation and rising domestic prices, and possible instability in domestic banking.
We have already seen turmoil in Turkey and in Argentina, which has secured a record $57 billion program pledge from the IMF. In Asia, Pakistan is negotiating IMF financial support of around $7 billion.
It can be argued that these are especially vulnerable countries, and so were the first to be exposed when U.S. monetary conditions tightened. But these conditions also pose a challenge for more robust countries. Indonesia, for instance, is grappling with the rupiah at the lowest levels against the dollar since 1997.
In principle, Asia has a support instrument of its own -- the Chiang Mai Initiative Multilateralization (CMIM), a multilateral currency swap agreement between ASEAN plus China, Japan and South Korea, set up in 2010.
This relies on a $240 billion financial safety net that can be deploy in the event of balance of payments and short-term liquidity problems. In practice, however, CMIM has not been put to a test, so it is not clear whether it has the operational capacity to intervene in a quick and credible way. Above all, it is not clear whether it has enough resources to fend off financial instability other than small, localized episodes.
Each CMIM member can count on a swap line up to a maximum amount calculated on the basis of the country's GDP; of this only 30% can be withdrawn without a linked IMF program.
Indonesia, for instance, can withdraw up to $22.76 billion, but only $6.8 billion would be available without the IMF. With the external debt of approximately $340 billion (or 34% of GDP), Indonesia is too big for CMIM. Similarly, South Korea would have about $11 billion under CMIM without the IMF; during the global financial crisis it relied on a $30 billion swap arrangement with the U.S. Fed, of which 16.35 billion dollars were withdrawn.
So Asia is between a rock and a hard place. CMIM can deal with small episodes of financial instability and provide emergency liquidity. But it would find much harder to manage a regional crisis without involving the IMF. The solution is to increase the resources available to CMIM to manage a protracted liquidity crisis, though still leaving complex multiyear rescue programs to the IMF.
But the main signatories -- China and Japan -- have little appetite for putting more money into CMIM. First, there are costs and risks in deploying dollars, unlike for the Fed that can provide dollar liquidity almost cost-free. Second, increasing China's and Japan's contribution would further tilt CMIM balance of power toward these two members at the expense of the rest.
The alternative would be to invite other countries with a stake in the region, such as Australia and New Zealand, to join CMIM. However, if they make a significant contribution the current members might have to grant them voting rights. But expanding from ASEAN plus 3 to countries that are not considered Asian -- and are perhaps seen as too close to the U.S. may be politically problematic.
So, "winter is coming," as Indonesia's president Joko Widodo said in Bali. Policymakers say each country should look first to its own defenses. They are right, but it may not be enough.
Asia has seen remarkably robust growth in the last two decades, with nominal GDP more than tripling and foreign exchange reserves soaring. But these reserves are unevenly distributed. China has around $3 trillion and Japan $1.2 trillion. That leaves the rest with less than $1 trillion.
So, in the event of a crisis too big for the CMIM, Beijing and Tokyo may come under pressure to provide emergency resources directly, if the crisis-hit countries want to avoid the IMF.
The current rapprochement between China and Japan, symbolized by the warm welcome Japanese Prime Minister Shinzo Abe has received in Beijing, bodes well for the future -- not least in financial affairs. The enhanced $26.8 billion swap agreement between the People's Bank of China and the Bank of Japan will be an important step toward improving bilateral financial cooperation -- and eventually creating a safety net for the whole region.
Paola Subacchi is a senior fellow at Chatham House.