Ministers back use of regional currencies for trade
ASEAN finance ministers yesterday backed a move to use regional currencies for trade within the grouping.
The plan could start on a bilateral basis between Asean countries before it becomes a multilateral arrangement.
“We need to use local currencies as intermediaries rather than be dependent on other currencies,” Malaysia’s Finance Minister Datuk Seri Anwar Ibrahim told a news conference at the end of a one-day ministerial meeting here.
A statement from the meeting, at which Singapore Finance Minister Richard Hu was also present, said the scheme would start on a voluntary basis, “with a view to evolving this facility into a multilateral arrangement”.
Noted Philippine’s Finance Minister, Mr Salvador Enriquez: “The idea of enlarging trade within the region is a multilateral one. But it will start on a bilateral level first, and eventually lead on to something more important and bigger.”
He said member countries could begin the process with bilateral agreements. Analysts said that this entailed using regional central banks as clearing houses for trade payments.
Thai Bankers Association president Olan Chaipravat was quoted in news reports yesterday as saying that such a move would help curb the region’s demand for the US dollar, easing pressure on local currencies which have taken a battering over the last six months.
Central bank governors from Indonesia, Malaysia, the Philippines, Singapore and Thailand met earlier last month to set up a technical task force to assess the potential costs and benefits of using regional currencies for trade.
The finance ministers also agreed to establish immediately an Asean surveillance mechanism to spot potential economic risks in the region before they trigger a financial crisis.
In line with this move, a secretariat would be set up at the Manila-based Asian Development Bank to provide technical and analytical support. Surveillance activities would be taken over by the Asean Secretariat in Jakarta in the long run.
Besides backing such initiatives to fight the current economic malaise in the region, the ministers also called on developed countries to do their part to help Asia, including opening up their markets to Asean goods, and urged Japan to play a leading role in bringing the region out of the present crisis.
“The underlying concern here is that whilst the affected Asean economies have taken the necessary measures to confront the problem, we have not seen a reciprocal response from G-7 countries,” said Datuk Seri Anwar, referring to the Group of Seven industrial nations.
He complained that some European countries were continuing “their protectionist policies which would spoil our markets there”.
Turning to the US, he stressed that instead of just expressing concern, Washington needed to be more “proactive” in its support.
“The US must encourage investment or indicate to their friends to make facilities and credit line assistance possible to countries in the region,” he said.
Indonesia’s Finance Minister Mar’ie Muhamad, meanwhile, disclosed that President Suharto had instructed officials from the central bank to visit Hongkong to study the currency board system there.
Mr Mar’ie said that Mr Suharto had yet to decide on implementation of the currency board plan to peg the rupiah to the US dollar.
“We need a credible currency board. That requires time and preparation,” he said.