Sherpa Hossainy's Blog

ASEAN leaders quash common currency idea

Posted in ASEAN, Currency, Economy by Sherpa Hossainy on July 10, 2013

Published in Myanmar Business Today (Vol 1, Issue 20) on June 20, 2013

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ASEAN leaders recently brushed aside the idea of having a single currency for the Southeast Asian block, saying it’s “impossible” and would jeopardise the economic stability of the region.

“ASEAN countries have suffered together from the Asian economic crisis in 1997. Imagine what would’ve happened if we didn’t have the chance to peg our baht and turn deficits into surplus. We’ve seen the benefits of exchange rates, which are an important substance of the capitalist system,” Thai Deputy Prime Minister Kittiratt Na-Ranong told a discussion at the World Economic Forum in Nay Pyi Taw recently.

He dismissed the idea of an ASEAN common currency by saying, “It’s impossible.”

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The recently concluded WEF saw a lot of intra-regional commitments for regional integration and cooperation being made but the leaders were not keen on a common currency. They said regional trade and growth can be achieved without having a single currency and an ASEAN currency is not the primary agenda ahead of the creation of the ASEAN Economic Community.

“By being one doesn’t mean you have to lose your individuality,” said Cesar V Purisima, secretary of finance of the Philippines.

Harish Manwani, chief operating officer of Unilever, told the panel: “There are many currencies in the world, not one; and it is possible to manage an integrated system within the current context.”

The idea of a single currency has been on the table for at least a decade as part of regional integration plans. But the fiscal situations of the member states are so diverse that a single currency regime could prove fatal. Putting together strong globally traded currencies such as the Singapore dollar with weak Indonesian rupiah, Vietnamese dong or Myanmar kyat would very much dilute the strength of a common currency. It would also give the economically weaker states an unfunded creditworthiness which could trigger an economic debacle as seen in the eurozone when Greece’s economy collapsed under its debt load.

The leaders agreed that the recent euro crisis was a valuable lesson, and countries should not rush the process of financial and monetary integration before developing an adequate institutional framework.

“It would be impossible to get a 10 percent GDP growth with a single currency. Economic growth will not be driven by a single currency but by supply chain strength, an important aspect in which ASEAN countries must improve,” Tarek Sultan Al Essa, chairman and managing director of Agility, told the forum.

 

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