ASEAN+3

10 ASEAN Members(Thailand-Vietnam-Cambodia-Laos-Myanmar-Malaysia-Indonesia-Phillipines-Brunei-Singapore)
+3 (China-Japan-SouthKorea)

http://www.msnbc.msn.com/id/10313726/site/newsweek/

Asia: Building Blocks
At next week's East Asia Summit, there will be talk of creating a regional common market and, eventually, a single currency. Are those plausible ideas or a pipe dream?

By Christian Caryl
Newsweek International

Dec. 12, 2005 issue - Just imagine: it's a sunny winter's day in 2045, and you're arriving in Bangkok airport on the 1:15 from Shanghai. The flight is considered internal, so there's no customs check; you can keep that dark red Asian Union passport in your pocket. No need to pick up any cash, either—you've still got plenty of yuen (the single Asian currency) left over from your previous stops, including Tokyo and Seoul. After your business meetings you head over to the magnificent glass-and-aluminum building that houses the Asian Parliament. You dodge the cheerful, prosperous-looking tour groups from Laos and Burma and find your way to an exhibition commemorating the 40th anniversary of the founding of the East Asian Community, back in the momentous year of 2005. "It was," reads a sign, "the first sign of light after the long dark years when no one thought that Asians had much of a chance of emulating the European Union."

On Dec. 12, when leaders from 16 Asian countries gather for three days in the Malaysian city of Kuala Lumpur, their deliberations may well determine whether the scenario described above remains a teasing exercise in science fiction—or a genuine vision for the future of the region. The East Asia Summit (EAS) is set to bring together representatives from the ASEAN+3 countries—that's the 10 Southeast Asian nations plus China, Japan and South Korea—and their counterparts from Australia, New Zealand and India. The idea has been percolating for years, but this is the first time that key players in the region have come together for the explicit purpose of deepening integration, not just economically but also politically. The agenda remains vague, but participants will probably talk not only about reducing tariffs and other trade barriers but also about how to intensify cooperation on other fronts, such as energy, avian flu and counterterrorism.

The Asian Development Bank recently revealed that it has started monitoring exchange rates—a move that lays the groundwork for a future Asian currency unit. In a speech in October, ADB president Haruhiko Kuroda discounted the view that the most East Asia can aim for is a NAFTA-type free-trade area. Instead, he argued, "our long-run objective should be the creation of an Asian monetary union with a single currency." He went on to cite the area's deepening intraregional trade as a reason for harmonizing exchange rates (since currency turbulence can have terrible knock-on effects). The benefits could be huge. ASEAN+3 alone encompasses one third of the world's population, one quarter of its GDP and half its foreign-exchange reserves. Some of its members boast the world's highest growth rates. A bloc capable of pooling that entrepreneurial energy and potential resources would represent a potent international force.

Skepticism is clearly warranted. East Asia, critics point out, is hardly comparable to Europe, where the EU members all adhere to a set of shared political values—namely, parliamentary democracy combined with free markets and advanced social-welfare systems. By contrast, the Kuala Lumpur participants include robust democracies (Australia, Japan), communist-capitalist hybrids (China, Vietnam), countries engaged in messy democratization (Cambodia, Indonesia) and one backward military dictatorship (Burma). Territorial disputes abound, and the threat of military conflict hovers fitfully over parts of the region. If anything scuttles the EAS, it could be the continuing tensions between Japan and its neighbors over Prime Minister Junichiro Koizumi's visits to the controversial Yasukuni Shrine war memorial. Last week China and South Korea hinted that, at Kuala Lumpur, the three nations won't be getting together in a summit parallel to the one held by ASEAN nations.

And then there are the vast differentials in national income. The richest countries in the EU are about 10 times more prosperous than the poorest ones (based on purchasing power parity), while in East Asia today the ratio is more like 100 to 1. It's hard to imagine how such diverse economies could manage to establish a true common market any time soon. Given that vast inequality, it's no surprise that one of the hottest topics is labor mobility; at least one Japanese newspaper has already voiced the opinion that the summit is just a clever gambit by Beijing to open up Japan to waves of Chinese immigrants. Most analysts are keeping their expectations modest. Simon Tay, chairman of the Singapore Institute of International Affairs, argues that the best analogy for the EAS at this stage is the G8, the club of major industrial nations that gets together periodically to air common concerns. Notes Tay: "The G8 meets, we all pay attention to it, but what does it actually achieve straightaway?"

True enough. And yet the meeting in Kuala Lumpur may also end up serving as a salutary snapshot of just how much has already been done. Denis Hew, a fellow at the Institute of Southeast Asian Studies in Singapore, says that over the last 20 years East Asian integration has had two main engines: "There has been a lot of foreign direct investment from Japan to the region, and production networks have been formed. China has now become a new member in this configuration, where you see a lot of parts manufactured here being exported to China and then re-exported to Western economies. Both are driving closer integration." Stephen Leong, assistant director-general of the Institute of Strategic and International Studies in Kuala Lumpur, adds: "Now in the region, we have a very basic institutionalization taking place. Our Finance ministers meet, our foreign ministers meet; we are building a structure. We can already see an East Asian community in the works. It is an inevitability."

Eisuke Sakakibara, a former senior Finance Ministry official in Japan, notes that trade among the countries of East Asia has "increased dramatically" over the course of the past decade or so—to an extent that outsiders may not have recognized. According to the ADB, intraregional trade in East Asia in 2003 accounted for 54 percent of total trade—approaching the level of the EU (64 percent) and higher than that of NAFTA (46 percent). The ADB points out that the 54 percent figure is about the same as that in the EU countries when the Maastricht Treaty was signed in 1992. "Economically," asserts Sakakibara, "we've already reached the stage of Europe." In terms of political integration, he concedes, Asia is still far behind, but that's because the process in Asia has been driven by markets rather than by political elites.

That's exactly the opposite of the situation in post-1945 Europe, where national leaders made a conscious decision to draw their region more tightly together as a way of avoiding future wars. East Asia, by contrast, is strikingly lacking in visionaries like the Frenchman Jean Monnet, who dreamed of European political convergence at a time when the idea looked like utter lunacy. (If anyone, the closest Asian equivalent would probably be former South Korean president Kim Dae Jung, who back in 1998 provided the impetus for the current summit.) The flurry of free-trade agreements sweeping the region shows that national leaders have finally started to follow where businesses long since began to tread. Japan, China and South Korea have all signed ASEAN's Treaty of Amity and Cooperation, which calls for the settlement of disputes by peaceful means and noninterference in the internal affairs of other countries. And the ASEAN Regional Forum has been used by ASEAN and China as a "confidence building" mechanism to smooth out security problems in the South China Sea.

If you thought the alphabet soup in Europe was bad, get ready for the East Asian version. EAVG, NEAT, ARF, AMM+3: they're but a few of the regional mechanisms that are already bringing bureaucrats, businessmen and scholars together to puzzle out shared concerns. ASEAN+3, now in its ninth year, has 48 ongoing projects promoting community building and economic integration. The so-called Chiang Mai Initiative brings together central banks from the ASEAN+3 countries in a forum aimed at preventing a recurrence of the financial crisis that shook the region in 1997. Then there's the Asian Bond Fund, inaugurated by the ADB, which has been quietly trying to enhance the liquidity and stability of regional bond markets. Masahiro Kawai, head of the ADB office of regional economic integration and special adviser to the ADB president, tells NEWSWEEK that while the idea of a common currency "has a long way to go," it "will help increase trade, investments and cross-border economic transactions, because of the stable exchange rate."

While those are priorities for Southeast Asian nations—trade between ASEAN and China has been surging by 20 percent anually in recent years—they're also concerned with reining in a newly powerful China. The Japanese voice similar concerns. When Japan learned that the United States hadn't been invited to the summit, Tokyo lobbied vigorously for including Australia and India as counterweights to China. Although irked by America's perceived failure to help out after the 1997 financial crisis, many leaders in the region are not eager to replace U.S. leadership with Chinese hegemony.

Still, when the dust settles in Kuala Lumpur, the summit will probably be judged less on the basis of grand strategic calculations than on the nuts-and-bolts issues that promise to deliver economic growth. One of those invited to the EAS is Tony Fernandes, CEO of AirAsia, a no-frills airline that's arguably the only ASEAN regional brand. He credits ASEAN with helping to keep the peace, but sees plenty of room for measures that would promote his business—tax incentives for cross-border investment, greater labor mobility, industry deregulation. His airline still doesn't have full landing rights in Singapore, so many of his planes are landing at a nearby airport in Malaysia. One of his biggest headaches, says Fernandes, is getting approval for a bus that can bring passengers across the border between the two countries. In short, before any grand dream can be realized, lots of little problems must be solved.

With Joe Cochrane in Bangkok, Marites D. Vitug in Manila, Sonia Kolesnikov-Jessop in Singapore and Lorien Holland in Kuala Lumpur

Editor's Note: The original version of this report incorrectly stated that South Korea, China and Japan had announced that the three nations would not be holding a tripartite summit parallel to the one held by ASEAN nations. In fact, the three countries had not made any formal statement to this effect at the time this piece was written.

© 2005 Newsweek, Inc.

http://www.thannews.th.com/detialNews.php?id=t1020744&issue=2074
29 ธ.ค. - 31 ธ.ค. 2548

ฝันตั้ง'สกุลเงินเอเชีย'

ธนาคารเพื่อการพัฒนาแห่งเอเชีย(เอดีบี) ออกมาเปิดเผยเมื่อต้นสัปดาห์ที่ผ่านมาว่า จะเริ่มนำระบบสกุลเงินเอเชียในรูปแบบตะกร้าเงินมาใช้ในเอเชีย เพื่อส่งเสริมความร่วมมือด้านการเงินในภูมิภาคคล้ายกับสกุลเงินยูโร(EURO)ในยุโรป โดยเอบีดีกำลังศึกษาระบบตะกร้าว่าควรจะเป็นอย่างไร รวมทั้งการให้น้ำหนักแต่ละสกุลเงินว่าควรกำหนดอย่างไร โดยจะเป็นระบบตะกร้าเงินที่ใช้รวมกันในกลุ่มสมาคมประชาชาติเอเชียตะวันออกเฉียงใต้ หรือ อาเซียน +3 (จีน เกาหลีใต้และญี่ปุ่น) โดยแนวทางการทำจะวิเคราะห์จากการเคลื่อนไหวของค่าเงินในกลุ่มประเทศดังกล่าวเทียบกับดอลลาร์สหรัฐ และยูโร และหาระดับเฉลี่ย โดยผลการศึกษานี้คาดว่าจะเปิดเผยได้ในช่วงต้นปี 2549 ซึ่งถึงขณะนี้ได้มีการพูดกันถึง สกุลเงินเอเชียอย่างไม่เป็นทางการแล้วซึ่งเรียกกัน ว่า Asia Currency Unit: ACU

เหตุผลหนึ่งที่ต้องการให้มี ACU เป็นผลกระทบมาจากวิกฤตเศรษฐกิจในเอเชีย ปี 2540 ทำให้ประเทศในเอเชียมองว่าจำเป็นต้องสร้างกลไกที่มีประสิทธิภาพในการป้องกันตัวเองไม่ให้เกิดวิกฤติเกิดขึ้นตามมาอีก

ด้านนักเศรษฐศาสตร์หลายคน เชื่อเช่นกันว่า การตั้ง ACU จะส่งผลกระทบด้านบวกต่อเศรษฐกิจของเอเชีย ซึ่งนอกจากจะช่วยลดความเสี่ยงในเรื่องอัตราแลกเปลี่ยนกับค่าเงินอื่นๆที่ค้าขายกันอยู่แล้ว ยัง ช่วยไม่ให้เกิดความแตกต่างด้านราคาสินค้าในกลุ่มประเทศสมาชิก แต่จะมีความโปร่งใสมากขึ้น และช่วยให้แข่งขันกันได้อย่างชัดเจนยิ่งขึ้น รวมทั้งเพิ่มความมีวินัยในเรื่องนโยบายการเงิน โดยเฉพาะธนาคารกลางของแต่ละประเทศที่จะมีความน่าเชื่อถือมากขึ้นในด้านเสถียรภาพของราคา โดยจะต้องมอบอำนาจให้ธนาคารกลางแห่งภูมิภาคเป็นผู้ดูแลนโยบายแทน ซึ่งธนาคารกลางแต่ละประเทศจะได้รับผลกระทบจากการสูญเสียอำนาจในการดูแลนโยบายการเงินการคลังของตัวเอง แต่ในทางกลับกัน จะช่วยเพิ่มขีดความสามารถในการสร้างเสถียรภาพทางเศรษฐกิจหากเกิดเหตุการณ์ช็อคขึ้นอีก

นักวิเคราะห์ยังมองอีกว่า ประเทศในเอเชียส่วนใหญ่มองถึงประโยชน์ที่จะได้จากการกำหนดสกุลเงินเอเชีย แต่จะพอใจมากน้อยเพียงใดนั้นยังเป็นคำถาม เนื่องจากประเทศในเอเชียทำการค้าระหว่างกันค่อนข้างมาก แต่ประเทศในอาเซียนไม่ได้ค้าขายกันมาก เช่นเดียวกับ ฮ่องกง ไต้หวัน สิงคโปร์ และเกาหลีใต้ แต่ประเทศเหล่านี้และอาเซียนจะค้าขายส่วนใหญ่กับจีน การหันมาใช้สกุลเงินเดียวกันจะทำให้สามารถผนวกการค้าเข้าด้วยกันมากขึ้น รวมทั้งเพิ่มความเกี่ยวพันกันมากขึ้นด้วย

อย่างไรก็ตาม แม้เอเชียจะมุ่งสร้างความร่วมมือไปสู่การตั้ง "สกุลเงินเอเชีย" ตามรอยยุโรป แต่เอเชียก็ยังมีความแตกต่างที่อาจทำให้กลายเป็นปัญหายุ่งยากได้ สืบเนื่องมาจาก 1. ความแตกต่างกันในเรื่องโครงสร้างเศรษฐกิจ ระดับรายได้ และระดับการพัฒนา 2. เศรษฐกิจเอเชียพึ่งพาตัวเองค่อนข้างน้อย เห็นได้จากการส่งออกที่พึ่งพาตลาดนอกภูมิภาคเห็นหลัก 3. สกุลเงินยูโรเกิดขึ้นเพราะการผนวกการเมืองในยุโรป ซึ่งเอเชียยังแตกต่างและยังไม่มีการพูดถึงการผนวกการเมืองเข้าด้วยกัน นอกจากนี้ความเป็นเอกราชของประเทศในเอเชียยังทำให้รัฐบาลไม่เต็มใจส่งมอบอำนาจการบริหารให้กับองค์กรระดับภูมิภาคที่จะเกิดขึ้น

แม้ภาพที่มองเห็นขณะนี้จะยังไม่ชัดเจนว่า เอเชียจะก้าวไปสู่การใช้ ACU หรือไม่ แต่ที่แน่นอนเอเชียกำลังเดินตามรอยสหภาพยุโรป(อียู)ในการใช้เงินสกุลเดียว หรือยูโร ซึ่งอียูใช้เวลานานถึง 50 ปี

http://www.pacificislands.cc/pina/pinadefault2.php?urlpinaid=19046

REGION: ADB To Launch Asian Currency Unit

Tuesday: December 20, 2005


The Asian Development Bank (ADB) said on Monday (19 Dec) it would soon launch a theoretical currency unit comprising a basket of Asian currencies — akin to Europe’s Ecu, which evolved into the euro — to promote regional cooperation.

Masahiro Kawai, head of the ADB’s office of regional economic integration, said the Manila-based institution was studying how the basket should be compiled, including how the weighting of each currency should be set, and would unveil it early next year.

“I don’t know if we will end up calling it ACU (Asia Currency Unit), but we plan to come up with a currency unit using a basket of currencies from the ASEAN+3 countries,” Kawai said in an interview with Reuters.

“By looking at the index, we hope to analyse how ASEAN+3 currencies as a whole are moving against the dollar or the euro and how each currency in the ASEAN+3 countries is moving compared with the average level of ASEAN+3 currencies,” he said.

ASEAN+3 comprises ASEAN’s 10 member countries plus China, Japan and South Korea. ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

Kawai, also special adviser to ADB President Haruhiko Kuroda, said the unit could help promote regional financial cooperation in Asia, similar to Europe’s experience.

In Europe’s Exchange Rate Mechanism (ERM), the European currency unit (Ecu) acted as a divergence indicator for participating currencies and helped promote monetary stability throughout the 1980s and 1990s.

After the landmark Maastricht Treaty was agreed in 1991, the drive toward monetary union picked up pace and the single currency, the euro, was launched in January 1999.

Kawai said since Asian nations had yet to establish any rigid, formal system like the ERM, they would not be compelled to act if their own currency deviated from the new Asian unit.

“But the new unit will help provide some kind of benchmark to Asian countries by looking at how much their currency deviates from it,” Kawai added.

Kawai also said that if it were deemed useful, countries could trade in ACU or issue ACU-denominated bonds in the future.

The ADB will also look at how best to compile the unit in case more countries join the ASEAN+3 group.

Europe had created a scheme in which the Ecu would not move radically when more members joined, he noted.

Since the 1997/98 Asian financial crisis, Asian countries have stepped up efforts to foster financial cooperation.

They set up a web of bilateral currency swaps under a scheme called the Chiang Mai Initiative to give Asian central banks extra firepower in case of a repeat of the speculative attacks, which sent their currencies tumbling eight years ago.

They also took steps to boost still-immature domestic debt markets, hoping to keep the region’s savings in Asia, as illiquid regional bond markets and heavy reliance on bank loans have been held partly to blame for escalating the 1997/98 crisis.

Many analysts, though, say it will still take at least a few decades before Asia can catch up with Europe in terms of economic integration......Reuters/PNS

The posibility of having a single currency in Asia is extremely low for some reasons.

http://www.adb.org/Documents/Speeches/2005/ms2005088.asp


“Towards a Borderless Asia: A Perspective on Asian Economic Integration”

Speech by
Haruhiko Kuroda
President
Asian Development Bank

At The Emerging Markets Forum

10 December 2005
Oxford , UK

I. Introduction

Distinguished members of the Forum, colleagues from the multilateral institutions, ladies and gentlemen:

I would like to congratulate the Advisory Board of the Emerging Markets Forum on undertaking this important initiative. I am honored to be in the esteemed company of Forum Co-Chairs, Mr. Michel Camdessuss and Mr. Fidel Ramos, as well as the many eminent speakers and participants who are here this week. My thanks to Mr. Michael Earl and Mr. Gautam Kaji for hosting the Forum at Templeton College, at a University that has inspired great intellectual debates for over nine centuries.

When I attended Oxford in 1969-71, the world was a much different place and a peaceful, prosperous Asia was barely conceivable. Now, it is well on the way to becoming a reality. So it is with much pleasure that I return here today to share my vision for Asia and the Pacific in the 21 st century — a vision of a region free of poverty — diverse yet united, well integrated within itself and with the global economy, and contributing profoundly to the ongoing progress of humankind.

Some skeptics may call this vision of deeply integrated Asia a pipe dream. Some say the disparities are too wide, the political divides too deep. But strong bridges for a united Asia, open to the world, are already being built.

II. Regional Cooperation and Economic Integration: the Four Pillars

Since the early 1990s, Asian leaders have significantly ramped up their efforts to strengthen what we at ADB view as the four key pillars of regional cooperation and economic integration: (i) cross-border infrastructure and associated software , (ii) money and finance, (iii) trade and investment, and (iv) regional public goods.

On the first pillar—subregional cooperation in infrastructure—much work is underway to connect countries through roads, ports, bridges, power and telecommunication networks, and also to facilitate trade through harmonized policy and institutional environments. The Greater Mekong Subregion, the Central Asian Republics and the countries of South Asia are all involved in such activities. And new initiatives are emerging that indicate a more pan-Asian approach. In this respect, the Mekong countries of Cambodia, the People’s Republic of China, Lao People’s Democratic Republic, Myanmar, Thailand and Viet Nam are well positioned to serve as a crucial link between South and East Asia.

On the second pillar—money and finance—we have the ASEAN+3 economic surveillance process, regional resource pooling through the Chiang Mai Initiative (CMI), and the Asian Bond Markets Initiative, aimed at promoting bond markets and mobilizing Asia’s savings for direct, efficient long-term investment in the region. While these efforts have largely focused on East Asia through the efforts of the ASEAN+3 group of countries, South Asian finance ministers recently agreed to meet on a regular basis for policy dialogue.

The third pillar—trade and investment—is perhaps the most advanced facet of Asia’s integration. Intraregional exports have quadrupled in value since 1990. Free trade agreements (FTAs) are not only proliferating, but becoming more far-reaching. The ASEAN-China FTA is already under implementation and the FTAs for ASEAN-Japan, ASEAN-Korea, ASEAN-India, India- China and many others are under negotiation or under consideration. Some cover not only trade in goods and services, but also cooperation in investment, technology, education, air services and human resources. FTAs within East Asia, as well as between South and East Asia, are rapidly expanding in number.

The fourth pillar—the provision of regional public goods—brings countries together to prevent and manage such things as communicable diseases such as SARS, Avian Flu and HIV/AIDS; cross-border trafficking; environmental degradation; and natural disasters. While funding for such initiatives is direly lacking, inter- and intraregional efforts are underway to effectively address the cross-border impact of these problems.

These four pillars of regional cooperation have brought substantial benefits to countries and people in the region—benefits that could otherwise not have been realized.

III. Building on the Momentum

The questions that often come up in discussions on Asia’s regional economic integration are: How far should Asia go in its endeavors towards regional integration? Should the ultimate objective be the adoption of a single currency, as in Europe? Or should Asia’s economic integration be modeled on the North American Free Trade Area ¾ or NAFTA, as it is commonly referred to ¾ far short of adopting a single currency but creating a giant free trade area? Or, should Asia innovate its own model of economic integration, threading together some elements of both the European and North American models and adding new ones of its own? These are the types of issues that the region needs to address to have a clear vision of where we want to see the region heading in the next quarter century.

Some have suggested that Asia should limit its regional integration ambitions to a NAFTA-type free trade area.1 Proponents of this view see merit in this suggestion, especially since the political will to go beyond a free trade area and create an Asian economic community seems to be lacking. I myself take a somewhat different view. I have argued that our objective should be the creation of an Asian monetary union with a single currency.2 I continue to believe that Asia in general, and East Asia in particular, should strive to form a monetary union in the long run.

Consider this: intra-regional trade in East Asia now accounts for 54% of the region’s total trade, sharply up from 35% in 1980.3 This is higher than the 46% intra-regional trade in the NAFTA region and is very much comparable to intra-regional trade in the European Union before the 1992 Maastricht treaty. Given this magnitude of intra-regional trade, even small intra-regional exchange rate misalignments can disturb trade and investment flows and could create trade frictions among the regional economies. This indicates the need for intra-regional exchange rate stabilization in the years to come, and ultimately a single currency.

As for political will, I believe that economic interests would affect political considerations in as much as political will can determine economic outcomes. So long as the economic benefits from regional integration are substantial, political compromises could eventually be reached.

Certainly, it will not come easily. As one observer recently put it, “…before any grand dream can be realized, lots of little problems must be solved.”4 In my view, however, these problems should not daunt us in our mutual quest to sustain growth, create opportunity and improve the lives of people in countries across the region.

What should Asia do in the next several years to fulfill the dream of an integrated, poverty-free, peaceful region? Let me share some of my thoughts on this issue before I conclude.

Clearly, we must intensify our efforts to build cross-border infrastructure and coordinate the associated laws, rules and regulations. East Asia alone will need a trillion dollars in the coming few years for infrastructure—a level of investment far beyond the capacity of governments.

To mobilize the necessary resources, Asia’s capital markets will need to be further strengthened. It is ironic that Asia’s massive needs for infrastructure investment go unmet while excess savings find their way to the global capital markets.

One reason for this is that Asian savings are not being efficiently intermediated by the region’s financial system. It is difficult for financial intermediaries and savers to find the right investment opportunities in the region. Market infrastructure is underdeveloped in many respects, and investor concerns include efficient pricing and liquidity. Perceived weaknesses in legal certainty and in regulatory frameworks could also be discouraging wider investment. These issues need to be resolved.

By ensuring that more of Asia’s savings remain in the region, Asia can also make a significant contribution to correcting global imbalances. There will, of course, be ramifications for international financial markets. However, change will be gradual because high savings in Asia will ensure that the region continues to be a capital provider to international markets for the foreseeable future.

We also need to bring greater coherence to the growing number of overlapping regional trade agreements in Asia, so they do not become a stumbling block to regional

and global trade integration. Both multilateral and bilateral agreements can be beneficial if designed appropriately. But while the number of both types is growing in the region, these agreements vary widely in scope, rules and participation. Thus, their proliferation may present greater challenges for harmonization and broader integration.

At the same time, it is important to realize that regional trade agreements can complement global trade liberalization. In this respect, the outcome of the Doha round is crucial. As some of the major trade distortions clearly lie in developed countries, the world’s trading system needs urgent reform. The current restrictions on agriculture, in particular, have imposed heavy costs on poor farmers in developing countries, and on consumers everywhere. Liberalization of world trade would have a significant, positive impact on poverty reduction in Asia, and every possible course of action should be pursued to ensure a successful conclusion of the Doha agenda.

Another important step is to bring greater regional exchange rate coordination to the region, to provide more stability and to help rebalance sources of growth away from the external sector into domestic demand. Here, we have seen some encouraging signs. China has started to adjust the RMB exchange rate and move to greater exchange rate flexibility. Singapore, Thailand and Korea have adopted a de facto or de jure managed floating exchange rate regime with reference to a basket of major currencies.

One option for facilitating greater exchange rate coordination across countries in the region could be to introduce an Asian Currency Unit, or ACU. The ACU ― a weighted currency unit of the national currencies of Asia ― can be used to monitor the stability of participating currencies and would tangibly demonstrate the need for greater exchange rate coordination. What Asia needs here is basically an exchange rate that is flexible toward the rest of the world but relatively stable within the region.

With regard to financial integration, we have seen recent progress in the ASEAN+3 finance ministers decision last May to double the size of the existing swaps under the Chiang Mai Initiative, integrate the CMI with the economic surveillance process, and increase the percentage of funds that can be disbursed without involving the International Monetary Fund. They also agreed on a collective decision making process — the first step towards multilateralization.

Further steps could be taken to expand the CMI to a more solid regional financing facility and by making the ASEAN+3 economic surveillance mechanism more effective—for example, through the establishment of a professional secretariat charged with both the CMI and regional economic surveillance.

Regional economic integration holds much promise for achieving a poverty-free, prosperous, and peaceful Asia. Much has been accomplished in recent years, but important challenges remain. Even as we address these challenges in the coming years, we should not forget that Asia’s post-war economic success has been due in part to its participation in the global economy. Drawing on this lesson, it is important to ensure that Asia’s regional integration in the years to come is not at the expense of its continued engagement with the rest of the world. Our objective should be not to create a “fortress Asia”, but a highly integrated Asia that is also open to the rest of the world. This is “open regionalism”. In short, Asia should increasingly act regionally while continuing to think globally.

IV. Concluding Remarks

Ladies and gentlemen, let me leave you with this thought: d ecades of dynamic growth have changed the face of Asia and the Pacific. Since 1990, 300 million of the region’s people have risen out of poverty and are living better lives. But developing Asia is still home to nearly two thirds of the world’s desperately poor people. Regional integration can be a powerful tool to help all countries sustain high levels of economic and employment growth, to spread the benefits of growth more equitably, and to realize the dream of an Asia and Pacific free from poverty.

Globalization will only succeed if people everywhere can recognize and benefit from its enormous potential. I salute this Forum for its concerted effort to contribute to this important agenda, and I look forward to many more such discussions in the years ahead.

Thank you.

"Some skeptics may call this vision of deeply integrated Asia a pipe dream. Some say the disparities are too wide, the political divides too deep. But strong bridges for a united Asia, open to the world, are already being built."

Haruhiko Kuroda
..

Consider this: intra-regional trade in East Asia now accounts for 54% of the region’s total trade, sharply up from 35% in 1980.3 This is higher than the 46% intra-regional trade in the NAFTA region and is very much comparable to intra-regional trade in the European Union before the 1992 Maastricht treaty. Given this magnitude of intra-regional trade, even small intra-regional exchange rate misalignments can disturb trade and investment flows and could create trade frictions among the regional economies. This indicates the need for intra-regional exchange rate stabilization in the years to come, and ultimately a single currency.

Haruhiko Kuroda

..

I think it will only work among the ASEAN members.
the "+3" are too rich and if they join the single currency their currency value will drop a lot.

Will there be any new currency? Asian Dollar?
Or use the strongest ones like Yuan, Yen or Baht :)

I don't really think it could become reality. and one Asian Union passport? nah, impossible. A developed country, eg. like Japan, would want citizens of less developed countries to go into their country freely.

this whole idea is just crap. Imagine how many people from all poor countries around Thailand would overflow Thailand and prostitution would be sooooooo high and the crime rate would be much higher and many other things.

The government system aren't even close between Thailand's neighboring countries

ASEAN+3

10 ASEAN Members(Thailand-Vietnam-Cambodia-Laos-Myanmar-Malaysia-Indonesia-Phillipines-Brunei-Singapore)
+3 (China-Japan-SouthKorea)

believe me

this is near impossible in our lifetime
the economic and political basis behind creating a single currency is complicated
i don't want to get into that
but you need a regional central bank, regional monetary policy, regional common market, regional assembly (on spending, taxation).... etc etc... collective governmental contribution...

and of course, the state of growth of member countries, the economic make-up of each individual country must be more or less similar.

we won't see such thing in our life time for sure

I'm not sure about the benefits of having a single currency, except probably less hassel of converting money from one currency to the other, and making trading easier?

Not in worth dollar policy within ASIANs' economy to be committed that especailly in the scope of great differential political and racial benefits among them :D

Individual and indepentence from each Dollars sign are the BEST and the ONLY one solution in foreseeable inevitably

Wouldnt be easier if it is just only the five ASEAN countries? (Thailand, Phillippines, Malaysia, Singapore, Indonesia)

I rather use the HK dollar :D

A Single Currency for Asia: Is It Time?
Speech given at the ADB Seminar “A Single Currency for East Asia – Lessons from Europe” at the 37th ADB Annual Meeting in Korea
Mr. Roberto F. de Ocampo

The 1997 Asian financial crisis may be said to have been the most traumatic experience in the region in recent times. It gave rise to much soul-searching and led to several initiatives along several fronts, among the most important of which were concerns related to regional and financial cooperation in East Asia. The crisis highlighted the need to address some major structural and policy weaknesses, especially in the financial and corporate sectors. The crisis put at the forefront of the regional cooperation agenda the need to focus on one important dimension – monetary and financial cooperation – with a view to enhancing East Asia’s resilience to future shocks.

Background to Resurgence of Interest in a Regional Currency

Suddenly, interest in the possibility of an Asian Monetary Union resurfaced, having been mulled off and on over the years, as part of continuing dialogues on regional economic cooperation. I might note, however, that the desire to develop our financial markets did not arise exclusively in the aftermath of the Asian crisis. For indeed, in the first half of 1997, among the major agreements reached during the APEC Finance Ministers Meeting which I had the honor of chairing was the adoption of a 5-point agenda for promoting the development of the regional financial and capital market. An unfortunate consequence of the crisis was to stymie the reform agenda, and to put the region on a defensive stance rather than the pro-active position that characterized the Finance Ministers’ 1997 consensus.

The role played by the multilateral agencies – the IMF, World Bank, and even the ADB – was perceived by some to be wanting in those traumatic moments, and indeed gave rise to the idea of a more focused Asian Monetary Fund. But being early days, what actually happened was the rise of bilateral swap arrangements, gradually increasing in size and coverage to generate what we now see as multilateral swap arrangements or the creation of an Asian fund. The ASEAN also weighed in with its proposal to settle intra-regional net trade payments in local currency, asserting that this would reduce the volatility of our respective exchange rates with the US dollar.

Further along the road, the ASEAN + 3 Summit in Manila in November 1999 officially supported efforts to develop new forms of cooperation among the 13 member countries represented. East Asia’s post-crisis initiatives at regional and financial cooperation stemmed from the realization that the unexpected cross-country contagion that occurred in the aftermath of the crisis could not be a matter of indifference among individual countries in the region. It was seen that the crisis had its origins in common weaknesses in the financial and corporate sectors among several countries, and so cross-country cooperation on financial reform issues would be beneficial to all. Over-all, it was recognized that countries needed to cooperate in monetary and financial spheres to provide a mechanism for crisis-prevention and crisis-management.

The post-crisis initiatives may be seen as proceeding in four areas:

· regional information exchange and surveillance (at its lowest and more doable level)
· regional resource pooling (which resulted in the ASEAN swap arrangement and bilateral swaps)
· financial sector development (which gave rise to networking arrangements among bank regulators and domestic credit agencies and the ASEAN + 3 Asian Bond Market Initiative), and
· exchange rate coordination (which gave rise to the setting up of an ASEAN Currency and Exchange Rate Mechanism Task Force in 2001 to examine the desirability and feasibility of regional exchange rate coordination).

A Regional Currency for Asia?

Even as these initiatives are making encouraging progress, the Asian region, and more particularly, East Asia, is now at the critical cross-roads in its initiatives towards regional monetary and financial cooperation. In this post-crisis period, it is increasingly being examined that intra-regional exchange rate stability is a desirable objective. There is a wide range of options in the menu being proposed, among them a common basket pegging of regional currencies and the adoption of a single regional currency in the long run. The European experience is seen as a model for the way forward. The question that of course arises is whether such a model would apply to East Asia, given the diversity of the economies that comprise it, and given that time – which Europe had – is a luxury that countries in the region can no longer afford in this fast-moving century. And if such a model were to be adopted – or a better word perhaps is adapted – by Asia, what kind of a road map is the region going to use, and would the individual countries be happy to use the same map in moving towards such a common destination?

The Euro as a Model for an Asian Currency

To see if the European model can serve as the template for the development of a single Asian currency, a quick review of how the European Monetary Union evolved might be worth repeating. Definitely, the euro did not spring forth full-blown on January 1, 2002. While it would seem that since its introduction, the euro may now be considered a success, having already assumed the role of the world’s second leading currency (albeit some way behind the US dollar), the highway that led to it was not without its difficulties. Inspiring as the European experiment might be, it is well to remember that it was a long, erratic, and often laborious process. It took 30 years to gestate, and integration was hampered along the way by several international crises and also by internal divergences, which aspiring Asia may do well to remember.

An ADB paper on the European Monetary Union described the path to monetary integration as being comprised of three distinct steps:

· the Werner Plan
· the European monetary system (EMS), and
· the EMU

Although the steps differed, they were rooted on common grounds. First, monetary integration is achieved through the introduction of a single common currency. Second, this introduction relies on a common policy managed by common institutions. And third, a high degree of convergence among the participants is a prerequisite for monetary integration. The paper stated that the third condition was crucial in the EMU process, since it determined the speed of integration.

The Werner Plan was the first attempt to achieve monetary union within ten years from 1969, but it failed to bring about coordination among the six European governments in periods of important international turmoil, among them the first oil crisis and the wave of instability in the foreign exchanges that followed the US decision to float the dollar in 1971. The situation emphasized the need for deeper monetary coordination between the member states, and in response the European Monetary System (EMS) was created.

The EMS had three main components: the European currency unit (ECU), the exchange rate mechanism (ERM), and financial support. The ECU, a basket of currencies of the European states, was the numeraire for currency parities in the EMS. According to the ERM, each currency had a central exchange rate linked to the ECU, the latter being used as a basis for a bilateral divergence indicator. Monetary authorities had to intervene once the bilateral market exchange rate crossed the divergence threshold. Financial support for interventions was based on three credit facilities, the most important being the very short-term facility whereby central banks were able to rely on an unlimited amount of foreign reserves which had to be settled 45 days later. The short-term facility provided automatic access for a longer period, while the medium term facility consisted of loans with conditionalities and reimbursements in tranches.

Over a ten-year period, the EMS helped reduce exchange rate variability – the flexibility of the system combined with the political resolve to bring about economic convergence achieved sustainable currency stability. However, there was a growing feeling that the completion of the Single Market called for deeper monetary integration. It was also felt that the potential of the internal market could not be fully exploited because of what economists considered the “impossible trinity” – free movements of capital, exchange rate stability, and independent monetary policies which could not co-exist in the long-term. Thus the path towards full monetary integration was firmly laid out in three stages:

· 1990-1883 (diagnostic stage) during which period progress made with regard to economic and monetary convergence was assessed while member states were to adopt appropriate measures to comply with certain prohibitions in the Treaty on the European Union (signed in 1991)

· 1994-1998 (convergence stage) during which member states were to prepare towards adopting the euro and were expected to make significant progress towards economic policy convergence (through precise but nonbonding rules on public financing and the introduction of monitoring of public financing). The European Monetary Institute (EMI) was established for the purpose of institutionalizing coordinated monetary policies. The EMI was meant to be only a transitory monetary institution, and would be the forerunner of the European Central Bank (ECB) which was established in June 1998.

· 1999-2002 or the period of implementation of the monetary union, during which conversion rates between the euro and national currency units were irrevocably fixed, and the euro was to become the currency of the participating countries and was to be used in the foreign exchange markets. It replaced the ECU, and the ECB used the euro for drawing up the monetary policy of the participating countries. By January 2002, national currencies were withdrawn, and new euro banknotes and coins were put into circulation.

Towards a Single Asian Currency

The creation of the European Monetary Union had a long history of cooperation. In the early 1950s the European Payments Union provided the first framework for cooperation, exchange of information, peer monitoring and trust building. The move towards the EMU was made possible by (1) high trade interdependencies, (2) common acceptance of basic political and social values (democracy, a market economy with a strong welfare state) – though we might mention that the UK did not consider democracy to be as strongly anchored in the Continent nor did it share a welfare state commitment) – (3) fairly even economic development and comparable living standards, despite divergences among its poorest members, and (4) a strong commitment to solidarity.

Nonetheless, not all countries participated in the EMU. This was because of the stringent requirements of policy coordination and institution building, which, when it came to the crunch, involved the renunciation of national sovereignty. The question of whether Asia is ready to embrace the strict requirements and follow the path carved by the EMU remains to be seen. Or is there an alternative that fits the culture, political history, and a shared sense of urgency that would unerringly move Asia towards regional integration? More to the point, towards a unitary currency for the region?

Moving Towards Asian Regional Monetary Integration After the crisis, Asian countries experimented with different exchange rate regimes – mostly in the form of flexible exchange rates, where central banks however intervened extensively to build up foreign reserves. The challenge before them is to decide how much flexibility is best in the future, while avoiding too much de facto pegging to the dollar (for most of Asia) if a repeat of the mistakes of the precrisis policy is to be avoided. Capital controls is of course an option, but with financial markets becoming more and more integrated, the impossible trinity provides only one of two choices – exchange rate stability or monetary independence.

Arguments for a monetary union in fact center on what is perceived to be its most important benefit – exchange rate stability. As exemplified by the European model, exchange rate stability would promote trade and investment, and give rise to peer pressure for macroeconomic coordination. The downside is that central bank autonomy in the participating economies would be lost, except in the leading country’s central bank. Another cost is that asymmetric shocks could cause difficulties without capital mobility and fiscal cross-border transfers. Another consideration for Asia, as it mulls the idea of its own monetary union is that certain preconditions were present when the EMU finally came into being: there was high intraunion trade, factor mobility, price and wage flexibility, policy coordination, and for the most part, shocks were symmetric.

In the case of Asia, the concept of “region” is premised on geographical reasons. The economic reality however is that there is substantial diversity in the economies, each with its on idiosyncracies. This heterogeneity is clear from a perusal of ADB key indicators which show that the highest per capita income is about 140 times that of the lowest as of 2001, in contrast for example with Europe where standards of living across countries were for the most part on par with each other. Moreover, Asian economies trade less with one another than European countries did among themselves. Likewise, in contrast to Europe, Asia does not have a similar integrationist tradition. This diversity makes the task of regional integration more challenging. This is not to say that the task is impossible. Allow me to express my thoughts on how Asia might trek towards this notional destination.

First I would say that instead of looking immediately outward toward the region, what if we first build inwards from each respective economy? As I stated earlier, to reach that convergence point, there may be a road map, but there could be several routes all leading there. In last year’s Bo’ao forum I indicated that such a customized way by which each economy could mark its place in the continuum of the development agenda and proceed from there may be more doable. Agreement on a timetable and drawing up of milestones would help each economy to set and execute reforms according to local conditions and its commitment to the development agenda. The key challenge facing the move towards greater cooperation and integration within the region is to find a way forward, that is, set priorities and sequence activities.

Steps Towards Achieving Monetary Integration

Let me go back to the post-crisis initiatives that I mentioned earlier.

· First, the regional information exchange and policy dialogue on surveillance is easily the most doable and consistent with a variety of possible institutional arrangements including, if need be, the launching of an Asian Monetary Fund in the medium term. Since sharing already existing information entails little additional cost, the improved sharing of economic information and macroeconomic monitoring is desirable, particularly in view of the general tendency for contagion to be regional. Similarities in economic and financial structures as well as in macroeconomic policy regimes suggest that countries can learn from each other’s experiences. Moreover, regional trade interdependencies are now increasing, signifying that macroeconomic and financial sector policies can be expected to have progressively larger economic spillovers within the region (as for example was shown in a sample of European countries). Further to this, the question of whether an independent regional monitoring system over and above global information and monitoring systems may need to be addressed. In fact regional level initiatives at economic monitoring have been undertaken, post-crisis, including the setting of a Regional Econoic Monitoring Unit (REMU) in ADB. Another issue is: what is to be done with the information? Are Asian countries ready to move from information sharing to surveillance? Effective surveillance may require the willingness to surrender some degree of sovereignty over macroeconomic policies as well as to exercise peer pressure on other countries to modify their policies. As long as it is based on an accurate diagnosis of macroeconomic problems, such discipline may in principle be considered beneficial to both those exerting the pressure and the country that is subject to the discipline. There is thus a strong case for coordination within Asia to be extended beyond mere information sharing to the level of regional surveillance. I would say that taking this step is the most doable, albeit it entails some surrender of what we call “amor propio” in my country.

· Second, earmarking a portion of foreign exchange reserves for financing the short-term liquidity needs of member countries, or resource pooling would be a logical next step. This could lead to the eventual establishment of a centralized reserve pool with a mandate for crisis -prevention and crisis-management. The Manila Framework actually included among the required initiatives both regional surveillance and a contingent financing mechanism for Asian currency stabilization.

·The third step is financial sector reform and development. The recently announced Asian Bond Market initiatives is one such contributory step. Moreover, regulators are now paving the way to give consumers a variety of products that could address their diverse and hybrid needs. This of course is a challenge to regulators to make judgments on risks that both takers and providers of products that local market might evolve, and ensure that appropriate safeguards are instituted. Moreover, the development of the local capital market rests a great deal on the role played by government, which as we know is the one that can create the benchmark of a risk-free yield curve. Cooperation in developing effective mechanisms for regulation and supervision is essential. This would involve setting up general regional guidelines for prudential regulation (to be adapted in accordance with individual needs) as well as the extension of the supervisory function within each country to all institutions that engage in financing activities.

· Fourth, and we go back to the issue of whether Asia is ready for regional exchange rate coordination. The question that comes to the fore is what form is it to take – a regional basket peg, an Asian Monetary Union, or full monetary unification. A fundamental difficulty in our part of the world is that there is really no consensus on where the common regional currency arrangement is headed for. The various options that have been suggested are: (1) a monetary union among ASEAN countries only; (2) a Greater China or RMB monetary union; and (3) a monetary union between Japan and Korea. At the Bo’ao forum last year, Professor Robert Mundell suggested that a wider area, such as an APEC currency area, rather than an Asian currency area would be easier to begin with, because in an Asian currency area, it would require a decision to use a major currency, in this case, the RMB or the Yen. Moreover, he extensively discussed the issue of RMB’s role in an Asian currency area, concluding that for China’s own sake, it should keep the RMB fixed, shouldn’t appreciate, depreciate or float. He also said that Japan should concentrate on saving the life of the Yen. As has been pointed out by many analysts, Asia at present does not satisfy many of the economic criteria for a successful currency union. While there is a growing consensus that exchange rate stability is a desirable objective, it is clear that the East Asian countries have a long way to go before adopting a common currency. The European experience does suggest that the adoption of a common currency is the last step in the process of regional economic integration, and hence takes a long time.

Final Comment

So where does that leave us? We go back to recalling the fact that East Asia has suffered a painful and costly financial crisis. This suggests to me that the East Asian countries, most especially, may now be prepared to set aside their differences and work together to develop a region-wide self-help system to prevent future crisis. It has been said that more than economic will, political will is what will in the end bring about a convergence similar to that accomplished in Europe. The number of initiatives taken – the Manila Framework, Chiang Mai Initiative, ASEAN+ 3 efforts – are proof of the sincere desire to move the region to convergence. I believe that our discussions at this seminar will provide us with a clearer view of the way forward. Asian culture has always emphasized consensus building rather than a confrontational approach. Such an approach has its upside and downside, but let it not be said that we are less than willing to take the necessary steps. Asia after all, has had a far longer history of civilization than most, and a patience bred through the ages..

I dont think Japan and S.Korea would want a single currency. Why would they!?

I dont think Japan and S.Korea would want a single currency. Why would they!?
very easy ....A strong and stable economy.
If the region is in financial crisis will Japan and SouthKorea be happy??

Wouldnt be easier if it is just only the five ASEAN countries? (Thailand, Phillippines, Malaysia, Singapore, Indonesia)
Yeah..I have been thinking similar thing like this.

Laos , Myanmar , Cambodia may have to wait for their readiness while other members join the single currency..

^^ Yeah I also agree that it's a good idea to have Thailand, Malaysia, Singapore, Phillippines, and Indonesia combine their currency as SEA currency. This is just my opinion. :cheers:

Yeah...although East Asia currency sounds really awesome...but what are the chances?
ASEAN currency is still pretty cool too!

But you know...that could damage our shopping/ retail industry...
Since quite often, when Singaporeans or Malaysians go shopping in bangkok they buy products in thailand assuming that products are cheaper in thai bahts when in actuality many similar products in thailand are more expensive then those sold in singapore and malaysia if you do correct conversions of prices into their currencies...

A single asean currency would allow our higher prices to become a lot more obvious...thus possibly encouraging tourists to go buy the products elsewhere like singapore and malaysia...gah...so an asean currency could become a double edged sword...

It is my dream!!!!!

Japan has a strongly overvalued currency while China/Thailand/Malaysia do have extremely undervalued currencies ... This gives the latter countries a strong advantage regarding exports because it makes them very cheap for the main importing countries ... I can't imagine they would be interested in endangering this situation by merging currencies.