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China, Japan, Korea on single currency unit

HYDERABAD: Finance ministers from China, Japan and South Korea called on Thursday for more regional financial cooperation and decided to examine the idea of regional currency units, a first step on the long road to an Asian euro.

The ministers, in Hyderabad, India, for the annual meeting of the Asian Development Bank (ADB), also called for the strengthening of a regional scheme to prevent currency turmoil and for the development of immature bond markets in Asia.

“We noted the importance of sharing our long-term vision for financial integration in the region,” they said in a joint statement.

“We agreed on further study of related issues, including the usefulness of regional currency units, through the ASEAN+3 finance ministers’ process.” ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. ASEAN+3 takes in these states plus China, Japan and South Korea.

A plan by the ADB for several types of theoretical Asian currency units (ACUs) has not got far, with some Asian countries doubtful that the development bank was the right body to explore the idea.

Given the political sensitivities involved, the ADB has recently stressed that an ACU, which would be made up of a basket of currencies, would not be traded and would simply be an indicator of the stability of participating currencies.

Asian countries now seem prepared to develop the work together, despite political tensions among Japan, China and South Korea, because financial crisis in 1997-98 made them realise that cooperation was important.

Europe’s textbook: Kwon Te-kyun, director general at the South Korean finance ministry’s international finance bureau, told reporters that teams from Japan, China and South Korea planned to hold their first meeting on currency integration some time this year.

“The ACU idea will be taken into account but, basically, today’s agreement means that discussion over the single currency unit will now be brought into the ASEAN+3 regime,” he said.

“It took 30 years for Europe (to launch the single currency) but it will take less for Asia because Asia has the textbook from Europe to use.”

A senior Japanese finance ministry official said Asian countries would work with the ADB on exploring the usefulness of regional currency units.

Masahiro Kawai, head of the ADB’s office of regional economic integration and the driving force behind its ACU plan, welcomed the finance ministers’ decision.

“We will support the ASEAN+3 governments in this area in any way possible. We will consult with their governments on how the ADB could assist their work,” he told Reuters.

Some analysts remain sceptical. “I think it’s a pipe dream,” said Nick Bibby, a strategist at Barclays Capital in Singapore.

“We occasionally see calls for this but it never goes anywhere and I expect the same to happen this time.”

Bibby questioned the viability of an Asian version of the euro because of widely varying levels of economic development in the region and a lack of transfer systems from areas doing well to those faring poorly. Others saw more merit in studying European-style integration.

“While the goal of creating a single Asian currency may be a long way off, it makes sense for the region to move in that direction,” said Kevan Watts, chairman of Merrill Lynch International, who was in Hyderabad for the ADB meeting. reuters

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