Asia Begins Work on Single Currency
By Na Jeong-ju
Korea Times Correspondent
HIDERABAD _ South Korea, China and Japan have agreed to form a task force within this year to produce a roadmap for the creation of a common Asian currency, mimicking the euro.
``South Korea, China and Japan have agreed on the concept of an Asian Currency Unit (ACU), and will start discussions for its creation this year, in an effort to promote financial integration of Asia,'' Deputy Prime Minister and Finance and Economy Minister Han Duck-soo told reporters.
Han made the comment after meeting with China's Jin Renqing and Japan's Sadakazu Tanigaki at the 6th meeting of finance ministers of the three neighbors, held on the sidelines of the Asian Development Bank (ADB)'s annual meeting here.
The idea of a single Asian currency, contemplated on and off after the Asian currency meltdown in the late 1990s, got a big boost at the annual ADB meeting here.
In a joint message from the three countries they said they would discuss the agenda with Southeast Asian countries under the framework of the so-called ASEAN+3.
ASEAN+3 refers to an economic cooperation regime comprising Seoul, Beijing, Tokyo and 10 member nations of the Association of Southeast Asian Nations (ASEAN).
``The idea of developing a single Asian currency has widely been shared by Asian policymakers, but there has been no concrete action on government level,'' said Kwon Tae-kyun, head of the ministry's International Finance Bureau, who attended the tripartite meeting. ``The three nations shared views that it is time to start a debate on the creation of a common currency. For that ultimate goal, we will form a joint research team this year.''
The study, however, is likely to take a long time before agreement is reached, Kwon said, citing contradictory views and differing opinions among Asian nations on the making of an ACU. It took over 30 years for European countries to create the euro after agreeing on its creation..
Policymakers believe a single Asian currency can protect Asian countries from volatile movements of the U.S. dollar in the region.
Also on the agenda at the finance ministers' meeting was finding ways of consolidating a regional liquidity support system, called the Chiang Mai Initiative (CMI), adopted in 2000 to battle speculative runs on currencies. By signing foreign exchange swap deals for the past years, the countries have doubled the amount of emergency funds to be provided to currency crisis-hit nations to some $75 billion. The ASEAN+3 nations are now preparing post-CMI measures to cement their currency support system.
``The regional financial cooperation within the ASEAN+3 is moving in a favorable direction,'' the ministers said in their joint statement. ``We welcome the completion of the CMI review. We agreed to make continuous efforts to seek the possibility to further enhance the regional financial cooperation beyond the CMI.
``We noted the importance of sharing a long-term vision for financial integration in the region; we agreed that related efforts should be initiated and developed through the ASEAN+3 Finance Ministers' Process.''
The countries plan forming a group of experts to serve as an independent economic assessment vehicle for the region. Also, the ``Technical Working Group on Economic and Financial Monitoring,'' which will play an important role in developing and spreading a joint warning system for early detection of irregularities, will be launched.
For the goal of achieving more consolidated financial integration among Asian countries, Korea, China and Japan agreed to strengthen their roles for global financial institutions, such as the International Monetary Fund and the World Bank. They called on the IMF and the World Bank to increase the ad hoc quota for the three nations at the next IMF and World Bank annual meeting scheduled for September in Singapore.
``We acknowledged the importance of addressing the issue of significant under-representation of the countries whose current economic strength and the relative position in the global economy are not properly reflected in the international financial institutions,'' Minister Han said.
The minister said they have made considerable progress through ``meaningful and fruitful'' discussions of mutual financial concerns. As for the economic prospects of the three countries, they said they remain positive, citing strong regional demand and continued robust growth of the world economy. They warned, however, high oil prices and the upward trend of interest rates may pose a major risk to the regional economy.
Economists are upbeat about Asia's economic potential.
ADB chief economist Ifzal Ali said in a report that developing Asian economies will deliver strong growth in 2006 supported by a broadly favorable outlook for the international economy, the continuing trend toward improved economic management, and apparent resilience to high oil prices.
He said the region would achieve an overall economic expansion of 7.2 percent in 2006 and 7 percent in 2007, a marginal easing from 7.4 percent in 2005.
jj@koreatimes.co.kr
05-04-2006 17:03