Southeast Asian countries will have to shelve their single currency plans for a while, or until the eurozone is able to overcome its financial problems and prove that having a common legal tender for the region is still the way to go, according to Asian Development Bank’s chief economist.
“The eurozone should serve as a guide for Asia,” ADB’s Changyong Rhee said in a press conference last week when asked about the merits of integrating economies in Southeast Asia.
“Having a single currency and a large union [of economies] may create problems. Let’s see how they [Europeans] solve their problems and then let’s study whether it is still prudent to have a single currency.”
Rhee said it would be unwise for members of the Association of Southeast Asian Nations (Asean) to begin serious talk about having a single currency when the euro zone countries are still struggling with serious debt and economic problems.
For now, Rhee said, it would be best for Asean members to focus on strengthening their economic ties. He said the concrete plans laid out in the economic integration of Asean by 2015 would suffice for now.
Under the Asean economic integration plan, the regulatory environment for cross-border trading of goods and services, and inter-country investments and employment will be eased over the next three years.
As a result, Rhee believes economic growth of the region and each Asean member will accelerate.
Once integrated, Southeast Asia may become a new growth force in Asia, joining the ranks of China and India, he said.
The Asean is composed of the Philippines, Indonesia, Malaysia, Thailand, Singapore, Brunei, Cambodia, Laos, Vietnam and Burma.
According to economists, there are advantages and disadvantages to having a single currency.
On one hand, having a common currency would ease inter-regional trade, they said.
But for countries with different levels of economic development, the difference in the prices of goods and services among member states becomes obvious, and having a single currency may lead to problems.
As a result, the country where scale of production of goods and services is smaller, and thus costlier, may find it difficult to compete in terms of price with a country that has a bigger production capacity, the chief economist explained.
Moreover, the country where labor costs are higher may lose a significant number of investors.
Rhee said having a single currency and an economic union means that an Asean nation must be willing to share its resources with a less fortunate member.
“Are Asian countries willing to share tax revenues and other resources among themselves? Maybe not yet,” he said.—Michelle V. Remo