Monday, May 27, 2002
Common Asian currency possible
REUTERS
BEIJING: Asia could eventually create a common currency similar to the euro, but the region should focus now on measures like currency swaps to prevent another economic crisis, a Japanese finance official said on Sunday.
Such currency swap arrangements were needed to head off future currency fluctuations since other measures, such as improved liquidity at the International Monetary Fund, were not enough, Haruhiko Kuroda, Japan's top financial diplomat, told an Asia-Pacific Economic Cooperation forum in Beijing.
"In light of the experience that the Asian currency crisis quickly spread to neighboring countries, regional financial cooperation is a logical way to proceed in preventing, managing and resolving a crisis," Kuroda said.
Still recovering from the 1997/8 regional financial crisis, Asian nations have struck six bilateral currency swap deals -- five involving Japan -- as part of the Chiang Mai Initiative that aims to have the central banks of 13 countries exchange currencies as needed.
In a related development on Sunday, a South Korean finance official said Seoul hoped to sign a currency swap deal with Beijing next month.
"I think it is in the final stage and I expect something in June," Kim Yong-Duk, vice minister of finance and economy, told Reuters when asked about progress on the deal on the sidelines of the APEC forum.
Eventual asia currency? China has already signed deals with Japan and Thailand and is in talks with the Philippines and Malaysia. Korea has an arrangement with Japan, and has also talked to Thailand, Malaysia and the Philippines.
Kuroda said the value of the arrangements was more than $17 billion, but that more were needed.
"It is important that the bilateral swap arrangements should be of sizeable amount, in order that the existence of such arrangements itself function as a measure for crisis prevention," Kuroda said.
Kuroda said such deals might pave the way for a managed exchange rate regime in which regional currencies were tied to a basket of major currencies but could move within a certain range, Kuroda said.
"If regional financial cooperation is to be further deepened, even establishing an Asian common currency might not be an impossible goal," Kuroda said.
"Actually the introduction of a common currency basket could be the very first step towards this goal."
Europe had shown that major economic and political problems could still be worked out, even if it took decades, Kuroda said.
"The tasks that were regarded as far-fetched and impossible fifty years ago have been achieved in Europe, following a lot of trials and errors in the process. There is no reason to this that it is impossible to achieve the same tasks in East Asia," Kuroda said.
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