Boosting trade and investment in Asia should take priority over currency integration plans among Asean members, the group’s secretary-general Ong Keng Yong said this weekend.
“We do not need to have a rigid currency arrangement for integration,” Ong said as Asean finance ministers gathered in Kyoto to discuss currency union.
The official warned ministers that trade discussions in the region must be “compartmentalized” from other issues, in order to minimize obstacles to integration. “Political questions should not deter us from working together on trade,” he said.
This stance was strongly reinforced by IMF deputy managing director Takatoshi Kato, who sounded a warning on the readiness of Asean states to engage in closer currency integration.
Kato contrasted Asean with the EU, where currency union evolved only after 40 years of free trade. “Compared with those of the EU, the Asean economies are at such different stages of development that a currency union would be unwise at this stage, and could cause problems with real exchange rates and stability,” he told the ADB assembly.
He also questioned the political will behind the ACU initiative, pointing to the differences with the EU’s more institutional and legal approach to integration. “An exchange rate band cannot occur until the members states are convinced that it is in their interests.”
Ong told Emerging Markets that the Asean Secretariat is not yet equipped to manage increasingly ambitious plans for financial integration. “We do not want to reinvent the wheel here. It may be better to second specialists from think tanks and such like [to work on the proposals],” he said. Ong also spoke of using the ADB itself to model technical initiatives within Asean.
On the question of Asean’s external trading ties, Ong acknowledged that progress toward closer cooperation with the US was slow. He told delegates that “we are trying our best to have the US included in our framework of trade discussions, but due to one reason or another, this is not so easy.”
Ong said he did not believe that US president George Bush’s upcoming attendance at the Asean summit in Singapore would necessarily represent a “turning point” ushering in closer relations with the group, due to many other competing demands on US foreign policymaking.
“But it should provide impetus for our discussions with the US at an official level,” he concluded.