ASEAN+3 finance ministers agreed yesterday to take over the ADB’s controversial plan to launch an Asian Currency Unit or ACU and to subject it to detailed scrutiny. The ministers also pledged to consider the possible “multilateralization” of the regional network of currency swaps known as the Chiang Mai Initiative.
Head of the ADB’s office for regional economic integration Masahiro Kawai said he welcomed the ASEAN+3 initiative on the ACU and pledged full support and cooperation in the ministerial study. But sources told Emerging Markets that the effective takeover of the plan by the ministers leaves the ADB in the dark about whether to launch its own version of an ACU.
The plan for an index of regional currencies drew fire from the US which interpreted it as a first step toward an Asian common currency that could threaten the dollar. There was also disagreement among Asian countries about what currencies should be included in the index. By taking over the study, ASEAN+3 will be able to make the necessary “political” decisions, Japan vice finance minister for international affairs Hiroshi Watanabe told Emerging Markets.
On the Chiang Mai Initiative, the ASEAN+3 ministers agreed on “collective decision- making procedures” for administering the $75 billion of swaps that are designed to support countries facing a short-term liquidity crisis. They also resolved to bolster economic surveillance among member countries of the ASEAN+3, which will be needed in conjunction with the CMI.
The next step, known as “post-CMI” will review “multilateralization” of the initiative which Korean finance minister, Han Duck Soo, described as a “more advanced form of collective decision-making” and how and when to activate currency swaps. But he stressed that this would be done “in conjunction” with the IMF in what appeared to be an assurance that the CMI would not evolve into an Asian Monetary Fund of the kind proposed by Japan in 1997 and which was seen as a competitive institution to the IMF.
The ministers urged IMF managing director Rodrigo de Rato to come up with concrete proposals to boost Asia’s say in the Fund by the time of the IMF annual meeting in Singapore in September, they said.
The ministers said that Asia’s economic growth momentum remains strong, but stressed that “there are a number of potential downside risks such as persistently high oil prices, widening global imbalances, upward trends in global interest rates and the potentially adverse effect of avian flu pandemics.”