Yet, conducting trade transactions using local currencies within the region is another choice that could be implemented to avoid risks that might arise when using a third party currency like the US dollar.
Finance Minister Agus Martowadojo said the 10 ASEAN members + 3 (Japan, China, South Korea) will consider the use of local currencies in making trade transactions among member countries.
"We also discussed efforts to encourage the use of local currencies in trade transactions, namely the local currency in respective country. This would be effective in the trade transactions within ASEAN members or in the trade between ASEAN states and China, Japan and South Korea. We are still discussing this matter," the finance minister said.
As preparations for the realization of this idea, the central banks of ASEAN countries and those of the three partner states are now studying the possibility of implementing a bilateral swap agreement.
"The bilateral swap agreement will be implemented using local currency, for example between Indonesia and Japan, Indonesia and China and Indonesia and South Korea. Ideally, the central banks of these countries should work together and study the possibility of the implementation of a bilateral swap agreement," the minister said.
According to the ASEAN Secretariat`s website, finance ministers from China, Japan, South Korea and ASEAN have several years ago agreed to expand their system of bilateral currency swaps under the Chiang Mai Initiative to a more multilateral system.
The ministers, meeting as the "ASEAN-plus-3" on the sidelines of the Asian Development Bank (ADB) annual meeting in Istanbul, said this would make the Chiang Mai Initiative a "more effective and disciplined framework."
Under the currency swaps, an Asian country hit by a foreign exchange crisis like the one in 1997 could borrow foreign currency -- usually US dollars -- from another country to bolster its reserves until the crisis had passed.
According to Pedro Paez Perez, former minister for economic policy coordination of Ecuador, the formation of regional monetary could increase coordination of monetary policies among states and help prevent currency fluctuations.
"Cooperation of among states in the region could prevent them from unnecessary debts and could develop their own natural resources to increase the working productivity of their people," he said.
He said that Asian countries need to stabilize their regional currencies and set up multilateral loan agency such as the one done by Latin American countries.
"Countries in the South need to do this so that they would no longer depend on the economic system of the Western Countries," he said in Jakarta on Thursday.
In this case, ASEAN needs to stabilize its local currencies for trade transactions, including the utilization of the currency swap facility.
The use of local currencies in trade transactions could minimize risks compared with using a third party currency such as the US dollar. Thus, the plan of ASEAN members to use local currencies is a good breakthrough.
"I think this is a good breakthrough and this needed to be followed up. If we use the third party currency in conducting trade transactions the value can usually change, thus risks can emerge," Finance Minister Agus Martowardojo said.
However, the minister could not yet assure when the local currencies would be realized because it still needed optimal preparations and popularization. "Maybe it is still a long way to go. It would still be discussed at the deputy prime ministerial level in the first place. Yet, if all have the commitment, it could be realized soon," the minister said.
At least this could be implemented before hand, before a single currency is created.
Virtually, ASEAN has a good prospect for a single currency like the euro by the European Union, as the regional association`s trade has been accumulating hundreds of millions of US dollars each year.
Diponegoro University economist Nugroho SBM said that ASEAN remains an important geopolitical and economic power in Asia, and even in the world, and therefore a single currency will strengthen it against pressure from the US dollar for instance.
With ASEAN having a single currency, he said, the strong effect of the US dollar in that part of the world would be sterilized and thus strengthening the monetary position of the ASEAN countries.
"Indeed, it would take a very long time. The European Union alone needed 60 years before agreeing to use the euro as a single currency, bit it would be better to discuss the foundation of an ASEAN single currency from now on," he said.
He said Indonesia, Malaysia, Singapore, Thailand, and the Philippines may serve as a driving power for the formation of a single currency because they have a dominating trade volume among the ASEAN member countries, he said.(*)
A014/HAJM/H-YH)
Reporter: Andi Abdussalam
Editor: Jafar M Sidik
Copyright © ANTARA 2011
