The Southeast Asian economic community strives to maintain each member country's export competitiveness. However, economists said a common currency or the formation of a monetary union for the Association of Southeast Asian Nations would likely take time.
"[The] common ASEAN currency [is] still far [from reality], as this would require unification of economies and financial markets, as well as rules/regulations," Rizal Commercial Banking Corp. Michael Ricafort told Daily Tribune.
"The Euro since [the] year 2000 is a good example/precedence," Ricafort added.
Although the introduction of Euro banknotes and coins didn't happen until the 2000s, planning and preparations started in the early 1990s through the Maastricht Treaty, which also established the European Union.
Much like the Euro of the European Union, a single currency was meant to "shield" the block from foreign exchange fluctuations.
A discussion about the adoption of a common currency is gradually taking shape, particularly in the wake of the Asian financial crisis. After the Euro, the single currency for Europe became a reality.
Adopting easier than maintaining it
The Asian Development Bank also noted that ASEAN may still be a long way from establishing a unified currency. In particular, the regional financial institution listed several things currently impeding the adoption of a common currency in the region.
These include the disparity in economic development levels between nations, flaws in many countries' financial systems, the need for "resource pooling mechanisms," and the necessary institutions for a currency union. The large diversity of economic development adds to the problem, ADB said.
The wide diversity of economic development increases the intricacy.
The most developed nation, Singapore, has a per capita GDP about 60 times greater than Myanmar's, with Vietnam, Indonesia, and Malaysia having the best performance rates among the Asean nations.
"Even among the ASEAN–5 (Indonesia, Malaysia, Philippines, Singapore, and Thailand), the per capita income of Singapore is about 40 times the per capita income of Indonesia. This degree of diversity is higher than among the countries of the EU," ADB wrote.
A unified currency requires strong financial infrastructure, markets, and institutional backing. Such institutions are present in only some ASEAN nations, despite the recent emergence of dangers to the financial sector.
The governments' sovereignty and autonomy are further limited by the inability to influence their countries' monetary and fiscal policies. But then, not all ASEAN members are immediately ready for this.
However, establishing a digital currency to improve payment efficiency might resolve the said problems.
Digital currencies and other advancements in payment systems may speed up and lower the cost of domestic and international transactions, ultimately allowing more low-income and rural families access to the financial system.
