HYDERABAD, India, 7 May 2006 — The Asian Development Bank will launch its own Asian currency units (ACUs) as planned despite a move by 13 countries in the region to set up currency units of their own, a senior ADB official said yesterday.
Finance ministers from the 10-nation Association of Southeast Asian Nations plus China, Japan and South Korea (ASEAN+3) agreed this week to look into developing new currency units, and the ADB said it would work closely with them on their project.
While any move to European-style financial integration is a long way off, officials say the ASEAN+3 decision to examine the idea reflected their eagerness to take back the initiative from the ADB, where a similar study is under way.
The ADB’s study has stalled because some countries are skeptical that the development bank is the right forum in which to explore the concept. But Masahiro Kawai, head of the ADB’s office of regional economic integration, said it would continue its work and launch the units at the appropriate time. “There is no change in our basic stance,” Kawai told Reuters on the sidelines of the ADB’s annual meeting in Hyderabad, India. “We will continue to work on technical aspects while coordinating with the ASEAN+3,” he said, though he added the ADB may need to wait and see what emerged from ASEAN+3 discussions.
ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. Kawai has been the driving force behind the concept of ACUs, which would be made up of a basket of regional currencies.
The bank’s ACUs would be used to analyze how participating currencies as a whole are moving against the dollar or euro and how each currency in the basket is moving compared with the average level of participating currencies.
Kawai stressed the units would not be traded and would merely be indicators of the stability of participating currencies.
The ADB has been calling for greater flexibility in Asian currencies amid growing concerns that global imbalances could prompt a disorderly decline in the US dollar. It believes that indicators such as ACUs could help Asian nations monitor their currency movements better. Kawai, a special adviser to ADB President Haruhiko Kuroda, said the bank would fully support the ASEAN+3 process, and said it was significant that the 13 finance ministers decided to explore the currency unit idea. “The ASEAN+3 group endorsed the importance of studying the ACUs and it is one step forward for their process,” Kawai said.
Asian nations are making gradual but solid progress in financial cooperation, but officials in the region are well aware that a home-grown monetary fund or a European-style common currency is decades away, at best.
Meanwhile, India’s Infrastructure Development and Finance Co. Ltd. sees a good year ahead as the government aims to boost growth by improving the country’s roads and power supply, its managing director said yesterday.
Foreign firms commonly cite poor infrastructure as the biggest challenge to doing business in India, Asia’s third-largest economy, which attracted only an eighth of the $60 billion in foreign direct investment that poured into China last year.