Asia must adopt yen as 'trading currency'

Asia must adopt yen as 'trading currency'

MANILA (Reuters): Asian countries should adopt the yen as a common unit for trading purposes but a single currency for ASEAN was unjustified, incoming World Trade Organization (WTO) chief Supachai Panitchpakdi said on Wednesday.

Speaking to reporters in Manila after attending a business forum, Supachai, Thailand's former deputy prime minister, said there were clear benefits from a common trading currency for the region.

"I think it would help reduce the cost of trade and would help the stability of the currency for trading in Asia."

However, he conceded its adoption would take time.

"I think the process cannot be forced because at the moment with the financial crisis and reform in Japan it might take some more time but I think we are moving in the right direction with the (recent) bilateral swap agreements."

Supachai ruled out the notion of a single currency for ASEAN, the 10-member Association of Southeast Asian nations.

"The size of the region does not justify it," he said.

Earlier he told delegates at the business luncheon that China's impending inclusion in the WTO should give urgency to economic restructuring efforts in East Asia.

He said the move should be viewed as an opportunity rather than as a threat to trade.

"China's entry into the WTO is a blessing...it will give advancement to trade liberalization, advancement of the multilateral trading system.

"But it does give us a sort of wake-up call that we cannot delay the process of injecting more technology into our industries, delay human resource development or export promotion activities."

He said when China joined the global trading body it would probably get around 80 percent of all foreign direct investments into the region and ASEAN's current share of 16 percent was likely to be halved.

To ensure the area continued to get its slice of the investment pie, countries in the ASEAN Free Trade Area (AFTA) would have to become more integrated and "engage with China as soon as possible in a closer economic arrangement".

In addition, AFTA should consider the inclusion of India in its economic zone.

On Asia's economic prospects for this year, Supachai said the slowing global economy meant "we have to brace ourselves for a little more indigestion and for more (trade) differences on the horizon".

With most East Asian countries adjusting their full-year growth forecasts downward, the region "would be lucky to grow one to two percent" this year.

He also said the current cyclical downturn in the information technology sector would "remain with us until at least the middle of next year".

The slow growth for the region meant trade disputes, such as those between Japan and China, became harder to resolve, Supachai said.

Countries pursuing bilateral trade deals, such as Singapore, and others like Malaysia, which has sought a tariff reduction exemption for its auto industry, "gives some doubt to AFTA's prospects".

However, he said ASEAN should be active in launching a new round of the WTO.

"I want regionalism to be the building block of a multilateral trading regime," he said.

Going into the next WTO round, Supachai said he hoped to address a range of issues including access for labor intensive products, implementation questions, and the world pharmaceutical patenting system among others.