Common Asian currency still a long way off: Bankers

Andrea Ricci, Reuters, Hong Kong

Asian central bankers attending a conference in Hong Kong hailed efforts toward greater regional monetary cooperation but said a single common currency was still a long way off.

"It took Europe 50 years, how long would it take us?" Philippine central bank Governor Rafael Buenaventura asked delegates to the World Economic Forum.

"We have no common borders...and diversity in economic development. It would also mean giving up political sovereignty, are we prepared to do that?"

In the wake of the 1997-98 Asian financial crisis, central banks in the region have taken a number of steps including instituting various swap agreements to guard against currency instability.

One idea that's been considered is the creation of a single regional currency, perhaps anchored by the yen or dollar or a basket of currencies.

But Hong Kong Monetary Authority Chief Executive Joseph Yam asked: "How can you have monetary union without convergence?

"An Asian Currency Unit could be linked irreversibly through a currency board style system, but this too would be a union without convergence, so may not be an answer," he said.

With the exception of China, which is growing more slowly than in recent years but at a still healthy pace, East Asian countries are facing sharply slower growth this year as export demand from the rest of the world wanes.

But the differences are as stark as the similarities. Hong Kong has a rigid currency board system. Other countries manage their currencies a lot, or hardly at all.

There are also vast differences in the level of economic development, with Singapore, for example, enjoying the per capita income of an advanced economy and others such as Indonesia and the Philippines battling widespread poverty.

"Integration, yes it's possible, but only in the longer term. Hasty action should be avoided," said Masayuki Matsushima, Executive Director at the Bank of Japan.

The central bankers also took a cautious view on the creation of an Asian Monetary Fund.

"It might allow as faster response (to a crisis) but would it just be a duplication of the IMF?" asked Buenaventura.

Liu Tinghuan, vice-governor of the Peoples' Bank of China, said regional cooperation wasn't something that could be done in isolation, but must be considered only in light of the broader trend toward globalization.

"When considering Asian monetary cooperation, we must look at globalization as the basis. Otherwise, cooperation in the region will not be effective," he said.

While hailing the grander regional efforts on preserving monetary stability, Hong Kong's Yam also urged Asia's central bankers to enhance the efficiency of markets to better channel the region's vast savings into investment.

Asia should work harder at supervising banks, regulating equity markets, and especially, developing local debt markets, he said.

Yam also urged the creation of a regional U.S. dollar clearing agency similar to Hong Kong's own real time settlement system to avoid currency risk due to time zone differences.