Economists oppose RI currency board
Economists oppose RI currency board
MANILA (AP): Southeast Asian economists believe Indonesian
plans for a currency board and Malaysian proposals for the use of
local currencies in trade will further aggravate the region's
financial crisis, an official said yesterday.
This was the consensus from a meeting in Manila of nearly 40
private and government economists from the Association of
Southeast Asian Nations, Asian Development Bank Institute dean
Jesus Estanislao said.
"The response was overwhelmingly negative. It is believed that
these proposals are inappropriate solutions to the crisis since
they will do more harm than good," Estanislao said.
Indonesia is preparing to establish a currency board to
stabilize its currency, the rupiah. Under a classic currency
board system, a country pledges to exchange each unit of its
currency for a fixed amount of foreign currency.
Estanislao said Indonesia's plan goes against most economists'
prescription of allowing foreign exchange rates to be determined
by market forces. He added that Indonesia does not have
sufficient reserves to defend its currency.
"The contagion effect of the financial crisis in Southeast
Asia stemmed from having stubbornly pegged interest rates at
unrealistic exchange rate levels," he said. "Why would anyone
want to repeat that problem?"
Estanislao said the group of economists who met in Manila on
Wednesday will recommend as an alternative to the currency board
proposal a trade credit facility to be extended by members of
ASEAN to Indonesia.
This proposal, he said, would serve as a short-term solution
to Indonesia's currency crisis since it would allow the country
to conserve its dollar reserves.
"This idea is being floated in the region at the moment.
There's nothing definite, but serious work is being done to
create this (proposal)," Estanislao said.
He believes at least US$25 billion in credit can be extended
to Indonesia by ASEAN and other countries such as Japan, based on
informal discussions among the region's deputy finance officials.
Estanislao said the economists also were not enthusiastic
about Malaysian proposals for trade among ASEAN members to be
conducted in local currencies instead of dollars to conserve
foreign exchange.
He noted that intra-ASEAN trading is marginal compared to
trading between ASEAN members and countries outside the region.
The amount of dollars that would be conserved therefore would not
be great, he said.
He said the economists believe the agreement would only
"further complicate an already complicated trading process"
within ASEAN.
ASEAN groups Brunei, Burma, Indonesia, Laos, the Philippines,
Malaysia, Singapore, Thailand and Vietnam.