KL, Manila to start barter trade agreement

KL, Manila to start barter trade agreement

MANILA (AFP): The Philippines and Malaysia are set to start a modified barter trade agreement in May that would lessen both countries' dependence on the U.S. dollar, central bank governor Gabriel Singson said yesterday.

Singson is due to leave for Kuala Lumpur next month to sign the agreement with his counterpart Ahmad Mohd Don, governor of Malaysia's central Bank Negara.

The agreement, believed to be the first among members of the Association of Southeast Asian Nations (ASEAN) in response to the financial meltdown, is to run for one year and is subject to renewal.

Under the trade pact, both countries agree to a "netting arrangement" in which they are allowed to offset imports with exports with only the balance to be paid in dollars.

Actual settlement is to be made after every two months, Singson said.

If at the end of two months, the Philippines is the net exporter, the Malaysian central bank will settle the balance to seal the transaction, he explained.

"This in effect would reduce the demand for dollars," Singson told reporters.

Other ASEAN members are expected to sign similar agreements, officials have said. ASEAN groups Brunei, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

Hong Kong Shanghai Bank Corp. senior vice president for treasury and capital markets Mark Boyne told reporters however that trade between Manila and Kuala Lumpur was limited and the scheme was not expected to have a large impact on lessening the demand for dollars.

Most of the imports of the two countries and of ASEAN as a whole come from Japan, Europe and the United States, he said.