Use of ASEAN monies not viable: RP official

Use of ASEAN monies not viable: RP official

MANILA (AP): A proposal to use local currencies instead of U.S. dollars in trading within Southeast Asia is not viable, a Philippine official said Tuesday.

Officials in the Association of Southeast Asian Nations have proposed the scheme as a way to lessen the region's reliance on U.S. dollars and strengthen its economic and financial integration.

Economic Planning Secretary Felipe Medalla said Southeast Asian governments could establish procedures for using regional currencies, but the process would be too cumbersome and would not be viable in the long run.

He said businessmen would prefer dollars because they are easier to convert and not likely to lose value rapidly.

Medalla compared holding a regional currency to owning an expensive painting.

"If you have two months to sell it you're OK, but if you are forced to sell it today because your kid is in the hospital, you're likely to lose a lot," he said.

He said central banks in the region would have to maintain substantial reserves of ASEAN currencies to make trading with those currencies viable. However, doing so would be risky because the currencies could lose their value and result in huge losses.

In the case of the Philippines, the peso can be readily swapped with the dollar because it is traded in large volumes on the foreign exchange market, Medalla said.

A leading Filipino businessman, Jose Concepcion, said recently that the Philippines, Thailand, Indonesia, Malaysia, Singapore and Brunei plan to have a framework ready for bilateral trade payments using local currencies by the end of the second quarter of 1999.

Concepcion, who heads a committee representing ASEAN's chambers of commerce and industry, said the less developed members of ASEAN - Myanmar, Laos and Vietnam - are not expected to participate in the scheme for some time.

Medalla said he was aware the Philippines is supporting the scheme and said he has told other Philippine economic officials that it is not viable.

In a report to ASEAN trade ministers who met recently in Manila, ASEAN secretary-general Rodolfo Severino said the group recognized the initiative isn't a "cure-all" for the continued volatility of regional currencies.

But he said there was good reason to hope the bilateral payments would help, given the magnitude of intra-ASEAN trade, which totaled US$86 billion in 1997.