ASEAN to Encourage the Use of Local Currencies for Trade and Commerce

ASEAN to Encourage the Use of Local Currencies for Trade and Commerce

The leaders of ten Southeast Asian nations and members of the Association of Southeast Asian Nations (ASEAN) have agreed to "encourage the use of local currencies for economic and financial transactions." The group comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. The move is intended to reduce dependence on the US dollar.

Calls for De-Dollarization Gather Momentum

The leaders of the Association of Southeast Asian Nations (ASEAN) gathered in Labuan Bajo, Indonesia, for the 42nd ASEAN Summit on May 10–11 under the chairmanship of the Republic of Indonesia. ASEAN members comprise Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. His Excellency Joko Widodo, the President of Indonesia, chaired the summit.

"We adopted the ASEAN Leaders Declaration on Advancing Regional Payment Connectivity and Promoting Local Currency Transactions to foster bilateral and multilateral payment connectivity arrangements to strengthen economic integration by enabling fast, seamless, and more affordable cross-border payments across the region," states an official declaration released by the chairman after the summit.

The declaration further adds:

"We commit to encouraging the use of local currencies for economic and financial transactions among ASEAN member states to deepen regional financial integration and promote the development of currency markets in local currencies to strengthen financial stability in the region."

The ASEAN finance ministers and central bank governors met in Bali, Indonesia, at the end of March and agreed to take steps to strengthen the use of local currencies in the region and reduce dependence on the US dollar or other major international currencies for cross-border trade and investment.

ASEAN to Follow the BRICS De-Dollarization Lead

Bank of Indonesia Governor Perry Warjiyo said in April that Indonesia is following the BRICS’ de-dollarization lead. The BRICS nations (Brazil, Russia, India, China, and South Africa) are working on a common currency to reduce their dependence on the US dollar. BRICS leaders are set to discuss the common currency at the upcoming leaders’ summit scheduled for August 22 in Johannesburg, South Africa.

The challenge to the dominance of the US dollar is a topic for debate on multiple forums among leading economists and financial analysts. A former White House economist has warned that if the BRICS nations used only their common currency for international trade, "they would remove an impediment that now thwarts their efforts to escape the dollar hegemony." Investment analyst Jon Wolfenbarger cautioned that a successful BRICS currency could end the US dollar's status as a reserve currency, impact US living standards, and curtail the power of the US government.

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