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NEWS UPDATES 7 August 2010

Asia told to review single currency

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ASIAN countries should look at the Asian currency unit, a single currency, more seriously to improve regional cooperation and development, according to the Asian Development Bank Institute (ADBI).

The creation of a single Asian currency is needed as East Asia is set to be the biggest economic zone in the world by 2020, exceeding North America and the European Union, said Dr. Masahiro Kawai, ADBI dean and chief executive officer.

"We have to start. It is a long-run agenda but the recent global financial crisis has given us some opportunities to do this," he said at the ADBI-Malaysian Institute of Economic Research (MIER) joint dissemination seminar in Kuala Lumpur yesterday.

Kawai said Asian economies should adopt policies that will enable them to respond to the more challenging global economic environment and to achieve balanced and sustainable growth.

The areas identified are improve macroeconomic stability, rebalancing production, enhancing social protection, deepening the financial system and forging regional cooperation, he said.

Macroeconomic stability can be improved by increasing the effectiveness of monetary policy, fiscal policy and management of exchange rates and capital flow, Kawai said.

"Some Asian economies should not go on keeping their exchange rates stable against the U.S. dollar and amassing international reserves. This would be the same recipe that contributed partly to the unsustainable global imbalances," he said.

Kawai said Asian countries need to promote measures to support increased infrastructure investment to create a seamless Asia, including an Asian Infrastructure Investment Fund. "There is also need to encourage development of regional bond markets by reinforcing the Asian Bond Market Initiative and Asian bond funds and supporting the issuance of bonds denominated in Asian currency units," he said.

"Domestic bond market development is to enhance resilience to external shocks, such as volatile capital flows, and make it easier to recycle savings for investment and consumption within the region."

Kawai also said that Asian economies needed to rebalance their production to encourage needed adjustments on the economy's supply side, including rising productivity, especially in the services sector.

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