A Feasibility Study On ASEAN Common Currency

This study aims to examine the feasibility of forming a common currency in ASEAN-5countries (Indonesia, Malaysia, Philippines, Singapore and Thailand), to explore the development of ASEAN economic and financial integration, and relevant issues.The study found that1) ASEAN-5countries economic conditions (convergence and symmetry) demonstrate feasibility evidence for a common currency area, by considering on some preconditions of OCA:symmetry of shocks; Maastricht’s convergence criteria; financial integration index; business cycle synchronization; and intra-regional trade. Although OCA theory is very important for analyzing the establishment of a common currency, but a series of criteria still cannot clarify accurate answer whether the country should join a common currency area or not. To achieve a monetary union needs not only economic criteria, but also political and socio-cultural conditions. At present, ASEAN still has no strong regional political commitment, lacking regional anchor country and regional institution to succeed a common currency. It will further suggest establishing an ASEAN Currency Unit as regional anchor currency; and adopting Multilateral Monetary Union model to create a sub-regional monetary area first and follows by adopting a Single Currency model later.2) For many years, ASEAN has made some significantly progress in economic and monetary cooperation, and always pursue for more deepening in their integration. The recent step of economic integration by launching AEC in2015also shows that ASEAN still being on the path towards monetary integration, so in future ASEAN may be possible to adopt a common currency area scheme as EU did.3) ASEAN may not now be ready for OCA. It may be a long run and no large step for ASEAN to achieve the idea on common currency. Consequently, there still have so many arrangements that ASEAN should be prepared prior to adopting a common currency. ASEAN has to continuously strengthen and deepen their economic and political foundation; develop effective supranational institute (such as, regional commission, regional central bank, regional surveillance unit, and fostering unit on regional currency); develop and strengthen regional financial and capital market; enhance free trade agreement and deepen regional economic integration; harmonize regional policies and regulations; and reduce the disparities on economic, political and socio-cultural among the countries. And when the time comes, it is hopefully that ASEAN may be possible to adopt and will be enjoy the advantages of a common currency.