In These New Times

A new paradigm for a post-imperial world

Thailand calls for greater Asian cooperation and new trading currency

Posted by seumasach on October 30, 2010

The Nation

30th October, 2010

Prasarn sees the scope for such cooperation, paved by existing frameworks like the Chiang Mai Initiative, and this could lead Asia into a new landscape in the next 10-20 years. The picture includes a new trade currency and a currency to store the value of assets, aside from the greenback.

 

“This requires the power and cooperation from a largesized economy that must act as the leader and show its prowess,” the governor said at a press conference yesterday.

 

Currency woes are part of the agenda to be discussed by Aseanleaders in Hanoi this weekend. Volatility tends to rise in line with monetary easing in major economies like the US and Japan, which are witnessing fragile recoveries. Several Asian countries, including South Korea, also urged nations to act unilaterally to control capital flows, despite the Group of 20’s broad rules on averting currency and trade rows.

 

The International Monetary Fund also considers the greenback “overvalued”, which indicates further weakening. In a note to finance officials, it also said decisions by China and some other Asian emerging economies to limit currency appreciation is contributing to “significant exchangerate misalignments” and to tensions across the G20.

 

“A noncooperative policy scenario involving firm resistance to currency appreciation in emerging surplus economies and the lack of expeditious repair and reform of the financial sector in major advanced economies, could be damaging,” the IMF said.

 

Prasarn highlighted external uncertainties as one of two main challenges facing the Thai economy, aside from political conditions. But he insisted that the central bank can somewhat handle the situation, and at present there are no signs of bubbles in the Thai economy as a result of the massive inflows.

 

While all parties are urged to raise competitiveness through valueadded products as “the Thai economy can no longer rely on labour or the cheap baht”, he commended the many businesses that have diversified markets, bought hedging contracts and improved the quality of products and services as an adjustment.

 

Policy flexibility will be the key to handle the shortterm volatility. New strategies will be plotted for longterm stability, including the way to manage foreign reserves, which could be denominated more in nondollar currencies, Prasarn said.

 

Opposing suggestions that reserves be channelled to finance megaprojects, he said the possible side effects should be thoroughly considered, as one day Thailand may experience outflows. He also insisted that the BOT would continue with rate normalisation.

 

He defended the BOT policy framework – focusing on inflation targeting and a managed float foreign exchange regime – as appropriate and providing ample flexibility to minimise the negative impacts from uncertainties. He acknowledged that some could fall victims to the changes.

 

“All will not always get what they want. As we need to safeguard the mutual benefit, it’s difficult for some groups to avoid the impact, especially when shortterm adjustments are in the process. Yet the ability to adjust will prove the strength in achieving the goal in the long term,” he said.

 

He also vowed that during his fiveyear term, the BOT would adopt a proactive role and work closely with public and private organisations for stable and sustainable growth. He also promised to further promote the financial market, for a wider range of products in response to business demand and better access to funding for all parties.

 

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