Kuala lumpur: Greater economic integration among the members of the Association of Southeast Asian Nations (ASEAN) is accelerating efforts to build an independent and resilient regional financial system, aimed at reducing reliance on external currencies and enhancing monetary stability across Southeast Asia, according to a Malaysian analyst.
According to Namibia Press Agency, these moves are not meant to target any specific country but rather reflect a desire to move away from external financial volatility and facilitate transactions using local currencies for intra-ASEAN trade. This approach will enable seamless cross-border transactions, provide greater market access for micro, small, and medium enterprises (MSMEs), and boost regional tourism, explained Lee Pei May, a political expert at the International Islamic University Malaysia, in a recent interview with Xinhua.
"The push for the use of local currencies has been ongoing for some time, as it helps strengthen the economic integration of ASEAN member states-an important goal that ASEAN seeks to pursue. In fact, other regions are also moving away from relying too heavily on a single foreign currency, such as the U.S. dollar, as external interest rates and shifting government policies may cause significant volatility in currency exchange," Lee stated, emphasizing that volatility is undesirable in any business.
Lee further elaborated that enabling cross-border settlements in local currencies would be faster and cheaper. She highlighted the tourism sector as a significant beneficiary, noting that tourists in the region will not need to exchange physical money when visiting other ASEAN states.
"The Regional Payment Connectivity (RPC) initiative was first established to strengthen payment connectivity among the five ASEAN members, notably Malaysia, Thailand, Singapore, Indonesia, and the Philippines. To date, the initiative has expanded to include central banks of Vietnam, Laos, Brunei, and Cambodia," Lee said, stressing the benefits of seamless cross-border transactions and boosted tourism under the local currency settlement framework.
Lee also noted that the ASEAN push for local currencies and reduced dependency on external monetary systems has gained momentum amid growing awareness of the risks posed by relying on the U.S. dollar. She pointed out that the perception of certain currencies as stable is shifting due to increasingly unpredictable global developments.
"In the past, certain currencies were viewed as stable, but due to increasingly unpredictable global developments, this perception is shifting," Lee remarked, adding that economic tools used to exert pressure on policy differences could have negative implications. "Such risks, even if unlikely, remind us why building regional financial resilience is critical," she concluded.