ASEAN: Common Currency Essay Pros & Cons.

Background on ASEAN Countries

Question:

Should ASEAN Countries adopt a Common Currency like Euro? Why do you think so?

This report reflects the key understanding on the common Currency for ASEAN countries and whether ASEAN countries should be inclined towards adopting this common currency or not. With the ramified changes and economic growth of the international countries, ASEAN countries have faced various problems and economic destruction throughout the time. However, this report, has also reflected the issue which European countries have faced due to sluggish economic conditions of EU members and downfall of Euro currency throughout the time. There are several pros and cons of adopting the common currency which must be taken into consideration before considering whether there should be Common Currency for ASEAN countries or not. In this report, the impact of EURO crises and its impact on the other EU members and benefits arise from adopting same currency has been taken into consideration.

There are several countries that have fallen under the ASEAN countries regional block named such asThailand, Vietnam, Indonesia, Malaysia, Philippines, Singapore, Myanmar (Burma), Cambodia, Laos, Brunei [1]

The association of Southeast Asian Nations is the regional intergovernmental organization comprising with the ten Southeast Asian States which promotes all the facilities and economic growth of these countries

After evaluating various factors and issues of the regional blocks that have adopted Common Currency for the betterment of their economic growth, it is considered that European countries have shown a good example for considering Common Currency for ASEAN countries. It is evaluated that all the EU members have been facing various issues and problems due to sluggish market conditions of one country members. Demonetization and decline of currency value due to the negative factor of one country member of EU has drastically affected the economic growth of other country member. One of the real problems that have been considered in Europe due to Common Currency adoption is related to divergence[2] This has shown that in EU regional blocks weaker countries Luxemburg Belgium have faced the drastic loss and has got weaker. On the other hand, strong economy of other country member of EU like Germany, Switzerland, Finland have stronger than others. This level of divergence is the most impacting factors for adopting Common Currency for ASEAN countries. Moreover, common currency for ASEAN countries also depends upon the internal and external factors of these ASEAN countries such as international policies, double taxation avoidance agreement, economic growth, GDP, national income and international trade associated with these countries [3]

Lessons Learned from the European Union Experience

With the ramified changes of the capital market growth and other internal and external factors of these ASEAN countries, it is observed that stock market fluctuation and growth of the one economy is completely depends upon the import and export of the country [4] For instance, if the import and export of one country is reduce by a particular percentage then the impact of that decline in international trade will be seen by observing the downfall in the stock market. It is considered that growth of the economy of particular country is based on the positive balance of trade. For instance, in Switzerland, it has increased its positive balance of trade by 20% as compared to last five years data. In addition to this, Germany has also increased its overall economic growth and efficiency of business by 22% throughout the time. It has shown that if balance of trade is positive then it will not only increase the GDP of that country but also increase the currency value of that country on international level. On the other hand, adoption of Common Currency for ASEAN countries will diminish these level of interlink between all of these factors. For instance, if all of these countries such as ASEAN countries regional block named such as Thailand, Vietnam, Indonesia, Malaysia, Philippines, Singapore, Myanmar (Burma), Cambodia, Laos, Brunei would go for adoption of Common Currency for ASEAN countries then these countries will be highly impacted by the international trade among their own regional blocks and will create divergence in their own economy. It will result to weaker countries of ASEAN group will become weaker and after that stronger economy such as Singapore and Thailand will become stronger. This level of mismanagement in these member countries will destruct the value of the regional blocks and will result to widespread difference in economic value.

There are several positive and negative factors such as convergence, divergence, prosperity and growth of these countries [5]However, with the change in economic factors and increased international trade, if ASEAN countries adopt Common Currency for ASEAN members then it will destruct the value of currency of these countries on international level. These countries will have to go through the denomination process which will surely reduce the level of international trade and international policies created such as double taxation avoidance agreement, zero tariffs and trait policies and other agreements. Another issue is related to the one of the renowned example Grease economic disaster which has affected the other EU member and denomination of euro on international level. This has shown the clear example whether ASEAN countries should go for adoption of common currency for all of these ASEAN members[6]

Factors to Consider for Common Currency Adoption

The main problem which ASEAN countries will face is related to sustaining the common currency for these ASEAN members on long run. Sustaining the common currency may be even more difficult for these countries than adopting it. However, there are main four constraints which will be surely faced by these countries such as diversity in level of economic growth, weakness in financial market, reduction of the value of the currency and lack of political understanding and corporation on monetary outcomes and common currency value. For instance, most of the import and export of these countries is done between them. If these countries will have common currency value on their particular national level then on the international level, value of these currencies will be reduced. Foreign exchange currency is the main factors to create value on the currency amount. If these ASEAN countries will have common currency then they will end up by having no foreign exchange currency and they will end up by paying more money for importing required amount of goods and services[7]

It is considered that issue of cost and benefits while adopting common currency for all of these ASEAN members should be gauged through the global perspective. However, the main benefit of adopting common currency for all of these ASEAN members is related to balance economic trade and zero tariff rates among all of these countries. This level of policies and plan will increase the GDP and international trade rate among these countries. On the other hand, the main cost which all of these countries would be facing is related to divergence due to denomination of currency value on the international level. If ASEAN countries fail to collect foreign funds then it will not only reduce the currency value on international level but also increase the cost of international trade. This level of business and policies and understanding on the cost associated with the ASEAN countries could be observed by evaluating the US international policies and currency value [8]

In ASEAN summit, it was suggested in 2011 that one day one day ASIAN countries could might even take over the role of US dollar and Euro value on the international market. It is considered that portents of ASIAN monetary integration points to growth in the international trade as pre-condition for the future financial growth and integration of these countries [9] However adoption of common currency for all of these ASEAN members will also increase the efficiency of these members’ country value and fiscal policies. For instance, fiscal policies of these countries will showcase the common economic growth and efficient international market growth of these countries. The EURO problems and downfall of their international growth is also the prominent factor to consider whether adoption of common currency for all of these ASEAN members should be done or not. Nonetheless, ASEAN countries could take chance for adopting common currency but for that it has to reform new polices and measures to make betterment in their international trade and value growth of their ASEAN currency[10] Secondly, adoption of common currency for all of these ASEAN members will also be more defensive rather than offensive on international level. However, EURO financial crises and down fall of international trade has triggered the international integration of these ASEAN countries to create shield against all the negative factors and international reforms in determined approach[11]

Costs and Benefits of Common Currency Adoption

The EURO financial crises have shown that common currency adoption will create stronger shield against sluggish international market condition and negative economic growth.

It may result to increased divergence between all of these countries and create differences between for all of these members that will destruct the international trade.

Adoption of common currency for all of these ASEAN members will strengthen the policies and measure of fiscal and international trade agreements[12]

However, ASEAN countries should be more inclined towards adopting economic integration than looking for adoption of common currency for all of these ASEAN members. [13]

After evaluating the US economic policies and EURO crises, it is considered that ASEAN countries should be more inclined towards adopting economic integration than looking for adoption of common currency for all of these ASEAN members. This level of international fiscal policies and governance integration will enhance the positive balance of trade and reduce the import and export tariff and traits in all of these countries. In addition to this, it will also help ASEAN countries to create shield against international financial crises at large.

Conclusion

After evaluating and considering all of these factors and international policies, it is observed that if ASEAN countries could integrate economic policies and common governance policies then it increase the overall economic growth of these countries. The main important outcomes of taking all of these countries for the economic integration will be related to creating shield against all the financial crises and negative outcomes of international policies. If ASEAN countries are looking for adoption of common currency for all of these ASEAN members then it will result to several negative outcomes and will result to demonitisation of these country money values on international level. It is considered that value of the money of particular country is completely based on the foreign exchange rate and funds reserved by these countries. If these countries will indulged in adoption of common currency for all of these ASEAN members then other countries may protest against these countries by not entering into international transactions or creating international barrios for these countries international economic growth.

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Potential Impact on Economic Growth and International Trade

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