ASEAN Common Currency: Economic Factors and Feasibility Report

This report provides a comprehensive analysis of the potential adoption of a common currency by ASEAN countries. It examines the economic factors influencing such a decision, including the experiences of the Eurozone and the impact of changing market policies and capital markets. The report delves into the factors affecting adoption, the potential benefits such as increased trade and economic integration, and the constraints, including diverse economic growth levels and political considerations. It also considers the global perspective, weighing the costs and benefits of a common currency in the context of international trade and financial stability. The report concludes by suggesting that ASEAN countries should prioritize economic integration over immediate currency adoption to mitigate risks and maximize economic benefits. The analysis considers factors like international policies, GDP, national income and international trade associated with these countries.

RUNNING HEAD: Common Currency for ASEAN countries
1
Name of the student-
Topic- Common Currency for Asian countries
University Name-

Common Currency for ASEAN countries
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Table of Contents
Introduction..................................................................................................................3
Members of ASEAN countries.................................................................................3
Factors that affect the adoption of common currency for ASEAN countries................4
Impact of changing market policies and capital market of one country on other
countries............................................................................................................................... 4
Achieving the object of two principles goal after adoption of Common Currency for
ASEAN countries.....................................................................................................................5
Constraints on the adoption of common currency for all of these ASEAN members...6
Globally perspective for adopting common currency for all of these ASEAN members
................................................................................................................................................. 7
Positive factor while adopting common currency for ASIANE country.......................7
Other associated factors for adoption of common currency for all of these ASEAN
members.................................................................................................................................. 8
Considering factors.......................................................................................................8
Conclusion....................................................................................................................9
References.................................................................................................................. 10

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Introduction
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.
Members of ASEAN countries
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
1 Cabanac, Michel. "Pleasure: the common currency." Journal of theoretical Biology 155, no.
2 (2012): 173-200.
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Common Currency for ASEAN countries
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Factors that affect the adoption of common currency for ASEAN 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
divergence2 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
2 Chow, Hwee Kwan, and Yoonbai Kim. "A common currency peg in East Asia?
Perspectives from Western Europe." Journal of Macroeconomics 25, no. 3 (2003): 331-350.
3 Aziz, Jahangir, Francesco Caramazza, and Ranil Salgado. "Currency crises: in search of
common elements." (2000).

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Impact of changing market policies and capital market of one country on other
countries
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
4 Thao, Ngo Nhat Ha Ly Thu. "A cluster-based approach for identifying ASEAN 5+ 3
Possibility of forming a common currency." (2014).

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countries will destruct the value of the regional blocks and will result to widespread
difference in economic value.
Achieving the object of two principles goal after adoption of Common Currency for
ASEAN countries
There are several positive and negative factors such as convergence, divergence,
prosperity and growth of these countries 5However, 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 members6
5 Mink, Mark. "Measuring stock market contagion: Local or common currency
returns?." Emerging Markets Review 22 (2015): 18-24.
6 Madhur, Srinivasa. "12. Costs and benefits of a common currency for the ASEAN." East
Asia's Monetary Future: Integration in the Global Economy (2004): 231.

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Constraints on the adoption of common currency for all of these ASEAN
members
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 services7
Globally perspective for adopting common currency for all of these ASEAN
members
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
7 Eichengreen, Barry, and Tamim Bayoumi. "Is Asia an optimum currency area? Can it
become one? Regional, global and historical perspectives on Asian monetary
relations." Center for International and Development Economics Research (1996).

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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
Positive factor while adopting common currency for ASIANE country
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
8 Do, Hung Quang, M. Ishaq Bhatti, and László Konya. "On ASEAN capital market and
industry integration: a review." Corporate Ownership and Control Journal 2, no. 1 (2016): 8-
23.
9 Dent, Christopher M. East Asian Regionalism. Routledge, 2016.

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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 currency10 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 approach11
Other associated factors for adoption of common currency for
all of these ASEAN members.
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 agreements12
10 Biondi, S. I. M. A. "Can the ASEAN Regional Integration Lead to A Single Currency in
Southeast Asia?." WANUA: Jurnal Hubungan Internasional 1, no. 2 (2016).
11 Chao, Roger Y. "Pathways to an East Asian Higher Education Area: a comparative analysis
of East Asian and European regionalization processes." Higher Education 68, no. 4 (2014):
559-575.
12 Alvarado, Sylvia. "Analysis of the optimum currency area for ASEAN and
ASEAN+ 3." Journal of US-China Public Administration 11, no. 12 (2014): 995-1004

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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
Considering factors
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
13 Acharya, Amitav. Constructing a security community in Southeast Asia: ASEAN
and the problem of regional order. Routledge, 2014

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countries by not entering into international transactions or creating international barrios for
these countries international economic growth i