A Single Monetary Regime in ASEAN: Panacea or False Hope


Muhammad Rasyid Ridho[1] & Wening Setyanti[2]

3rd Winner of Call for Essay: ASEAN Community Post 2015

Basically, there are four pillars under ASEAN economic integration: (1) a single market and production base, (2) a highly competitive economic region, (3) a region of equitable economic development, and (4) a region fully integrated into the global economy. From the four pillars that were realized through the AEC, we see the similarity between it, conducted by ASEAN today with the European single market. The European single market refers to the European Union (EU) as one territory without any internal borders or other regulatory obstacles to the free movement of goods and services and the European single market then make a more progressive agenda of their economic integration, called Economic dan Monetary Union (EMU) with euro as their single currency. The single currency presents undeniable advantages: it lowers the costs of financial transactions, makes travel easier, strengthens the role of Europe at international level, etc.[3] From this explanation, will ASEAN economic integration be more progressive by laying down something like EMU? Does it matter to create a model of monetary union as a form of more progressive economic integration in this region?


Questioning Southeast Asia Monetary Union: Economic Inequality among States

Arguably, ASEAN is not yet ready for economically integrated. Why? Because inequality still exist between ASEAN member countries, especially under the economic sector as a key factor of advancement indicator and stability. For example, we have a model to compare and classify the ASEAN member countries, called its ‘level of wealth’ which are wealthiest, middle, and least wealthy countries. Wealthiest are Singapore, Brunei Darussalam, and Malaysia; Thailand, Philippines, and Indonesia can be categorized as middle; the ‘CLMV’ are middle to least wealthy countries per 1993-2010—we can see the gap on figure 1.[4] Although those gaps started to decrease per year, but the economic problems always emerge annually.


From the chart above, we can see that the gap is still going on and the position between actors still not much changed (nearly same as the first order). So far, there is no significant changes in the nearly three decades (per 2016) and it could be our fundamental evidence to prove our scepticism of ASEAN economic advancement based on its inequality and disparity of economic circumstances. The more progressive economic integration such as monetary union and/or single currency seems impossible to be apply in ASEAN.

Preventing the Possibility of Crisis Reoccurrence

The reason why monetary union cannot be applied in Southeast Asian countries is to avoid any possibilities of crises that caused by converging policy in single currency. Just imagine how destructive the subsequent effects if those countries do that kind of manoeuvre to support several domestic programs. The prominent example is European crisis 2008, when most countries face slowdown and credit freeze. If we put ASEAN in this scenario, then because of the striking differences in economic performance by each member, then crisis will engulf all countries in the region.

To prevent the crisis, then there must be a unified fiscal policy. Unfortunately, to unify it means the respective country ability to control its spending has to be restricted and conferred to a higher authority. By this instance, ASEAN become into a new super-state agency. New problem arise, does every country want to bestow their sovereignty to this new agency for unitary monetary stability sake? Most of ASEAN will resort to a specific norm in ASEAN Way, the non-intervention. Thus, the implementation of monetary union is not going to happen in any extent.

Status Quo in Southeast Asian Monetary Regime

The status quo shows us there is no singular monetary regime in this region. By de facto category, countries like Indonesia, Malaysia, Singapore, and Thailand are utilizing managed floating system; meanwhile Vietnam pegs her currency to US dollar; Philippines uses flexible exchange rate system with independent characteristic; and Myanmar pegs to special drawing rights.[5]

However, there are many attempts to do cooperation in monetary sector and we deem this situation is sufficient enough to support monetary stability regionally. There are four instruments; first, Chiang Mai Initiative Multilateralization (CMIM) is agreement on currency swap between ASEAN+3 central banks. Second, Asian Bond Market Initiative (ABMI), to promote local currency bond market and supported by a specific forum to harmonize regulatory basis.  Third, Credit Guarantee and Investment Facility (CGIF), for helping supplying bonds in local currency. Fourth, ASEAN+3 Macroeconomic Research Office (AMRO) for monitoring macroeconomic trends, evaluating financial sector, and giving policy recommendation for ASEAN+3.[6]

By looking at these points, ASEAN shall reconsider their decision if they are going to establish a single monetary regime, especially by reflecting to EU case. Another aspect that shall take into account is the probability of ASEAN-sceptics’ appearance inside ASEAN, whether they are putting their focus particularly in disagreement over monetary union issue or campaigning ASEAN demise.


Bock, Matthew J. ‘Income Inequality in ASEAN: Perceptions on Regional Stability from Indonesia and the Philippines’ (ASEAN-Canada Working Paper Series no. 1. Singapore: RSIS Centre for Non-Traditional Security (NTS) Studies. 2014).

Ciorciari, John D. “Chiang Mai Initiative Multilateralization: International Politics and Institution-Building in Asia.” Asian Survey 21, no. 5 (2011): 926-952.

Rajan, Ramkishen S. Management of Exchange Rate Regimes in Emerging Asia. ADBI Working Paper. Tokyo: Asian Development Bank Institute. 2011.

Verbeken, Dirk. “History of economic and monetary union,” European Parliament. October, 2016. http://www.europarl.europa.eu/atyourservice/en/displayFtu.html?ftuId=FTU_4.1.1.html (accessed November 1, 2016).

[1] Student of International Relations Department of Social and Political Sciences Faculty, Universitas Gadjah Mada.

[2] Student of International Relations Department of Social and Political Sciences Faculty, Universitas Gadjah Mada.

[3] Dirk Verbeken, “History of economic and monetary union,” European Parliament, October, 2016, http://www.europarl.europa.eu/atyourservice/en/displayFtu.html?ftuId=FTU_4.1.1.html (accessed November 1, 2016)

[4] Matthew J. Bock, ‘Income Inequality in ASEAN: Perceptions on Regional Stability from Indonesia and the Philippines’ (ASEAN-Canada Working Paper Series no. 1, Singapore: RSIS Centre for Non-Traditional Security (NTS) Studies, 2014).

[5] Ramkishen S Rajan, Management of Exchange Rate Regimes in Emerging Asia, ADBI Working Paper, Tokyo: Asian Development Bank Institute, 2011.

[6] John Ciorciari D., “Chiang Mai Initiative Multilateralization: International Politics and Institution-Building in Asia,” Asian Survey 21, no. 5 (2011): 936.