Taiwan's central bank governor Perng Fai-nan (彭淮南) called on his Asian counterparts to work toward establishing a body that would stabilize exchange rates in the region.
In a speech delivered at the 38th Annual Meeting of the Asian Development Bank in Istanbul, Turkey on Thursday, Perng called on other Asian central bank heads to "set up a formal regional exchange-rate coordination mechanism through which stable currency relationships can be established."
Perng's remarks were noteworthy because regional currencies have surged against the US dollar beginning from the fourth quarter of last year, due to large short-term capital inflows. Therefore, "Exchange rates become more volatile than can be explained by fundamentals, destabilizing the economies," he said.
"To deal with excessive volatility, a number of Asian countries formed the Asian Bellagio Group. I suggest that we push this idea further and set up a formal regional exchange-rate coordination mechanism through which stable currency relationships can be established," he said.
The Asian Bellagio Group -- made up of officials from Japan, China, South Korea and the Association of South East Asian Nations members -- met in Bangkok in February to discuss the US dollar's slide.
"An effective exchange rate coordination mechanism not only contributes to regional economic stability but also further promotes trade and investment by bringing down transaction costs and uncertainties associated with exchange rate fluctuations," he said.
In the past year, the Korean won has gained 17 percent against the US dollar, the NT dollar has strengthened 6.8 percent and the Japanese yen has risen 4.2 percent. Those gains erode the value of these countries' overseas sales, causing exporters' earnings to slump and damping economic growth.
Perng said in the speech that he believed Asian countries should engage in broader and more frequent formal policy dialogues and information exchange. "Most importantly, regional cooperation should be more inclusive. Countries with economic strength and adequate financial resources should be allowed to participate in the process," he said.
Therefore, he suggested the ADB actively establish itself as the platform for regional economic integration. Through this platform, member countries will be able to engage in more extensive cooperative relationships among one another, he said.
In his speech, Perng also briefed his Asian counterparts about the economic development of Taiwan.
For last year, Taiwan's GDP increased 5.71 percent and its consumer prices rose 1.62 percent. The nation's unemployment dropped to 4.15 percent this March from its peak at 5.35 percent in August 2002, he said.
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