Asia is deepening economic integration to complement closer trade links, but the region looks set to take a different road than Europe and a common currency remains far off, officials and experts said yesterday.
"The approach to financial integration in Asia ... will take a different path from what we have seen in other parts of the world, in particular in Europe," Malaysian central bank Governor Zeti Akhtar Aziz said.
"Given that our region is more heterogeneous in nature, it has different aspirations and different starting points in this integration process," she told a seminar on the sidelines of the IMF-World Bank meetings in Singapore.
In Europe, economic and monetary integration has been accompanied by political integration but experts say this looks less likely in East Asia due to regional frictions, notably between Japan and China.
Financial integration will allow Asia to channel its massive savings around the region for economic development, the panelists said.
It will also complement growing free trade ties bolstered by the rise of China and India, and Japan's recovery, but is unlikely to result in a regional currency area any time soon, they added.
Barry Eichengreen, professor of economics and political science at the University of California, said that Asia could take a step toward monetary union with a regional currency unit based on a basket of currencies.
This unit could be given legal tender status until such time that the transition to a single currency was completed, he said.
The Asian Development Bank has been spearheading a proposal for the creation of an Asian currency unit or ACU, which would initially be an index rather than a real currency, to try to bolster monetary stability and economic growth.
"Importantly, and for me this is the key point, there is no reason why the currencies in this basket cannot continue to fluctuate against one another," Eichengreen said.
Thailand central bank governor Pridiyathorn Devakula said however he did not expect to see a sole Asian currency within his lifetime.
Japan's vice minister for international finance, Hiroshi Watanabe, agreed it would take a long time but said the result could be a sturdy currency.
"If in the long term -- I'm not sure how long it takes -- there is one Asian currency and it is backed by good economic performance in Asia, in that case such a currency will have a good position in the world market," he said.
He said that while Asia was more heterogenous than Europe, the gaps were narrowing because of globalization.
"Some countries have differences but ... we are going to move on and such kind of heterogeneity becomes smaller and smaller," Watanabe said.
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