The 42nd ASEAN Summit was held in Labuan Bajo, Indonesia, on May 10-11, with the leaders of the Association of Southeast Asian Nations (ASEAN) in attendance. The summit was chaired by H.E. Joko Widodo, president of Indonesia, and the members of ASEAN include Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. The leaders adopted the ASEAN Leaders Declaration on Advancing Regional Payment Connectivity and Promoting Local Currency Transaction, which aims to foster bilateral and multilateral payment connectivity arrangements and enable fast, seamless, and more affordable cross-border payments across the region.
The declaration also commits to encouraging the use of local currencies for economic and financial transactions among ASEAN member states. This will deepen regional financial integration and promote the development of the currency market in local currency to strengthen financial stability in the region.
De-Dollarization Movement in ASEAN and BRICS
The ASEAN finance ministers and central bank governors met in Bali, Indonesia at the end of March and agreed to take steps to reinforce the use of local currencies in the region and reduce reliance on the U.S. dollar or other major international currencies for cross-border trade and investment. This move is similar to that of the BRICS nations (Brazil, Russia, India, China, and South Africa) who are working toward a common currency to reduce their reliance on the USD.
Bank of Indonesia Governor, Perry Warjiyo, has announced that Indonesia is following the BRICS’ de-dollarization lead. The success of a BRICS currency could lead to the U.S. dollar losing its reserve currency status, which would hurt U.S. living standards and lead to less power for the U.S. government. A former White House economist has warned that if the BRICS nations used only their common currency for international trade, it would remove an impediment that now thwarts their efforts to escape dollar hegemony. Investment analyst Jon Wolfenbarger also cautions that a successful BRICS currency could result in the U.S. dollar losing its reserve currency status.
In conclusion, the ASEAN Leaders Declaration on Advancing Regional Payment Connectivity and Promoting Local Currency Transaction is a significant step in reducing the reliance on the U.S. dollar and promoting regional financial integration. The de-dollarization movement in ASEAN and BRICS could have far-reaching consequences for the U.S. economy and global financial markets.