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Kuala Lumpur, Malaysia – In a significant move towards greater financial independence and stability within the Association of Southeast Asian Nations (Asean), the regional bloc is actively promoting the use of local currencies in trade. This initiative, spearheaded by Prime Minister Anwar Ibrahim, aims to lessen dependence on the US dollar and mitigate the risks associated with unilateral financial dominance.

Speaking today, Prime Minister Anwar Ibrahim highlighted the practical steps Asean is taking to foster a more resilient and self-reliant financial system. The increasing adoption of local currencies in trade settlements represents a tangible commitment to achieving this goal.

Why the Shift Away from the US Dollar?

The reliance on the US dollar in international trade has long been a subject of discussion, with concerns raised about its potential impact on developing economies. Fluctuations in the dollar’s value can significantly affect trade balances, investment flows, and overall economic stability for Asean member states. By embracing local currencies, Asean aims to insulate itself from these external shocks and gain greater control over its financial destiny.

The Benefits of Local Currency Trade

• Reduced Transaction Costs: Using local currencies can eliminate or reduce the fees associated with currency conversions, making trade more cost-effective for businesses.
• Increased Trade Volumes: Lower transaction costs can stimulate trade activity between Asean countries, boosting economic growth and regional integration.
• Enhanced Financial Stability: Reducing reliance on the US dollar makes the region less vulnerable to external financial crises and policy changes.
• Greater Monetary Policy Autonomy: Asean member states will have more flexibility to manage their own monetary policies without being unduly influenced by US dollar fluctuations.

Current Progress and Future Outlook

Several Asean member states have already begun experimenting with local currency settlement arrangements. For example, agreements have been established between Malaysia and Indonesia, as well as between Thailand and Malaysia, to facilitate trade using their respective currencies. The Asean+3 process, which involves Asean countries and China, Japan, and South Korea, is also playing a crucial role in promoting regional financial cooperation.

Prime Minister Anwar Ibrahim emphasized that this is an ongoing process and that further efforts are needed to expand the use of local currencies across the region. He noted that the success of this initiative depends on the willingness of businesses to embrace the new arrangements and on the continued commitment of Asean member states to fostering a more integrated and resilient financial system.

Implications for the Global Financial Order

Asean's move to promote local currency trade has broader implications for the global financial order. It reflects a growing trend among emerging economies to reduce their dependence on the US dollar and explore alternative financial arrangements. While the US dollar remains the dominant currency in international trade, Asean's efforts could contribute to a more diversified and multipolar financial system.

Ultimately, Asean's pursuit of greater financial independence demonstrates its commitment to regional stability, economic growth, and a more equitable global financial landscape.