10 Southeast Asian Nations Challenge Dollar Dominance With Push for Local Currencies

The leaders of 10 Southeast Asian nations, members of the Association of Southeast Asian Nations (ASEAN), have agreed to “encourage the use of local currencies for economic and financial transactions.” The group comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. This move will help them reduce their reliance on the U.S. dollar.

The leaders of the Association of Southeast Asian Nations (ASEAN) gathered in Labuan Bajo, Indonesia, for the 42nd ASEAN Summit on May 10-11 under the chairmanship of the Republic of Indonesia. ASEAN members comprise Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. The summit was chaired by H.E. Joko Widodo, president of Indonesia.

An official declaration released by the chairman at the conclusion of the summit states: “We adopted the ASEAN Leaders Declaration on Advancing Regional Payment Connectivity and Promoting Local Currency Transaction to foster bilateral and multilateral payment connectivity arrangements to strengthen economic integration by enabling fast, seamless, and more affordable cross-border payments across the region.”

The declaration continues:

We commit to encourage the use of local currencies for economic and financial transactions among ASEAN member states to deepen regional financial integration and promote the development of currency market in local currency to strengthen financial stability in the region.

At the end of March, the ASEAN finance ministers and central bank governors met in Bali, Indonesia, 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.

Bank of Indonesia Governor Perry Warjiyo said in April that Indonesia is following the BRICS’ de-dollarization lead. The BRICS nations (Brazil, Russia, India, China, and South Africa) are working on a common currency to reduce their reliance on the USD; their leaders plan to discuss this topic at their upcoming leaders’ summit.

Multiple people expect a common BRICS currency to erode the U.S. dollar’s dominance, including a former White House economist who warned that if the BRICS nations used only their common currency for international trade, “they would remove an impediment that now thwarts their efforts to escape dollar hegemony.” Investment analyst Jon Wolfenbarger cautioned that a successful BRICS currency could result in the U.S. dollar losing its reserve currency status. This would hurt U.S. living standards and lead to less power for the U.S. government.

What do you think about Southeast Asian countries pushing to use local currencies instead of U.S. dollars? Let us know in the comments section below.