Ten years after the 1997 Asian financial crisis, cooperation among countries has not yet made the progress it should have in order to reduce risks from volatility in the financial market, economists from East Asia and Australia told a conference on "Advancing East Asian Economic Integration".

"East Asian countries should cooperate in currency arrangements," said Kanit Sangsubhan, director of the Fiscal Policy Research Institute (FPRI), which co-hosted the seminar with the Australian National University.

Governments in the region or central banks should reach agreement on exchange rate policies. For instance, all countries should let their currencies move up against the US dollar at the same time, he said.

Exchange rates have become a big issue facing the region. For example, the baht floats on the market but the Chinese yuan is virtually pegged to the greenback, allowing trading within only a narrow band.

As capital flows into the region, the baht has come under severe pressure, forcing the Bank of Thailand to adopt the draconian capital-control measure in December.

The central bank's requirement of 30-per-cent withholding on non-trade and investment accounts triggered a plunge in the stock market of more than 100 points in a single day.

The central bank and the government fear that rapid strengthening of the baht could kill off the export sector, as exporters would lose share in the global market to China, which has a weaker currency, making its goods relatively cheaper.

The issue should be raised at the meeting of Asean Plus Three, consisting of the 10 members of the Association of Southeast Asian Nations and China, Japan and South Korea.

After the Asian financial crisis, Asean Plus Three launched the Chiang Mai Initiative, a swap arrangement which allows member to tap a pool of liquidity to defend against currency attacks, he added.

Eiji Ogawa, an economist at Hitotsubashi University in Japan, suggested the yen should be used as a reference currency for a future regional monetary unit, akin to monetary unification that produced the euro in Europe.

Economists also discussed turning the Asia-Pacific Economic Cooperation forum, a non-binding club, into a binding one in order to accelerate economic liberalisation and integration.

Olarn Chaiprawat, honorary adviser to the FPRI, urged governments in the region to be aware of advancing economic integration.

"Now Thailand has to import cheap labour from neighbouring countries and the government also grants tax and investment incentives via the Board of Investment to attract skilled workers," he said.

Wichit Chaitrong

 The Nation