One of the world’s most important processes in recent years has been the weakening of the US dollar on the international currency market and the desire of many countries to abandon it in order to release their economies from US influence. The United States is resisting this process.
Recently, the US created the Trans-Pacific Partnership: one of its goals was to counteract China’s economic expansion in the Pacific Ocean. Undoubtedly, the US dollar will be the most popular currency in the territory of the TPP. The United States itself and its closest partners such as Australia, Canada, Japan, etc. have joined the TPP. However, the Partnership is still open – as the US hopes to attract further members. Even the Peoples Republic of China was invited, despite it being the main competitor of the TPP. So, a number of developing countries of the Asia-Pacific region, seeking to increase their participation in international trade, are now facing a choice between the TPP and other economic organisations where Russia and China play the main role. First of all, this concerns the ASEAN countries.
Several major events were held in Hanoi at the end of October 2016: the 8th CLMV (Cambodia, Laos, Myanmar and Vietnam) Summit, the 7th ACMECS (Ayeyawady – Chao Phraya – Mekong Economic Cooperation Strategy) Summit and the World Economic Forum on the Mekong Region (Mekong WEF).
As it is well known, the Mekong River has its origin in China and traverses the entire Mainland Southeast Asia, uniting all of its countries into a single sub-region. The river is of great economic significance for Vietnam, Cambodia, China, Laos, Myanmar and Thailand. These countries are forced to actively cooperate in order to jointly use it without violating any interests. CLMV and ACMECS Summits have been held since 2003. The most important economic and political issues of the Mekong sub-region are discussed there. These meetings have brought about a number of benefits, by maintaining regional stability and promoting the economic growth of all countries involved. Thanks to their cooperation, the Mekong sub-region has become one of the fastest growing parts of ASEAN and the Asia-Pacific Region. Mekong WEF was first organised at the initiative of Vietnam. 60 companies from the Mekong sub-region and more than 100 companies from other countries took part in the Mekong WEF. The aim of the Forum was to introduce the global business community to the potential of the sub-region and attract investment.
As usual, issues concerning cooperation in agriculture, environment, security and others were discussed at all the events. One of the outcomes of the 7th ACMECS Summit was a joint statement made by the representatives of business circles from Vietnam, Cambodia, Laos, Myanmar and Thailand, in which they called upon their countries to switch to local currencies in mutual trade, abandoning the US dollar. According to the President of the Thailand-Vietnam Business Council Sanan Angubolkul, business would benefit from the transition to local currency. Trade would become simpler, costs would be reduced as well as the risks associated with the unstable exchange rate of local currencies against the US dollar. Furthermore, he noted that companies from different countries of the sub-region that are ready to make the transition, will not wait for the readiness of all CLMV members. They may cooperate with each other on a bilateral basis. There is already an example of such cooperation: Vietnam and Thailand abandoned the US dollar when trading with each other three years ago. Since then, their mutual trade turnover has grown by almost 40%.
If all the countries of Mainland Southeast Asia abandoned the US dollar in local trade, i.e. almost half of ASEAN, it would be a major step towards de-dollarization of the entire Southeast Asia. It would be a loss for the United States and a win for China in the struggle for influence in the region. It is well known that ‘nature abhors a vacuum’; so, with time the US dollar might be replaced with the Chinese yuan, which since October 1, 2016 has ranked third behind the US dollar in the list of IMF reserve currency. Experts forecast that within ten years, the Chinese currency may outstrip the US dollar, and become the most popular in the world. This scenario is increasingly likely because of the ‘Maritime Silk Road’ set to soon appear along the southern coast of Eurasia. This trade route, created at the initiative of China, has the potential to unite all the countries through which it will run into a huge free trade zone. This FTZ would benefit from a single currency, likely to be the yuan.
However, despite the fact that ASEAN as a whole and in particular the Mekong sub-region are most influenced by China, all these countries understand that dealing with one partner alone is not profitable. They intend to work with other major players on the international market. For example, many ASEAN countries are now expressing a desire to create a free trade zone with the Eurasian Economic Union, which is headed by Russia. Recently, an agreement between the EAEU and Vietnam entered into force; there are ongoing negotiations with Thailand, and Singapore is interested. There is also a strong desire to de-dollarize the economic relations between ASEAN and EAEU countries. Thus, at the end of 2015, Russia and Thailand held negotiations on the matter. They concerned the need to make the transition to direct correspondent relations between banks in the Russian Federation and Thailand in order to facilitate payments between companies from the two countries. There was discussion of the possibility of establishing such relations between a number of Thai and Russian banks, including the Central Bank of the Russian Federation. The possibility of opening branches of Thai banks in Russia was also discussed. All these measures would help Russia and Thailand to switch to making payments in their own currencies without using the US dollar.
It should be noted that policy of ASEAN countries is quite balanced; they are not biased towards any one side and they cooperate with all potential partners. For example, countries such as Vietnam and Singapore are members of the TPP, but at the same time they are actively strengthening relations with China and the EAEU (it bears remembering that Vietnam is one of the initiators behind abandoning the US dollar in the Mekong sub-region). Thailand is showing a strong interest in the EAEU, but is also considering the possibility of joining the TPP. Besides, all these countries are involved in the ‘New Silk Road’ project and are members of the Asian Infrastructure Investment Bank, established by China in opposition to the pro-American World Bank and to the pro-Japanese Asian Development Bank. So, ASEAN may become a zone where several global economic blocs interact while maintaining its own economic independence, which fully corresponds to the idea of a multipolar economy in a multipolar world.
Dmitry Bokarev, political observer, exclusively for the online magazine “New Eastern Outlook”.