During the 42nd ASEAN Summit in Labuan Bajo, Indonesia, De-dollarization, economic growth, and ASEAN centrality were among the main topics of discussion.
The summit, themed “ASEAN Matters: Epicentrum of Growth,” reflects the bloc’s growing confidence in its ability to influence global economic trends. Indonesia, as the largest economy in Southeast Asia, has taken a leading role in spearheading the De-dollarization mission for ASEAN.
The ASEAN Outlook on the Indo-Pacific (AOIP) serves as a critical strategic framework for enhancing ASEAN’s centrality in addressing regional issues.
During a meeting of ASEAN finance ministers and central bank governors, it was agreed to reinforce the use of local currencies in the region.
By reducing reliance on major international currencies, such as the USD, ASEAN countries hope to mitigate the risks associated with global crises, including high inflation.
Improving regional payment interconnectivity is another crucial aspect of the De-dollarization process. The expansion of cross-border payment instruments is likely to be a key topic at future ASEAN summits.
In 2021, the central banks of Indonesia, Malaysia, the Philippines, Singapore, and Thailand signed a Memorandum of Understanding (MoU) to develop an interoperable QR code-based payment system based on local currency settlement (LCS).
De-dollarization efforts are not confined to the ASEAN region, as other emerging economies, particularly the BRICS countries, are pursuing similar initiatives.
These efforts aim to reduce vulnerability to external shocks, promote financial stability, and foster a more balanced global monetary system.
However, De-dollarization also presents several challenges and risks for ASEAN countries, including the potential loss of confidence in regional currencies, increased exposure to exchange rate fluctuations, limited liquidity, coordination challenges, and geopolitical tensions.
Despite these challenges, the benefits of De-dollarization for ASEAN far outweigh the risks. By working together to implement De-dollarization initiatives and strengthen their financial infrastructure, ASEAN countries can position themselves as leaders in shaping a more balanced and resilient global monetary system.
The future of De-dollarization within the ASEAN region largely depends on the successful implementation of the measures discussed during the 42nd ASEAN Summit and the continued commitment of the member nations to promoting local currency usage and regional financial integration.