[Viewpoint]A vision for AsiaDear President Lee Myung-bak,
All the news seems gloomy these days. Being the self-proclaimed “economy-savvy” president, you must feel frustrated by the economic slump. You have reproached your aides and thrown a fit, but they all just want to save their necks. No matter what you want to try, the opposition party holds you back. Your proposals are not being approved by the National Assembly. The media compares you to Barack Obama, but handling situations like Obama is not easy. After all, you are Lee Myung-bak, not Barack Obama. I suggest you calm down and accept criticism as a president’s lot.
But that doesn’t mean you have to despair. Opportunities abound for Korea to assert itself in the international arena. Next week, you will be attending the Korea-China-Japan summit in Fukuoka, Japan. In the past, the heads of the three Northeast Asian nations have met on the sidelines of the Asean+3 Summit, but this is the first time they will be meeting separately. The meeting itself is significant, but what’s more important is the timing.
There can be no better time to discuss a currency cooperation system among Korea, China and Japan.
Business executives, students and expatriates in China and Japan are suffering from increasingly dismal exchange rates. Earlier this year, 1 Chinese yuan equaled 128 Korean won, but now it has risen to 213 won. One hundred yen used to convert to 851 won, but now the rate is 1,575 won.
Trade with China and Japan makes up nearly 50 percent of Korea’s total trade, and tens of millions of people travel between these three nations. When one country is in trouble, the crisis immediately spreads to the other two. Therefore, stable exchange rates among the three countries’ currencies are vital. When the exchange rates are stable, consistent business transactions are possible.
The scene was set by the hit the global economy took from the financial crisis originating in New York.
Economic experts are calling for currency cooperation among Korea, China and Japan. Professor Eisuke Sakakibara of Japan’s Waseda University says that Korea, Japan and China need a cooperative system in which each country contributes 5 percent of its foreign currency reserves to a mutual aid fund. Korea University Professor Park Yeong-chul also advocates a joint exchange rate management system. The yen to U.S. dollar exchange rate should be maintained at over 100 yen, and the values of the Korean won and Chinese yuan should fluctuate accordingly, thus remaining stable.
Director Yu Yongding of the Chinese Academy of Social Sciences argues that Korea, China and Japan need to work together and act under a united front since the International Monetary Fund is not fulfilling its function and these three countries are the United States’ biggest creditors.
While an expansion of currency swap limits will be discussed at the Fukuoka meeting, that’s just a beginning. The meeting should lay the foundation for financial and currency cooperation in Asia.
We can begin with a currency swap among Korea, China and Japan and establish a mechanism that keeps exchange rate fluctuations within a certain range. The mechanism should then be expanded to include Asean member countries.
Moreover, an Asian Monetary Fund should be established based on the $80 billion multilateral currency swap system agreed upon at the Asean+3 summit meeting. While the idea was frustrated by Washington’s opposition at the time of the Asian financial crisis, the United States no longer has any justification for opposing the plan. Doing so would be like the pot calling the kettle black.
Mr. President, please thoroughly prepare and present a grand vision when you go to Fukuoka. This is something Korea can do better than China or Japan. In a triangle made up of two big powers and one medium one, it is appropriate for the mid-sized power to take the initiative.
Call for the eventual adoption of a single Asian currency.
Korea has another factor that will enable it to exert international influence. Starting next year, it will serve as president of Asean+3 and will be on the 2009 G-20 management leadership committee to discuss the content and method of international financial reform.
The international financial order has to move toward a multilateral system. The National Intelligence Council predicts this in its Global Trend 2025 report.
I hope you can turn the crisis into an opportunity through the “Fukuoka initiative.”
Share a vision for a cooperative financial and currency system in Asia.I wish you good luck.
*The writer is an editorial writer and traveling correspondent of the JoongAng Ilbo.
by Bae Myung-bok
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