KUALA LUMPUR, Oct 4 — Asia, with its 4.7 billion population, is arguably the dynamo of global economic growth and it is about time it works on a solution to the global economy’s reliance on the US dollar as well as a fairer and more equitable global policy and regulatory environment that will benefit the wider world and not just a select few, Minister of Finance Datuk Seri Tengku Zafrul Aziz said.
“Asian economies perpetually seem to be at the mercy of decisions and market fluctuations occurring a few continents away. I am not advocating abandon the greenback for another currency like some have.”
“Malaysia remains committed to the global financial architecture as it exists but sooner or later, these are questions smaller trading nations must consider, uncomfortable as they may be,” he said at the Khazanah Megatrends Forum 2022 here today.
He said given the unique position of the US dollar as the reserve currency of the world, one that often appreciates in periods of uncertainty, a currency’s position versus the greenback, especially in the short term, is hardly a yardstick of the state of the economy.
“A world where key countries can adversely affect the growth trajectories of others, including Malaysia, is unsustainable,” he said.
He said certain policies might benefit one superpower domestically but they must not end up hurting others and potentially jeopardising global prosperity.
“There must be a sense of responsibility, as well as justice, towards collective global growth, as well as improved monetary cooperation and coordination.
“It is high time we get the job done by creating a viable International Monetary Cooperation Mechanism to ensure financial systems are not only effective and fair but also consider the unique needs of small, emerging and developing countries equitably,” he said.
He said dialogues are crucial but action is more important and such actions are not new and have been done before.
“In 1985, the Plaza Accords were signed to stabilise the US dollar against the Japanese yen and German mark,” he said.
He said between 1985 and 1987, the accords stabilised the US current account balance while solidifying Japan’s presence as a major player in the international market.
“A second agreement, the Louvre Accord, was signed in 1987 to stop the continuing decline of the dollar and stabilise exchange rates,” he said.
He said another action was during the Global Financial Crisis, where central banks in developed countries coordinated to prevent financial contagion from spreading to the rest of the world.
“Finally, at the onset of the Covid-19 pandemic, the Global Financial Safety Net provided ample financing to quickly stabilise the global financial markets and contain the economic crisis.
Furthermore, he said existing institutions like the Bank of International Settlements (BIS) and International Organisation of Securities Commissions (IOSCO) also have an important role in aiding developing countries and emerging economies.
“The cost of uneven growth between countries, or even de-globalisation, will be high especially when we are trying to tackle global issues such as poverty and sustainability.
“Indeed, these are issues I have been raising with some of my counterparts in the past few weeks and definitely these are some of the key ideas I hope to take with me at the upcoming International Monetary Fund and World Bank Fall Meetings later this month,” he said.
He added that as an emerging economy that is striving to be a high-income nation, Malaysia must continue voicing out for a fairer and more equitable global policy and regulatory environment. — Bernama
