Opening Remarks by
President Tadao Chino
Asian Development Bank

at the ADB Annual Meeting Seminar on
"A Single Currency for East Asia: Lessons from Europe"

14 May 2004
ICC Jeju, Republic of Korea

Mr. de Ocampo, Mr. Kuroda, Mr. Padoa-Schioppa, Ladies and Gentlemen,

It is indeed a pleasure for me to welcome all of you to this important seminar.

When the financial crisis struck East Asia in 1997, few could have predicted that the region's rebound would be as swift and robust as it has turned out. The crisis provided the region with the impetus not only to address major structural weaknesses, especially in the financial and corporate sectors, but also to enhance its resilience to external shocks on a regional level. Before the 1997 crisis, regional integration in East Asia was largely limited to trade and investment. Since then, the region has continued with these efforts, while pursuing a new dimension-monetary and financial cooperation.

In this regard, one of the key issues is whether East Asian countries should aim for exchange rate coordination, with the ultimate goal of adopting a single currency over the long, perhaps, very long, run, such as happened in Europe.

This question has added significance because recent research has shown that from a purely economic perspective, East Asia is as suitable for a single currency as Europe was prior to the Maastricht Treaty in 1991. However, most of you would agree that adopting a single currency requires much more than simply satisfying a set of technical criteria. It would also require improved policy coordination, considerable institution-building efforts, and political consensus across countries. Yet, if the economic advantages of a single currency are significant, it is possible that countries may be prepared to take the necessary steps to reap the potential benefits.

Moreover, from a global perspective, two sets of factors are likely to encourage more countries to adopt common currencies-first, the increased number of countries in the world and, second, the trend toward globalization.

At the end of World War II, there were only 76 independent countries; today there are about 200. For many of newly independent countries, the costs of maintaining separate currencies and floating exchange rates are likely to be high. Moreover, in an increasingly globalizing world, there will be greater synchronization of business cycles. Hence, the benefits of having fewer currencies to conduct cross-border business, especially at the regional level, are likely to increase.

Should East Asia be part of this possible global trend toward currency consolidation? The region needs to start considering this question, even if there might be no immediate answer. If the answer eventually turns out to be "yes," the preparatory groundwork alone would involve considerable effort. Judging by the European experience, the time required to complete the process, including the transitional exchange rate arrangements and policy coordination, will not be short.

To discuss these important issues, we have with us some of the most renowned experts in the field. I would like to express my special thanks to them for having accepted our invitation to join us here today.

And let me once again extend a warm welcome to all of you. I wish you success in your deliberations during this seminar.

Thank you.