Demise of US dollar as world currency

Experts see demise of dollar as world currency

 By DORIS C DUMLAO and MICHELLE V. REMO

IT may only be a matter of time before the US dollar gets replaced as the main currency in international trade, according to economists attending the meeting of the board of governors of the Asian Development Bank (ADB) in Manila.

Asian Development Bank, ADB

For many years, the dollar “has been almost the sole ‘reserve’ currency,” banked on by the world economy, American economist Jeffrey Sachs said on Thursday in one of the forums held during the ADB annual event. “Going forward, (the dollar) can’t play that role anymore.”

Sachs added that he could not see how the US dollar could remain as the world’s reserve currency when “the role of the United States in the global economy is diminishing.”

Several finance experts echoed Sachs’ sentiment, explaining that, with the greenback expected to weaken further, the world should turn to another currency to facilitate international trade and other commercial transactions.

“Having another reserve currency other than the US dollar is only a matter of time. We don’t know exactly when it will happen, but it will,” Neeraj Swaroop of Standard Chartered Bank said in an interview at the sidelines of the ADB meeting.

In the area of merchandise trading, Swaroop said, countries have actually started to use currencies other than the US dollar.

Sachs also said that some countries could turn to more than one currency in maintaining their foreign exchange reserves.

One currency being considered is the Chinese renminbi (RMB) which, according to HSBC, will inevitably become an international reserve currency.

The renminbi, or yuan, has the potential to become an international reserve currency because China is continuing to post strong growth, becoming an important player in the global economy, Iwan Azis, ADB head for regional integration, said in the same forum.

Also, China is pushing to make the yuan the world’s reserve currency – a move that is seen to hasten the replacement of the US dollar, Azis added.

Already, British banking giant HSBC has mapped out a strategy to be a leading global player in the “renminbi banking” space.

This global strategy has filtered into the Philippine market with the bank’s introduction of RMB-denominated deposit and trade financing facilities, top HSBC officials said in a press briefing on Thursday.

Spencer Lake of HSBC said the renminbi was increasingly becoming an important currency from a trade perspective.

Lake was in Manila as head of the HSBC delegation to the ADB event.

“If it were freely convertible today, it will be the second-largest currency in the world,” Lake said, noting that China has started to liberalise currency systems.

“It’s part of our core strategy to adopt and put in place all of the infrastructure and products to embrace (the renminbi) as a future reserve currency,” Lake said.

Lake said the bank’s strategy appeared to be gaining ground as indicated by a “significant” buildup of the RMB business in Hong Kong, Singapore and other South-East Asian countries.

“The world is getting ready to adopt it as a world currency,” he said. “You’ll see it as a more common language.”

“Reserve” currency, which is currently used to describe the US dollar, is the denomination that accounts for bulk of the foreign exchange reserves of most countries.

A country taps its foreign exchange reserves whenever it needs to pay off the costs of imported products and debts to foreign creditors.

After the United States fell into a recession in 2009, the US dollar began to weaken against emerging market currencies.

The trouble with hanging on to the dollar as the main reserve currency is that it is prone to depreciation given the prevailing economic troubles of the United States.

Depreciation of the US dollar, in turn, may lead to a reduction in the value of a country’s foreign reserves, experts said.

Apart from the yuan, Sachs said other viable currencies that could replace the US dollar were the euro and the Japanese yen. — Philippine Daily Inquirer / Asia News Network   

Trust deficits - US-China Relations

 

The conductor: At the opening ceremony for the U.S.-China Strategic

and Economic Dialogue, Secretary of State Hillary Clinton introduces

an unnamed U.S. official to China's State Councilor Dai Bingguo. Tense

circumstances due to the case of Chen Guangcheng have put all her

diplomatic skills to the test.

Lack of Mutual Sino-U.S. Military Trust a Major Threat

Is Washington encouraging the Philippines and Vietnam to challenge China’s territorial claims in the South China Sea? In this editorial from the Global Times, which reads like a summary of what the U.S. and China have been discussing since Friday, Beijing warns the U.S. not to try to make up for its economic weakness with what it regards as foolish military adventurism.

The China-U.S. Strategic and Economic Dialogue pertaining to military cooperation and the visit by China Defense Minister Liang Guanglie to America are important events for military exchanges between the countries. These will create a certain degree of relaxation and ease their long-running military confrontation. Such an atmosphere is essential to improving ties, as it reduces the damage and the significance of the friction over specific matters. [referenceto controversy over Chen Guangcheng].

Military trust should be amassed by resolving disputes over China's sea territory [reference to the South China Sea], and through a process of boosting mutual understanding and adapting to circumstances as they arise. This will help build a foundation for the two nations to avoid misinterpreting military maneuvers by the other.

Thus, both nations must have a clear and accurate understanding of one another. It is unwise for the United States to look down on China as a mere land force that can only play a limited regional role. Because China has interests around the world, it is essential for its military to extend its reach further. Neither should China view the presence of the U.S. military in Asia as illegal or ignore America’s special influence over global security. China must accept the truth that the U.S. is an essential power in the region.

The objective of achieving mutual military trust will never be reached if China seeks to squeeze the United States out to lead Asia on its own, nor if the U.S. seeks to constrain the rise in China's military strength. Luckily, neither Beijing nor Washington has such aims.

Now, as their interests and objectives overlap, each country is in a defensive crouch in relation to the other, giving an opening to brief confrontations. Since the United States has announced its return to Asia, the respective bottom lines of both nations concerning the South China Sea have come close to clashing.

Although analysts still see the possibility of a military conflict in the South China Sea as slim, once the two sides enter into an arms race and making displays of military strength, all efforts to build mutual trust will be ruined.

Competing territorial claims in the South China Sea: China sees

the United States meddling, whereas other nations in the region

regard the U.S. as playing a balancing role. 

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Philippines slammed for hiding poor & slums during ADB event!

 Gov't hit for 'hiding' poor at ADB meet

MANILA, Philippines - Rights groups and unions slammed the Philippines Friday, May 4, after it erected advertising hoardings that hid slum housing from delegates attending a conference on solving poverty in Asia.

A Philippine policeman (R) argues with foreign delegates to the Asian Development Bank board of governors annual meeting (AFP, Ted Aljibe)

The giant boards were put up beside a road taking 4,300 delegates from Manila airport to the Asian Development Bank meeting that began on Wednesday, May 2, blocking the view of an open sewer and shanties.

The boards advertised Philippine tourist attractions as well as the high-level meeting, which proclaimed as its theme "inclusive" growth for Asia, home to some 902 million of the world's poor according to the bank.

The government said it was merely trying to put its "best foot forward" but New York-based Human Rights Watch criticized the boards, saying it sent the message that dire poverty can just be ignored.

"Instead of trying to hide the poor, the Philippine government should be pressing the bank to tackle poverty head on," said Jessica Evans, the group's senior international financial institution advocate.

Union leader Josua Mata, of the Alliance of Progressive Labour-Centro, told AFP the attempt to wall off the poverty was "embarrassing" and the government should turn its focus to creating jobs and building resettlement sites.

President Benigno Aquino's office insisted the effort was not an attempt to hide poverty, which the government says affects a fourth of the population of 95 million.

"It's but natural to fix it (the city) up a bit and I don't think we're violating any human right by trying to put our best foot forward," presidential spokesman Ricky Carandang told reporters.

"We're not trying to whitewash poverty, it's very real," another spokesman, Abigail Valte, said.

Carandang said the government was spending 39 billion pesos ($907 million) this year in cash handouts to help three million poor families to escape poverty. The ADB lent the government $400 million in 2010 for the program.

ADB external relations director Ann Quon defended the hosts.

"We do not think it is the host country's intention to paper over poverty in the Philippines," Quon said.

"In fact, the government has placed poverty reduction at the center of its development agenda." - Agence France-Presse

Philippines erects wall to obscure view of slums

MANILA, Philippines

‘FENCING POVERTY’. A resident pedals his tricycle, locally known as "pedicab", past a wall covered with a tarpaulin poster of the ongoing 45th Annual Board of Governors meeting of the Asian Development Bank at suburban Pasay city south of Manila, Philippines, Thursday May 3, 2012. Behind the wall is the slum along a garbage-strewn creek. (AP and RUEL PEREZ/Radyo Inquirer 990AM)

Delegates attending an international conference in the Philippines capital may not see what they came to discuss: abject poverty.

A makeshift, temporary wall has been erected across a bridge on a road from the airport to downtown Manila that hides a sprawling slum along a garbage-strewn creek.

Presidential spokesman Ricky Carandang defended the wall's installation, saying Thursday "any country will do a little fixing up before a guest comes."

He expressed hope that this week's annual meeting of Asian Development Bank Board of Governors, which includes finance ministers and senior officials from 67 member states, will show the Philippines is open for business.

The lending institition, which is headquartered in its own walled compound in Manila, aims to cut poverty in the Asia-Pacific region.

"We need to show our visitors that Metro Manila is orderly. We owe it to ourselves," said metropolital Manila chief Francis Tolentino.

"I see nothing wrong with beautifying our surroundings. We are not trying to keep the poor out of the picture," he said.

There was no immediate comment from ADB.

The Philippine Communist Party recalled that former first lady Imelda Marcos -- notorious for her ostentatious lifestyle -- was ridiculed for trying to hide squatter colonies. She erected similar whitewashed walls along the route of foreign visitors to the Miss Universe pageant held in Manila in 1974, and other international events.

"The government should face reality. If they don't, how will they know the problem, how will they solve the problem," said Renato Reyes, secretary general of the largest left-wing group Bayan. "By covering the truth, they lose the energy or intention to resolve the problem."

About a third of Manila's 12 million residents live in slums, and a third of 94 million Filipinos live below the poverty line of $1.25 a day. Overall, more than half the population in Asia remains poor.

- The Associated Press 

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Bersih 3: 'Hand Gesture Politics' to 'Occupy Dataran' ?

Anwar has some explaining to do, says The Economist

KUALA LUMPUR: Video footage of Datuk Seri Anwar Ibrahim during Bersih 3.0 posted on YouTube shows him making a curious rolling gesture with his hands to PKR deputy president Azmin Ali.

Within seconds, PKR supporters breached the police barricades and charged into Dataran Merdeka, prompting the police to respond with tear gas and water cannons to prevent a stampede.

In an interview with Radio Australia on Tuesday, Anwar denied that his hand gesture was a signal to protestors to breach the barricades, instead claiming that it meant “negotiate with the police”.

While the hand gesture is open to interpretation, a few outside observers had their own take on it.

“Mr Anwar has some explaining to do”, was The Economist's verdict and, here in Malaysia, Anwar's role in Bersih 3.0 has been criticised by people from both ends of the political spectrum.

At a PKR press conference on Monday, independent filmmaker Benji Lim accused Anwar of endangering the lives of protesters, as well as jeopardising Bersih's cause.

“The protest was completely hijacked by the opposition,” he claimed, before being bundled unceremoniously out of the room.

Even Bersih 3.0 chief organiser Datuk S. Ambiga noted Bersih's politicisation by opposition leaders, telling journalists that she “cannot control what they say”.

Anwar has dismissed any criticism of his conduct. Instead, at the press conference, he launched an attack on the government, accusing the Barisan Nasional leadership of behaving like Stalin and Hitler.

He went on to suggest his fate was comparable to a Nazi concentration camp victim a claim made on the exact anniversary of Hitler's death.

Political observers say that Anwar has often been seen indulging in “hand gesture politics”, revelling in grand spectacles but offering voters little in terms of a detailed blueprint for transformation.

Some say Anwar's “hand gesture politics” appears to have backfired.

Don't be surprised to see him spend much of the coming weeks and months explaining what his Bersih hand gesture really meant. -Bernama

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Bersih 3.0: More tests for Malaysian democracy

Bersih 3.0 and its aftermath show deep divisions in our society but many participants deemed it a good day for Malaysian democracy, despite the ugly end.

FEW events have generated so much commentary in so short a time as Bersih 3.0. By now gigabytes of photographs and video material must have been uploaded and shared, despite the recorded cases of seizure and smashing of equipment that occurred on the day.

One might have thought that this sheer amount of data might be able to provide a comprehensive picture of what really happened.

On the contrary, amid accusations of photo manipulation and devious cut-and-paste there seems to be enough material for those who have already taken sides to harden their stances, with no quantity of counter-evidence being sufficient to sway their positions.

As Deputy Higher Education Minister Datuk Saifuddin Abdullah — possibly the most erudite member of the Government — has said, Bersih 3.0 (and its aftermath) show deep divisions in our society.

Big turnout: Thousands of protesters outside Dataran Merdeka last Saturday.

I was not a frontline witness on Saturday. In the morning I attended the Global Donors Forum organised by the World Congress of Muslim Philanthropists outside the Middle East for the first time.

The event brought together civil society organisations from across the Muslim world to discuss how to improve and target charitable giving to strengthen the ummah.

I argued that philanthropy thrives when wealth thrives, and that Muslim societies should pursue open economies and democratic government so that they can compete intellectually, culturally and economically.

En route to the event, I had to negotiate through a police roadblock at Jalan Parlimen, and immediately saw columns of people percolating through the Bank Negara roundabout towards Dataran Merdeka.

Later in the afternoon, I was on Jalan Ampang and witnessed an orderly line of policemen guiding a horde of protesters outside KLCC in a scene reminiscent of the many marches I saw in London.

I was very impressed and excited by this, and thought of having a closer look after my previously set appointments at the former Istana Negara and lunch in town, as I was due at the nearby Royal Lake Club at 3.30pm (which had earlier been a starting point for many marchers).

Alas, it was around that time that chemical compounds were fired and sprayed into the crowd at Dataran Merdeka — whether due to a breach by agent provocateurs or genuine protesters who were goaded, encouraged or given false pretences — and the whole thing deteriorated.

This is where accounts diverge. It’s worth pointing out, however, that across the country and globe where simultaneous protests were held in dozens of cities (easily the biggest international Malaysian rally in history), there were no reports of violence at all.

As I have written before, I agree with many of Bersih’s demands. But I fully support the right of peaceful protest and have the utmost respect for my relatives, friends and colleagues (and many of their elderly parents) who took part that day, fully in the knowledge that they might be confronted.

They included people who might have little in common with each other, but were generally united in pursuing cleaner elections in our country.

Some friends did complain that the politicians took too visible a role, and it should have been more solidly a civil society effort, but this seems to be true peculiarly at Dataran Merdeka itself.

Certainly, many participants deemed it a good day for Malaysian democracy, despite the ugly end.

Most ugly of all — and indeed, heartbreaking — were the instances of alleged police aggression that day.

Though the aggression was later attributed to rumours of a policeman being killed by protesters, that these violent instances occurred have now been recognised either tacitly (by way of apology to victims) or explicitly by the Prime Minister, Home Minister and Inspector-General of Police.

Now that they have been admitted, every Malaysian should hope that investigations are conducted properly.

If, as some photographs suggest, some of these thugs are not policemen at all, they and whoever issued them with uniforms must be punished. Of course, any thugs among the protesters should also face justice.

> Tunku ’Abidin Muhriz is the president of IDEAS.

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