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   

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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