Law, Trade and Finance
Asian Commercial, Financial and Economic Law and Policy series
Edited by Ross P. Buckley, Richard Weixing Hu and Douglas W. Arner
Chapter 13: The Evolving Role of the Asian Development Bank in the Creation of an Asian Currency Unit
Nhu Vu In 1966, the Agreement Establishing the Asian Development Bank (ADB)1 came into force to foster economic development in Asia. Partly motivated by a desire to invest surpluses, and recognizing Asia’s need for development capital, Western countries established the ADB at a time when Asia was starved of capital. Currently however, some Asian countries have much less poverty than they did 40 years ago and now generate huge capital surpluses. Because of these changes, some have argued that the ADB should lend less and focus instead on becoming an economic coordinator to ensure regional stability throughout Asia. This chapter will examine the legal authority of the ADB in pursuing such regional coordination and stabilization activities, focusing on the ADB’s project to create an Asian Currency Unit (ACU). The purpose of the ACU would be to serve as a currency index. It would be based on a ‘basket’ of the weighted average of currencies of Asian countries and would probably also include the euro and the dollar.2 The primary purpose of the index would be to bolster capital markets so that regional countries could be more resistant to external shocks by facilitating exchange rate adjustments.3 Other benefits of the ACU would include lessening dependence on extra-regional currencies to serve as regional reserves, alleviating global imbalances, reducing Asian dependency on the US dollar, contributing to the development of an Asian multi- Agreement Establishing the Asian Development Bank (22 August 1966), 571 U.N.T.S. 123 (hereinafter ADB Charter), art. 65. 2 Masahiro...
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