TOKYO: Malaysian Prime Minister Mahathir Mohamad on Thursday (May 30) proposed to create a new “special currency” for the region based on gold, replacing the existing currency trading regime.
Speaking at a dialogue session at the 25th International Conference on The Future of Asia (Nikkei Conference), he claimed that a regional currency based on gold would be more stable.
The prime minister said that by pegging the new currency to gold, it could be used to evaluate the import and export activities among East Asian countries.
“We can make settlement using that (new) currency. That currency must be pegged to the local currency as the exchange rate, which is something that can be related to the country’s performance,” he said.
“That way we know how much we owe, how much we have to pay in the special currency of East Asia."
The new currency could also be extended to countries outside East Asia, he said.
Dr Mahathir noted that the global market is now tied to the US dollar, and this makes the currency prone to manipulation.
“Just because that one country is affected, there is infection to the other countries. Malaysia was very stable way back in 1997 (during the Asian financial crisis) ... but because of the problem occurring in Thailand, they said we must peg the Malaysian currency (to the US dollar),” he recounted.
“What happened? The currency traders sold the Malaysian currency and the value of Malaysian currency depreciated.”
“This currency trading is not something that is healthy because it is not about the (economic) performance of countries but it is about manipulation.”
When asked if the Japanese yen or Chinese yuan could be used as the common currency in the region, the prime minister replied: “If we are trying to promote our own currency, there will be conflict."
“But if we have a common currency for East Asia, a common trading currency that is not used in each country but for the purpose of settlement trade only, then there will be stability,” he said.
“Trying to promote the yen or the yuan is not the way to go.”
US SHOULD STOP LABELLING OTHER COUNTRIES: MAHATHIR
Earlier this week, the United States added Malaysia to a watchlist of trading partners for currency practices, citing its foreign exchange intervention operations.
Malaysia’s central bank has refuted the claim. In a statement on Wednesday, it said the Malaysian economy remains resilient, underpinned by strong economic fundamentals, including the flexibility accorded by a floating exchange rate and strong external balance.
"Malaysia supports free and fair trade, and does not practise unfair currency practices," it said.
Other countries, including Singapore, China, Germany, Japan, South Korea and Vietnam were also added to the list.
On Thursday, Dr Mahathir hit out at the US for “labelling countries”.
“The US is fond of labelling that country is no good, this country is no good and telling countries on ways to conduct their business,” he said.
“You are not democratic. That is not for any single power to decide. If you want to live in a united world, stable world, we must resort to sustainability through agreement between all nations that have a stake in that problem."