Asean can lead the shift towards a more balanced global financial order

No country in the world should have the privilege of running persistent deficits because the rest of the world depends on its currency.

Yet this is arguably one of the unique advantages enjoyed by the US through the dominance of the US dollar in global trade finance and foreign exchange reserves.

Unlike most other currencies, whose strength is largely derived from economic fundamentals such as productivity, competitiveness and fiscal discipline, the US dollar also benefits from its entrenched position in the global financial system. This is reinforced by the fact that governments, corporations and central banks across the world continue to use the dollar as the primary medium for trade, investment and reserves. This creates a constant demand for dollars and US treasury securities, enabling Washington to finance deficits on a scale that would be difficult for most nations.

The world should gradually move towards a system where currencies derive their strength primarily from the intrinsic fundamentals of the economies that issue them rather than from an entrenched position within the international monetary system. Such a transition would create a more balanced, resilient and equitable global financial order.

The question is where such a process should begin. Asean is uniquely positioned to start the ball rolling.

The 10 Asean countries represent one of the world's most dynamic economic regions, yet much of the trade between them continues to be conducted using the US dollar, even when neither the buyer nor the seller is American. Businesses often convert local currencies into dollars before conducting transactions, creating unnecessary costs and reinforcing dependence on a currency external to the region.

The practical first step would be to increase the use of local currencies in intra-Asean trade. Malaysian companies trading with Indonesia, Thailand, Vietnam, Singapore and the Philippines should increasingly be able to settle transactions directly in their respective currencies. Such arrangements would reduce transaction costs, minimise exposure to exchange-rate volatility and strengthen regional financial cooperation.

Alongside this, Asean central banks could expand currency swap arrangements, improve regional payment infrastructure, and facilitate cross-border settlements using local currencies. These measures would gradually reduce the need for dollar intermediation without disrupting trade or financial stability.

Malaysia is well placed to champion this initiative as it maintains strong diplomatic relations with both Eastern and Western powers while pursuing an independent and pragmatic foreign policy. Once a stronger Asean mechanism is in place, this could be extended to other major economies such as China, India, Japan and South Korea. Together, these countries account for significant share of global trade and economic output. Increased use of regional currencies would reduce the excessive reliance on a single currency.

The next stage would involve expanding such arrangements to willing partners in the Middle East, Africa, and Latin America. Over time, a network of local-currency settlement mechanisms could emerge, giving nations greater flexibility in conducting trade and managing reserves.

This is not a call for the replacement of the US dollar. The dollar will likely remain a major international currency for many years to come. Rather, it is a call for the gradual evolution towards a multi-currency international financial system where currencies compete on the strength of the underlying economies.

Under such circumstances, the value of the US dollar would depend more directly on US economic fundamentals, fiscal discipline, innovation and institutional strength. Likewise, currencies around the world would rise and fall based on the performance of the economies behind them.

As economic power becomes increasingly dispersed across Asia and other emerging regions, the international financial system must adapt to reflect this reality. Asean has the economic weight, strategic location and collective interest to initiate the change.

The journey towards a more balanced financial order will not happen overnight. It will require patience, cooperation and political will. Asean can take that step and help shape a fairer and more resilient financial future.

Source: NST