Business
Single Currency For The Region?
Academic says move is beneficial
Except for the British still clinging to their pound and some other rebels, citizens of the European Union since January have become accustomed to the Euro as their common currency.
While the Pacific franc still survives in New Caledonia, French Polynesia and Wallis and Futuna, in France the French franc has joined Germany's mark and Italy's lira in sinking into oblivion.
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Could the Pacific Islands have a single currency?
Dr. T K Jayaram, of the University of the South Pacific's Economics Department, does not rule that out now that the 14 islands states of the Pacific Islands Forum are moving towards the full inception of a free trade zone.
But, he says, the islands first need to vastly improve trade between themselves. They need to promote higher labour mobility, a stronger commitment to fiscal discipline and more political solidarity, if they decide that free trade should be matched with establishing a single currency. Jayaram discusses the idea of a Pacific Dollar in a paper entitled "Prospects for a Currency Union in the Pacific: A Preliminary Assessment", presented at the recent Global Network Third Annual Conference, held in Rio de Janeiro, Brazil.
While the two free trade agreements - PACER (Pacific Agreement on Closer Economic Relations and PICTA (Pacific Islands Countries Trade Agreement) - became effective from January 1, this year, tariffs and other barriers to trade between the islands states that have accepted them won't be fully removed until 2012.
"Only when intra-trade volumes rise could the idea of a single currency union with a single currency be further explored," Jayaram says. However, Pacific Islands countries need to "put their house in order first" and show more political commitment to such a union.
A common currency would have benefits, he says. "A common exchange rate with the rest of the world and the commitment to one currency within the region would enable importers and exporters to have their transaction costs eliminated to trade within the region, resulting in saving enormous resources for better utilization. Transaction costs would be reduced, which means tourists in the region need not have to waste time and energy getting their currency converted. A single currency would also mean establishing a single central bank with one common monetary policy, replacing the existing reserve banks. Highly skilled human resources in economic and financial management, now being used in reserve banks of the region, could be saved and better employed within the region."
Jayaram says the arrival of the Euro shows that a regional agreement for a Pacific dollar is not impossible for countries with common goals and historic and strategic needs and interests. While some Pacific Islands currencies have distinctive names and shapes, all have one common decimal base. Some countries issue their own currencies. Others use foreign currencies, notably the Australian or United States dollar.
- Countries issuing their own currency: Fiji ‹ dollars and cents; Papua New Guinea - kina and toa; Solomon Islands - dollars and cents; Vanuatu - vatu; Samoa - tala and sene; Tonga - pa'anga and seniti.
- Countries using Australian dollar: Kiribati, Tuvalu, Nauru.
- Countries using US dollar: Marshall Islands, Federated States of Micronesia, American Samoa, Palau, Guam.
- Countries using New Zealand dollar: Cook Islands, Niue, Tokelau.
- French Pacific Francs: French Polynesian, New Caledonia, Wallis and Futuna.
