Make a start

Money can be antidote to many things, including (as it turned out) to the spread of Communism in Asia. But you need a knife to spread the jam on the toast, and of the many institutions that sprang up during the Cold War to do the job, was the Asian Development Bank (ADB). In spite of its inclusive membership, it was really intended to serve the needs of East Asia. But sometimes success can be a double-edged sword, as the ADB (as also the World Bank and the IMF) has been discovering. Like them, in the face of ever-increasing private capital flows, it faces irrelevance. Like them, it has been looking for something to keep it busy. Partly as a consequence, it has dug up an old idea which everyone thought had been given a quiet but decent burial, namely, an Asian Currency Union. In fact, after the Asian crisis of 1997, Japan had mumbled something along the lines, but not found many takers because, if there is one thing the countries of East Asia want to avoid, it is Japanese domination. The US had also pooh-poohed the idea. But at the ADB meeting in Hyderabad last week, it once again said that it might be a good idea to have such a union, say, along the lines of the euro. Perhaps it sees itself as an Asian ECB.

However, to the annoyance of India's finance minister, it also said that India would not be part of such an arrangement. Mr Chidambaram archly pointed out that if the ADB was going to initiate and run the project, India as a fully paid-up member of the ADB could not be excluded. It wasn't up to the ADB but to the Indian government to decide whether it wanted to participate or not, just as it had been up to individual members of the EU to decide. He is right, of course, not least because the movement towards a currency union is as much a matter of politics as it is of economics. Even if the former is left to sort itself out, the question would always remain: does it make any sense to leave out an economy that is clearly going places? Nor does it make great political sense on the part of the ADB to project itself as a cosy club of the Asean+3. That might do little to reverse its slide towards irrelevance and may even accelerate it.

It should also be pointed out that, attractive though the idea might be because of the rapid integration that is taking place in East Asia, if the EU project is anything to go by, the ACU project will not be easy and is certainly not realisable in the near or even medium-term future. The key issue is the degree to which individual countries will agree to give up sovereign control over monetary and fiscal policy. Such a degree of cooperation, notwithstanding trade integration, will be hard if not impossible to achieve. The experience with the euro is not entirely convincing, either, and opinion continues to be divided. Britain, for example, has so far stayed out. The best one can expect for an ACU is slow movement on an experimental basis. But India needs to be part of that experiment from the very start.