Author: Dejvi Dedaj - South East Asia and Oceania Team


Economic unity is a collaborative state whereby different entities, particularly states, work together as if they were a single economic unit, thus contributing to the overall economic stability and development of the states involved. Economic unity is typically pursued at the regional and international levels and can take different forms, ranging from economic, monetary, or customs unions, with notable examples being the European Union or the CARICOM Single Market & Economy. Economic unity can be achieved through different policies and mechanisms, such as the establishment of a shared market, the enactment of common trade or fiscal policies, or the adoption of regional payment systems. In particular, regional payment systems comprise international mechanisms aimed at facilitating payments between the citizens of the various participating countries. Traditionally, cross-border payments are slow and expensive to carry out; however, regional payment systems facilitate cross-border transactions and reduce collateral costs, such as currency exchange costs. 

The concept of economic unity is not unknown to the area of Southeast Asia; on the contrary, in 1967, the Association of Southeast Asian Nations (‘ASEAN’) was established to promote economic unity between the participating countries. According to the ASEAN Charter, regional economic integration is pursued by advancing a market economy, adhering to trade rules as determined by different multilateral treaties or ASEAN itself, and eliminating all other existing barriers to economic integration. Recently, ASEAN made another step towards attaining economic integration by implementing a regional cross-border payments system that allows ASEAN citizens to pay in their local currency using a QR code. 

Why Should the Regional Payments System Adopted by ASEAN Be Celebrated?

The newly implemented regional payments system by ASEAN will be conducive to the growth of trade and commerce within Southeast Asia as it fosters seamless financial cross-border transactions, streamlines payment processes, and encourages economic cooperation among participating states. ASEAN's endeavour should also be expected to reduce transaction costs, cultivating a more advantageous environment for individuals and businesses alike operating within the Southeast Asian region. Additionally, such an initiative will empower entities to explore new opportunities, thus expanding their market reach and engaging in more diversified trade activities.

In addition, the adoption of QR code payments does not entail the imposition of fees on cardholders that wish to make a payment and offer better conversion rates, in contrast to traditional card-based payments. 

The adoption of the ASEAN regional payments system will also reduce ASEAN’s reliance on external currencies for cross-border transactions, particularly the US dollar. The so-called phenomenon of de-dollarisation, whereby states attempt to move away from the US dollar, is premised on concerns that the dominance of the US currency allows the US to exert significant pressure and influence on other countries, “holding them hostage”.


Lastly, the benefits of the regional payments system for small and medium-sized enterprises should not be underestimated. Although access to the foreign exchange market has traditionally been challenging for such entities due to the high transaction costs relative to their small size, the regional payments system would enable small and medium-sized enterprises to see transaction and currency exchange costs reduced, thus facilitating their access to overseas exchange markets. 

What Are the Arguments Against the ASEAN Regional Payments System?

Importantly, several arguments against ASEAN’s initiative have been voiced to challenge its implementation. First, it is feared that economic integration within ASEAN will put pressure on certain currencies, most prominently the Singapore dollar, thus rendering it the de facto reserve currency of ASEAN. This could in turn weaken the purchasing power of other ASEAN currencies, resulting in “higher imported inflation if central banks [do not] intervene”.

Second, the new regional payments system may present novel security and fraud issues, requiring banks to implement strong measures to effectively respond to such risks. Soft security policies are known to catch the attention of hackers who can use such policies to their advantage to benefit financially, thus causing the banks, and by extension the consumers, at the receiving end to incur hefty, and sometimes irretrievable, losses. 

Third, as a novel model, the regional payments system will necessarily involve the education of the public to ensure the success of the policy. However, educating the public can be a time-consuming process, requiring the devotion of significant resources to the cause and potentially delaying the successful rollout or implementation of the system.