ASEAN goes for financial integration

The Philippines is hosting this week the 31st ASEAN Summit and Related Meetings which has the theme "Partnering for Change, Engaging the World"

In 2015, the ASEAN Economic Community (AEC) established the AEC Blueprint 2025, the master plan for ASEAN economic integration for the next 10 years.

The blueprint focuses on several issues of vital interest to every ASEAN member nation. Its main focus is the continued existence and unity of its regional economic community, a sort of economic lifeline of the rising region. ASEAN is a dynamic region known for diverse strengths. It has a total population that stands at 625 million people. Significantly, the region’s economic growth continues to surpass that of advanced economies. There’s also the fact that current market forecast predicts a rosier economic outlook for the region compared to the rest of the world. Most notably is the significant rise of ASEAN’s GDP per capita, from US$1,054 in 1996 to US$4,000 in 2016, consequently lifting millions out of poverty. Such growth must not become fragile, or else, this may put a damper on its road to region-wide financial integration. ASEAN governments and private capital need to step up collective efforts to keep pace with a rising middle-class.

In the AEC Blueprint, ASEAN seeks to achieve, anchored in the real world, a well-integrated and smoothly functioning regional financial system, characterized by more liberalized capital account regimes and inter-linked capital markets. This calls for a herculean set of tasks to achieve such vision. More than anything else, it will take more time, more action to chip away at the inefficiencies, vested interests, and structural underbrush in the ASEAN financial sector.

It calls for ASEAN to expand cross- border cooperation agreements among ASEAN banking and financial institutions, largely focused on common utilities for services like electronic payments, inter-bank payments, trade finance employing today's modern technology.For a better perspective, ASEAN policymakers will have to make sure that they possess a clear idea of what consumers of financial services are looking for, and how their respective governments’ regulatory agencies, clothed with authority, will implement with clarity and efficiency relevant financial market concerns. This will place the ASEAN vision for financial integration on a much firmer ground.

Proponents for the financial integration by 2025 have likewise spelled out as front-and-center of their goal, three (3) strategic objectives, namely financial integration, financial inclusion, and financial stability as well as three cross-cutting areas ( capital account liberalization, payment and settlement systems, and capacity building ); these objectives are as follows: First, the strengthening of financial integration to speed-up intra-ASEAN trade and investment will be facilitated and implemented through increasing the role of ASEAN indigenous banks, and having a more integrated insurance and capital markets. This will be supported by a robust financial market infrastructure that is safe, cross-efficient and more connected; second, the promotion of financial inclusion will be done through the delivery of financial products and services to a wider community that has remained underserved, including micro, small, and medium enterprises. These would include initiatives to address the uneven digital gap in the region and reflect changes in the demographic structure as some ASEAN countries become aging societies; and the third is the financial stability that will be ensured through the continuous strengthening of regional infrastructure particularly during times of regional crisis.

It helps if the ASEAN collective leadership will remain committed to strategic thinking with a strong bias toward flexibility, improvisation and innovation. This matters now more than ever in our changing global economy. Believe me, that counts for plenty. Former Malaysian Prime Minister Mahathir Mohamed in a talk before the Financial Executives Institutes of the Philippines (FINEX) annual general membership meeting held in Makati City on October 13, 2017 expressed optimism that the Philippines has " the potential for leading ASEAN integration because it had experience with regard to running a country that is very big, over 100 million people of diverse races and tribes".

Success, however, is far from assured. ASEAN must continue addressing the bloc’s issues, mostly economic, banking and capital markets while, at the same time, it must create new economic opportunities for its millions of citizens. Remember that saying, “a ship in the harbor is safe, but that’s not what ships are for.”

The ASEAN vision is paved with the best intentions. The best is yet to come.

***** Atty. Abelardo “Billy” Cortez is an independent board director at First Metro Investment Corporation (Metrobank Group). He was formerly FINEX president and chairman of the Capital Markets Development Council. abelardo.cortez7@gmail.com