New South Asian Economic Union mooted
In order to move towards regional financial integration, what's most important is the agreement amongst all countries to agree to the establishment of the South Asian Economic Union, a capital market expert says.
"Then the relevant policy experts from all the governments and private sector stakeholders can work on how to achieve the purposes of the economic union by working on sector to sector basis," Aftab Ahmad Ch., Secretary General, South Asian Federation of Exchanges ( SAFE) told the Business Times.
He said that SAFE has been recognised as a relevant industry association for the stock and commodity exchanges, and it looks forward to the day when the dream of having inter- connected capital markets can come true. In this respect, he said that the most surmounting challenge is the political environment of the region, which has worsened further during the last few years. "Because of this, there has been virtually no movement or discussion on how to integrate our economies.
Unless we see an improved political atmosphere, the progress towards our goal would remain muted."
The removal of controls on capital transactions within the South Asian region, harmonisation of capital market infrastructure including regulations, taxation, accounting, trading systems and cross-listings of securities 'can' be a reality, according to him.
"There are three ways to enabling cross border trading-one that we remove or ease capital controls, two that we agree to price and settle the securities in either US$ or Euro, three that we create a mechanism for South Asian depository
The removal of controls on capital transactions within the South Asian region, harmonisation of capital market infrastructure including regulations, taxation, accounting, trading systems and cross-listings of securities 'can' be a reality, according to him.
Receipts."
He added that alongside this, regulatory harmonisation in all related laws impacting the markets would also be needed. "SAFE has done extensive work in the area of harmonisation of the regulatory framework for our capital markets, however matters related to taxation would need to be decided by the policy makers," he added. Mr. Ahmad was in Colombo recently with CEOs of stock exchanges from around South Asia, who gathered for the Executive Committee Board Meeting and workshop of SAFE.
Analysts say that Asia is also being affected to some extent by the European debt crisis. In this situation, it will be necessary not only to strengthen regional financial integration, but also to develop a range of stronger measures to deal with crises. Specific priorities include using foreign exchange policies, fiscal and monetary policies, financial regulations and capital transaction regulations, to curb excessive capital inflows and outflows, and to implement countermeasures when such situations arise.
Continued efforts to improve domestic financial systems are also essential, they say.
(Duruthu)