If
we look at the Thai economy over the past decade, we can see the clear trend
that Thailand has been tilting ever closer to its own region, specifically
Asean.
The region has been Thailand's major trading
partner, with over 18 per cent of the country's total export value. I would
have to say that there is now a renewed sense of urgency that Asean must
further cooperate and integrate in order to reduce our own exposure to the
world's developed economies, especially the struggling European and US
economies.
Natural market forces are also a major
catalyst, as consumer demand in nearby countries such as China and Indonesia is
on the rise. The regional focus comes from a top-down effort as well, however,
primarily through the economic integration programs of the Asean.
As everyone knows by now, we will be entering
into the Asean Economic Community (AEC) in 2015. Under the AEC Blueprint, there
are four pillars for economic integration to be achieved, namely: a single
market and production base; a competitive economic region; equitable economic
development; and integration into the global economy.
To enhance economic linkages in the region, I
personally think that a major step in 2012 onwards will be the beginning of
capital-markets linkages, as stock markets in Malaysia, Thailand and Singapore
will be linked, allowing brokers direct access to trading in certain stocks on
other participating bourses.
Other reforms to follow include increased
banking integration in 2013 and the Asean Economic Community in 2015. Full
liberalisation of banking, which Asean leaders acknowledge is a strategic
economic sector, therefore means a slower pace will be required. This will
eventually come in 2020, although the Bank of Thailand is looking at perhaps
bringing this timeline forward.
Despite concerns common to sovereign
countries about surrendering control to a supranational bloc, and the missed or
pushed-back deadlines for some of these reforms, the argument for economic
integration remains a powerful one in the eyes of many leaders and economists.
In particular, for a region with a recent history of conservative banking
regulators and the fear of capital flight - caused by the memories of the 1997
Asian financial crisis - integration could lead to a more stable system and a
lower cost of finance.
Also, I think that more regional integration
would afford countries a wider range of instruments and financial assets to
obtain insurance against shocks and risk management opportunities. The
Asean-listed stocks will further this goal by allowing trades via an electronic
platform, meaning that in participating countries, brokers can directly access
stocks on the bourses of others, removing the need to go through a local
broker. That means a reduction in fees for investors, and therefore for listed
companies a larger pool of potential shareholders.
I believe that the first links will be
established between Malaysia, Thailand and Singapore in 2012, and then add
stocks from bourses in Vietnam, Indonesia and the Philippines. Eventually,
greater integration could help Asean countries gain the attention of international
investors. Separately, these smaller countries attract less attention because
of their size than Japan, which has the world's third-largest economy, and the
populous giants India and China.
The technological underpinning of the
Asean-listed stock exchange is a system called the Asean Common Exchange
gateway. Brokers in one country will place an order on their home exchange, and
the trade will be executed in the other country, which will be executed as a
service by a broker there.
Looking ahead, the next step toward financial
integration will come in 2013, with the concept of Asean Qualified Banks. While
the rules were still under discussion as of early 2012, the idea is that banks
that meet certain standards will be able to operate in any Asean member state.
Fuller details are expected to become available later this year, but this is a
case of government trailing the private sector, as many of the region's large
banks have already expanded to other Asean countries: CIMB Group and Maybank of
Malaysia, Singapore's United Overseas Bank, and Thailand's Bangkok Bank are
just a few examples. Although the standards have not been set, there is
speculation that just a few banks in Asean will meet the potential criteria.
The big change in 2015 will be the
implementation of the Asean Economic Community, which will represent a leap
towards full economic integration, with some exceptions such as banking.
According to the AEC Blueprint, that will require the free flow of goods,
services, investment, capital and skilled labour - basically the four pillars
of economic integration under the AEC.
I reckon that in the years ahead, the AEC
will transform the Southeast Asian region into a single market and production
base. Thai people and businesses now need to look beyond our own domestic
market and see the broader Asean market with over 580 million consumers.
Dr Chodechai Suwanaporn
Business & Investment Opportunities
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