- Category: Asean Economic Community
05 Jun 2013
- Written by Henry J. Schumacher / Asean-EU Perspective
THE European financial-services industry in Southeast Asia believes that a strong and competitive financial-services industry has an important role to play in achieving Association of Southeast Asian Nation’s (Asean)Vision 2020. Southeast Asia is an important market for European business institutions and the financial-services industry has a key role to play as an enabler and facilitator of growth. The financial industry supports proportionate regulation. Key to this is greater cooperation, economic integration and regulatory harmonization in the region.
A healthy financial-services industry is important for a number of reasons, including:
§ Supporting economic development, including the long-term funding of major infrastructure projects in the region/supporting public-private partnerships in the Philippines;
§ Financing the development and growth of small and medium enterprises (SME), the backbone of Asean economy and financing trade;
§ Providing sustainable long-term financial solutions to fund people in retirement and to service the needs of Asean’s growing middle classes;
§ Deployment capital more effectively, including mobilizing consumer savings into productive investment in the wider economy;
§ The industry is also a major employer and contributes significantly to government treasuries through the payment of taxes.
1. Asean Economic Community and Regional Financial Regulations
§ Regulatory harmonization reduces cost of compliance for financial-services firms operating regionally and would encourage longer term investments. A more efficient industry has more resources to invest and support the real economy.
§ The removal of national barriers—regulatory, trade, labor market restrictions—will help both local and international financial institutions deliver a more comprehensive service to customers in the region so that a seamless trading platform can become a reality.
2. Market access
§ There has been much talk about an Asean Qualified Bank license and more information about how this will operate, the qualifying requirements and the impact on international banks operating in the region would be welcome.
3. Capital markets development
§ The development of capital markets in the region is a cornerstone.
§ The bond markets, in particular, are fragmented and suffer from a lack of supply. Some of the key challenges to local bond market growth and integration include:
(a) Lack of harmonized regulatory standards in the region
(b) Creating a pan-Asian rating scale
(c) Lack of bond market infrastructure, including a pan-Asian clearing system and a pan-Asian bond issuance and trading platform
(d) Lack of a harmonized taxation framework
§ Facilitating cross-border electronic payments will assist intra-Asean trade flows. At present, national payment systems are not always compatible with each other and work should be undertaken to create a harmonized system; a useful step would be the creation of national payments advisory bodies,
consisting of representatives of the ministry of finance, regulatory bodies, the central bank and local and international financial institutions.
5. Retail banking and access to bank accounts
§ More steps should be undertaken to increase financial inclusion in Asean, ensuring everyone has access to a bank account and that financial capability is improved; financial inclusion brings benefits for consumers, the government and industry.
6. SME financing
§ The strategic action plan for SME development adopted in 2010 is an important step. SMEs are the backbone of Asean’s economy and it is essential they receive the support (financial and otherwise) to make investments for future growth and internationalization. There are a number of cross-border and national policies that could be put in place to dramatically facilitate SME growth.
§ The insurance industry plays a unique and important role with the financial-services sector providing wealth protection and accumulation for consumers and servicing their long-term retirement and saving needs. In order to perform this function more effectively for consumers and continue to support economic development, the industry recommends—among others—to introduce measures to encourage the deepening and broadening of equity markets—bringing more SMEs to market and expanding their access to capital.
8. Skills and labor market issues
§ The movement of skilled labor across borders is important to ensure that the manpower needs to corporates—large, medium and small—can be effectively met. There are substantial restrictions in place and Asean should look to build on progress made in this area. In addition, governments should ensure that immigration rules are proportionate; the development of a common Asean visa would improve international competitiveness of the region—not just for financial services, but for business as a whole.