Singapore official urges Asean members to aim for economic and financial union
Senior minister believes further integration will help anchor region’s peace and stability
A senior minister in Singapore has urged Asean member states to work more closely together to deepen economic and financial ties and help anchor regional peace and stability in the wake of rising geopolitical tensions following the ruling on territorial rights in the South China Sea.
Modelled after the European Union’s single market initiative, the 11 members of the Association of Southeast Asian Nations have come up with the Asean Economic Community (AEC) – a roadmap and common regulatory framework for liberalising capital markets and manufacturing activities so each member state can trade freely and play to their own strengths.
Hong Kong is keen to conclude its own free-trade agreement with Asean this year that will see the city secure better trade terms and be able to tap into the common market benefits.
So far, the AEC has succeeded in implementing its own framework for bilateral banking and fund passport agreements that will give banks and investment management companies mutual access to sell into each other’s markets.
As a next step, Josephine Teo, Singapore Senior Minister of State, Prime Minister’s Office, Ministry of Foreign Affairs and Ministry of Transport,disclosed that the AEC was working on more ideas to achieve greater regional financial union.
“Asean member states will adopt a common international standard for their domestic retail payment systems,” said Teo, speaking at the OCBC Treasury, Economic and Business Forum in Singapore on Thursday.
The plan will link the fragmented domestic retail payment systems into one pan regional infrastructure by resolving the “interoperability” of different applications and systems in existence.
“These cross-border linkages will allow Asean retailers and consumers to make cheaper and faster payment transactions,” she said. There are broader benefits in “promoting financial inclusion by offering access to a more efficient remittance channel”.
Further, she said AEC is working towards harmonising prospectus requirements for companies wanting to raise capital through cross-border IPOs and bond issuances. This is to be done through a framework in development called the Asean Disclosure Standards.
“Capital markets will work more efficiently for businesses and investors,” Teo said. “These are modest first steps which may disappoint those who prefer more spectacular moves. But better that we make progress in a consistent direction than to have to back-track every now and then.”
Although the region’s geopolitical risk noticeably increased after the Hague’s ruling on the South China Sea this week, Teo pointed out that a more geopolitically testing time of war and ideological conflict occurred from the 1960s to early 1990s, before Asean members found solitary and regional integration.
“There was a lot happening in Asean and Singapore [at that time]. Lee Kuan Yew had said Asean’s start was unpromising [but] also said it had a promising future. That has been true for nearly half a century and remains so today.
Teo said the region’s “cohesion is challenged from time to time”, as current events prove. “This is to be expected, as we are each a sovereign state with our own national interests,” she said.
“But I think we should remember that the formation of Asean itself was anticipatory in nature. It was an attempt to forestall divisions in the region going way back to 1967 and prevent the chance of a downward spiral into chaos for the region.”
Working together over the years has helped Asean member states find peace and stability, she said. This in turn had enabled the region to thrive as “one of the most economically dynamic regions of the world” today.
“Each Asean member state also saw the benefits of economic integration for our businesses and our peoples as our trading and investment links intensified,” Teo said. “Despite the occasional ups and downs, integration within Asean is happening – slowly but surely.”
Teo cited figures to show that Asean was now the 7th largest “economy” in the world, with 650 million people and an estimated GDPsize of US$2.4 trillion dollars. As a result, “our partners are keen to deepen links”, she added.
Having joined China’s Asia Infrastructure Investment Bank and inking a deal with the US-led Trans Pacific Partnership, Asean is now looking to a 16-party Free Trade Agreement with other countries that have free-trade agreements with its members.
Known as the Regional Comprehensive Economic Partnership (RCEP), its membership comprises 45 per cent of the world’s population and accounts for about one-third of global GDP.
“When concluded, it may potentially be the largest trading bloc in the world,” Teo said.
The block is also further looking into greater air connectivity internationally, with the Asean-China Air Transport Agreement (AC-ATA), as well as the soon-to-be-negotiated EU-Asean Comprehensive Air-Transport Agreement.
“These initiatives are examples of attempts by Asean to stay ahead of the curve. They augur well for the longer-term prospects of Asean and its member states,” Teo said.