The ASEAN Banking Integration Framework (ABIF), is now in its final stages of development. The ultimate objective of this initiative is to enable greater presence of ASEAN financial institutions to operate in the region to facilitate greater intra regional trade and investment activities. Businesses will thus stand to gain by having improved access to a larger and a more secure source of financing for such cross border trade and investment activities. Headway has also been made in developing the capital markets in the region and to move towards greater financial integration of the markets. Over the recent decade, the ASEAN bond market has more than tripled in size to USD1.1 trillion. ASEAN Exchanges, a collaboration of seven stock exchanges within the region, was launched in 2011 to drive cross-border collaboration, streamline access, create ASEAN-centric products, and implement targeted promotional initiatives. In addition, the listing of ASEAN indices with the Financial Times and London Stock Exchange (FTSE) in 2005 has also enhanced the market visibility of the ASEAN exchanges, which represent close to 95% of the investable market capitalisation in the region and which has a combined market capitalisation of approximately USD2.9 trillion. This facilitates businesses in cross-listings between the exchanges and in raising funds given this common platform for ASEAN businesses. Finally, ASEAN Central Banks and Monetary Authorities have long been involved in various regional cooperation initiatives to develop efficient, secure and reliable payment and settlement systems.
Given the immense funding requirements that ASEAN has, particularly for large investment projects and infrastructure development, greater financial integration will facilitate channeling part of the region’s surplus funds towards productive investment opportunities in the region. Regional financial integration will also allow for more efficient risk diversification of assets to include foreign assets from within the region. This will not only reduce vulnerability to external developments but will contribute to achieving more stable conditions in the regional financial markets. Additionally, this trend has been reinforced by greater coordination and cooperation among the regional Central Banks and regulatory authorities to safeguard financial stability. The collective actions that have been taken have enhanced the ability to manage and respond to risks confronting the region. Greater financial integration has also created an enabling environment for businesses. It has facilitated improved access to financing investments in the region. In particular, the presence of larger and increasingly more viable financial institutions in the region along with more developed financial markets have generated greater cross-border funding possibilities in the region and has allowed for more funding options for businesses. Further work in this direction is underway and significant progress on this front is expected to occur in this next decade. Key distinguishing features of ASEAN’s model of integration While ASEAN may draw on the experience from the European model of monetary and financial integration, the region has charted its own path towards greater financial integration.