Muhammad bin Ibrahim: ASEAN’s rapid economic growth and future potential Opening address by Mr Muhammad bin Ibrahim, Deputy Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the ASEAN Fixed Income Summit (AFIS), Kuala Lumpur, 29 September 2014. *  *  *  I am pleased to be here at the inaugural ASEAN Fixed Income Summit, which is hosted by Bank Negara Malaysia, together with Cagamas, the ACI – Financial Markets Association of Malaysia and Malaysian Association of Corporate Treasurers. We have here today, an impressive gathering of senior policy makers across ASEAN and senior representatives from major financial institutions and corporations operating in the region. I would like to welcome all of you to Sasana Kijang, Kuala Lumpur and to Malaysia. Today, we are in one of the most dynamic and fastest-growing regions in the world. Based on IMF’s forecast, world growth in 2014 and 2015 would be 3.4% and 4% respectively. The ASEAN region is expected to grow by 6.4% in 2014 and 2015. ASEAN’s GDP is expected to reach USD3 trillion by 2017, tripling in size relative to a decade ago. With a diverse range of economies in terms of size, stages of development and economic structure, including home to many dynamic and emerging economies such as Myanmar and Vietnam, economic expansion in this region are expected to be sustained, and significantly outpace global growth. As ASEAN continues to open up to global investors, foreign direct investment flows (FDI) is expected to accelerate.
This effort should be expedited to provide issuance flexibilities and accelerate intra-regional cross border issuance. Much has been discussed and deliberated on this subject matter. It is timely to put idea into action. The benefits are significant, as ASEAN issuers will be able to raise long-term domestic currency funding not only from their onshore investors but across the region. Issuers would have access to a wider base of investors. A wider source of funding would also potentially enable them to better match funding and investment needs. Such a framework would also expedite the issuers’ compliance with regulatory process, leading to a shorter time to market, which would result in more reasonable cost issuance. Another bold step is to recognize the credit rating given by the domestic credit rating agency for domestic currency bond or sukuk issuance. Such recognition ought to be given should the rating agency had long enough credit cycle to prove its rating reliance. Domestic rating agencies have better local knowledge and insights. The rating methodologies are similar, technical model-driven and back tested. In addition, most domestic rating agencies have international partners for technical assistance, standard and quality assurance. Before I conclude, there are some ideas that could contribute to the further integration of our fixed income markets. Firstly, a crucial driver for greater financial integration is the availability of efficient and effective financial intermediaries. We should look to enhance and better connect the network of intermediaries in the region as it would support the development of a strong and integrated market.