With the ten-nation ASEAN Economic Community going into effect this year, an IMF working paper urged faster financial integration despite the consensus-driven deliberate regional “way “ among the range of members at all income levels. It applauds greater banking and capital market linkages since the late 1990s crisis, but notes that further financial services strides could offset the fallout from higher global interest rates and promote inclusion to reduce poverty.
The Fund added that despite safety nets in place like the Chiang Mai multilateral currency swap initiative, East Asia was hit by the mid-2013 Federal Reserve monetary policy scare and further protections could be considered with cautious capital account liberalization. Trade openness is already large with imports and exports above 100 percent of GDP outside Indonesia, Myanmar and the Philippines.
Intra-ASEAN commerce, mainly geared to consumer good supply chains, has quadrupled to $650 billion since 2000. Banking and securities market ties have lagged the pace except for Hong Kong and Singapore and are behind the Eastern Europe and Latin America norm as well.
FDI flows were a record $125 billion in 2013, bur foreign ownership limits are often in places especially in the services sector. Global banks have raised exposure in Indonesia, Malaysia and Thailand from a low base but ASEAN-based bilateral shares are “particularly low,’’ according to the Asian Development Bank with the Philippines at under half a percent of system asset