Purisima pushes regional financial integration

MANILA, Philippines - Members of the Association of Southeast Asian Nations (ASEAN) must embrace immediate harmonization of regulatory standards and best practices in order to accelerate regional financial integration and compete with the rest of the world, one of the Philippines’ top economic managers said.

During the IISS Fullerton Lecture last Feb. 7, Finance Secretary Cesar Purisima said efforts must be intensified to speed up and deepen regional financial integration to enhance ASEAN’s competitiveness and capitalize on economies of scale and a larger consumer base.

While ASEAN member countries have made great strides in improving the soundness of their financial institutions, the region’s banks still lag behind their counterparts in advanced countries.

Purisima said the banking sector has so far seen little integration as no ASEAN-based bank has yet established a presence in all ASEAN member states.

“It will be a challenge to trade without integration of financial markets, which is something we need to work on. I am not aware of any ASEAN bank that has branches in all ten ASEAN countries. If we are to integrate, our banks must be at the forefront of opening up the markets since they are the ones who facilitate the flow of information,” he noted.

The Finance chief also highlighted the need to harmonize regulatory standards such as disclosure requirements, and of credit rating agencies.

“We have a credit rating agency in the Philippines and its counterparts in other ASEAN markets, but can you compare them as apples to apples?,” Purisima said.

“The ASEAN region is a reserve surplus area. We actually create reserves and yet we send these abroad, outside ASEAN…That is why I think it is important to recycle our own reserves as close to home as possible.  However, that will not happen without integrating first these capital markets. Otherwise, no capital market would be deep enough and none will have the liquidity. One of our goals then must be to brand ASEAN as a distinct class of investment opportunities,” Purisima added.

With the expected integration by 2015, ASEAN will be among the top 10 economies in terms of population, and probably among the youngest with an average age of 27 years old.

“The ASEAN is in the right place of the world for the next 30 to 50 years. An Ernst & Young study estimates that two-thirds of the world’s middle class will be from our region in Asia by 2030. Again, the young and the middle class are the drivers of growth,” Purisima said.