ASEAN KEY DESTINATIONS
‘AEC may not meet December deadline for integration’
THE Asean Economic Community (AEC) may not meet its deadline for full integration by December this year as obstacles in doing cross-border business are still prevalent in the region, said Malayan Banking Bhd chief executive officer Abdul Farid Alias.
“The intention of the AEC is to promote free movement of trade, labour, and capital. At present, the ease of doing business differs greatly from country to country, and more needs to be done to address this,” he said during a keynote interview at the Financial Times Asean Economic Summit in Kuala Lumpur on Saturday.
The AEC is conditional on the successful implementation of several high-priority measures, such as customs integration, transport integration and financial integration.
Another key point of contention among the 10 Asean member nations is the reduction of tariffs relating to cross-border trade. Four of the countries – Cambodia, Laos Myanmar, and Vietnam – had requested for a time extension to meet this criteria.
Speaking from a banker’s perspective, Farid said that labour mobility was a key problem for financial institutions with regional aspirations.
“In Maybank’s case for example, we would like to transfer people across the region much more quickly. It will help Maybank to promote the regional organisation that we want to build,” Farid stresses that more cooperation is needed among financial regulators in ASEAN, with the ultimate objective of creating a uniform regulatory framework.
“Every financial institution regulatory framework in the region differs from one country to another. Maybank is under the one of the most stringent requirements which is under Bank Negara (central bank), so it allows us to meet other countries’ requirements as well,” he said.
One of the stringent requirements under Bank Negara’s purview is the Basel III requirement that is imposed on Malaysian financial institutions, which compels financial institutions to deleverage while maintaining capital and liquidity buffers.
Aside from Singapore, which leads the way in the transaction of Basel III-compliant financial instruments, other ASEAN nations are still lagging behind in terms of compliance due to the uneven growth rates within the countries’ respective banking industries.
According to Farid, a major challenge for businesses with cross-border exposure is that some requirements that are set forth by local regulators can be costly, thus affecting returns on equity and growth.
“Sometimes, local regulations require businesses to set up infrastructure that is solely developed in that home country. This can be very expensive.”
“It would be much more efficient if we were allowed to build one system for the entire region,” he said.
For ASEAN to achieve financial integration, more work needed to be done in terms of achieving consensus between regulators and businesses as well as among the regulatory institutions themselves, he added.
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