Managing Financial Integration and Inclusion in ASEAN: Opportunities and Challenges

Event | 3 - 4 September 2014 Jakarta, Indonesia

Purpose

The purpose of this conference is to have a substantive discussion on ASEAN financial integration and inclusion issues among policymakers and key stakeholders for a shared understanding of the benefits and challenges of integration. This conference will contribute to on-going discussions on deepening financial integration and inclusive growth in the Asian region under the ASEAN Economic Community by 2015 and beyond.

Background

ASEAN financial integration has been pursued in earnest since the endorsement of the Roadmap for Monetary and Financial Integration of ASEAN by the ASEAN Finance Ministers in 2003. As a result three key initiatives have been implemented including the ASEAN financial services liberalization, capital market development, and capital account liberalization to support the roadmap. In 2012, the ASEAN Financial Integration Framework was also formulated by the Central Bank Governors to supplement the roadmap, particularly in identifying milestones for an integrated banking sector in ASEAN by 2020.

Although ASEAN financial integration is far from complete, it continues to gain ground. For example, despite the dominance of the banking sector, there is evidence that capital markets (particularly bond markets) and foreign direct investment have made increasing contribution as alternative sources of funding and investment in the region. Local currency bonds have been developed, while in the equity markets, efforts have been enhanced to broaden and deepen liquidity and market linkages. Capital flows have also been increasingly liberalized. Plans for establishing ASEAN Qualified Banks in the region by 2020 are also encouraging. Together, they support the view that financial deepening and integration in ASEAN has improved over time.

However, there are challenges to successful integration. One concern is that banking integration might further expose the region to increased cross-border spill overs and risks, as evident in the recent eurozone crisis. There are also concerns on the ability of the region to deal with changing global financial landscape, like the adjustments to the new Basel III requirements, and how the region can adjust to this new environment without undermining their ability to implement their commitments to integration.

But perhaps the biggest concern is how to make financial integration work, and to ensure that the quality of integration contributes to inclusive growth in ASEAN. Through deeper and more integrated financial markets, access to finance can be improved. This should enable households to reduce the incentives to save more, and for small entrepreneurs to raise funds, thus contributing eventually to increased consumption and investment demand.

To be sure, achieving the goals of financial integration and inclusion is not easy, given the current constraints in the region in terms of limited risk diversification, absence of adequate liquidity, gaps in regulatory quality, and inadequate financial infrastructure links. But the upshot is that these can be overcome with a carefully designed and well managed financial integration and inclusion agenda.

Objectives

  • Introduce recent developments in global financial markets and changing global financial landscape.
  • Discuss current initiatives in ASEAN to integrate banks and capital markets.
  • Discuss the role that regional financial market infrastructure plays in strengthening financial linkages.
  • Discuss the links between financial integration and inclusion, particularly the impact of integrated financial markets in enhancing the domestic sources of growth like consumption and investment.
  • Explore the role of postal saving systems as an alternative vehicle to enhance access and meet the needs of the poor and low-income people for financial services, develop a domestic investor base, narrow gaps in banking services, and support financial stability.
  • Discuss the role of microinsurance as an alternative solution to financial services to the poor.

Outputs

  • Improved capacity of government officials in understanding critical issues related to financial integration and inclusion in ASEAN, as well as in formulating policies and strategies that enhance their ability to manage the challenges of integration consistent with development goals and strategies.
  • Enhanced dialogue and networking among government agencies, international organizations and the private sector to integrate their financial markets through sharing of best regulatory practices among policymakers and practitioners in the region.
  • Concrete policy recommendations for promoting the benefits of deeper, more inclusive and more integrated financial markets, and the strategies to ensure successful financial integration and inclusion agenda in each ASEAN country.
  • Presentation materials to be disseminated through the ADBI website.

Participants

Mid-level to senior government officials (Central Bank and Ministry of Finance).

How to register

Participation is by invitation only.

Language

English

Responsibilities

Actively participate in discussions and share views and experiences with others.

Partners

Ministry of Finance of Indonesia