Barriers, inefficiencies, US monetary policy among issues calling for prompt solutions
Regional business leaders last week gathered in Singapore for the Network Asean Forum (NAF), during which they brainstormed solutions for some of the issues hindering the creation of an integrated Asean Economic Community.
They also discussed the impacts on Asean economies of the United States’ tapering of its quantitative-easing policy.
Tony Fernandes, chief executive officer of low-cost carrier Air Asia Group, said there remained several barriers to creating a single aviation market in 2015.
“These barriers include [cross-border] ownership issues, aviation rights, etc, as we couldn’t fly over other countries without such rights, or Malaysian airlines could not fly Thailand’s domestic points. This conference tried to get rid of these inefficiencies, especially rules and regulations that we put in place.
“The common Asean market should have a common regulator, common slot coordinator, freedom of movement for airlines. We’re moving in the right direction, but it’s a long way to go. Unless all Asean countries moved in the same direction, we wouldn’t have a unified Asean market.
“Regarding the impacts of the US’s tapering of its quantitative-easing policy on Asean economies, I think we have to do a rebalancing. It’s a wake-up call for Asia, and we need to be more competitive and not use protectionist policies. Good policies often come during bad times. I hope we use this to make ourselves better.
“The weakening currencies in this region will be favourable for external tourists” visiting Asean countries.
Nazir Razak, CEO of Malaysia’s CIMB banking group, said: “The proposed pan-Asean stock exchange will benefit the integration of the region’s capital markets, as we can list the biggest companies in Asean on one exchange.
“This will make it easier for global investors to put more money into the region.
“This will also help some companies in the smaller countries where the exchanges are completely ignored by global funds to be able to tap equity capital.
“Compared [with] the Asean Link, it’s vastly different, as Asean Link is not doing much. [A] pan-Asean stock exchange will allow regional companies to migrate into a whole new exchange. Other barriers against the integration of Asean capital markets include disparity in taxes, disparity in market access, as well as in rules and regulations surrounding the domestic capital markets. Harmonisation of these rules has to be done much faster.
“On the US’s tapering of its QE policy, I think it’s an adjustment period for Asean, a reversal [of capital flows] to normal, so there will be volatility [on stock prices, exchange rates, etc].
“We have enjoyed too much cheap money, so we have to adjust to a more normal environment. The party is over for now.”
Chartsiri Sophonpanich, president of Bangkok Bank, who also attended the NAF conference, said: “The Thai economy has slowed along with other regional economies. The impacts of the US’s tapering of its QE policy are inevitable, as huge liquidity has been injected into the global economy” [over the past years].
“On the other hand, the US tapering underlines the fact that the QE policy has achieved its objective of stabilising the US economy. I see tapering as a good sign for the long run as it helps boost the global economic stability.
“Thailand’s and other Asean countries’ economic fundamentals remain quite strong. In particular, Thailand’s new investment in infrastructure projects as well as other structural reforms will boost the country’s competitiveness and productivity.
“The revised GDP [growth] forecast of 3.8-4.3 per cent reflects reality, so there is no worry, and it’s also consistent with the regional trend. On the baht [which has dropped to 32 per US dollar], it’s also consistent with other regional units, so the relative competitiveness is not much different. For Thai businesses, it’s necessary to focus on added value and a higher level of competitiveness and in the short term they need tools to manage their exchange risk.”