Bangkok Bank President Chartsiri Sophonpanich says Asean countries can still prosper despite the repercussions of the euro-zone crisis
Chartsiri Sophonpanich, president of Bangkok Bank, Thailand’s largest commercial bank by assets, says Thailand and other Asean member countries can learn several lessons from the euro-zone crisis.
While the upcoming Asean Economic Community (AEC), which will become effective in 2015, is unlike the euro-zone monetary union, it is the first major step in cross-border economic integration among the 10 Asean countries. Asean groups together Thailand, Malaysia, Singapore, Indonesia, the Philippines, Brunei, Vietnam, Myanmar, Laos and Cambodia.
At this stage, the AEC is similar to the European single market and production base, while some of Asean’s other aspects are also comparable to those of the European Union.
At present, the EU has a total of 27 member countries. Of these, 17 economies are members of the euro single currency, with Germany, France, Italy and Spain among the major euro economies.
The euro-zone crisis, which hit Ireland first, has worsened over the past year. It has already claimed five victims, with Cyprus being the latest to seek a bailout from the EU.
Previously, Ireland, Greece, Portugal and Spain also sought bailouts as national governments of these countries faced bankruptcy due to their huge fiscal deficits and sovereign debts relative to GDP.
Governments’ populist policies and overspending in the public sector, as well as the overleveraged banking sector, are blamed for the current crisis, which may break the euro if Greece or other members exit the single currency system.
As a key condition of the bailout package, Greece, for example, has been ordered to cut its public spending dramatically. This has caused massive social unrest as unemployment skyrocketed.
Due to the lack of its own national currency after the switch to the euro, the Greek government does not have the option of devaluing its national currency to re-balance the economy unless it exits the euro system.
In the case of Asean, there is no plan for a monetary union like the euro-zone economies opted for, but Asean will go ahead with its single market and production base under the AEC framework in 2015. This will unite the 10 member countries to create a regional market of nearly 600 million consumers, making it a more attractive place for foreign investment, where a single production base can serve the entire AEC market.
Besides cross-border investment liberalisation, the AEC will also open up the service sector, capital markets, and promote a freer flow of skilled labour across national borders.
“The situation in the euro zone provides a very good lesson for Asean countries to look at. We could learn how to better cope with crisis and to work together for greater prosperity in the integration process.
“In my opinion, Asean countries still have a good opportunity for economic growth. The Greater Mekong Sub-region, or GMS, which includes Myanmar, Thailand, Laos and Cambodia, also has strong potential, so these countries will be a driving force in AEC.
“Myanmar, which is opening up, has a lot of potential due to its large population and abundant natural resources, so we can expect growth and prosperity in Myanmar over the next decade.
“Our branch network in the region has been an important part of the bank, so we are able to provide support to our existing customers who invest in the region,” he says.