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Securities regulators from the Association of Southeast Asian Nations (ASEAN) have agreed to a plan to integrate regional capital markets by 2015.

Securities regulators from the Association of Southeast Asian Nations (ASEAN) have agreed to a plan to integrate regional capital markets by 2015. The integration of regional capital markets is part of the broader program to create an ASEAN Economic Community, similar to the one that exists in Europe, in six years. The ASEAN  regional capital market, once completed, is expected to account for 15 percent of the world’s market capitalization and will allow free trade of products across any exchange from a single access point.

The general idea of regional integration, both politically and economically has been an increasing trend in recent years. It is generally agreed that enhancing regional cooperation works to the advantage of individual countries. This is particularly true for smaller countries who, without the help of a regional body, might find it difficult to compete in global markets. It also works for bigger countries by providing easier access to other markets. Examples of efforts at regional integration are ASEAN, the African Union, Mercosur, and the European Union.

According to Thirachai Phuvanatnaranubala, Secretary-General of the Securities and Exchange Commission and chair of the ASEAN Capital Markets Forum (ACMF), the plan will be implemented in several phases.

The first phase, to be implemented from now until 2010, focuses on wholesale markets for institutional and qualified investors and deals with establishing a common language and legal jurisdiction for documentation. The second phase, running from 2011 to 2012, looks at mutual recognition of rules for securities offerings. The third phase, running from 2013 to 2015, oversees ASEAN investors trading products freely.

According to an article written by Shinichiro Takaya for the Asia Securities Analysts’ Federation Electronic Journal, there are several infrastructures that needs to be established for this regional capital market integration to be successful. These include deregulating current rules on capital flows, granting a single passport to a financial institution, unifying standards for listing and delisting, harmonizing account standards and information disclosure, deciding on a common language for corporate disclosure, providing support for public services who give quick and accurate economic statistics, establishing a third-party/international monitoring system to ensure the legality and integrity of the regional market, and establishing an efficient currency exchange system while a single unified currency has not been introduced. In addition, Mr. Takaya states that measures need to be put in place that protect each domestic partner’s economy from excessive volatility of inflows and outflows that comes when an emerging market is integrated into a regional or global capital market network.

Providing these necessary infrastructure will surely present obstacles for the creation of a regional capital market. In particular, Mr. Thirachai said that having to deal with the capital controls that each country imposes and making sure to harmonize the different tax systems, will definitely act as obstacles to their plan.

But Mr. Thirachai and the securities regulators have high hopes for the plan they agreed to implement. First, they hope that ASEAN financial products will be viewed more as a class rather than individually. This will promote investment in the region by making it easier for investors to analyze the different financial products offered. Second, they hope to make ASEAN markets more attractive as a fund-raising market for investments by broadening the scope and opportunities for investment and by creating more uniform standards and procedures in the region.

Market regulators in Thailand, Malaysia and Singapore are expected to sign the agreement later this month. The ACMF hopes to get the approval of ASEAN finance ministers when they propose the plan to them in April 2009.

Source: www.AsiaEcon.org
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Source: www.asiaecon.org |

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