A.

BriefHistoryoftheASEAN(1967Present)(EiraandMaribel)

AssociationofSoutheastAsianNations(ASEAN)
Establishedin1967byIndonesia,Malaysia,thePhilippines,Singapore,andThailand
Joinedby:
Brunei(1984independencefromtheUK)
Vietnam(1995)
Burma(Myanmar)andLaos(1997ASEAN30thAnniversary)
Cambodia(1999)
ASEANCharter
constitutionoftheASEAN
enforcedonDec.15,2008
legallyestablishestheASEANasaninternationalorganization
Purpose:tobuildaregionwithsustainedeconomicgrowthaccompaniedby
lastingpeace,securityandstabilityaswellassharedprosperityandsocial
progress
10ASEANleaders(onefromeachmemberstate):ASEANEminentPersonsGroup
ASEANCommunity
3pillars:
1.
PoliticalSecurityCommunity
2.
EconomicCommunity
3.
SocioculturalCommunity
ASEANcommandsfargreaterinfluenceonAsiaPacifictrade,politicalandsecurity
issuesthanitsmemberscouldachieveindividually.
USrelationswithASEANhavebeenexcellentsinceitsinception.
USbecameaDialoguePartnercountryofASEANin1977
OnNov2009,ObamametwithASEANleaderinSingapore.>Firstmeeting
everbetweenaUSPresandall10ASEANmembers
ASEANEconomicCommunity(AEC)
Shallbethegoalofregionaleconomicintegrationby2015
Keycharacteristics:
a.
Singlemarketandproductionbase
b.
Highlycompetitiveeconomicregion
c.
Regionofequitableeconomicdevt
d.
Regionfullyintegratedintotheglobaleconomy
AECwilltransformASEANintoaregionwithfreemovementofgoods,
services,investment,skilledlaborandfreerflowofcapital.

B.FocusofDiscussion:BanksintheASEAN

InresponsetotherequirementsfortheupcomingASEANIntegrationby2015andtheAsian
BankingIntegrationFramework,thePHscrappedthelimitonForeignBankOwnership(i.e.
RA7721limitedforeignbankownershipto60%).

CommercialbanksarebyfarthemostimportanttypeoffinancialinstitutionsinASEAN.
Overall,theyaccountedformorethan82%oftotalfinancialassetsinASEANin2009.

Commercialbanksaresupervisedandregulatedmainlybythecentralbank,whereas
specialpurposebanksandnonbankfinancialinstitutionsareregulatedbydifferentregulatory
agencies.

C.PhilippinesBankingLandscape

BanksinthePhilippinesaretakingmoreinwardlookingstrategies.
Intrinsicallytheyarelesspositiveininvestingabroadandevenlargebankshaveno
networksoutsideofthecountryexceptformoneytransfercentersformigrantworkers.
Itsmainreasonistheexistenceofalarge,untappeddomesticmarket.
PhilippinesratioofbanklendingtoGDPisthesecondlowestonlytoIndonesiaamong
theASEAN5.
About80%ofhouseholdshavenodepositaccountsandtheyareexpectedtogive
amplebusinessopportunitiestodomesticretailbanks.
Further,thescaleofthebanksissmallerthanthoseinSingaporeandMalaysiaand
theythinktheyhavenoadequatefinancialresourcestoinvestabroad.
TheBDOUnibank,thelargestbankinthePhilippines,ismoreinvolvedin
strengtheningitsdomesticfoundationtofacecompetitionfromforeignbanksrather
thantoincreaseitsbusinessintheASEANregion.
IthasalargevolumeoftransactionswithChinaandthemeritofintegrationofASEAN
bankingsectorisrathersmalltoit.(Thisislikelytobeanotherreasonofits
unwillingnessofgoingabroad.)

D.NotionforMultibankIntegration

ASEANneedstonurturegloballycompetitivebanks.TheintegrationofASEANbanking
institutionswillcreateanenvironmentconducivetotheemergenceofsuchbanks.Itwillbuild
upacustomerbaselargeenoughtosupportthegrowthoflargecompetitivebankswitha
footholdinglobalbankingthroughmergersandtheacquisitionofsmallbanks.ASEANbanks

willthenbeabletomobilizemoresavingsthroughtheirnetworkandallocatethesetomore
productiveinvestment,therebyincreasingtotalfactorproductivityandacceleratinggrowth.

Whatweretryingtosayhere(goalofourpaper)isthatasmuchasbankingintegrationis
ideallygoodforthePHwewanttoprovethatbeforetheimplementationofsuchathingthere
shouldbemoreprotocolsandlawsthatpreventtheissuesthatwillbementionedbelow.We
willtrytoprovethatthePHhasnottakenthestepsnecessaryfortheASEANmultibank
integrationandhenceshoulddelayitsintegration.

E.IssuesregardingtheASEANMultibankIntegration

Formostemergingmarkets,liberalizationisanessentialpolicytoolthatattractsmuchneeded
foreigncapitalforinvestmentpurposes.

Financialliteraturehaspresentedastrongemphasisontheintegrationonstockmarketswith
theinterestincreasedconsiderablyfollowingtheabolitionofforeignexchangecontrols,the
introductionofinnovativefinancialproducts,suchasCountryFundsandAmericanDepository
Receipts,whichhavecreatedmoreopportunitiesforglobalinternationalinvestments.

Inlightofthese,someissueshavepresentedthemselvestroublesomealongsidethe
implementationofthesepolicies:

1.NationalSovereignty

Inanintegratedfinancialmarket,financialinstitutionsandmarketparticipantsoperateunder
thesamesetofrulesandregulations.ASEANwideintegrationofthebankingmarketrequires
asubstantialdegreeofregulatoryharmonizationamongthememberstates,butinstitutinga
uniformregulatorystructureacrossaregionwithmanysovereignstatesatdifferentstagesof
developmentisadauntingtaskasitinfringesonnationalsovereignty.

2.Spilloverofissuesfacedbyforeignbanks

Theentryofforeignbankscouldexposethedomesticbankingmarkettothespillovereffects
ofdifficultiesencounteredbythesebanksintheirhomecountries.

3.Volatilityinthemarket

Theriskthatthefreedomtomakecrossbordertransactionsmayemboldensomeofthese
newforeignentrantstoengageinspeculativeactivitiesthatwillincreasethevolatilityof
capitalinflowsintoaspecificmemberstate,therebydestabilizingitseconomy.

4.StabilityofDomesticBanks

Entranceofforeignbankswillnotleaddomesticbankstoimprovetheirefficiencybutwill
actuallydootherwiseandslowlykilloffthemarket.

F.RelevanceforDevelopmentEconomics

DevelopmentEconomics
- is a process where there is improvement in the lives of all people in the country. This
involves not only living standards, such as greater availability of goods and services
(and also the ability to purchase them) but also the promotion of attributes such as
self-esteem, dignity and respect, and the enlarging of people's freedom to choose
and to take control of their own lives. While a country may grow richer therefore,
through the growth of its real output, it does not necessarily mean that it will
experience development.

ASEANIntegrationinrelationtoDevelopmentEconomics
WillhelpintradeandexchangeofinformationwithotherASEANcountries
Mayleadtobettercompetitionthatwillonlybenefittheeconomyofthecountry
Mayleadtolowerpricesandalargervarietyofproductsandservices
Callforgovernmentregulationsinordertohelpthelocalbankscompetewithlarger,
foreignfirmsespeciallyinthePhilippinecontext
Mayleadtosmallerbanksmergingwithothers(oracquisitions)inordertocompete
againsttheincomingforeignbanks
Willprovidemoreopportunitiesandjobsastheywillbeabletoreachalargermarket
fromalloverthecountryandotherASEANcountries
WillencouragelargecompaniestoinvestinthePhilippinesthatwillhelpinthe
developmentoftheeconomyofthecountry

G.Conclusion/FinalRemarks(Kristian)

Economicintegrationintheformoffree(er)movementofgoods,capitalandpeoplewill
typicallyyieldwhateconomistscallefficiencygainsforacountrybenefitsderivedthrough
specialization,competitionandbetterallocationofresourcesinproduction.


Fearsoverchangingcomparativeadvantages,badenvironmentsofdoingbusiness,more
complexandchaoticglobalconditions,etc.mustbebalancedbycarefulexploitationof
opportunities.

TobeabletoestimatetheimpactoftheAEC,first,wetakeintoaccountmultiplepolicy
measuresthatcomprisetheAEC,includingtheeliminationoftariffsandnontariffmeasures,
tradefacilitation,andimprovementsintheinvestmentclimatesecond,weuseamodel
specificationthattracksbenefitsderivedfromproducingawiderrangeofvarietiesandfrom
productivitygainsassociatedwitheconomiesofscaleandchangesinthedistributionoffirms
byproductivitythird,weexploretheimpactofattractingnewexternalpartnersintothe
ASEANshubandspokenetworkoffreetradeagreements.
Ifimplementedasplanned,theAECshouldhelpreplacetherelativelyslowgrowingmarkets
oftheUnitedStatesandEuropebyacceleratingthegrowthofmarketsintheregionitself.

ADB(2007)arguesthatASEANsdevelopmentmoreorlessconformstotheKuznets
process:thecontributionofagriculturetoGDPfallsovertimethecontributionof
manufacturespeaksandthecontributionofservicesrises.

Withthesuccessoftheseinitiatives,investorscanexpectstrongparticipationofSMEsinthe
buildingofregionalproductionnetworkwhichinturnwillprovidebusinessmenwithwider
optionsforsuppliersandpartnersfromsupportingindustries.Investorscanbenefitfromthe
InitiativeforASEANIntegrationasbeneficiaryASEANgovernmentswillbemorecapableto
developandimplementeconomicpoliciesthatwouldfurtherboostthepositiveeffectsofthe
AEC.

Thebankingindustryisakeysectortowatchasconsolidationandnetworkexternalities
(morebranchesandmorecustomersspelllowercostsonthemarginandhigherprofits)take
place.Asexpected,severalregionalgiantsareseekingtogainafootholdandexpandin
relativelyunderdevelopedmarkets.

ThePhilippineshasitsownstrengthsgoingintoAEC2015,e.g.,governanceimprovements
thatledtostrongereconomicfundamentalsandinvestmentupgrades,andnetworkof
overseasFilipinoswhobringinformationonmarkets,financingoptions,transferable
technologiesontopofcontinuedforeignexchangeremittances.

Thelawthatabolishesacaponforeignbankownershipwhichpreviouslylimitedforeign
financialinstitutionstoowningnomorethan60%oflocalPhilippinesbankwillhelpthe
PhilippinesgetreadyforfurtherintegrationwithitsneighboursintheAssociationofSoutheast
AsianNations(Asean)region.Butitwillalso,intheshorterterm,giveaclearmessageto
foreignlendersthatthecountryisopenforbusiness.

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http://www.up.edu.ph/developingskillsandcompetenciesforaseanintegration/
http://www.triplealearning.com/files/developers/a_z_economics/page_19.htm
http://www.eastasiaforum.org/2014/08/29/bankingintegrationinaseangatherspace/
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