Readiness of ASEAN Banking Sector Integration: Recent Development and Statistical Evidence

[Report for “MOHE/BNM Attachment Program”]

Abstract

ASEAN has a vision to form a single community by 2015. Thus, ASEAN integration has been a topic of great interest but unfortunately, attention has been over-focused on economics aspect. This paper aims to study the specific aspect of ASEAN banking sector integration within three objectives. Firstly, this paper aims to compare the ASEAN countries’ respective commitments to its own members through ASEAN Framework Agreement on Services (AFAS) against their commitments to the world under General Agreement on Trade in Services (GATS). Secondly, this paper aims to evaluate the readiness of ASEAN for banking sector integration using statistical approach. Thirdly, the statistical results from the second objective will be utilized to construct an indicator of readiness for ASEAN banking sector integration. The results reveal that ASEAN countries’ commitment to AFAS did not differ much from their respective commitments to GATS. Statistical evidence shows that there are vast differences in monetary conditions between ASEAN countries, hence causing difficulties for one-step-total-integration. Therefore, “paired-integration” is proposed based on the results of “readiness indicator”. Optimal pairing for Malaysia is Thailand, followed by Philippines and Singapore.