(Mizzima) – An “Asean bank” system will be discussed on the sidelines of the Asean summit in Cambodia on March 26. The idea is to make it easier for member banks to set up subsidiaries and operate throughout the region, sources said prior to the summit meeting.
The move fits in with the plan to integrate the region's financial markets in line with the Asean goal to create an economic community by 2015, according to an article in The Mainichi Daily News that quoted anonymous official sources.
Central bank governors are expected to discuss the idea at meetings on the sidelines of the Asean finance ministers meeting in Phnom Penh.
“If accepted, a bank can have a license automatically from the 10-member countries,” said the official. “The ultimate goal is to promote financial market integration, one of the core ideas of the Asean Economic Community.”
Observers said that to get the plan off the ground countries would probably have to narrow the gap in the different stages of development of financial markets in the region. The plan will probably begin in financially strong countries such as Singapore, Malaysia, Thailand, Indonesia and the Philippines.
Financially developed member states are expected to provide technical assistance to weaker members – Brunei, Vietnam, Cambodia, Laos and and Burma, the newspaper said.
So far only three banks – from Singapore, Malaysia and Thailand – are believed to meet the anticipated standards. Asean central bank governors will gather in Phnom Penh for a series of meetings that start with the Asean Central Bank Forum on March 26, culminating in a meeting of Asean central bank governors on March 29.
Central bank governors from Cambodia, Indonesia and Brunei will also take part in the Asean finance ministers' meeting to be held March 30.
Burma is among the weaker Asean countries with a financial system that is now undergoing study by International Monetary Fund (IMF) officials. Meral Karasulu, the deputy division chief of the IMF Asia and Pacific Department who led the IMF assessment team, said in a statement released in January: “Burma has a high growth potential and could become the next economic frontier in Asia, if it can turn its rich natural resources, young labor force, and proximity to some of the most dynamic economies in the world, into its advantage.”
She said the process of upgrading Burma's antiquated financial system has already begun with recent changes in the exchange rate and restrictions on current international payments and transfers. The IMF team studied current processes and analyzed factors that could streamline and enhance Burma’s financial system.
“As this essential process continues, channeling the reform momentum to improving monetary and fiscal management and to structural reforms would allow taking full advantage of the positive effects of exchange rate unification,” she said. Karasulu said modernizing Burma’s economy would require changes to enhance the business and investment climate, modernizing the financial sector, and further liberalizing trade and foreign direct investment.
She noted that the parallel market exchange rate of the kyat has appreciated by about 32 per cent in nominal effective terms since end-FY2009/10. The appreciation pressures are primarily due to large foreign inflows into the economy, which cannot find an outlet due to exchange restrictions on current international payments and transfers, she said.
She said the technical work by the Central Bank of Myanmar (CBM) is already under way to establish the necessary market structure. Ultimately, the unification of the exchange rate would require moving away from the “export first” policy. In light of the appreciation pressures, she said, certain exchange restrictions can be removed immediately, for example, by allowing the use of all foreign currency bank account balances for imports, easing import licensing requirements and access to the newly established foreign exchange retail counters.
“A successful exchange rate unification would require improvements in all areas of macroeconomic management,” she said. “This will have to start with establishing a monetary policy framework to focus on price stability. The authorities' plan to grant operational autonomy and accountability to CBM is a welcome first institutional step towards this goal.”