The Development and Integration of Financial Markets A study of the ASEAN Economies

Abstract

Abstract newline1. The ASEAN was constituted on August 8, 1967, in Bangkok, with the founder members - Indonesia, Malaysia, Singapore, Thailand and the Philippines. Later on, five nations joined Brunei Darussalam in 1984, Vietnam in 1995, Lao PDR and Myanmar in 1997 and Cambodia in 1999. There were the following contributory factors for the rise of the ASEAN region. newline Discriminatory trade and investment policies at the global level newline Bilateral free trade agreements newline Competition from China newline Doha negotiations newline Development of financial markets in the advanced nations newline The Asian Financial Crisis newline newline2. In 1997, ASEAN vision-2020 was seen as the realization of the end-goal of economic integration . It was visualized that there will be a stable, prosperous and highly competitive ASEAN economic region in which there is a free flow of goods, services and investments, a freer flow of capital, equitable economic development, and reduce poverty and socio-economic disparities. In the AEC Vision -2025, it was envisaged that there will be a smooth regional financial integration, having the features of liberalized capital account and inter-linkage of the financial markets. There were three strategic objectives- namely financial inclusion, financial stability and financial integration. newline newline3. The first effort towards trade liberalization started with the launching of the Preferential Trade Agreement (PTA), which came into existence in February 1977. In 1988, other trade liberalization measures were taken in the form of Brand to Brand to Complementation (BBC). In 1992 AFTA, was launched to get trade liberalization at full scale. AFTA was endorsed through the signing of the framework agreement in the 4th ASEAN summit in Singapore. Its objective was to enhance economic cooperation and to follow a common effective preferential tariff (CEPT). newline newline4. In 2003, the formation of AEC was proposed by the then Prime Minister of Singapore, Mr Goh Chok Tong, who was concerned about the weak ability of the ASEAN to attract FDI. The ASEAN had set a target