Moving forward with ASEAN: Advancing Partnership for Sustainability
Mr. Natapat Paruggamanont
Mr. Supphakon Damrongkitkanwong
It is undeniable that the financial sector plays an integral role to the well-being of any economy. In fact, the financial sector is often regarded as the “blood vessel” of the economy, as a smooth-functioning financial system is a necessary pre-requisite for economic growth. When it is healthy, it allows for an efficient allocation of credit to businesses and households, which creates an inductive environment for investments and growth to prosper. Meanwhile, if this “blood vessel” is infected, it could instead lead to several malfunctions of the body and serious adverse consequences. Therefore, as Thailand is taking over the role of the ASEAN Chairmanship in 2019, this article seeks to highlight the three key deliverables relating to the financial sector that Thailand will focus on under the overarching theme of “Advancing Partnership for Sustainability”.
ASEAN financial integration plays an integral role in achieving the AEC’s ultimate goal, particularly in creating a “highly integrated and cohesive economy”. Throughout the past few years, regional financial cooperation has significantly strengthened financial integration, promoted financial inclusion and ensured financial stability. Going forward, the financial sector will continue to be strongly emphasized as it contributes towards our overarching theme. In this regard, Thailand aims to drive three key deliverables during its Chairmanship: connectivity, resilience, and sustainability.
Promoting connectivity is necessary to promote a “seamless ASEAN” and “advance partnerships” forward. Enhanced connectivity will act to support financial integration and allow for financial services to become more interconnected, thus providing more efficiency and convenience for businesses and investments. One important aspect of connectivity is in terms of e-Payment. Technological innovations such as PromptPay and Standardized QR codes have made troublesome and expensive transactions a thing of the past. Today, we can make virtually all of our transactions and payments with just the tip of our fingers. Imagine how much simpler our lives would be if this interoperability would be applicable across ASEAN countries as well. As such, Thailand has already begun to promote the cooperation of Thai commercial banks with regional counterparts to connect real time retail payment systems to make transactions faster, cheaper and more convenient.
Given the increasingly interconnected and digital environment that we aim to pursue, another key deliverable that Thailand will promote is building resiliency. This is because the aforementioned potential benefits would be in vain without a financial system that is resilient to various shocks. Ensuring that the regional financial system remains stable and safe will not only provide benefits to consumers directly, but will also lead to sustained economic growth. In this regard, cybersecurity represents a new area of challenge for policymakers given its rapid increase in frequency, variety and complexity. As such, regional knowledge sharing and capacity building remain important issues to pursue, and Thailand aims to promote such developments during its role as ASEAN Chair in 2019.
Of course, it is necessary to weigh the benefits from a more connected and resilient ASEAN with its costs. In this regard, an important question we must all ask ourselves is how do we ensure that these benefits endure for generations to come. This brings us to the final key focus that Thailand aims to pursue, which is sustainability. This final deliverable emphasizes the practices in the financial sector, including both the banking sectors and capital markets, which play an important role in capital allocation towards the private sector. This means shifting our focus more towards longer-term sustainability and paying increased attention to Environmental, Social, and Governance (ESG) aspects as opposed to shorter term gains. One way that this can be achieved is through promoting “Responsible Lending” and increased “Green Bond” issuance as well as developing reliable indicators for Green and Social Equity to induce more investor participation. The key to achieving this is to make market participants internalize issues that are related to ESG into their business frameworks to increase their social awareness and encourage them to implement policies that are more environmentally friendly.
The financial sector plays an integral role in promoting sustainable and undisrupted real economic growth. In addition, financial integration will act as a key turning cog to continue to foster ASEAN’s ultimate goal of an integrated and cohesive economy. As such, Thailand will continue to support financial integration in its capacity as the 2019 ASEAN Chair in line with our 2019 Theme of “Advancing Partnership for Sustainability”.
The opinions expressed in this article are the author’s own and do not necessarily reflect the official opinion of the Bank of Thailand.