Leading Asian bankers and financial legislators called for the creation of a single financial platform for the continent, complaining that the savings glut in Asian markets was being invested in other places like the US and Europe.
The single financial platform would include multinational credit ratings agencies, clearing platforms and banking institutions but consensus on it, in a region with a long tradition on disharmony and mistrust, would be hard to reach.
“There is an increasing recognition that the stakes are big on this, that things need to get done, but the process is difficult,” said Piyush Gupta, chief executive officer at Singaporean lender DBS. “It’s like pushing water uphill.”
Talking to Emerging Markets, Nazir Razak, group chief executive at CIMB Group, Malaysia’s leading investment bank, highlighted the problems of convincing Asian nations of working better together. “We have supported the creation [of a pan-Asian ratings agency] at CIMB. There’s a huge need for one, but it’s not happening,” he said.
Razak also decried the lack of pan-Asian asset management firms – Japan’s Nomura and Korea’s Mirae apart – as well as a palpable lack of trust between Asian nations, which was endangering enhanced regional financial integration.
“There are issues of competition around Asia that we have to deal with,” Razak said, noting that Singaporean lender DBS had “lost deals due to its national identity”. Likewise, he noted that Singaporean state-run firms only deposit capital in lenders based in a country with a high sovereign credit rating.
He also called for the creation of a pan-regional stock exchange. “That would be a real game-changer for Asia.”
Bandid Nijathaworn, chairman of the Thai Bond Market Association (TBMA), said that there was a “clear need to develop a stronger Asian capital markets system in the region”, and to ensure that Asian savings are recycled back into regional projects. He noted that the process had to be driven by governments. “Once they start the ball rolling, the private sector will follow.”
Asia also faces a rising infrastructure investment deficit, and delegates were keen to note the importance of keeping capital within the region. Iwan Azis, head of the Office of Regional Economic Integration at the Asian Development Bank, bemoaned the fact that a vast amount of regional household savings flees the region, settling in assets and accounts in Europe, North America and Australasia.
“This is a big problem,” Azis said in an interview with Emerging Markets. “This is a region with a huge deficit of hard and soft infrastructure, rising to $8 trillion over the next ten years. Where is that money coming from? It should be coming from the region, through Asian bond markets. We need to ensure that Asian money stays within Asia, and the answer is to create a working regional bond market.”
But to move toward a more harmonious and trusting Asia, much needs to be done. Friction has broken out in recent weeks between both Japan and South Korea and Japan and China over disputed islands, and levels of mistrust between even notionally friendly Asian nations remains high.
Unless disputes can be solved amicably, Asia, particularly in the northeast of the region, will miss an important chance to project its own economic vision to the world – and to act collectively to project regional economic ambitions and projects.