AEC banking has yet to cross border

Officially formed a year ago, the ASEAN Economic Community (AEC) is home to more than 600 million people and fast-growing economies that boast a combined GDP of almost $3 trillion. The landscape of the regional market is expected to transform in the years to come with free movement of goods and services, investment, and skilled labour, as well as the liberty of cross-border financial services.

According to Tharabodee Serng-Adichaiwit, senior vice president and general manager at Bangkok Bank Public (Vietnam), following the AEC formation, many Thai companies have been looking forward to investing overseas. They feel confident with the level playing field that AEC has created.

For Vietnam, in particular, Serng-Adichaiwit noted that numerous companies have eventually found their way to Thailand. “Like Masan, they’ve started to sell their products in Thailand and Vinamilk or even Vietjet Air, too.”

The banking and finance sector, however, has not seen much of the movement or transformation. Serng-Adichaiwit stressed that “we have to accept that there are different situations and regulations between each AEC countries, so it will take time for this sector to open up, but for those who are ready to go overseas, they will branch out to serve their customers.”

“For Vietnamese banks, they are still in the state of building a stronger empire locally, and then they will work on elevating their business to reach international standards in order to expand overseas,” Serng-Adichaiwit told VIR on the sidelines of the Bloomberg ASEAN Business Summit in Hanoi last week

Likewise, vice chairman of Credit Suisse Asia Pacific Lito Camacho said, “Unfortunately, the banking and finance sector among the ASEAN countries have yet to open up, because our banking rules in the ASEAN member countries don’t really make a distinction between ASEAN and non-ASEAN foreign investors.”

“In terms of opening it up and encouraging inter-regional investment across countries in the banking sector, it hasn’t actually happened because today we don’t really make that distinction.”

“So how can they encourage ASEAN banks to really invest in Vietnam if they’re just going to enjoy the same benefits as a non-ASEAN bank?” Camacho questioned.

“That’s one of the things that I’m hoping the ASEAN leaders will come around to solving. If you want ASEAN to be integrated, you have to give reference to distinguish ASEAN capital, ASEAN labour, and ASEAN services – not only ASEAN goods,” he noted.

Meanwhile, according to CEO of Deloitte Vietnam Pham Van Thinh, the conflicts of alignments among AEC countries where economic views are often influenced by political viewpoints – arise from different interests in different countries – have posed as a weak link.

“Each decision made in AEC is a collective decision, which can only go through if all member countries agree to it. If one disagrees, a decision may not be put through. This is a real barrier which I believe is blocking the development of AEC,” Thinh said in an interview last Thursday.

In some 20 years joining the global integration, ASEAN, according to Minister of Planning and Investment Nguyen Chi Dung, has always been the first and most important playground for Vietnam, particularly when such a level playing field has now grown bigger, into the so-called AEC.

“Being positioned in the middle group, we fully understand that we must quickly narrow down the gap of development in the country and those in the upper group,” Dung said. “To be able to do this, Vietnam has been pursuing a strategic direction of growth, in a much faster pace and more sustainably, making the country into the top destination for Southeast Asian investors,” he added.

Vietnam’s Prime Minister Nguyen Xuan Phuc told the Bloomberg conference, “Each of the ASEAN nations would not be able to develop successfully if we solely rely on the exploitation of natural resources or basic labour. We ought to change, innovate, enhance our competitive advantages, and integrate deeper into the global supply chain, as well as aim for higher level of value-added”.

“The AEC thus act as a body and a motivator in the process of connecting economies, enabling new ideas and startups, and at the same time creating new drive for the development of trade and investment,” Phuc stressed.