Euromoney Conferences: The Greater Mekong Investment Forum
"Confidence GMS"
in Connectivity of the
Speech by Dr. Veerathai Santiprabhob, Governor of the Bank of Thailand
Bangkok, June 1, 2017
Excellencies, Distinguished Speakers,
Ladies and Gentlemen.
A very good morning to you all.
Let me first thank Mr. Tony Shale, the CEO of Euromoney Asia, for organizing this
conference and inviting me to join you once again this year. It is always a great pleasure to
speak at the GMS Investment Forum. Let me also extend a warm welcome to those of you
who travelled from abroad.
***
Ladies and gentlemen,
Established way back in 1992, the GMS marks a quarter of a century milestone this
year. To me, the GMS today is like a promising 25-year-old graduate from a prestigious
university, full of energy and potential, on her way to making a mark in her career.
The GMS is a dynamic region, linked by the richness of the great Mekong river, with
abundant endowments and opportunities awaiting to be further explored.
Last year, I expressed my confidence in the future of the GMS, as a result of synergy
and connectivity that had been harnessed over the years. Today, I would like to once again
reiterate the importance of regional connectivity, as prospects for trade and investment
opportunities in the GMS have improved with a more positive global economic outlook.
I have three key messages on GMS connectivity to share with you today and
would like to invite you to be a part of this exciting journey:
Let's
think of the young vibrant graduate I mentioned, there is so much potential and
opportunity she can explore. She can broaden her skills and horizon as she gains experience
and professional networks over time. She will unavoidably face some challenges along the
way. But with support from her peers, together with technological advancement, she will be
able to stay on course for success. This is similar for our vibrant GMS.
This is owing to its geography,
First: The GMS is a region full of opportunities.
complementarity and connectivity among its members and with other regions;
GMS's
through
Second: endowments and opportunities can be expanded
enhancing financial connectivity, technology and innovation; and
Despite many challenges,
Third: policymakers and their private-sector partners
to the GMS region.
can make a difference
***
1. Why do I say that the GMS is a region of opportunities?
Over the past 25 years, integration within the GMS has deepened, integrating a
diverse group of members through physical, trade, investment as well as people-to-people
connectivity. Even more remarkable is the recent growth momentum of the GMS. Since
1992, the PPP-adjusted GDP of the GMS has expanded almost seven-fold from $455 billion
to around $3 trillion, making it, in aggregate, the eighth largest economy in the world, or the
size of the British economy.1 Intra-regional trade also increased 90-fold since its inception.2
Intra-regional investment growth has also been impressive. More specifically, last year, the
GMS agreed to further prioritize over 100 infrastructure investments and technical assistance
projects worth over $32 billion for the next 3 years, including the Laem
Chabang-BangkokDawei corridor in Myanmar and Thailand, and the Vientiane-Boten railway project in Laos.3
These remarkable developments are the results of continued efforts, both from within and
outside the region, on strengthening physical, trade, and investment connectivity.
While GMS's growth prospects are promising, the strength of the GMS will
Despite the GMS's young population,
depend on its ability to remain competitive.
growing middle class, increased urbanization, and rich natural resources, we cannot only rest
on our endowments and past achievements. Rather, we have to find new ways to unlock the
potential of the GMS. While physical infrastructure connectivity has seen much progress, I
believe that financial integration is needed to complement infrastructure, trade, and
investment connectivity. This leads me to my second topic.
***
2. How can we harness these opportunities through greater financial connectivity?
Let me introduce three potential benefits of financial connectivity: (1) lower
costs, (2) broader coverage, and (3) modern choices.
On Costs: Costs of cross-border financial transactions are still relatively high in
This is especially true for low value transactions and cross-border remittances,
the GMS.
where fees can be as high as 13% of the value of funds transferred.4 These high costs impede
not only remittances but also bilateral trade and investment. We therefore need to work on
solutions that will promote competition and innovations, making these services more
affordable.
While a complete solution for cross-border transfers is yet to emerge, significant
progress has been made with respect to payment solutions within each GMS country.
In Vietnam, OnePay allows customers to make financial transactions on e-commerce
websites, as well as deposit funds into their bank accounts without visiting a physical bank
branch. Wing in Cambodia, BCEL in Laos and Wave Money in Myanmar all provide instant
money payments and transfers through mobile phones to recipients who do not have bank
accounts. In Thailand, PromptPay is a modern, faster payment system that provides free
transfer services for transactions up to 5,000 baht (or about 150 US dollars), one of the
cheapest rates in the world. PromptPay allows individuals and businesses to transfer money
between banks and e-wallets using their mobile phone or citizen ID numbers. The Thai
government also uses PromptPay to deliver electronic welfare payments to individuals, with a
PromptPay's
view to minimizing costs, risks of fraud as well as financial leakage. Given
open architecture, we hope that the system will soon be integrated into the daily lives of the
Thai public.
Up to now, these payment platforms are mostly used for domestic transactions.
What we need is to connect these platforms to facilitate larger cross-border financial
Having an efficient cross-border payment platform in the GMS will
activities in the GMS.
yield tremendous benefits for economic activities in the region, especially for border trade. I
believe that it will not take long before solutions for cross-border payments become
widespread. As of now, a partnership between a Thai telecommunication company and
Myanmar businesses offers a cross-border remittance solution that allows sending money
directly to recipients, including those in rural areas of Myanmar. In Thailand, cooperation
between a Thai bank and a Chinese FinTech firm will soon launch a low-cost baht-yuan
cross-currency remittance platform based on blockchain technology. These initiatives are
promising projects that will lower costs of financial transaction, and enhance closer financial
connectivity and economic integration in the GMS region.
***
On coverage of financial services: At present, financial services in the GMS are
The increasing cross-border trade and investment call for
mainly provided by local players.
broadening cross-border players. As a result, the Bank of Thailand, together with other
central banks in the region are working towards establishing a cross-border banking network
through the so-called framework, which will facilitate
Qualified ASEAN Bank or QAB
qualified banks in ASEAN to increase their presence in another country. The expansion of
banking presence through this framework will help increase coverage and service efficiency
that are needed for economic integration. The Bank of Thailand is in the process of
negotiating bilateral QAB frameworks with Myanmar, Indonesia, Malaysia and the
Philippines.
Turning to the capital market, Thailand is also playing a proactive role to connect
- -
capital markets in the GMS by allowing foreign entities government and private to raise
funds in Thailand. Last year, the Lao PDR launched 11-billion-baht issue (or about $300
million) of baht-denominated bonds, which were well-received by the investors. In addition,
Thailand has allowed firms from the GMS to be listed on the Thai Stock Exchange with a
view to providing global investors with a wider coverage of investment products. Therefore,
this will offer firms from the GMS with wider coverage of fund raising.
***
In June 2014, the World Bank's Global Findex
On the choice of financial services:
estimates that over three-quarters of adults in CLMV countries still do not have access to
financial services5. There is room for improvement and we are fortunate to live in an era
where technological advancement can do wonders to mankind. Financial service providers,
-
both old and new, can capitalize on modern technology to provide new and perhaps once
unimaginable - products and services. These technologies will allow business to by-pass
the traditional stages of financial market developments, especially those that are paper-based
or those that rely on brick-and-mortar infrastructure.
Let me cite a few examples which I find very encouraging. In Thailand, an
offshoot of the TMB Bank, called ME by TMB, is a bank that does not rely on physical
branches. Vietnam has a similar model called Timo Bank. Businesses are conducted online,
making full use of digital payment technology. These banks pass on reduced costs to
consumers in the form of better offers, such as higher deposit interest rates or better services.
As technology provides more choices, there is room to provide more alternatives by
easing some of our regulations. Take, for example, for trade settlement
local currency usage
and direct investment in our subregion. The Bank of Thailand is currently working with
central banks in the region to relax regulations on the use of local currency for cross-border
trade and investment. Amid volatile global financial markets, this will offer businesses more
options in choosing currencies for trade settlements. Exporters and importers are able to
reduce their foreign exchange conversion costs and better manage foreign exchange risks by
using their local currency for settlement. The local currency framework that Thailand
concluded with Malaysia has been operational since 2016. We are now discussing a similar
framework with Indonesia, which will be implemented by the end of this year. We also have
a bilateral swap agreement in local currencies with China to facilitate the use of renminbi and
Thai baht bilateral trade and investment. We hope that similar frameworks can soon be
expanded to other GMS countries.
***
Ladies and Gentlemen,
-
3.
Let me now turn to my third message the challenges and the role of
policymakers to support businesses.
While the GMS was first initiated by policymakers, it is now driven mostly by
businesses. In order to further support business development, policymakers need to set
proper incentives, governance structures and regulatory frameworks to foster closer market
linkage. I see two ways we can address this.
First, each individual country must ensure that its rules and regulations are
sufficiently flexible to support innovative regional connectivity and technologies. To provide
regulatory flexibility and to support FinTech in Thailand, we have allowed innovative
"regulatory
FinTech products to be offered and pre-tested under the so-called sandbox",
which is designed to be a safe space where businesses can test innovative products, services
business models and delivery mechanisms. This arrangement will make it easier for firms to
test their products, and for regulators to develop necessary regulatory requirements before
these products are launched to the public.
Second, in light of the diverse financial systems in the GMS, domestic regulations and
policies need to converge to create a more integrated market. Take the payment systems, for
instance. Currently, different systems among our countries mean that payment connectivity
"Wave" "Wave"
is not seamless. In other words, "PromptPay" does not speak and does not
speak "Wings". Adhering to harmonized standards and ensuring that each system is more
able to link within an interoperable environment can help overcome this challenge. As a
result, I encourage GMS policymakers to cooperate on diverse aspects of banking businesses.
At the end of the day, this will make financial transactions within the subregion much easier.
***
Ladies and gentlemen,
In the current VUCA world, with rapid technological changes, we, as policymakers or
central bankers, would need to adapt ourselves and ensure smooth transition into this new
business-driven paradigm. We therefore welcome those who want to seize these
opportunities in the GMS.
A solid platform of road, ports, power grids, and tourism infrastructures already exist
in the GMS. Going forward, it is time to envision the GMS that is integrated in other
dimensions too, particularly finance. This is why I view that financial connectivity is an
important element in the next chapter of the GMS.
As I mentioned, I see the GMS as a fresh graduate. At 25 years old, a great future is
awaiting. Let us walk with her, help her unlock her potential, and lend her necessary
supports to ensure her success and prosperity.
I thank Euromoney once again for organizing this conference. I wish you productive
and engaging sessions today. Thank you.