Zeti Akhtar Aziz: Mobilising ASEAN - building the future through
partnership
Keynote address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia (Bank
Negara Malaysia), at the Wharton Global Forum Kuala Lumpur 2016 "Mobilising ASEAN:
Building the Future Through Partnership", Sasana Kijang, Kuala Lumpur, 11 March 2016.
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It is my very great pleasure to welcome you to Kuala Lumpur, Malaysia for the Wharton Global
Forum 2016. Over the years, the Wharton community has very much recognised the potential
of the ASEAN region as a growing force in the global economy. Indeed, in the recent five years,
Malaysia is the third country in ASEAN to host this Global Forum (Bangkok in 2015 and Jakarta
in 2012) and while central bankers have been a recurring feature at the Wharton Forum,
I do however believe that this is possibly the first time a Central Bank is the venue and host to
the Wharton Global Forum. We are really delighted to have this opportunity to be the host for
this year's Wharton Forum. I am particularly pleased to welcome you to Sasana Kijang, our
Central Bank's centre of excellence for learning and international cooperation. Indeed, the
word 'Sasana' is a Sanskrit word that means a meeting place. The building Sasana Kijang
which opened its doors in 2011 was envisioned to be a global meeting place for learning,
international knowledge exchange, collaboration and cooperation. Today, it has evolved to
become a truly global meeting place for thought leadership and collaboration, with the
presence of several international organisations in the building and the regional and
international meetings that are held here. Being a Central Bank, our goal is to ultimately
enhance our knowledge and capability to enable us to better serve society. This is not unlike
Joseph Wharton's vision for the Wharton School to produce graduates who would become,
what he referred to as, "pillars of the state, whether in private or in public life".
The Collective Strength of the ASEAN Region
Turning to the theme of the Global Forum - "Mobilising ASEAN: Building the Future through
Partnership". Founded almost half a century ago, ASEAN is currently one of the
fastestgrowing and most dynamic regions in the world. While at different stages of economic
development, the ten economies of ASEAN all share immense growth potential. The region
has experienced a long-term average annual growth of more than 5%, much higher than the
global average, and this is expected to be sustained going forward. Collectively, ASEAN is
now the sixth-largest economy in the world, with a population of 630 million and a combined
GDP of USD2.5 trillion. ASEAN is also one of the centres of global trade, after the European
Union, North America and China, and it is home to more than 220 global companies with
annual revenues of above USD1 billion. This strong growth and economic dynamism of
ASEAN are supported by its favourable demographic structure. With a young population,
ASEAN has the third-largest labour force in the world, after China and India, with a fast-growing
middle class given the rapidly rising affluence. By 2020, ASEAN is expected to account for
more than USD2 trillion of additional consumption to the world economy.
Motivation for ASEAN Integration
A key factor that underpins the region's potential is its progressive economic integration.
ASEAN is one of the most diverse regions in the world - in terms of economic size, income
level, resource endowment, economic structure, financial sector development, and economic
systems. The region has therefore leveraged on its complementarities arising from this
diversity. This is reflected in the increased cross-border production networks, and the
significant increase in intra-regional trade and investment activities. Since 1990, ASEAN
intraregional trade has grown from 18% to 24% of its total trade, and intra-regional investment
activities have now quadrupled since 2000, from 4% to 17% of its total investment. While there
has been a trend towards greater intra-regional trade and investment, financial integration in
the region has not progressed as significantly. ASEAN economies have, however, now
reached that stage of development whereby greater regional financial integration can further
unlock our growth potential. The push for regional financial integration is to bring about a more
effective intermediation of funds, bringing the excess savings from one country to be
channelled into productive investments in another. The ASEAN region, having one of the
highest savings rates in the world, therefore has the immense potential to meet some part of
the region's massive requirements for financing, particularly for large investment projects and
infrastructure development. Financial integration will facilitate channelling part of such surplus
funds towards productive investment opportunities in the region. It will also allow for more
efficient risk diversification of assets to include foreign assets from within the region. This will
not only reduce vulnerability to external developments but will contribute to achieving more
stable conditions in the regional financial markets.
ASEAN's Approach towards Greater Integration
Turning to the approach we have taken for ASEAN integration. Like most regional blocs, the
integration process for ASEAN seeks to promote greater regional connectivity which will in turn
expand and reinforce the region's growth potential. For ASEAN, this integration process has,
however, followed its own distinct path. While ASEAN has drawn lessons from the European
experience of monetary and financial integration, the approach taken by ASEAN is distinctly
different in order to be consistent with the circumstances of the region. Unlike the European
Union, in which the formation of a monetary union with a single currency represents a major
element in realising its economic integration, the ASEAN region had come to a decision in
early 2000s, based on a study by the ASEAN Central Banks that a common currency would
not be pursued. This was because the ASEAN economies did not have the preconditions to
achieve such a monetary union and that the effort to achieve such preconditions would involve
immense costs to the economies. It was therefore concluded that the region would instead be
better served by greater regional financial integration to achieve the very same objectives of a
greater shared economic prosperity for the region. Additionally, in Europe, the integration
process is facilitated by a more centralised governance structure led by supra-national
institutions while ASEAN has built on institutional arrangements and mechanisms that would
facilitate financial integration that leverages on a network of committees for the governance
process. ASEAN has also adopted a more flexible path that allows member countries to
participate in the financial integration process based on the state of readiness. Of particular
focus is the harmonisation of regulatory standards and supervisory practices, which is
reinforced by capacity building initiatives and technical assistance to bring all member states
to a similar level. This inclusive approach ensures that all member states mutually benefit from
the integration process. Additionally, regional cooperation in the areas of surveillance
arrangements, financial safety nets, and crisis management has been intensified to secure
financial stability during the integration process. While much remains to be done, significant
achievements in regional financial integration have already been met in recent years. Notably,
the launch of the ASEAN Banking Integration Framework (ABIF) in March 2015 and the
progress made in integrating the regional capital markets and the payment and settlement
systems are important milestones in this process.
Partnerships for a Successful Future
While the authorities and policy makers in ASEAN have entered into multilateral partnerships
to achieve the common goal of a more promising future, so has the private sector, given the
immense opportunities the more integrated region presents. This is also reinforced by the
intrinsic predisposition of the DNA of the region and its people and institutions. The future of
ASEAN needs to be built on the collective actions that are for the advancement of ASEAN.
Businesses have already been proactive in harnessing the benefits arising from the diversity
and complementarities in the region. To date, these efforts have culminated in the launch of
the ASEAN Economic Community in 2015.
In a global landscape that is constantly evolving, uncertain and complex, building effective and
smart partnerships has become an imperative for the common goals that ASEAN aims to
achieve. Partnerships are important because no one entity has all the solutions, answers and
expertise to take full advantage of all the opportunities and synergies that are created in such
partnerships.
Moving forward, building successful partnerships is an important strategy to realise the true
economic potential of ASEAN. As an example, effective partnerships in the financial sector
have made important contributions to institutional building in our financial systems. It allowed
shared knowledge and expertise to tap into opportunities to create scale and efficiencies for
the development of common infrastructure. Another area that has leveraged effectively on
partnerships has been in developing the ecosystem to support start-up businesses. An
example of this is the Malaysian Global Innovation & Creativity Centre (MaGIC) ASEAN
Startup track which builds a community of startups within ASEAN and accelerates their
timeto-market-readiness. There are also various financial technology or 'fintech' initiatives by
regional financial institutions that foster partnerships to accelerate financial innovators in the
region.
In 1919, an American biochemist discovered the four basic building blocks that form the DNA's
iconic double helix structure. Similarly, I believe that successful partnerships are also anchored
by four strong foundations in its DNA, namely Adaptability and Responsiveness,
Complementarity, Trust, and Governance. Let me elaborate on these essential foundations
for success for aspiring policymakers and entrepreneurs to reflect on.
The first base of a strong partnership is adaptability and responsiveness. In today's world,
challenges will not be easily addressed with conventional and one-dimensional solutions. With
greater interconnectedness and intensification of competition, one needs to draw on broader
perspectives that can be gained from partnerships, to build the agility to manage in an
everchanging environment. In a partnership, it is important to strive for mutual respect and
recognition of the differing needs, preferences and interests, and to encourage an open
dialogue around them. In this, the parties involved need to be adaptable and responsive in
offering pragmatic solutions that will deliver on the common goals, while respecting the
respective priorities of various stakeholders.
The second base of an effective partnership is complementarity. ASEAN's diversity does not
only manifest in terms of potential economic development, it also extends to the region's varied
cultures, languages, and religions. ASEAN therefore presents a unique opportunity to tap into
this diversity as a unique strength and to harness the complementarities. By working
collectively, ASEAN partners can build significant collaborative advantage to exploit new
opportunities and achieve shared goals. This will involve removing constraints and taking bold,
even experimental, steps to push new frontiers that may not have been considered possible
before.
The third base of a successful partnership is trust. And with trust, must come accountability.
One can observe the fallout from the lack of trust in the financial markets during and after the
global financial crisis, when many markets froze and fraudulent actions by financial institutions
shattered the public's confidence. Trust is pivotal in any collaborative relationship. The value
of trust at the individual, institutional, national, and global levels cannot be overstated. Building
trust, particularly among very diverse stakeholders, is of course not easy. Therefore,
partnerships will benefit from a clear commitment to stated goals that are in turn supported by
accountability structures that will sustain and reinforce that commitment.
Finally, a key aspect in delivering partnership aspirations is governance. Partnerships will
thrive and add value when they are supported with effective decision-making structures and
organisational frameworks to ensure the smooth translation of ideas from conception to
implementation. These factors create partnerships with real impact as they are able to fully
and sustainably utilise their specialist skills, knowledge and technological capacity in ensuring
successful outcomes.
Conclusion
In conclusion, the road to a promising and sustainable future for ASEAN is not one that can be
traversed in isolation, especially in a world that is becoming increasingly borderless. As we
see our economies prosper, our society will also mature with our improved growth
potential. However, we must bear in mind that having good 'genes' does not guarantee
successful results until we come together to activate and realise our latent potential. Therefore
policymakers, business community and civil society must collaborate effectively for this better
future, together. On this note, I wish you an enriching, dynamic and productive Forum.