Regional integration: the ASEAN model We stand today on the brink of very exciting times for ASEAN as we draw closer to the vision of an ASEAN economic community in 2015. If the AEC vision was aspirational when it was first conceived, it is now clearly an imperative. This has prompted an increased momentum in efforts to realise an integrated ASEAN economic community, notably by achieving increased financial integration, higher levels of intra-regional trade and greater two-way cross-border investment flows. 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. The region’s integration process however, has followed its own path. Given the diverse nature of our economies within ASEAN, the integration model adopted for ASEAN has been one that focuses on (i) strengthening preconditions through collective capacity building to promote more open market access among the economies in ASEAN; (ii) progressively reducing barriers to facilitate cross-border trade; (iii) developing the market infrastructure and enabling environment to promote efficient and effective intermediation of cross-border financial flows; and (iv) establishing the appropriate safeguards for financial system stability. Progressive financial integration through this ASEAN model has been a strategy that has augured well for the region, allowing for the greater integration at a pace that is based on readiness and strength of the financial sector. Since 2007, ASEAN has achieved considerable progress in its efforts to deepen financial integration.

Macroprudential instruments like debt service-to-income (DSTI) or loan-to-value (LTV) are very powerful in preserving financial stability, but the access to credit for households from the lower income percentile might be affected. 2  However, in the long run, these macroprudential policies might have a positive contribution to preserving the wealth of borrowers, underpinning also financial inclusion. This is also the Romanian experience. When we entered the European Union in 2007, we had to get rid of all our macroprudential measures like LTV (loan-to-value) or DSTI (debt-service-to-income), because at that time such instruments were considered to hinder the free movements of capital. We reintroduced these measures in 2009, after the outbreak of the crisis. The bulk of non-performing loans we witnessed came exactly from exposures dating back to the time when the above-mentioned measures had been lifted (2007-2008) and the most affected borrowers were from lower-income buckets. For these individuals, higher access to finance and better financial inclusion in the short run implied over the medium and long term difficulties in repaying debts and, in many cases, negative equity for their balance sheets. Our lesson is that improving financial inclusion should take place in a sustainable manner. Macroprudential instruments might hurt this inclusion in the short term, but they will support it in the medium and long run. Our active involvement in raising the degree of financial education of the population is crucial for reaching the same objective. I am very interested to hear your views and experience on this matter.