zeti akhtar aziz : asean – towards a more integrated market keynote speech by dr zeti akhtar aziz, governor of the central bank of malaysia, at the 19th asean banking conference 2012 “ asean – towards a more integrated market ”, kuala lumpur, 7 november 2012. * * * as we enter a new phase of globalisation, asia ’ s role in the world economy is being significantly transformed both in terms of its significance and influence. asean economies are very much a part of this process. this trend has become more pronounced following the global financial crisis. five years into the crisis, the world economy continues to be challenged to hold a sustained recovery. the financial sector restructuring and reforms, and the structural adjustments being undertaken by the crisis - affected economies will not only take time to produce results, but in the more immediate term, these efforts will involve costs to the economy. while emerging markets such as those in the asean region are not insulated from these developments, the region has displayed remarkable resilience during this period. the region has benefitted from the decade of restructuring and financial reforms following the asian financial crisis. in addition, structural adjustments undertaken during this period and have resulted in more diversified economies, in which domestic sources have become increasingly important in sustaining growth performance. the region ’ s more favourable growth prospects are also underpinned by the relatively sound fundamentals that include strong external and fiscal positions, stable macroeconomic conditions, low unemployment and resilient financial systems. this has also enabled the region to better manage the large and volatile capital flows that we are experiencing, thereby mitigating its destabilising effects on economic activity. these strong foundations have supported asean economies through the challenging external developments that have taken place and have well positioned the region to realise its full potential as a dynamic growth centre. it is my great pleasure to be here to speak at this 19th asean banking conference, hosted this year by the association of banks in malaysia ( abm ) here in kuala lumpur. this conference takes place at an important juncture for our region, as concrete plans are being advanced to achieve an asean economic community ( aec ) by 2015. the aec blueprint, adopted by asean leaders in 2007, envisages asean to become a single market and production base that is characterised by the free movement of goods, services, investment and skilled labour, and freer the flow of capital. despite the recent global financial crisis, the drive for this vision to be realised remains resol

its market size and the abundance of natural resources. asean ’ s proximity to major markets such as china and india reinforces its status as an important global value chain player and a preferred production base for many multinational corporations. in 2010, foreign direct investments into the region registered an impressive growth of more than 100 % from the preceding year. the strong ties between the asean economies are also underpinned by the continued growth of intra - regional trade, which now accounts for 25 % of asean ’ s total trade. going forward, this trend is set to continue. the growing consumer market and the expansion of production networks in asia will continue to be a major driving force in promoting this increased intraregional trade. in addition, the measures taken to boost investment, as well as infrastructure development will reinforce this trend. 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. asean has undertaken gradual and sequenced liberalisation of identified financial services sub - sectors through the asean framework agreement on services ( afas ). five rounds of negotiations have been concluded, with the sixth round of negotiations expected to