Senior economist, Asia (ex-Japan) at Deutsche Bank, discusses banking and finance in Asean
What are the prospects for growth in Southeast Asia if international conditions remain difficult?
If the G-3 economies continue to grow, even at below potential rates, Asean should be able to grow at around 4-6% year-on-year, propelled by intra-regional trade as well as domestic consumption and investment which will in turn be supported by fiscal stimulus measures in the more mature Asean economies.
What new paradigms of growth are likely to be needed in Southeast Asia in the coming decade?
Governance and development of intra-regional financial intermediation will be needed. Asean-10 on aggregate has surplus savings, but these savings are not being channelled to finance investment in the region. Regional integration is necessary in light of the existence of other large emerging markets such as China, India, Brazil and Russia. Population size, governance and ease of doing business are important considerations for investors.
What lessons should Southeast Asia take from the recent economic slowdown, particularly in Europe and the US?
First, Asean should nurture increased domestic demand and intra-regional synergies to drive future economic growth. Second, openness augments growth potential but also brings contagion risks. The importance of having prudential regulations and good governance standards are important for sustainable growth. In this regard, the road toward the Asean Economic Community (AEC) is a positive development for the region.
How is the region’s banking sector expected to gain from the formation of the AEC?
It is poised to gain from higher transaction volumes in trade and investment flows from both intra-regional and global origins. Greater regional synergies are also expected to increase income and financial sophistication, boding well for consumer banking, corporate banking and the development of the region’s capital markets.
In terms of FDI competition, to what extent is the emergence of Myanmar a positive or a threat to less developed countries such as Laos and Cambodia?
The emergence of Myanmar is not necessarily a zero-sum game for Laos and Cambodia. Myanmar is a much larger country in terms of GDP size and population, so it will attract FDI that seeks competitive and abundant labour, as well as larger markets. Laos’ attraction lies in the hydropower sector, which will remain unique. Cambodia is well known for its tourism sector, which is also unlikely to change. FDI for labour-intensive industry such as garment and textile may be somewhat affected, however. On the other side of the coin, a more prosperous Myanmar should attract more interest into the region.
