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KUCHING: Trade among Asian nations can grow with greater economic integration among Asian countries, taking into example the proposal for an Asean Economic Community (AEC) by 2015. According to Datuk Seri Nazir Tun Razak, CIMB Group Bhd’s (CIMB) chief executive, the global economic crisis had amplified the need for Asian countries to be more balanced in their dependencies for economic growth, in favor of domestic demand and intra-Asian trade and investments.
“Fuelling the latter must start with a re-evaluation of trust levels between Asians economic agents – individuals, companies and institutions,” Nazir affirmed during his speech at the recent Malaysia-China Trade and Investment International Conference 2011. “The global economy is so intertwined and interdependent that Asia cannot be immune to a major downturn in the Western economies nor an upheaval in Western financial system.
“For instance, let us look at Asean equity markets. At present, Asean is just trying to tie-up some form of cross border trading platform between our stock exchanges. Such a plan is facing resistance from incumbent stockbrokers in each country and would only have limited impact.” During his speech, Nazir also emphasised his call for a new Asean exchange which would list Asean’s largest companies as a step towards creating competitive scale for the region’s equity markets.
“This will make Asean equities far more compelling for investors, from the rest of Asia and beyond.” In addition, the CIMB chief executive highlighted the need for Asia to have its own strengthened financial architecture to facilitate greater intra-regional investments. “As our collective belief in our shared future grows, we must invest more in each other and do so directly, without the cost and risks arising from Western intermediation.
“There are of course many instruments for investing across Asian borders and we are seeing a proliferation in credible Asian financial institutions, asset managers, private equity firms and so on that is ready to facilitate this flow.”
Another point cited by Nazir was the need for a pan-Asian rating agency for a balanced view of Asian credits. “Despite the recent waves of downgrades across the West, I still find it difficult to understand how China (AA-) can be rated lower than Spain (AA) or how India (BBB-) can be rated lower than Ireland (BBB+) (S&P Ratings),” he opined.
“The implications of this ratings disadvantage are pervasive especially since sovereign ratings will typically limit ratings of corporates and banks in Asia. Asian nations and their corporates find it more expensive to raise capital because of the higher perceived risk, reducing their competitiveness.”