The AEC will include a smoothly functioning regional financial system, supporting greater trade and investment flows, with more liberalised capital account regimes and interlinked capital markets. Strong regional banks, competitive insurance markets, and deep and liquid capital markets, supported by efficient payment and settlement systems, will facilitate economic growth in the region. The development of ASEAN’s financial and capital markets will strengthen ASEAN’s resilience to external shocks and help channel funding to where it is most needed. This will be achieved through:
Financial services liberalisation: Progressive removal of restrictions to the provision of financial services by ASEAN financial service suppliers to ASEAN domestic markets
Capital account liberalisation: Freer flow of capital across the region
Capital market development: Building capacity and infrastructure for the development of ASEAN capital markets
Harmonisation of payments and settlements systems: Harmonising domestic laws and regulations, and linkages of systems
Supporting initiatives: Capacity building, regional financing arrangements, and regional surveillance and policy dialogues
Taxation
ASEAN is also working towards the establishment of an effective network of bilateral agreements on the avoidance of double taxation among AMS to reduce business costs. An Avoidance of Double Taxation Agreement (DTA) provides certainty to individuals and businesses regarding when and how tax is to be imposed in the jurisdiction where the income-producing activity is conducted or payment is made. In a DTA, the taxing rights of each jurisdiction are defined and there are provisions for one of the jurisdictions to give tax credit or exemption to eliminate double taxation. DTAs also provide for reduced rates of withholding taxes on cross-border payments. Completing the network of DTAs among all AMS will encourage greater cross-border trade and investment in the region.
What This Means for Consumers and Businesses?
Greater Access to Financing:
The ASEAN Banking Integration Framework (ABIF) provides a platform for two or more AMS to agree on specific areas for liberalisation based on ASEAN banks’ commercial interests. The banks that meet AMS’s admission criteria and prudential requirements can enjoy greater market access and operational flexibility. This facilitates the expansion of our local banks in ASEAN, placing them in a stronger position to support the regional expansion plans of Singapore businesses.
Deeper and more liquid capital markets in the region, underpinned by efficient payment and settlement systems and freer capital flows, will benefit issuers raising funds in the region. AMS have harmonised disclosure standards to facilitate multi-jurisdictional offering of equity and debt. This provides significant efficiencies to issuers as they need only adopt a single set of disclosure standards for prospectuses in an offering across multiple ASEAN jurisdictions. Malaysia, Thailand and Singapore are signatories to the scheme.
Lower Business Costs
Competitive insurance markets will lower the cost of insuring business risks, which will stimulate economic growth and spur intra-ASEAN trade. AMS have agreed to prioritise the liberalisation of crossborder supply of Marine, Aviation, and Goods in International Transit insurance.
Better Quality of Financial Services and Improved Investment Opportunities
As AMS integrate financially, the quality of financial services provided to ASEAN consumers will improve and reach a wider community that is currently under-served. Deeper capital market integration will provide investors new investment opportunities in ASEAN markets. The ASEAN Trading Link electronically connects exchanges in Malaysia, Singapore and Thailand. Through the electronic trading link, investors will have easier and more seamless access into ASEAN markets from one single access point. Investors will benefit from the ASEAN Collective Investment Schemes Framework, which allows fund managers operating in a member jurisdiction to offer collective investment schemes constituted and authorised in that jurisdiction to retail investors in other member jurisdictions under a streamlined authorisation process.
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