30 November, 2010

7th ASEAN Finance Ministers’ Investors Seminar (AFMIS)


1.            I am honoured to welcome you to Kuala Lumpur and to the ASEAN Finance Ministers’ Investor Seminar. It is indeed a privilege to address this distinguished gathering of the ASEAN Finance Ministers alongside so many members of the investment community.

2.            Since 2004, this forum has allowed investors from various regions to engage directly with the Finance Ministers of the ASEAN countries as a group, as well as individually in separate country sessions. This provides an important venue to share perspectives on the ASEAN markets and a deeper appreciation of our regional strengths and value proposition as a global investment destination. This is especially true in the current economic environment, where ASEAN is playing an important role in contributing to the global recovery.

3.            Let me now turn to some of the reasons I believe ASEAN offers such great opportunities for investors; I will then touch on the efforts being made to increase these benefits through greater integration of ASEAN; and I will close with a few thoughts on ASEAN’s role as a responsible global stakeholder in this time of remaining economic uncertainty.

Ladies and gentlemen,

I. Investing in Tomorrow’s ASEAN: Sustainable and inclusive growth with stable financial markets

4.            ASEAN has established a reputation of rewarding investors with stable and profitable returns on investment, not only for portfolio managers, but also for longer-term direct investors in both real and financial sectors. Foreign investors’ stake in ASEAN has been a key factor in supporting investment and growth of new sectors which have been crucial for ASEAN’s economic development.

5.            Foreign investment in ASEAN has gone beyond simple provision of capital by bringing in new technology, skills and connectivity to the global market place. In return, foreign investment in ASEAN has yielded very attractive returns, with net profit and dividends for non-residents ranging from USD500 million to USD14 billion across the various ASEAN countries in 2009.

6.            Moving forward, ASEAN aims to progressively improve investment opportunities through promoting sustainable growth and accelerating the integration of ASEAN capital markets. While not having been put directly under stress by the global financial crisis, ASEAN regulators have initiated regulatory changes to enhance investor protection, foster markets’ resilience and sustain investor confidence. The various approaches to economic transformation and regulatory changes in ASEAN countries will result in better investment climates across the region.

7.            These developments are contributing to an emerging ASEAN single identity of shared values and goals for economic prosperity of which I am very proud. Through these shared values, each country is a gateway to investments in the ASEAN region.

Ladies and gentlemen,

8.    Several concrete factors support an optimistic outlook for investment in this region:

9.            First, in addition to growing the ASEAN market organically, ASEAN countries have established partnerships with international players to expand their outreach. Investment in many ASEAN countries is a gateway not only to investment within ASEAN, but also to hedge and arbitrage via products unavailable in domestic exchanges. For example, Malaysia’s recent partnership with the Chicago Mercantile Exchange offers a global platform for hedgers to leverage trade in US dollar and ringgit based palm oil derivatives.

10.         Second, ASEAN’s market potential is continuing to grow. With a total population exceeding the EU, the ASEAN market is further enriched by being a geographical and cultural bridge between the even larger markets of China and India. Within ASEAN, as the more matured ASEAN economies move towards high income status, purchasing power is increasing and reinforcing a virtuous cycle of higher incomes. As the people in this room are well aware, higher incomes amidst a culture of sustained savings across all ASEAN countries mean more demand for investment instruments, as well as demand for investment advisory and management services.

11.         Third, ASEAN is committed to deregulation and liberalization of its markets. It is committed to moving forward on new free trade pacts and additional liberalization in financial services. It is committed to policies of domestic deregulation and liberalization. Malaysia, for example, is broadening the range of FTAs and has begun negotiations of the Trans Pacific Partnership (TPP). Thailand, Malaysia, Singapore and Indonesia have also put in place legislative frameworks to promote highly competitive and fully secure markets. This will provide broader and more lucrative opportunities for investors in ASEAN.

12.         Fourth, ASEAN has a clear early mover advantage in Islamic finance. As the global community embraces Islamic finance as an alternative financial model, ASEAN offers unique opportunities for new Islamic finance instruments and fund management businesses. Big international fund managers like Saturna and Franklin Templeton have begun offering Islamic finance services out of Malaysia. We also see great potential for ASEAN as the gateway to tap Islamic investment funds from across the Middle East.

13.         Fifth, ASEAN countries are also a growth bed for new markets and products, particularly in the pension fund services. While the demographics in ASEAN remain skewed towards a younger population, we need to plan ahead to develop a private pension fund industry and enable workers to plan and manage their wealth for retirement. For investors, pension fund reform initiatives offer participation in a new industry and create new opportunities for partnerships in an emerging aspect of fund management in the region.

14.         Finally, high incomes have been achieved in economies driven by innovation and creativity. More resources in ASEAN are being allocated to incentivize innovation and creativity which will drive ASEAN aspirations to reach a higher income status. Public policy will support new opportunities in private equity and venture capital finance in sectors beyond ICT. In Malaysia, there is a new focus for innovation in services and agriculture, the latter to leverage on research in bio-tropics and other new product lines with synergies to a vibrant pharmaceuticals industry. This in turn provides new areas of interest for venture capital funds and angel investors, as well as opening exciting new sectors for more traditional investors.

II. Integration of ASEAN capital markets: a roadmap towards achieving an ASEAN Economic Community

Ladies and gentlemen,

15.         Many here today are keenly following the movement toward greater ASEAN integration. Recent decisions by the ASEAN leaders should give you comfort that current initiatives will indeed enhance the longer-term financial rewards for investments in ASEAN. The initiatives recently reviewed by leaders in Hanoi are many. I shall highlight a few today—those that impact most on investment and financial matters.

16.         First of all, important achievements have been made in implementing the Roadmap for an ASEAN Community by 2015. A new organizational framework and legal basis are giving “teeth” to the implementation of the programmes in all the 3 self-reinforcing pillars—ASEAN Political-Security Community, ASEAN Economic Community and ASEAN Social-Cultural Community.

17.         The ASEAN Economic Community (AEC) of course will have most impact on the investment climate. In this field, ASEAN leaders noted that the prompt regional economic recovery is having a positive impact on the establishment of the ASEAN Free Trade Zones Area for trade in goods, services and investments, as well as in implementing the ASEAN single window and trade facilitation programmes.

18.         Physical and trade connectivity took a major step forward in October. The leaders’ adoption of the Master Plan on ASEAN Connectivity will expedite the move towards AEC. This connectivity plan, designed with international expertise, will improve infrastructure linkages, reduce regulatory barriers to movement of goods, and improve ease of travel. This will enhance regional trade and investment and foster competitive growth within ASEAN and with ASEAN’s neighbours like India, China, Japan and South Korea.

19.         A major initiative that will achieve ASEAN connectivity objectives as well as develop ASEAN’s capacity to raise funds is the creation of the ASEAN Infrastructure Fund. The Fund target size of US$800 million aims at supporting infrastructure projects in ASEAN to catalyse economic integration. Malaysia has pledged US$150 million, which has been matched by the Asian Development Bank. To date ASEAN states have pledged US$335 million to the fund. The outcome of infrastructure financing support is important to ASEAN’s growth. A 1% increase in infrastructure spending in Asia can increase private consumption by 1-2% of GDP, an important result that will benefit the wider investment community as well as ASEAN’s nations and their people.

Ladies and gentlemen,

20.         The effort to increase regional capital market connectivity has also progressed significantly. One of the key thrusts of the ASEAN Capital Market Forum Implementation Plan is to improve regional market connectivity through an electronic trading link. This will be known as the ASEAN Common Exchange Gateway.The link aims to increase the global profile of ASEAN markets by providing instant access through an electronic gateway to all ASEAN markets. Further, the ASEAN link will enhance the ability to trade across markets allowing investors to better diversify their investments and increase their overall trading liquidity in the region.

21.         It is also recognised that regional companies meeting international benchmarks on governance standards are becoming more important if we are to attract outside investors. The ASEAN Capital Market Forum has recently embarked on an initiative to rank ASEAN companies based on compliance with international standards of corporate governance. The aim is to develop a culture of governance among PLCs within the ASEAN countries as one of the approaches to develop “quality performance” companies being traded in ASEAN exchanges.

22.         With so much progress being made on the institutional front, it now remains for the private sector to take advantage of these improved regimes implemented by the capital market regulators. Private sector investors can now develop more products that will have regional appeal, conduct more-cross-border offerings and explore mutual opportunities to conduct greater cross-border business.

III.           Conclusion: ASEAN as responsible member of the global community

Ladies and gentlemen,

23.         While pursuing initiatives on many fronts towards ASEAN integration and a larger and cohesive investment area, ASEAN must be a responsible player in the global community. This is and will be demonstrated by the way we respond to economic downturns, but also by the way we respond to broader challenges like climate change, natural disasters and pandemics. ASEAN has an important role to play in the globalised world. By exercising “a common but differentiated responsibility” ASEAN is becoming a region of choice for investors seeking socially responsible investments.

24.         Post the Global Financial Crisis, I believe it is through trade opening measures that we can bring back prosperity to the developed, emerging and the developing economies, and hence, to the global economy as a whole. ASEAN has expressed its desires to see a revival of trade talks. On its own, ASEAN will continue to pursue trade agreements beyond the WTO. The opening of markets in a fair and balanced manner will correct imbalances in the longer-term, while raising opportunities for job-creation in the short and medium-term.

25.         In conclusion, ASEAN is implementing a range of measures to build an integrated capital market and to create an ASEAN asset class for investors, while at the same time fostering its position as a modern and responsible resource for the global community. At this juncture of the business cycle, we fully understand that ASEAN’s strength, and ASEAN as a place of choice for investments, is enhanced as ASEAN responsibly takes the right actions to support global growth and investment. In turn, ASEAN looks forward to equally responsible actions by domestic, regional and international investors as they share in the economic benefits ASEAN has to offer.

26.     I wish all of you an enjoyable and fruitful dialogue and I thank you.

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