Tuesday, March 24, 2015

Remembering LKY; Developments from the ASEAN Finance Ministers and Central Bank Governors' Meeting

The big news from ASEAN this week was of course the passing away of Singapore’s former prime minister Lee Kuan Yew.  He was the last surviving member of the five ASEAN national leaders in office at the time of the 1967 Bangkok Declaration that created ASEAN; Khun Thanat Khoman, the former Thai foreign minister, is the last surviving signatory to the Bangkok Declaration.

Ed signing the condolence book at the Singapore Embassy in Washington, DC

I only met Mr. Lee once, at a bar convention in Singapore a few years ago.  During a question and answer session, I asked him about Singapore’s contribution to international law and order.  He replied that, as a small country, Singapore had to pick and choose its opportunities to influence world opinion in any matter, let alone law and order, carefully. Hopefully Singapore will continue to exercise this role in the world without him.

  • The ASEAN Banking Integration Framework (ABIF) Agreement was signed off. Under the ABIF, any two ASEAN member states may enter into reciprocal bilateral agreements governing the qualification and operation of Qualified ASEAN Banks (QABs) in the two countries.  QABs would receive national treatment, e.g., be treated the same as domestic banks.  The ABIF operates as a series of bilateral arrangements because ASEAN does not have a central bank, nor any existing institution that could handle region-wide bank regulation, and ASEAN does not seek to develop such an institution (as usual).  Perhaps the next step would be a continuing working committee of the central banks to deal with ongoing issues.  Bilateral approaches may work for market access and oversight of banks, but the real test of the ABIF will be when the next financial crisis hits: will a series of bilateral arrangements be sufficient to deal with the crisis or will a stronger committee, with a permanent staff seconded to ASEAN be needed?  We’ll have to see.
  • The Protocol to Implement the Sixth Package of Financial Services Liberalisation  under the ASEAN Framework Agreement on Services (AFAS) was signed by all ASEAN Finance Ministers.  The Sixth Protocol contains the enabling provision for the implementation of the ABIF and the Seventh Protocol is under negotiation.
  • The ASEAN Finance Ministers agreed to the Protocol on the Legal Framework to Implement the ASEAN Single Window (PLF-ASW). The ASW is critical to the ASEAN Trade in Goods Agreement, (ATIGA), as I explained in this previous post 
  • Just as importantly, Protocol 7 of the ASEAN Framework Agreement on the Facilitation of Goods in Transit (AFAFGIT) was signed. This solves a major lacuna in the ATIGA that can cause goods to lose their ASEAN origin when traded within the AEC, as was discussed in another previous post.

Again, the critical question is how these agreements will be actually implemented on the ground in ASEAN.