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October 19, 2009 20:16 PM

Financial Integration To Boost Investment In Asia, Says Zeti

KUALA LUMPUR, Oct 19 (Bernama) -- Asia, which is contributing one-third of the global output and trade, should further strengthen financial integration to help further enhance the competitiveness of the region, said Bank Negara Malaysia's governor Tan Sri Dr Zeti Akhtar Aziz.

"Financial integration will be one of the keys for stabilising and also the key to unleashing the full potential of Asia," she said this when presenting a paper on "Asia's New Development Strategy: Where Now?" at the Asia-Europe Meeting here Monday.

Zeti said a more integrated regional financial system would enable better matching of savings and investments in the region, allowing for Asia's large pool of savings to be channelled into productive uses within the region.

This, she said, would not only contribute to lowering intermediation costs but also support intra-regional trade and investment as well as increase the potential to raise funds and provide a larger investor base.

"The development of financial markets in Asia would therefore encourage a part of the Asian savings to be reinvested in Asia and thus in turn contribute towards global financial stability," she added.

Zeti said further deepening financial integration in the region required four areas, namely financial sector liberalisation, capital account liberalisation, development of regional payments and settlement systems, and greater cooperation among regional regulators and central banks.

In pursuing these priorities, she said consideration however needed to be given to the diversity of the various economies within the Asian region.

The various reforms were also needed to be aligned to the heterogeneities of the various economies to ensure such reforms would not lead to disruption and financial instability, she added.

According to Zeti, Asia should also give more focus on promoting a greater role of domestic demand going forward as this economic diversification will provide increased resilience in the face of external shocks and enhance the region's overall growth prospects.

A critical area needed to unleash the further potential of domestic demand was the development of more comprehensive social safety nets, particularly in the area of pensions and retirement benefits, education and healthcare, she said.

Moving forward, Asia should further diversify the external markets as well as accelerate the efforts for greater intra-regional trade in Asia, Zeti said.

Intra-regional trade as a share of total trade in the region rose to 45 per cent in 2006 from 25 per cent in 1980, she said.

-- BERNAMA

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