The Asia-Pacific chief of American banking giant JP Morgan is upbeat on the unification of Southeast Asian countries and their resilience to financial crises following the wave of structural reforms adopted in the aftermath of the regional currency turmoil of 1997.
In an interview with Inquirer at the sidelines of the Asia-Pacific Economic Cooperation (Apec) Summit, Hong Kong-based JP Morgan Asia Pacific chair and CEO Nicolas Aguzin said that in the long haul, the 10-member Association of Southeast Asian Nation (Asean) could be a significant bloc but the region might not reap the fruits of this integration immediately.
“In the short term, I won’t expect a major shift. But it’s the progressive evolution of rules and coordination around tariffs, about operating procedures, that’s what’s going to be important,” Aguzin said.
The creation of the Asean Economic Community (AEC) will unify a region with a combined gross domestic product of $2.5 billion and population of 600 million people. This is envisioned to be a region where goods, services, investments, skilled labor as well as capital may freely flow.
The region is also seen to benefit from its proximity to the world’s most populous countries, China and India.
“Looking forward, we feel very confident about the soundness of this group of countries. All countries have governments and leadership that are looking at liberalizing their economies, fostering international investment and trying to increase the competitiveness of their countries in the long-run,” Aguzin said.
Asean consists of a diverse group of 10 fast-growing countries which are at different stages of economic and financial development: Brunei Darussalam, Cambodia, Indonesia, Lao P.D.R., Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. They have a young and growing population and a growing middle class with high saving rates. However, large investments are needed to boost human capital, connectivity and infrastructure.
Aguzin said the Asian currency crisis of 1997—during which sharp currency depreciation triggered a wave of corporate defaults that hurt banking systems, only strengthened the region and helped it confront the effects of many other crises in other parts of the world.
“The countries increased their (foreign) reserves, undertook a more disciplined fiscal policy and monetary policy as well,” Aguzin said. “Some of the crisis can be seen as very negative because it hurt a lot of people and a lot of companies, but in the long term it was also beneficial for the region in terms of improving the discipline of the region,” Aguzin said.
The current economic woes of neighboring China are not seen to sour favorable prospects in the region.
“After going through 20 years of double-digit growth (in China)—there’s no country that has done that before, after so many years of high growth (in China), there will be bumps in the road. We’ve seen this summer some hiccups around the stock exchange, outflow of capital, decrease in reserves, (currency) devaluation. That will happen. It’s a market that’s fairly immature still in terms of the capital market,” Aguzin said. “That doesn’t change our view which is a very positive view in terms of prospects for the region, and for China.”
Overall, the global banking system is seen to be in a much better shape in the aftermath of the financial crisis that shook out Wall Street and caused a global financial crunch in 2008-2009.