Readiness of ASEAN Banking Sector Integration: Recent Development and Statistical Evidence

ASEAN has a vision to form a single community by 2020. Thus, ASEAN integration has been a topic of great interest but unfortunately, attention has been over-focused on economic aspect. This paper aims to study the specific aspect of ASEAN banking sector integration with three objectives. Firstly, the paper aims to compare the ASEAN countries’ respective commitments to its own members through ASEAN Framework Agreement on Services (AFAS) against their commitments to the world under General Agreement on Trade in Services (GATS). Secondly, it aims to evaluate the readiness of ASEAN for banking sector integration using statistical approach. Thirdly, the statistical results from the second objective are utilized to construct an indicator of readiness for ASEAN banking sector integration. The results reveal that ASEAN countries’ commitments to AFAS did not differ much from their respective commitments to GATS. Statistical evidence shows that there are vast differences in monetary conditions between ASEAN countries, hence causing difficulties for one-step total integration. Therefore, ‘paired-integration’ is proposed based on the results of ‘readiness indicator’. The results reveal that optimal pairing for Malaysia is Thailand, followed by Philippines and Singapore.