On September 18, 2012, the ASEAN Trading Link (“Link”) went live with the Singapore Stock Exchange and Bursa Malaysia being able to trade securities on each other’s exchange. A month later, the Stock Exchange of Thailand was connected to the Link.
Although the launching of the Link is a momentous occasion for members of the Association of Southeast Asian Nations (ASEAN) and their aspirations to create an ASEAN Economic Community (AEC) by 2015, the integration of ASEAN’s capital markets faces many hurdles, such as the infrastructure needs for trading and a set of common rules.
But what does this mean for corporate governance?
In a region where corporate governance has varied based on jurisdiction, the creation of the ASEAN Corporate Governance Scorecard (“ASEAN CGS”) by the Asian Development Bank is seen as being crucial to regulatory harmonization based on global best practices in corporate governance. Moreover, as corporate governance becomes a more important element for investors, the region’s members are taking notice. In this case, countries are working to implement the ASEAN CGS. As noted by Charamporn Jotikasthira, the president of the Stock Exchange of Thailand, implementation of the ASEAN CGS will “prepare Thai listed companies for greater competition and greater recognition in CG
Similarly, the Philippines is working to implement the ASEAN CGS. As stated by Institute of Directors IOD Chairman Jesus P. Estanisalo, the ASEAN CGS will help to integrate the Philippines into the ASEAN Economic Community. Chairman Estanisalo maintains that “one way to be active in that integration is to think the same way [as his ASEAN peers] as far as corporate governance is concerned, that is why [they] are adopting the same metrics and the same questions.”
Even though the AEC and the Link remain a work-in-progress, the significance of further integration and recognition of the importance of corporate governance cannot be overlooked. Although there is no date for other ASEAN exchanges to join the Link, there are, however, opportunities for markets to develop better practices to secure additional investment. For investors, better practices like increased transparency and regulatory stability will help to build the level of investor confidence that makes a market enticing to invest in. For Southeast Asia, securing additional investment and integrating into an economic community is crucial as it is “the only way ASEAN will be able to hold its own economically against the might of the United States, the European Union and, increasingly, China and India” (“ASEAN as an Entity Can be a Force to be Reckoned with if the AEC Comes into Fruition” Cambodian Business Review, November 30, 2012). In this case, it is imperative for the ASEAN economies to further develop good governance practices as part of their drive toward launching the AEC in 2015. Their economic future relies on it.