AEC 2015: Ambitions, Expectations and Challenges ASEAN's Path towards Greater Economic and Financial Integration

The formation of the AEAN Economic Community (AEC) in 2015 is an important milestone in the process of ASEAN integration. The challenge for members is to tap on the gains of integration while staying prepared for changes. As financial integration is part of this process, it is important to reap benefits by creating a mutually reinforcing “virtuous circle” of financial integration: having more willingness in financial liberalization would—through increased competition and technology transfer—support the development of the financial sector, which, in turn, will support further liberalization. We aim to quantify the extent of liberalization under the AEC Blueprint and the current state of implementation, and come to the conclusion that it does not aim towards full liberalization in all areas, with implementation currently lagging behind in some areas. Importantly, Thailand’s present willingness to liberalize the financial sector trails other ASEAN peers. However, relevant indicators of financial development and institutional environment reveal that Thailand’s readiness is relatively on par with its peers. We therefore come to the policy recommendation that Thailand has room to accelerate its liberalization process under the Blueprint, particularly in the area of financial liberalization. Key to this is the adoption of an “integration mindset” by incorporating regional integration issues into domestic laws, regulations and master plans, which will ultimately give thrust to the aforementioned “virtuous circle”.