ASEAN Way: Challenges to ASEAN Capital Market Integration

Abstract

This research argues that the ASEAN Way of respecting sovereignty, non-interference, consensus and flexibility causes partial success of ASEAN capital market integration. Although the ASEAN Way is vital to the existence of ASEAN, and there are several innovations that were built on the basis of the ASEAN Way, such as regional cooperation concerning bond market development, financial services liberalisation and investor protection. However, the ASEAN Way has significantly influenced the intensity of institutionalisation and legalisation processes of ASEAN regionalisation. Critically, there remain significant disparities in the regulatory, normative, and cognitive institutions in the financial markets among the ASEAN countries. This research argues that the ASEAN Way is the strong point of ASEAN, whose elasticity prevents the institution from falling apart; however, the ASEAN Way has critically influenced the institutionalisation and legalisation processes of ASEAN, and at the same time has caused implementation gaps across ASEAN member countries. This research uses a comparative analysis between ASEAN and the existing, global financial cooperation, for instance, the EU, in order to distinguish the distinctive characters and the influences of the ASEAN Way on regional capital market integration. It then compares the implementation efforts of ASEAN members to investigate how the ASEAN Way triggers discrepancies among ASEAN members that eventually impede the goal of integrating the regional capital markets.