The Feasibility of Monetary and Financial Integration in ASEAN: Policy Considerations for Enhancing Integration Feasibility

Abstract

ASEAN leaders approved the ASEAN Vision 2020 plan which attempts to turn ASEAN into a more competitive region within the world economy. The purpose of this paper is to discuss the feasibility of monetary and financial integration among ASEAN member countries. Monetary and financial integration are two strategies for promoting economic expansion in ASEAN. Some scholars suggest that integration is feasible as ASEAN countries are primed for integration as they share the need to grow economically and protect themselves from a future economic shock. In contrast, some scholars argue that integration is not feasible due to the high degree of economic, political, and socio-cultural diversity among ASEAN countries. ASEAN must develop a plan that accounts for the diverse levels of development and different levels of economic stability. ASEAN must resolve member policy ineffectiveness and incentivize member countries to address bad incentive structures and moral hazard. ASEAN must also device methods and strategies that enable and support policymakers to collaborate effectively while being incentivized to pursue ASEAN region’s best interests. If ASEAN leaders are able to design appropriate frameworks, strategies, and plans that reconcile the items mentioned throughout this paper, we believe ASEAN economic integration to be feasible in the long-run.