Evaluating Financial Integration and Cooperation in the ASEAN

Financial integration is less pronounced in the ASEAN than other measures of economic integration. This is particularly apparent when compared against other regions that have undergone similar integrative efforts, such as the European Union. Cross-border trade flows, foreign-direct investment, and investment in capital goods outstrip other investment flows. Regional institutional and legal structures governing these investment flows, while limited, present marked achievements towards creating an ASEAN financial community. The gap persists despite suggestions that the Asian Financial Crisis and the Global Financial Crisis (or the North Atlantic Financial Crisis from the Asian and Stiglitz perspective) would accelerate financial regionalism as a way to create a wider safety net against sudden capital outflow or capital stoppage. This paper will endeavor to offer legal, governance, and institutional explanations to explain the impetus for the ASEAN to integrate within itself instead of the Western financial system. It will offer suggestions to augment financial integration by making changes to the most effective initiatives.