KUALA LUMPUR (May 12): Asean's long-standing ambition to create a unified regional capital market remains hampered by a reluctance among member states to share control over data and foreign exchange policies, according to DBS Bank Ltd.

Country members are also unwilling to open up their fiscal and trade regulations to other countries, according to DBS’ head of investment banking coverage for Malaysia Tan Chek Soon. He described the issue as “the biggest elephant in the room” preventing the economic bloc from moving towards a common capital market framework.

“If you look at the European Union as a whole, in the past, if you wanted to be in the European Union, you had to give up certain authorities or sovereignty over some of these policies. It’s a tricky issue,” Tan said. He was speaking during a panel discussion at Affin Bank’s conference on the impact of the Middle East war on Asean.

Despite these hurdles, Tan remains optimistic. "We have so many best talents here in Asean. I am sure we can come together and figure out something."

The concept of a unified Asean capital market has been discussed for years among member states as part of broader regional financial integration efforts under the Asean Economic Community framework. Malaysia, in particular, has been advocating for greater regional connectivity, including proposals for Asean-focused initial public offerings (IPOs). However, progress has remained slow due to differing market structures.

According to Tan, a harmonised regional capital market would ultimately make Asean “more attractive to global investors” by allowing them to view the region as a single investment bloc rather than a collection of individual markets.

“If we have an integrated capital market flow — whether it be equities, harmonising stock exchanges in terms of equity listings, bond settlement or regulatory disclosures — I am very sure Asean as a bloc becomes a more attractive asset class,” he said.

He also added that a stronger integration could improve capital allocation within the region by matching countries with deeper pools of institutional capital to faster-growing economies seeking funding.

“Indonesia has so many growth companies. Everybody wants to raise capital, but the market is small. In Singapore and Malaysia, you have much more capital in terms of institutional money and wealth capital,” he said. “If you have a harmonised capital market, we can invest in those companies, and those companies can list in Singapore, Malaysia or Thailand, for example.”

During the same session, Institute for Democracy and Economic Affairs (IDEAS) director Tan Sri Dr Rebecca Fatima Sta Maria said Asean should focus on practical “baby steps” to improve regional integration, particularly in labour mobility.

Rebecca highlighted a proposal from the Asean Business Advisory Council to create or designate selected firms as “Asean business entities” (ABEs). This status would allow the designated firms to move skilled employees across regional branches with more ease.

“If I’m designated as one of the entities and I have branches in Indonesia or Manila, I can have free movement of my people between the branches,” she explained. The proposal could also reduce bureaucratic hurdles involving work permits and temporary transfers for skilled workers moving within the same company group.

“They can have that freedom of movement, say for temporary movement anyway, three months or whatever, without having to jump through those hoops of regulations,” she said.

Rebecca said the proposal is a pragmatic first step towards a better regional labour mobility, although she acknowledged Asean remains far from adopting a European-style Schengen system for free movement across borders.

“I think the answer to getting to Schengen is a big deal, but at least these are baby steps for the business community,” she added.