Introduction of international financial markets

An international financial market is a market in which people and entities an trade financial securities, commodities, and other fungible items of value at low transaction costs and at prices that reflect supply and demand. Securities include stocks and bonds, and commodities include precious metals or agricultural goods.

There are both general markets (where many commodities are traded) and specialized markets (where only one commodity is traded). Markets work by placing many interested buyers and sellers, including households, firms, and government agences, in one "place", thus making it easier for them to find each other. An economy which relies primarily on interactions between buyers and sellers to allocate resources is known as a market economy in contrast either to a command economy or to a non-market economy such as a gift economy. In finance, international financial markets facilitate: The raising of capital (in the capital markets) The transfer of risk (in the derivatives markets) Price discovery Global transactions with integration of financial markets The transfer of liquidity (in the money markets) International trade (in the currency markets)

and are used to match those who want capital to those who have it.

Typically a borrower issues a receipt to the lender promising to pay back the capital. These receipts are securities which may be freely bought or sold. In return for lending money to the borrower, the lender will expect some compensation in the form of interest or dividends. This return on investment is a necessary part of markets to ensure that funds are supplied to them In mathematical finance, the concept continuous-time Brownian motion stochastic process is sometimes used as a model.

Definition
In economics, typically, the term market means the aggregate of possible buyers and sellers of a certain good or service and the transactions between them. The term "market" is sometimes used for what are more strictly exchanges, organizations that facilitate the trade in financial securities, e.g., a stock exchange or commodity exchange. This may be a physical location (like the NYSE, BSE, NSE) or an electronic system (like NASDAQ). Much trading of stocks takes place on an exchange; still, corporate actions (merger, spinoff) are outside an exchange, while any two companies or people, for whatever reason, may agree to sell stock from the one to the other without using an exchange. Trading of currencies and bonds is largely on a bilateral basis, although some bonds trade on a stock exchange, and people are building electronic systems for these as well, similar to stock exchanges.

Nature And Functions of international financial market

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International financial markets undertake intermediation by transferring purchasing power from lenders and investors to parties who desire to acquire assets that they expect to yield future benefits. International financial transactions involve exchange of assets between residents of different financial centres across national boundaries. International financial centres are reservoirs of savings and transfer them to their most efficient use irrespective of where the savings are generated. There are three important functions of financial markets. First, the interactions of buyers and sellers in the markets determine the prices of the assets traded which is called the price discovery process. Secondly, the financial markets ensure liquidity by providing a mechanism for an investor to sell a financial asset. Finally, the financial markets reduce the cost of transactions and information.

Growth Of International Financial Markets

Since the 1960s, the growth of international financial transactions has been profoundly influenced by the growth in international trade involving exchange of goods and services. The value of imports in US dollars for the world as a whole went up in the last five decades by a multiple of 14 from about $ 590 billion in 1960 to about $ 8000 billion in 2000. While
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international trade can exist in the absence of international financing arrangements as under direct exchange, barter and cash payment in gold, there are no international finance or markets where no goods and services are exchanged between residents of different countries. There would be no reason for borrowing, lending or investing between countries since nothing could be bought with the product of loan or investment.

Benefits
International financial markets and the transactions therein have however facilitated and helped the expansion of international trade based on comparative absolute advantage resulting in welfare benefits in terms of higher income among participant nations. Further, the growth of international financial markets has facilitated cross-country financial flows which contribute to a more efficient allocation of resources. Efficiency in use rather than origin of or abundance governs allocation of resources internationally. This means that potentially high return projects in countries with low savings will not be neglected in favour of low return projects in high saving countries simply because of where savings are generated.

Implications for London as an International Financial Centre

Over the last three decades the performance of infrastructure providers in London has varied. Those that have performed least well, at least up until recent years, have for the most part been industry-owned and they have missed some significant strategic opportunities. The more successful have been those commercial providers which have shown an ability to reform themselves more rapidly (such as Reuters) or else take advantage of new opportunities with better vision (such as ICAP) than the industry-owned providers. One of the most important infrastructure providers is of course the Bank of England. Its role has changed very significantly since it became independent in 1997. Decisions by the Bank, whether positive (to concentrate almost exclusively on the determination of monetary policy) or negative (not to participate in the European Target 2 payments system) have had a profound effect upon the industry in London. The Bank used to play an important role as an active promoter of the UK financial services industry. If it is no longer interested in so doing, and is adopting an approach more akin to that of the Fed in the United States, then it leaves a vacuum which needs to be filled. How? There would seem to be no doubt that the quality and performance of the infrastructure providers have a direct impact on the success or otherwise of London as a financial services centre. It is clearly necessary to examine just how the performance of some of these infrastructure providers has
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helped (or hindered) London as a financial centre in the past, and how the situation might change in the future.

Recent developments and trends in world financial markets

Recent trends in global financial markets
Perhaps foremost among recent changes in world financial markets has been their accelerating integration and globalisation. This development, which has been fostered by the liberalisation of markets, rapid technological progress and major advances in telecommunications, has created new investment and financing opportunities for businesses and people around the world. Easier access to global financial markets for individuals and corporations will lead to a more efficient allocation of capital, which, in turn, will promote economic growth and prosperity. Apart from this ongoing integration and globalisation, world financial markets have also recently experienced increased securitisation. In part, this development has been spurred by the surge in mergers and acquisitions and leveraged buy-outs that has taken place in markets of late, not least in the euro area. One aspect of this securitisation process has been the increase in corporate bond issuance, which has also coincided with a diminishing supply of government bonds in many countries, particularly in the United States. Other interesting developments in world financial markets include the continued broadening and expansion of derivatives markets. The broadening of these markets has largely come about because rapid advances in technology, financial engineering, and risk management have helped to enhance
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both the supply of and the demand for more complex and sophisticated derivatives products. The increased use of derivatives to adjust exposure to risk in financial markets has also contributed to the rise in the notional amounts of outstanding derivatives contracts seen in recent years, in particular in over-the-counter (OTC) derivatives markets with interest rates and equities as underlying securities. While the leveraged nature of derivative instruments poses risks to individual investors, derivatives also provide scope for a more efficient allocation of risks in the economy, which is beneficial for the functioning of financial markets, and hence enhances the conditions for economic growth. Among the many changes in global financial markets, developments in the euro area have been particularly striking.

Recent trends in euro area financial markets

The launch of the euro on 1 January 1999 was a historic event. 11 national currencies were converted into one single currency overnight. It marked the start of a period of profound change in Europe's financial landscape. The successful launch of the euro, which is a key element in the creation of a stable, prosperous and peaceful Europe, has also boosted the integration of financial markets in the euro area. This process of integration in European financial markets coincided with the trend towards globalisation. Both these factors help to explain current developments in Europe's financial markets. The main catalyst behind the huge changes that have taken place, and continue to take place, has, of course, been the arrival of the single currency. In January 1999, foreign exchange and interbank markets immediately switched over to the euro. At the same time, a single monetary policy was established, with a uniform policy implementation framework for all euro area countries. Furthermore, a unified payment
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system was introduced, providing for real-time gross settlement transfers throughout the euro area. As regards euro area banks, the transparency brought about by a single currency and a single monetary policy makes it easier for customers to compare bank products and costs. This, in turn, will foster competition among banks. Although this increased competition will lead to lower bank margins, it will promote restructuring and consolidation among banks in the euro area, which will help them to compete globally. In fact, these events are already happening: banks all over Europe are merging or forming alliances on an unprecedented scale, thereby drastically changing the national banking environment and creating international networks. Hence, the introduction of the euro has not only provided banks with a market large enough to support their efforts in global competition, but also pressured them to undertake the restructuring and consolidation they need in order to be successful in an increasingly global market. In addition to these changes in the banking sector, the advent of the euro also provided the basis for a Europe-wide securities market. The euro area money market underwent a wideranging process of integration and standardisation following the introduction of the single monetary policy framework. The unsecured deposit markets and the derivatives markets became fully integrated in early 1999. Moreover, the need to redistribute liquidity among euro area countries, including liquidity provided by the Euro system as part of its refinancing operations, fostered the development of area-wide transactions in the money market. TARGET, the new area-wide payment system which constitutes the major settlement system for payments in euro, has played a key role in facilitating the redistribution of liquidity across the euro area. In addition, by encouraging greater arbitrage activity, TARGET has facilitated an equalisation of prices prevailing in the various segments of
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the money market throughout the euro area. While there has been less integration in other segments of the euro area money market, such as the repo markets and the short-term securities markets, I am convinced that the integration process will continue in these areas, given the favourable conditions provided by European Economic and Monetary Union. Another sector in which impressive changes have taken place following the introduction of the euro is the euro-denominated bond market. There was a marked rise in private bond issuance in the euro area in 1999, which has continued broadly unabated in 2000. Following the introduction of the euro, the euro-denominated component of international bond markets played a far larger role than the predecessor currencies of the euro had hitherto. In other words, the whole has turned out to be much greater than the sum of the parts. Apart from this, it also became clear that various characteristics of newly issued debt securities were changing. In particular, the average size of new bond issues rose considerably in 1999, as the number of very large issues, of EUR 1 billion or more, grew significantly. These changes show that the newly created euro-denominated bond market, by virtue of its size and high degree of openness, is more able to absorb very large issues than the individual bond markets of the predecessor currencies of the euro. Hence, the introduction of the single currency has resulted in more efficient and well-functioning markets, which benefit not only euro area residents, but also market participants outside the euro area. Furthermore, this market still has great potential since the use of securities finance by the corporate sector, relative to bank finance, is still only about half that of its counterpart in the United States. The single currency also appears to be a catalyst for restructuring the European corporate sector, and for the emergence of new companies. The ongoing integration process of the national stock exchanges has also been supportive in
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this respect. Primary issues of European equities have reached record highs, with whole new markets, such as the Neuer Market in Frankfurt, becoming prominent internationally. These developments can only favour those companies which may have found it difficult in the past to finance themselves, but which will now be able to raise equity more easily. In addition, a number of Europe-wide equity indices have been established, thereby contributing to extending the trading possibilities and the position-taking opportunities for investors. Alliances between stock exchanges should also foster the integration of stock market infrastructures. These changes are bound to intensify competition and make European markets more resilient and fit for the global economy.

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Economic integration
Measures Enabling Financial Market Integration in India Broadly, integration of financial markets in India has been facilitated by various measures in the form of free pricing, widening of participation base in markets, introduction of new instruments and improvements in payment and settlement infrastructure.

Free Pricing
Free pricing in financial markets was facilitated by various measures. These include, inter alia, freedom to banks to decide interest rate on deposits and credit; withdrawal of a ceiling of per cent on call money rate imposed by the Indian Banks Association in 1989; replacement of administered interest rates on government securities by an auction system; abolition of the system of ad hoc Treasury Bills in April 1997 and replacement by the system of Ways and Means Advances (WMAs) with effect
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from April 1, 1997; shift in the exchange rate regime from a single currency fixed-exchange rate system to a marketdetermined floating exchange rate regime; gradual liberalisation of the capital account in line with the recommendations of the Committee on\ Capital Account Convertibility (Chairman: Shri S. S. Tarapore) (see Chapter VI on Foreign Exchange Market); and freedom to banks to determine interest rates (subject to a ceiling) and maturity period of Foreign Currency Non-Resident (FCNR) deposits (not exceeding three years); and to use derivative products for hedging risk. In the capital market, the Capital Issues (Control) Act, 1947 was repealed. The introduction of the book-building process in the new issue market strengthened the price discovery process. Enhanced presence of foreign banks, in line with Indias commitment to the World Trade Organisation under GATS, strengthened domestic and international markets interlinkages, apart from increasing competition. Initially, the participation in the call market was gradually widened by including non-banks such as financial institutions, non-banking financial companies, primary/satellite dealers, mutual funds and c o r p o r a t e s ( t h r o u g h p r i m a r y d e a l e r s ). T h e p r o c e s s o f transformation of the call money market into a pure inter-bank market, which commenced from May 2001, was completed in August 2005. Foreign Institutional Investors (FIIs) were allowed to participate in the Indian equity market and set up 100 per cent debt funds to invest in government (Central and State) dated securities in both the primary and secondary markets. This
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provided a major thrust to the integration of domestic markets with international markets. The linkage between the domestic foreign exchange market and the overseas market (vertical integration) was facilitated by allowing banks/authorised dealers (ADs) to borrow and invest funds abroad (subject to certain limits), and to lend in foreign currency to companies in India for any productive purpose, giving them the choice to economise on interest cost and exchange risk. Exporters also have the ability to substitute rupee credit for foreign currency credit. Indian companies were permitted to raise resources from abroad, through American/Global Depository Receipts (ADRs/ GDRs), foreign currency convertible bonds (FCCBs) and external commercial borrowings (ECBs), thus, facilitating integration of domestic capital market with international capital market. The Reserve Bank allowed two-way fungibility of ADRs/GDRs in February 2002. Co r p o r a t e s w e r e a l l owe d t o u n d e r t a k e a c t i ve h e d g i n g operations by resorting to cancellation and rebooking of forward c o n t r a c t s , b o o k i n g fo r w a r d c o n t r a c t s b a s e d o n p a s t performance, using foreign currency options and forwards, and accessing foreign currency-rupee swap to manage longer-term exposures arising out of external commercial borrowings. Integration of the credit market and the equity market was strengthened by application of capital adequacy norms and allowing public sector banks to raise capital from the equity market up to 49 per cent of their paid-up capital.

New Instruments
Repurchase agreement (repo) was introduced as a tool of shortterm liquidity adjustment. The liquidity adjustment facility (LAF) is open to banks and primary dealers. The LAF has
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emerged as a tool for both liquidity management and also signalling device for interest rates in the overnight market. Several new financial instruments such as inter-bank participation certificates (1988), certificates of deposit (June 1989), commercial paper (January 1990) and repos (December 1992) were introduced. Collateralised borrowing and lending obligation (CBLO) and market repos have also emerged as money market instruments. New auction-based instruments were introduced for 364-day, 182-day, 91-day and 14-day Treasury Bills, the zero coupon bond and government of India dated securities. In the longterm segment, Floating Rate Bonds (FRBs) benchmarked to the 364- day Treasury Bills yields and a 10-year loan with embedded call and put options exercisable on or after 5 years from the date of issue were introduced. Derivative products such as forward rate agreements and interest rate swaps were introduced in July 1999 to enable banks, FIs and PDs to hedge interest rate risks. A rupee-foreign currency swap market was developed. ADs in the foreign exchange market were permitted to use cross-currency options, interest rate and currency swaps, caps/collars and forward rate agreements (FRAs) in the international foreign exchange market, thereby facilitating the deepening of the market and enabling participants to diversify their risk.

Institutional Measures
Institutions such as Discount and Finance House of India (DFHI), Securities Trading Corporation of India (STCI) and PDs were allowed to participate in more than one market, thus strengthening the market inter-linkages. The Clearing Corporation of India Ltd. (CCIL) was set up to act as a central counter-party to all trades involving foreign
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exchange, government securities and other debt instruments routed through it and to guarantee their settlement. Technology, Payment and Settlement Infrastructure The Delivery-versus-Payment system (DvP), the Negotiated Deal ing System (NDS) and subsequent ly, the advanced Negotiated Dealing System Order Matching (NDS-OM) trading module and the real time gross settlement system (RTGS) have brought about immense benefits in facilitating transactions and improving the settlement process, which have helped in the integration of markets. In the equity market, the floor-based open outcry trading system was replaced by electronic trading system in all the stock exchanges Financial Deregulation And Volatility In Emerging Equity Markets

Definition:
The elimination of tariff and nontariff barriers to the flow of goods, services, and factors of production between a group of nations, or different parts of the same nation.

Obstacles to economic integration

Obstacles standing as barriers for the development of economic integration include the desire for preservation of the control of tax revenues and licensing by local powers, sometimes requiring decades to pass under the control of supranational bodies. The experience of 1990-2009 has shown radical change in this pattern, as the world has observed the economic success of the European Union. So now no state
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disputes the benefits of economic integration: the only question is when and how it happens, what exact benefits it may bring to a state, and what kind of negative effects may take place. Economists argue that the negative consequences of economic integration include the suppression of local industries causing unemployment. Others say that there is no other way to exist in the current global economic environment for a state if it wishes to prosper. The conclusion is to prepare a state for economic integration before it will actually take place. There are different models of how to do it. The "South East Asian model" of economic integration is export oriented, while the "Latin American" one has fully open doors to imports consequently forcing local manufacturers to increase their standards of production. Global unification of financial markets, which preceded formal global economic unification, along with turbulent 2008 economic crisis de facto raised an issue of the global regulation of the markets. At the same time, this seems impossible without global supranational bodies being in place. This is a dilemma posed in discussions in the main international panels of the world (G8; G20; UN General Assembly): economic integration is both pushed by world economic development and stopped at the political level, including cultural differences between states (e.g., Iran and Israel). Potential global economic integration may be able to solve an issue of reallocating the capital needed to develop less developed regions, blocs and states - on the one hand, and unwillingness of more industrialized part of the world to do it on the other hand. As the global competition, sourcing and logistics becomes globally universal, it will eventually cause gradual harmonization of policies (within or outside the blocks, with or no formal global economic integration in place).

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Integration of markets

Euro
ISO 4217 code Inflation
Method

EUR (num. 978)

2.5%, August 2011

HICP
10 currencies[show]

Pegged by
Symbol Nickname Plural Coins

The single currency See Euro linguistic issue

1c, 2c, 5c, 10c, 20c, 50c, 1,

2

Banknotes

5, 10, 20, 50, 100, 20

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0,500 Central bank European Central Bank

The euro (sign: ; code: EUR) is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland,Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain. The currency is also used in a further countries and consequently used daily by some 332 million Europeans. Additionally, over 175 million people worldwide - including 150 million people in Africa - use currencies which are pegged to the euro. The euro is the second largest reserve currency as well as the second most traded currency in the world after the United States dollar. As of July 2011, with nearly 890 billion in circulation, the euro has the highest combined value of banknotes and coins in circulation in the world, having surpassed the U.S. dollar.] Based on International Monetary Fund estimates of 2008 GDP and purchasing power parity among the various currencies, the eurozone is the second largest economy in the world. The name euro was officially adopted on 16 December 1995. The euro was introduced to world financial markets as an accounting currency on 1 January 1999, replacing the
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former European Currency Unit (ECU) at a ratio of 1:1. Euro coins and banknotes entered circulation on 1 January 2002. Since late 2009 the euro has been immersed in the European sovereign debt crisis which has led to the creation of the European Financial Stability Facility as well as other reforms aimed at stabilizing the currency.

Currency sign

North American Free Trade Agreement

The North American Free Trade Agreement or NAFTA is an agreement signed by the governments of Canada, Mexico, and
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the United States, creating a trilateral trade bloc in North America. The agreement came into force on January 1, 1994. It superseded the Canada United States Free Trade Agreement between the U.S. and Canada. In terms of combined GDP of its members, as of 2010 the trade bloc is the largest in the world. The North American Free Trade Agreement (NAFTA) has two supplements, the North American Agreement on Environmental Cooperation (NAAEC) and the North American Agreement on Labor Cooperation (NAALC). Administrativ e center Languages Membership Mexico City, Ottawa, and Washington, D.C. 3[show] Canada Mexico United States Establishment Formation January 1, 1994

Area Total Water (%) 21,783,850 km2 (1st) 8,410,792 sq mi 7.4

Population 2010 estim ate Density 457,284,932 (3rd) 25.1/km2 (195th) 54.3/sq mi 2010 (IMF) estimate $17,617,989 trillion (1st)
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GDP (PPP) Total

Per capita

$38,527 (14th) 2010 (IMF) estimate $17,271,000 trillion (1st) $37,769 (21st)

GDP (nominal) Total Per capita

Website www.nafta-sec-alena.org

Provisions
The goal of NAFTA was to eliminate barriers to trade and investment between the US, Canada and Mexico. The implementation of NAFTA on January 1, 1994 brought the immediate elimination of tariffs on more than one-half of U.S. imports from Mexico and more than one-third of U.S. exports to Mexico. Within 10 years of the implementation of the agreement, all US-Mexico tariffs would be eliminated except for some U.S. agricultural exports to Mexico that were to be phased out within 15 years. Most U.S.-Canada trade was already duty free. NAFTA also seeks to eliminate non-tariff trade barriers.

Objectives of Nafta:-

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Substantial tariff reductions over a ten year period by member countries. More and easy access to financial services among the member countries. Protection to investments in member countries. Lowering trade barriers to movement of goods. Creating of a North American Development Bank. Formation of a US-Mexico border environmental commission for avoiding all types of pollution and clearing toxic waste dumps.

(SAARC)South Asian Association for Regional Cooperation

The South Asian Association for Regional Cooperation (SAARC) is an organisation of South Asian nations, founded in December 1985 by Ziaur Rahman and dedicated to economic, technological, social, and cultural development
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emphasising collective self-reliance. Its seven founding members are Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan, and Sri Lanka. Afghanistan joined the organization in 2005. Meetings of heads of state are usually scheduled annually; meetings of foreign secretaries, twice annually. It is headquartered in Kathmandu, Nepal. The 16 stated areas of cooperation are agriculture and rural, biotechnology, culture, energy, environment, economy and trade, finance, funding mechanism, human resource development, poverty alleviation, people to people contact, security aspects, social development, science and technology; communications, tourism.

History
The concept of SAARC was first adopted by Bangladesh during 1977, under the administration of President Ziaur Rahman. In the late 1970s, SAARC nations agreed upon the creation of a trade bloc consisting of South Asian countries. The idea of regional cooperation in South Asia was again mooted in May 1980. The foreign secretaries of the seven countries met for the first time in Colombo in April 1981. The Committee of the Whole, which met in Colombo in August 1985, identified five broad areas for regional cooperation. New areas of cooperation were added in the following years

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Headquarters Official languages Demonym Membership

Kathmandu, Nepal English South Asian 8 Members[show] 9 Observers[show]

Government Chairman Secretary General

Organization Mohamed Nasheed Fathimath Dhiyana Saeed December 8, 1985

Establishment Area Total

5,130,746 km2 (7th1) 1,980,992 sq mi

Population 2009 estimate Density 1,600,000,000 (1st1) 304.9/km2 789.7/sq mi 2009 estimate US$ 4,382,700 million (3rd1) US$ 2,779 See footnote 2 (UTC+4 to +6)

GDP (PPP) Total Per capita

Currency Time zone Website www.saarc-sec.org

1 2

If considered as a single entity. A unified currency has been proposed. Present currencies (ISO 4217 codes bracketed):
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Objectives of SAARC
The objectives of the Association as defined in the Charter are: to promote the welfare of the people of South Asia and to improve their quality of life; to accelerate economic growth, social progress and cultural development in the region and to provide all individuals the opportunity to live in dignity and to realize their full potential; to promote and strengthen collective self-reliance among the countries of South Asia; to contribute to mutual trust, understanding and appreciation of one another's problems; to promote active collaboration and mutual assistance in the economic, social, cultural, technical and scientific fields; to strengthen cooperation with other developing countries; to strengthen cooperation among themselves in international forums on matters of common interest; and to cooperate with international and regional organisations with similar aims and purposes. Afghanistan was added to the regional grouping on 13 November 2005, With the addition of Afghanistan, the total number of member states were raised to eight (8). In April 2006, the United States of America and South Korea made formal requests to be granted observer status. The European Union has also indicated interest in being given observer status, and made a formal request for the same to the SAARC Council of Ministers meeting in July 2006. On 2 August 2006 the foreign ministers of the SAARC countries agreed in principle to grant observer status to the US, South Korea and the European Union. On 4 March 2008, Iran requested observer status. Followed shortly by the entrance of Mauritius
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Association of Southeast Asian Nations

The Association of Southeast Asian Nations, commonly abbreviated ASEAN is ageo-political and economic organization of ten countries located in Southeast Asia, which was formed on 8 August 1967 by Indonesia, Malaysia, the Philippines, Singapore and Thailand Since then, membership has expanded to include Brunei, Burma (Myanmar), Cambodia, Laos, and Vietnam. Its aims include the acceleration of economic growth, social progress, cultural development among its members, the protection of regional peace and stability, and to provide opportunities for member countries to discuss differences peacefully. ASEAN covers a land area of 4.46 million km, 3% of the total land area of Earth, with a population of approximately 600 million people, 8.8% of the world population. The sea area of ASEAN is about three times larger than its land counterpart. In 2010, its combined nominal GDP had grown to US$1.8 trillion. If ASEAN were a single entity, it would rank as the ninth largest economy in the world.
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Objectives of ASEAN
To promote active collaboration and mutual assistance in matter of common interest. To accelerate economic growth, social prograess and cultural development of member countries. To maintain close co-operation with existing international and regional organisation with similar aims To ensure the stability of the South East Asian region.

Association of Southeast Asian Nations ASEAN

Flag

Emblem

Motto: One Vision, One Identity, One Community Seat of Secretariat Working language Jakarta English[show]
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Demonym Member states Leaders Secretary-General ASEAN Summit

Southeast Asian 10[show]

Surin Pitsuwan Indonesia[2]

Establishment Bangkok Declaration Charter 8 August 1967 16 December 2008

Area Total 4,479,210.5 km2 2,778,124.7 sq mi

Population 2010 estimate Density 601 million 135/km2 216/sq mi 2010 estimate US$ 3,084 billion[3] US$ 5,131 2010 estimate US$ 1,800 billion $2,995 0.742 (high) (61st) 10[show] ASEAN (UTC+9 to +6:30)
29

GDP (PPP) Total Per capita

GDP (nominal) Total Per capita

HDI (2011) Currency Time zone

Internet TLD Website www.asean.org Calling code

1 2 3

10[show]

10[show]

If considered as a single entity. Selected key basic ASEAN indicators Annual growth 1.6%

History
ASEAN was preceded by an organisation called the Association of Southeast Asia, commonly called ASA, an alliance consisting of the Philippines, Malaysia and Thailand that was formed in 1961. The bloc itself, however, was established on 8 August 1967, when foreign ministers of five countries Indonesia, Malaysia, the Philippines, Singapore, and Thailand met at the Thai Department of Foreign Affairs building in Bangkok and signed the ASEAN Declaration, more commonly known as the Bangkok Declaration. The five foreign ministers Adam Malik of Indonesia, Narciso Ramos of the Philippines, Abdul Razak of Malaysia, S. Rajaratnam of Singapore, and Thanat Khoman of Thailand are considered the organisation's Founding Fathers The motivations for the birth of ASEAN were so that its members governing elite could concentrate on nation building, the common fear of communism, reduced faith in or mistrust of external powers in the 1960s, and a desire for economic development; not to mention Indonesias ambition to become a regional hegemon through regional cooperation and the hope on the part of Malaysia and Singapore to constrain Indonesia and bring it into a more cooperative framework.
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In 1976, the Melanesian state of Papua New Guinea was accorded observer status. Throughout the 1970s, the organisation embarked on a program of economic cooperation, following the Bali Summit of 1976. This floundered in the mid1980s and was only revived around 1991 due to a Thai proposal for a regional free trade area. The bloc grew when Brunei Darussalam became the sixth member on 8 January 1984, barely a week after gaining independence on 1 January.

The ASEAN way

In the 1960s, the push for decolonisation promoted the sovereignty of Indonesia and Malaysia among others. Since nation building is often messy and vulnerable to foreign intervention, the governing elite wanted to be free to implement independent policies with the knowledge that neighbours would refrain from interfering in their domestic affairs. Territorially small members such as Singapore and Brunei were consciously fearful of force and coercive measures from much bigger neighbours like Indonesia and Malaysia. "Through political dialogue and confidence building, no tension has escalated into armed confrontation among ASEAN member countries since its establishment more than three decades ago". The ASEAN way can be traced back to the signing of the Treaty of Amity and Cooperation in Southeast Asia. "Fundamental principles adopted from this included: mutual respect for the independence, sovereignty, equality, territorial integrity, and national identity of all nations; the right of every State to lead its national existence free from external interference, subversion or coercion; non-interference in the internal affairs
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of one another; settlement of differences or disputes by peaceful manner; renunciation of the threat or use of force; and effective cooperation among themselves" On the surface, the process of consultations and consensus is supposed to be a democratic approach to decision making, but the ASEAN process has been managed through close interpersonal contacts among the top leaders only, who often share a reluctance to institutionalise and legalise co-operation which can undermine their regime's control over the conduct of regional co-operation. Thus, the organisation is chaired by the secretariat. All of these features, namely non-interference, informality, minimal institutionalisation, consultation and consensus, nonuse of force and non-confrontation have constituted what is called the ASEAN Way. This ASEAN Way has recently proven itself relatively successful in the settlements of disputes by peaceful manner realm, with Chinese and ASEAN officials agreeing to draft guidelines ordered to avert tension in the South China Sea, an important milestone ending almost a decade of deadlock. Despite this success, some academics continue to argue that ASEAN's non-interference principle has worsened efforts to improve in the areas of Burma, human rights abuses and haze pollution in the region. Meanwhile, with the consensus-based approach, every member in fact has a veto and decisions are usually reduced to the lowest common denominator. There has been a widespread belief that ASEAN members should have a less rigid view on these two cardinal principles when they wish to be seen as a cohesive and relevant community.

Cross-Border Mergers & Acquisitions Reducing the Risk of Failure

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The globalisation of business over the last 20 years has seen companies search out new markets in order to grow and maintain their competitive advantage. This globalisation has been accompanied by a surge in cross-border mergers and acquisitions. Research into companies involved in cross-border mergers and acquisitions, however, points to failure rates of up to 70% with very few deals enhancing shareholder value. When analysed in more detail, the overwhelming majority of senior personnel highlight culture and communication as the two areas that prove to be the most challenging. This is substantiated by a survey of Fortune 500 CFOs where 45% attributed M&A failure to unexpected post-deal people problems, Issues ranging from corporate governance to employee welfare or customer satisfaction become complex when different cultures are involved. Understanding the opportunities and threats that these cross-border M&As present must form a key part of any pre and post-merger integration strategy. Cross-border M&As have been increasing significantly in industrialized as well as developing countries over the past decade. Growing in a parallel path, cross-border M&A activity has been a driving force of FDI flows. Although developing countries share of cross-border M&As is still small relative to industrialized countries, transactions in Latin America (primarily through privatization) and East Asia (post-crisis asset sales) have been leading an upsurge among developing countries. In East Asia, Korea and Thailand in particular have been attracting large volumes of M&A activity since 1997. The recent M&A activity stem from two different motives: resolution of past problems (corporate restructuring) and opportunities for the future (strategic partnering). The majority of M&As is seen in the industries under competitive pressure as a result of deregulation, technological renovation, or large
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R&D expenditures. In developing countries under severe financial distress, cross-border M&As can immediately provide liquidity and prevent asset losses, and enhance resource allocation. In the long-term, M&As introduce new management and operation systems, thereby improving efficiency and competitiveness.

Ensuring a Successful Integration Process

Communicaid has extensive experience of assisting leading international companies to be successful with their crossborder merger, acquisition, collaboration, joint venture or other business integration projects. We provide consultancy, training and support services at all stages from pre to post-deal.

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Q: What is the motivation for cross-border mergers and acquisitions?

A: To build shareholder value.

Q: What are the drivers of M&A activity?

A: Macro - Global competitive environment (i.e. technological regulatory, and capital market changes)

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Micro - Industry specific dynamics (i.e. access to strategic assets, market power, synergies, size, diversification, financial opportunities)

Note: An enterprises potential value is a combination of the intended strategic plan and the expected operational effectiveness to be implemented post-acquisition.

Q: What are the advantages to a cross-border acquisitions versus a greenfield investment? A: Advantages: Faster to implement. Cost-effective means of both gaining competitive advantage and eliminating a local competitor. Opportunities created through international economic, political, and foreign exchange conditions. Q: What are the challenges to a cross-border acquisitions versus a greenfield investment? A: Challenges: Melding corporate cultures. Downsizing challenges (i.e. employees, host government intervention)

Q: What are the three stages to the cross-border acquisition process? A:

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1. 2. 3. 4.

Identification and valuation of target Ownership change Management of the post-acquisition enterprise. Cross-border diversification

Goal: Minimize the firms overall cost of capital

Conclusion
The implementation of the single market and the introduction of the euro have strengthened competitive pressure and increased flexibility in the EU economies. Furthermore, they have also had a clear impact on global markets, prompting further integration of international financial markets. In other words, it is clear that developments in financial markets have contributed to a more efficient allocation of capital. This is also to the benefit of pension funds. On the other hand, the integration of the financial markets and the technological developments have substantially increased the risk of contagion in the event of a financial crisis. It is necessary therefore for governments and authorities to continue to cooperate to create regulations and institutions for the purpose of minimising financial risk.

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