DELAYS in the implementation of the planned Association of Southeast Asian Nations (ASEAN) Economic Community (AEC) could discourage companies from expanding within the region, Moody’s Investors Service said.

The global debt watcher, in a report titled “Inside ASEAN” released last week, noted that expansion of Southeast Asian companies within the region has been largely limited, with cross-border acquisitions within ASEAN making up just 9% of their overall expansion activities.

On the other hand, domestic acquisitions by ASEAN-based companies accounted for 55%, while acquisitions outside the region made up 36%.

“While the AEC is scheduled to be in place by end-2015, member countries have yet to make significant headway in areas such as eliminating non-tariff barriers, reducing cross-border investment obstacles and improving labor mobility,” Moody’s said.

“Until further clarity on such pertinent issues materializes, ASEAN companies may be tempted to hold off on large scale intra-regional investments despite the secular story of increasing trade integration,” it said.

ASEAN — composed of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam — aims to transform the region into a single market and production base next year.

Moody’s said “deeper financial integration” is needed in ASEAN given that markets in the region remain largely fragmented.

The debt watchdog noted the wide disparities among the 10-member alliance’s domestic regulations and corporate governance, as well as currency and interest rates, limiting the availability of funding for regional expansion.

“Capital market integration is a cornerstone of the AEC, which will help reduce barriers to ASEAN cross-border activity over time,” Moody’s said, noting the ASEAN Banking Integration Framework launched in 2011 as part of the broader AEC objectives.

The ASEAN Banking Integration Framework aims to achieve multilateral liberalization in the banking sector by 2020 for ASEAN commercial banks by liberalizing capital accounts and domestic financial markets in individual countries, regulatory harmonization, and stronger policy coordination among the member states.

The framework is part of the AEC Blueprint, which aims to bring economic benefits and financial stability to the region through multilateral liberalization by 2015. — Daryll Edisonn D. Saclag, Businessworld