THE IMPACT OF FINANCIAL DEVELOPMENT ON DOMESTIC RESOURCE MOBILIZATION IN ASEAN COUNTRIES

Abstract

The main aim of this thesis, as the title reflects, is to review the impact of financial development on the domestic resource mobilization process in the ASEAN countries. In the last two decades, the ASEAN countries have been putting in much effort to develop their own financial systems. Their hard work has brought about substantial achievements such as higher growth and higher investment levels. Domestic resource mobilization can be interpreted as both the process of encouraging domestic savings and the process of allocating these savings to efficient investments. The trend of this mobilization process in the ASEAN countries has been quite impressive especially in recent years. All this, as I will try to show, can be attributed to the financial developments in these countries. The nature of financial development discussed can be divided into two categories: institutional or market developments and financial reforms. Institutional developments can contribute positively to the domestic resource mobilization process as it creates better financial intermediation. The capital markets provide another alternative for both short-term and long-term funds to be mobilized to domestic investments. Financial reforms of real interest rates and macroeconomic stability, on the other hand, determine the amount of savings that can be mobilized to finance domestic investment. All these financial developments must be well coordinated to produce desirable results in the domestic resource mobilization process. The results of this study do indicate that financial developments did indeed contribute positively to the domestic resource mobilization process in the ASEAN countries. However, there is still much room for institutional developments and improvements in attracting more domestic savings through financial liberalization policies. More attention should also be placed on the efficiency of allocating these savings.