11 September 2015, Mactan, Cebu, PHILIPPINES—Six APEC economies signed the Statement of Understanding for the Asia Regional Funds Passport (ARFP) today, a multilateral arrangement that will facilitate the cross-border offering of eligible collective investment schemes in the participating economies.
Recognizing the value of forging stronger and more streamlined connections in the financial markets, Australia, South Korea, New Zealand, Thailand, Japan, and the Philippines signed the legally non-binding document, expressing keen interest to pursue the ARFP.
Philippines Finance Secretary Cesar V. Purisima, host of the APEC Finance Ministers’ Process this year, said “Closer financial integration is a key pillar of our agenda here in Cebu. We are optimistic that regional cooperation in building better financial linkages can smoothen our path to shared prosperity.
With 40% of the region’s Micro, Small and Medium Enterprises (MSMEs) underserved, we expect easier cross-border flows of funds to accelerate trade and investment in the region.”
“Specifically, the Asia Region Funds Passport aims to give investors access to a larger range of well-regulated funds. This will help to further strengthen the international competitiveness of our financial services sector across Asia in relation to other parts of the world,” Cormann said.
An APEC initiative under the Finance Ministers’ Process, it aims to establish a regional environment where operators of collective investment schemes, such as mutual funds, based in a member economy will be able to offer their products to investors in other passport member countries.
The ARFP accomplishes this by reducing and streamlining regulatory inconsistencies and overlaps, factors for increased difficulties in offering products to customers in multiple economies.
According to a study by the APEC Policy Support Unit in 2014, by improving efficiency, the initiative will result in savings of USD20 billion annually in fund management costs. It could also create 170,000 jobs in APEC economies within five years.
The statement signed by the Ministries of Finance or agencies of participating economies reflect their shared goals of enhancing economic growth with sound development in the region by deepening the region’s capital markets to attract finance, as well as strengthening the capacity, expertise, and international competitiveness of financial markets in the region, and the fund management industry.
Furthermore, signatories aim to provide investors in their respective economies a more diverse range of investment opportunities, to enable them to better manage their portfolio and meet their investment objectives. One of which is to facilitate the channeling of the region’s savings to a pool of funds available for investment.
The maintenance of legal and regulatory frameworks will likewise be ensured to promote investor protection, fair, efficient, and transparent markets for financial services in support of financial stability and to provide high standards in the management and distribution of collective investment schemes.
First recommended by the Australian Financial Centre Forum in 2010 as part of its aim to develop Australia as a leading financial services centre. Last September 2013, Australia, South Korea, New Zealand, and Singapore signed a Statement of Intent during the APEC Finance Ministers’ Process meeting in Bali.
These countries undertook public consultations on detailed Passport arrangements with the goal of a 2016 pilot implementation. In 2014, the Philippines, together with Thailand and Japan, joined the 4 countries in the technical working group.
The Passport will remain open for participation by subsequent eligible economies from such time as is appropriate to their particular circumstances.
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