Pilot participants in a scheme designed to make it easier to sell financial products between APEC member states have formally ratified the initiative’s terms.
Agreed in Singapore following lengthy consultations, the breakthrough Asia Region Funds Passport aims to streamline transactions of instruments such as mutual funds among finance professionals based in different APEC nations.
Creators of the Passport hope that it will spur a plethora of efficiency gains, and therefore stimulate job creation and growth in the Asia-Pacific region.
From early 2017, a group of seven economies will trial the system, with Australia, Japan, Korea, New Zealand, the Philippines, Singapore and Thailand taking part. In the next few weeks, securities regulators from each territory are expected to countersign the Memorandum of Cooperation that underpins the pilot phase.
Australian Treasury senior adviser Trudie Wykes – chair of the steering group behind the scheme – explained: “The Asia Region Funds Passport aims to cut down on incompatible or overlapping regulation that may hinder the marketing of managed funds between participating APEC economies.
“The initiative is a win-win for financial services professionals and retail investors, with potentially significant benefits for employment and economic growth.”
Wykes added: “Participating economies will seek domestic approval on the agreed practical arrangements for the initiative’s implementation, operation and governance. Economies will endeavour to implement the rules and arrangements with their domestic regulatory frameworks within 18 months after signing the Memorandum.”
According to the APEC Policy Support Unit, once the Passport becomes fully operational, it could save the region’s investors an annual $20bn in fund-management costs.
The Unit also predicts that the scheme will offer higher investment returns at the same degree of risk, or lower, and encourage the establishment of locally domiciled funds. They, in turn, could create around 170,000 jobs throughout APEC member economies within five years.
Wykes noted that other APEC economies will “continue to engage” with the pilot-programme nations to facilitate the Passport’s development.
“The progress of the initiative,” she said, “will help to build understanding of its requirements and implications in practice, and lay a foundation for its possible expansion within the region.”
Further to the pilot-phase agreement, a dedicated tax-reference group has also been established to facilitate the public disclosure of relevant tax rules across the participating states.
The group aims to safeguard the integrity of ‘passported’ funds by helping potential investors understand how the rules around eligible products may affect them.