MACTAN ISLAND, Cebu: Recognizing the value of forging more streamlined connections in the financial markets, six member economies of the Asia Pacific Economic Cooperation (APEC) have signed a statement of understanding on a collective investment scheme that could produce billions of dollars of savings annually in fund management costs.
The Asia Regional Funds Passport (ARFP) is a multilateral initiative to facilitate cross-border transactions of collective investment schemes in participating economies.
Australia, South Korea, New Zealand, Thailand, Japan, and the Philippines signed a legally non-binding document, expressing keen interest to pursue the ARFP.
An APEC initiative under the Finance Ministers’ Process, ARFP aims to establish a regional environment for operators of collective investment schemes, such as mutual funds, to offer their products to investors in other member states.
The ARFP accomplishes this by reducing and streamlining regulatory inconsistencies and overlaps—factors that make it difficult to offer products to customers acro ss economies.
According to a study by the APEC Policy Support Unit in 2014, the initiative will result in savings of $20 billion annually in fund management costs through improved efficiency. It could also create 170,000 jobs in APEC economies within five years.
“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 smooth out our path to shared prosperity,” Philippines Finance Secretary Cesar Purisima said.
With 40 percent of the region’s micro, small and medium enterprises (MSMEs) underserved, the signatories expect easier cross-border flows of funds to accelerate trade and investment in the region, Purisima noted.
For his part, the Australian Finance Minister Mathias Cormann said the ARFP is a key trade liberalization initiative that further drives important financial integration in the region.
“It will not only reduce the amount of red tape faced by fund managers across our region, but will provide investors with greater choice of investment products,” he said.
Specifically, Cormann said the ARFP 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,” he added.
The ARFP was first recommended by the Australian Financial Centre Forum in 2010 to develop Australia as a leading financial services center.
In 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 arrangements with the goal of piloting the ARFP in 2016.
In 2014, the Philippines, together with Thailand and Japan, joined the four countries in the technical working group.
The Passport will remain open so other APEC members may join the initiative.