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Asia Region Funds Passport to draw in more investments

Kathleen A. Martin (The Philippine Star) - September 11, 2015 - 10:00am

MACTAN ISLAND, Cebu, Philippines – Six Asia-Pacific economies including the Philippines signed yesterday an agreement that will facilitate easier movement of investments throughout member states in Asia.

Finance ministers and officials from Australia, South Korea, New Zealand, Thailand, Japan, and the Philippines inked a statement of understanding for the Asia Region Funds Passport (AFRP).

Finance Secretary Cesar Purisima said this region-wide initiative is in line with the Asia-Pacific Economic Cooperation’s (APEC) efforts to achieve financial integration and boost the region’s growth.

“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,” Purisima said.

“With 40 percent 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,” he added.

The AFRP eases regulatory requirements for operators of investment schemes so they could easily offer products in another territory outside of their host country.

This increases the products available to consumers in the participating economies, and also expands the markets of those offering investment products in those countries.

“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 product,” Australian Finance Minister Mathias Cormann said.

“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,” he continued.

The AFRP is expected to deepen capital markets in the region and strengthen the capacity, expertise, and international competitiveness of financial markets and the the fund management industry.

The statement of understanding also requires the signatories to ensure their legal and regulatory frameworks promote investor protection, and support fair, efficient, and transparent markets.

Participation in the AFRP will remain open to eligible APEC economies and a memorandum of cooperation for this is expected to be signed before the end of the year.

SEC chairperson Teresita Herbosa said the ARFP, once fully implemented, would  help “achieve the freer flow of capital within the Asia region by providing a multilaterally agreed framework to facilitate the cross border marketing of managed funds such as mutual funds across participating economies in the Asia region.”

The APEC Finance Ministers initiated the AFRP in response to the growing recognition of the value of creating better financial linkages among economies in the region and the desire to work towards reduction of barriers and transaction costs due to varying taxations, laws and regulations.

SEC commissioner Ephyro Amatong, for his part, said the initiative could create a bigger pool of funds that might be tapped for investment to drive growth within the region.

In a separate statement, the APEC said: “Once the passport is fully up and running, it could save the region’s investors USD20 billion annually in fund management costs, offer higher investment returns at the same or lower degree of risk, and encourage the establishment of locally domiciled fundswhich could create 170,000 jobs in APEC economies within five years.”

On the other hand, APEC economies that are not ready to join the passport in 2016 are given the opportunity to develop their capacity in order to meet the passport regulatory and membership requirements in the future, Amatong said. – with Iris Gonzales

ACIRC ASIA ASIA REGION FUNDS PASSPORT ASIA-PACIFIC ECONOMIC COOPERATION AUSTRALIAN FINANCE MINISTER MATHIAS CORMANN ECONOMIES EPHYRO AMATONG FINANCE MINISTERS FINANCE SECRETARY CESAR PURISIMA FUNDS REGION
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