It has been argued that many obstacles remain to reaching an integrated and harmonised Asian fund passport. These include disparate levels of expertise and know-how in the region, different tax treatments, or regional competition among the partnering jurisdictions.
However, it should be evident that serious initiatives have been put in place. As a consequence, competition with the European Ucits brand could emerge and global companies will have to reconsider current strategies in the region.
Local Asian markets have been trying to favour the development of their domestic industry. For instance, in the past two years in Taiwan, investment restrictions on offshore funds have intensified. Now the concentration of Taiwanese investors in a foreign fund cannot exceed 70%; the concentration of investment portfolios of an offshore fund in Taiwan securities markets cannot exceed 70%; all commission fees (which are usually higher for offshore funds) must be disclosed; and a tougher, income-based, tax treatment is applied to overseas income for Taiwanese residents.
Given this situation, it was not surprising to see the rise of proposals for a regional fund passport, such as the one in Europe.
In April, the Monetary Authority of Singapore issued a consultation paper on standard requirements and product restrictions for mutual recognition of collective investment schemes under the Asian capital market forum.
The Australia and Asia Pacific Economic Co-operation initiative gathers finance ministers of Australia, Hong Kong and Singapore. The movement aims to liberalise and harmonise the regulatory developments for a regional fund passport. A finely-tuned regulatory framework is expected to be finalised and a pilot will be launched later this year.
Another initiative emanated from the Association of Southeast Asian Nations (Asean), which is composed of ten Asian jurisdictions: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. This group targets the liberalisation and harmonisation of the financial markets.
Last year, Asean announced several new initiatives. The implementation of the so-called capital market integration is expected to be achieved by 2015. It consists of key themes such as regional economic integration, market infrastructure expansion and taxation.
Product innovation should always be welcomed. Hopefully, the expected market growth in Asia should be large enough to accommodate European and Asian products to the benefit of all end investors.
Ching Yng Cho is head of the Association of the Luxembourg Fund Industry’s Asia office
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