REPUBLIKA.CO.ID, JAKARTA -- The implementation of a multilateral framework that facilitates the cross-border marketing of managed funds across participating Asia-Pacific economies is likely to create a significant number of new jobs and channel more of the region’s savings into investments that promote economic growth and prosperity, at lower cost, according to a new study. The passport is intended to reduce regulatory inconsistency and overlap which makes it difficult for collective investment scheme operators to offer products such as mutual funds to retail customers in multiple economies in the region.
"There is a strong business case for introducing a funds passport in Asia. By improving efficiency within the sector, the passport could save the region’s investors 20 billion USD annually in fund management costs and offer higher investment returns at the same or lower degree of risk,” said Quynh Le, an APEC Policy Support Unit analyst and lead author of the study in a written statement on Thursday.
Once the passport is fully up and running, it will encourage the establishment of locally domiciled funds which could create 170,000 jobs in APEC economies within five years. According to Le, the passport will also help to steer capital from markets where it is in surplus to those where it is in short supply and, in the process, recycle savings into investments that fuel commercial innovation, productivity and long-term growth.
Executive Director of APEC Secretariat, Alan Bollard said that strong Asian growth had contributed to a substantial increase in private wealth in the region in recent decades. It is a trend that is expected to continue. It is forecast that Asia will account for 63 per cent of the world’s private wealth by 2017.
“Ultimately, the passport could even facilitate the marketing of Asian funds in Europe through an Asian-European mutual recognition agreement and contribute to greater global growth,” Bollard added.
Like any cross-border financing solution, the passport carries the risk that shocks in one market will be amplified and transmitted to others, and is something that policymakers need to address. The key is striking the right regulatory balance to achieve industry efficiency while ensuring that proper investor protections are in place.
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