Regulators and politicians in Hong Kong, Japan, Singapore and Malaysia are considering setting up a pilot programme with Australia to introduce an Asian fund passport scheme, says Bill Shorten, Australia’s assistant treasurer and minister for financial services and superannuation.
He made the remarks at last week’s AsianInvestor conference in Melbourne for superannuation funds looking to invest more directly into Asian markets.
Shorten has picked up on an initiative blessed by his predecessor, Chris Bowen, to further integrate Australian and Asian financial markets, in part by encouraging more regional investment flows, attracting Asian asset managers to operate in Australia, and promoting Australian financial groups in Asian countries.
Shorten notes there are plenty of Australian asset managers but few are engaged in Asia. Despite the huge and growing size of the A$1.3 trillion superannuation business, these funds are mainly inward looking.
The minister believes this is short-sighted. The size of domestic pension savings contributed to Australia avoiding the global financial crisis, allowing local companies to raise capital despite tough market conditions, and is an asset not to be squandered.
One way to utilise the superannuation business is to export Australia’s huge and experienced onshore industry of investors and service providers to Asian markets still building their pension systems.
“Australia missed out on the rise of Japan in terms of providing financial services,” Shorten says. “We can’t miss out on the rise of China and India.”
To boost Australia’s presence in these markets, the government has accepted a programme of restructuring its tax rules for cross-border funds, including scrapping taxes on the investment income of foreign domiciled funds sold in Australia (to allow foreign fund managers to utilise Australian investment advisers and distributors).
The centrepiece of this initiative is to negotiate a regional funds passport (mutual recognition). Shorten recently visited Hong Kong and says regulators and industry executives are receptive to the idea. In addition, he says Australia is in talks with the governments of Japan, Singapore and Malaysia with regard to a pilot programme, although he gives no timetable on when such an agreement could be reached. Ideally this is a multilateral project.
Shorten says he realises the idea of Sydney or Melbourne as a ‘financial hub’ in a region awash with hub ambitions can seem a little ridiculous. But the government can put in place measures to make it easier for Asian and Australian funds to operate across borders.
“It will let Australia export its skills and participate in the rise of China and India,” Shorten says.