Japan was one of six signatories to the Asia Region Funds Passport (ARFP) scheme at the Apec finance ministers meeting in the Philippines late last week, However, Singapore was not among them.

Japan joined Australia, New Zealand, South Korea, the Philippines and Thailand in signing a statement of understanding (SOU) in the September 11 ceremony in Cebu.

Singapore had been part of the original group of four Asian nations to sign a statement of intent on ARFP when the scheme was announced at the Apec finance ministers’ meeting in Bali in September 2013, as reported.

The city-state also took part in the public consultations on detailed passport arrangements, of which a draft was released in March this year, as reported.

Many had forecast Singapore would be the hub to initiate a full Asia-Pacific fund passport scheme, given that it had a foot in two camps with ARFP and the Asean Collective Investment Scheme. It was seen as being savvy for keeping its options open, and was even being tipped to join the mutual recognition scheme between Hong Kong and mainland China.

Media have reported that Singapore withdrew from ARFP so it could focus on developing the Asean CIS, of which it is a chief architect.

AsianInvestor obtained a transcript of Australia finance minister Mathias Cormann’s speech delivered at the meeting in Cebu last week. He stated that Singapore could still be part of the scheme in future.

"While Singapore is unable to sign the statement of understanding today, it has been represented at passport negotiations and intends to participate in the passport moving forward," he claimed.

Neverthess, the big boost to ARFP came in the form of Japan, which has previously appeared hesitant to commit. Industry players had expressed a desire for Japan to take part, given the size and maturity of its funds market.

In fact, some had tipped Japan to be the game-changer, saying whichever scheme it joined would become scaleable. Given the geographic remits of the other two schemes, the Asean CIS and the Hong Kong-China mutual recognition scheme, ARFP was really the only scheme it could join.

Similar to those two shemes, the ARFP project aims to liberalise fund distribution among participating countries. Eligible products domiciled in one participating country will be able to be distributed in all participating nations under a streamlined authorisation process.

In the case of ARFP, its goal is to complete the fund approval process within 28 days, a considerable improvement on the six to 12 months that is the case today.

Other than the six countries to have signed the statement of understanding, all Apec economies have been urged to take part when the scheme begins in 2016. Members hope that ARFP will become the de facto regional standard.

“This joint statement expresses our commitment to join the Asia Region Funds Passport," Cormann said. "As signatories, we commit to work together to finalise all outstanding issues necessary to enable the passport to commence operating.”

From here the securities regulators of the six participating nations will sign a memorandum of cooperation by the end of 2015. After that they will have 12 months to implement the passport arrangements domestically.

Industry experts have warned that one of the biggest hurdles to ARFP's success will be the higher tax imposed by Australia and Korea on offshore funds which, if not resolved, could spell its failure, as reported.

Opinions on the prospects of ARFP have varied. Some suggested domestic regulatory issues were too challenging, while others said success would depend on who the participating members were, saying a big hitter such as Japan could make a difference, as reported.