Thailand signed up to the Asian Region Funds Passport (ARFP) scheme this week, joining Australia, Japan, Korea and New Zealand as a signatory to the memorandum of cooperation (MoC), AsianInvestor can reveal.
The scheme, due to come into effect on Thursday (June 30), will facilitate the sale of cross-border funds between participating markets, as reported. The other four countries signed the MoC in April, but Thailand's participation was delayed by internal processes, but the Thai cabinet signed this week.
However, Thai fund managers’ take-up of ARFP is likely to be slow, as it was with the Asean collective investment scheme (CIS), said Rapee Sucharitakul, secretary general of Thailand's Securities and Exchange Commission (SEC). That passport scheme launched in summer 2014 with Thailand, Malaysia and Singapore as signatories. There are 13 funds approved for cross-border distribution under the Asean CIS, but only one from Thailand.
It is understandable that cross-border schemes in the region would have a slow start, Rapee (pictured) told AsianInvestor. “Asia is not a single market; we are not the European Union."
He pointed out that ARFP was a mutual recognition agreement rather than a passport programme, because the host jurisdiction must still give approval for fund distribution.
Moreover, Asean markets, aside from Singapore, still have a captive domestic investment market, he added. “Investors rely on local operators with whom they are more familiar. It all comes down to the sophistication of the investor itself [for the success of a scheme in the local market]."
Still, in time the schemes will gain traction as the Thai market further opens up to competition to provide investors with more investment choice, noted Rapee.
The Philippines has also expressed its intention to sign the MoC, but faces a bigger issue than Thailand: the eligibility requirement, as reported. This may take time to resolve, because it hinges on becoming a full member of the International Organization of Securities Commissions (Iosco), which promotes adherence to internationally recognised standards for securities regulation.
Ephyro Luis Amatong, a commissioner at the Philippine Securities and Exchange Commission, said the Philippines’ application for Iosco membership had been filed. “But clarifications are needed regarding our ability to share bank deposit information. That has been the stumbling block,” he said.
Under Iosco rules, full membership requires the signing of a multilateral memorandum of understanding concerning consultation, cooperation and exchange of information. This requires signatories to provide information and assistance when authorities are investigating offences, such as insider dealing and market manipulation. Information in question might include records that identify the beneficial owner and controller of an account.
But the Philippines has a bank secrecy law prohibiting the disclosure of, or inquiry into, deposits with any banking institution.
Meanwhile, Singapore, another of the initial ARFP participants, has said it would not sign yet because there needed to be a level playing field in respect of tax treatment of local and foreign funds if it is to participate as reported.