President Benigno S. Aquino III graces the “APEC Finance Ministers’ Meeting and Related Meetings,” a series of gatherings attended by heads of finance ministries across Asia-Pacific and top executives of multinational financial institutions. REY S. BANIQUET/NIB
CEBU CITY, Philippines—Finance officials of the 21 economies belonging to the Asia-Pacific Economic Cooperation (Apec) forum, meeting in Cebu City on Friday, approved a road map to an Apec community that is more financially integrated, resilient and prosperous.
The Cebu Action Plan, initiated and overseen by the Philippines, the host of this year’s round of Apec meetings, is aimed at integrating the region’s financial sector while enhancing resiliency, fiscal transparency and infrastructure development.
It will be pitched to Apec leaders when they meet for the Leaders’ Summit in November.
“The Cebu Action Plan that we launch today is the work of a region facing forward in steadfast cooperation amid complex challenges and opportunities. We hope the Cebu Action Plan emerges as the lasting legacy of the Philippines’ hosting,” said Finance Secretary Cesar V. Purisima, who chaired the Apec’s 22nd Finance Ministers’ Meeting.
“With 21 economies, multilateral institutions and private sector support behind it, we are optimistic the Cebu Action Plan can be taken in the next meetings as a living body of continuing work in our bid for a more prosperous, financially integrated, transparent, resilient and connected Asia-Pacific,” Purisima said.
4 pillars
Amid developments from within and outside affecting the region, the Philippines saw the need to put in place certain measures to ensure that Apec economies would be resilient to financial shocks, could bounce back when disaster strikes, and would sustain the economic growth being enjoyed now.
The Cebu Action Plan has four pillars—promoting financial integration; advancing fiscal reforms and transparency; enhancing financial resiliency; and accelerating infrastructure development and financing.
It sees the member economies committed to working toward more liberalized financial services and capital accounts. A more integrated financial sector will mean freer flows of funds able to withstand downturns.
Financial resilience
As for fiscal transparency, Apec noted that “regional cooperation on taxation and governance reforms will help ensure that available fiscal space are dedicated toward growth-inducing investments,” hence “finance ministers agreed that fiscal transparency and reforms figure in optimizing public investments across the region.”
The effects of calamities and natural disasters in the Asia-Pacific—a huge part of which lies in the Pacific Ring of Fire of volcanic eruptions and earthquakes—are seen as being tempered by financial resilience mainly through disaster risk financing and insurance mechanisms.
“In a region where more than 60 percent of the world’s disasters strike with costs of damages reaching $1.2 trillion in the past decade alone, economies committed to enhance financial resilience by building deeper financial markets,” Apec said.
Infrastructure development is also seen as crucial amid expanding economies in order to attract investors as well as connect urban and rural areas.
“Finance ministers looked forward to the development of an Apec PPP [public-private partnership] knowledge portal in collaboration with the Global Infrastructure Hub to serve as an online repository of PPP infrastructure projects. Finance ministers also noted how developing quality infrastructure as an asset class for institutional and long-term investors in the Apec region can facilitate the mobilization of regional savings into long-term investment pools,” according to Apec.
Nonbinding
The 10-year road map “seeks to coordinate the policies, rules and practices across Apec economies to support strong, sustainable, inclusive and balanced growth throughout the region.”
Specifically, the Cebu Action Plan aims to: facilitate trade and investments in the region; pursue good governance and sound fiscal policies; deepen financial markets that offer diversified financial instruments, advance financial inclusion for all households and business (including those led by women); and enhance financial resilience to global market volatility and natural disasters; and mobilize more financing for quality infrastructure development to sustain growth.
“The time period of the Cebu Action Plan and its initiatives and deliverables is ideally envisioned to last through 2025, though interested member-economies may also pursue these initiatives within a time frame that is consistent with their domestic policy considerations,” the plan read.
However, Apec is nonbinding, hence adherence to its initiatives are voluntary.
Nonetheless, the Cebu Action Plan will address common challenges such as lack of investment for infrastructure in the larger part of the region, while also sustaining the gains and tapping the opportunities to achieve balanced growth, said Australian Finance Minister Mathias Cormann.
Peru’s deputy finance minister Enzo Defilippi said Apec members will sustain the initiatives started through the Cebu Action Plan. Peru will host next year’s Apec meetings.
Funds passport agreement
On the sidelines of the finance officials’ meeting here, six Apec economies signed a statement of understanding for the Asia Region Funds Passport, an initiative aimed at allowing financial services professionals to sell market investment products to retail customers in neighboring Asian countries.
Purisima signed on behalf of the Philippines, alongside the finance officials of Australia, Japan, New Zealand, South Korea and Thailand.
The statement signifies the intention of the six economies to join the initiative when it goes on full swing late next year, said Manuel Huberto B. Gaite, commissioner of the Securities and Exchange Commission of the Philippines.
A memorandum of cooperation leading to the implementation of the Asia Region Funds Passport is eyed for signing by the respective securities regulators by the end of this year, Cormann said.
Signatories will be given 12 months to implement the passport arrangements domestically, he added.
“[The Asia Region Funds Passport] will not only reduce the amount of red tape faced by fund managers across our region, but will provide investors with a greater choice of investment products,” Cormann said.
“Specifically, the Asia Region Funds Passport aims to give investors access to a larger range of well-regulated funds. This will help to further strengthen the international competitiveness of our financial services sector across Asia in relation to other parts of the world,” he added.
“We encourage other economies to join and reap the benefits that this initiative provides,” the Australian finance chief said.
According to Apec, the Asia Region Funds 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.”
“Once the passport is fully up and running, it could save the region’s investors $20 billion annually in fund management costs, offer higher investment returns at the same or lower degree of risk, and encourage the establishment of locally domiciled funds which could create 170,000 jobs in Apec economies within five years,” Apec said last June, citing a 2014 economic cost-benefit analysis conducted by the Apec Policy Support Unit.
Bank secrecy laws
The Philippines has yet to secure approval of its reapplication for Appendix A of the International Organization of Securities Commissions (Iosco)—a requirement to implement the Asia Region Fund Passport initiative. Iosco is an association of organizations that regulate the world’s securities and futures markets and whose primary objective is exchange of information.
One roadblock to the Philippines’ Iosco reapplication is the country’s bank secrecy laws which prevent access to bank deposits, Gaite said. Apparently, the Philippines is one of only three countries in the world that still has bank secrecy laws for tax purposes.
Gaite said the SEC is looking at citing the provision in the bank secrecy laws allowing bank inquiries by the Anti-Money Laundering Council in cases of securities violations.
He said the government is confident that it will get the international body’s nod before yearend.
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