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Towards an inclusive, stable financial sector
THE Ministry of Finance and the Monetary Authority of Singapore (MAS) assumed the ASEAN Finance Chairmanship in 2018. Under the theme of "Resilience and Innovation", both organisations have pursued various initiatives under the ASEAN Finance Track.
ASEAN is a vibrant, inter-connected region of 630 million people. It is currently the sixth-largest economy in the world, and is projected to become the fourth-largest by 2030 after the US, China and the European Union.
According to data from the International Monetary Fund, ASEAN's economy grew by 5.1 per cent in 2017 and is expected to outstrip most other regions in 2018. Last year, ASEAN attracted almost US$140 billion of Foreign Direct Investments.
The ASEAN Economic Community (AEC), which is the realisation of the region's end-goal of economic integration, envisions ASEAN as a single market and production base, a highly competitive region with equitable economic development, and fully integrated into the global economy.
The AEC Blueprint 2025 provides broad directions through strategic measures to guide the next phase of ASEAN economic integration.
Under this blueprint, a stronger AEC is envisaged by the year 2025 with the following features: a highly integrated and cohesive economy; a competitive, innovative and dynamic ASEAN; enhanced connectivity and sectoral cooperation; a resilient, inclusive and people-oriented, people- centred ASEAN; and a global ASEAN.
Ensuring that the financial sector is inclusive and stable remains a key goal of regional economic integration.
Under the AEC 2025 vision, the ASEAN financial sector integration has three strategic objectives, namely to strengthen financial integration, promote financial inclusion, and ensure financial stability.
ASEAN is committed to meet the large infrastructure financing gaps in the region on several fronts.
First, there is a need to increase the visibility of ASEAN infrastructure project opportunities by showcasing investible projects.
In April this year, a PwC Report series profiling ASEAN infrastructure investment opportunities was completed. The World Bank-Singapore Infrastructure Finance Summit, which brought together infrastructure players on the supply and demand side, was also organised that month.
Second, it is crucial to improve the bankability of ASEAN projects by strengthening project preparation capabilities and promoting adoption of standardised contractual provisions.
In February, government officials and companies participated in an ASEAN Workshop on Project Structuring and Financing.
Singapore also secured commitment for the ASEAN Capital Markets Forum, and the Working Committee on Capital Market Development to work towards standardising contractual terms.
Third, there is a commitment to support the growth of infrastructure as an asset class in ASEAN by developing investment benchmarks that will facilitate investors' assessment of the risk-return profile of projects.
Singapore has advanced financial integration in ASEAN by strengthening private market financing opportunities for promising ASEAN growth enterprises.
In October, the MAS said that 380 participating investors who enrolled for the Singapore FinTech Festival's deal-making platform, Match, have indicated intentions to invest up to a total of US$6.2 billion in ASEAN enterprises next year, and an additional US$6 billion earmarked over the subsequent two years.
Match will culminate in the Global Investor Summit, to be held from Nov 13-14 during the third Singapore FinTech Festival. The summit brings together the investment and enterprise communities, showcasing the best of next-generation ASEAN startups and growth enterprises across all sectors - FinTech and beyond FinTech.
FACILITATE TRADE & INVESTMENT
In May, the ASEAN Directors-General of Customs endorsed the commencement of a feasibility study on an ASEAN Mutual Recognition Arrangement (MRA) on Authorised Economic Operator (AEO).
ASEAN Member States (AMS) are currently undertaking the study to fact-find and analyse the feasibility of establishing an ASEAN MRA on AEO. This would not only facilitate and simplify mutual recognition negotiations and programme administration by ASEAN customs administrations, but also serve to reduce the regulatory burden and compliance costs of the trading community in ASEAN.
ASEAN has also made progress in customs cooperation via the ASEAN Single Window (ASW) that took effect on Jan 1 this year, improving intra-ASEAN connectivity by connecting the National Single Window of each AMS together.
On tax initiatives, ASEAN has made important strides in cooperation on cross-border tax matters to promote intra-ASEAN investment and trade flows.
ASEAN will continue efforts to complete and improve the network of Avoidance of Double Taxation Agreements among AMS, and share best practices on the implementation of automatic exchange of financial account information in accordance with international standards.
ASEAN will also promote best practices of dispute resolution mechanisms to provide for more efficient settlement of tax disputes, and improve the withholding tax structure in AMS, following the study on withholding tax practices within ASEAN.
The Singapore Green Finance Conference was held in June 2018, together with other green-finance related events organised by the Global Financial Markets Association and the International Finance Corporation.
The ASEAN Capital Markets Forum launched ASEAN Social Bonds Standards and ASEAN Sustainability Bonds Standards during its annual Conference in Singapore in October.
RESILIENCE AGAINST NATURAL DISASTERS
ASEAN has agreed to establish the South-east Asia Disaster Risk Insurance Facility (Seadrif) in mid-2019 to enhance its capacity to deal with economic losses from natural disasters.
Seadrif is a regional facility that will provide disaster risk financing and insurance solutions, including a sovereign catastrophe risk insurance pool for participating ASEAN members. It will also help ASEAN transfer and diversify insurance risks beyond its domestic markets.
The Central Banks, Regulators and Supervisors (Ceres) Forum was launched on July 1 this year. This is the first global platform for central banks, regulators and supervisors to share information impacting global security and resiliency. To date, four AMS have joined the platform - Brunei, Indonesia, Singapore and Thailand.
Singapore facilitated a session on Ceres during the FS-ISAC Asia-Pacific Summit, arranged for central banks and regulators to better understand the forum, training and analytical services. Singapore also secured commitment for the ASEAN Senior Level Committee on Financial Integration to develop the modalities of information-sharing on cyber security.
ASEAN will continue to strengthen the surveillance capacity of ASEAN+3 Macroeconomic Research Office, an international organisation established in Singapore; and enhance the operational efficiency of the Chiang Mai Initiative Multilateralisation, which is a US$240 billion regional financial safety net.
ASEAN is leveraging digital solutions to advance financial inclusion in the region.
The ASEAN Financial Innovation Network launched the world's first online, cross-border and open-architecture platform - API Exchange - in November 2018 to:
- Connect financial institutions (FIs) and FinTech firms through a globally curated marketplace;
- Facilitate experiments in a sandbox among financial industry players; and
- Enable adoption of APIs to drive digital transformation in the region.
ASEAN is also working on guidance notes on digital financial services for ASEAN, as well as on financial education and consumer protection.
ENHANCE PAYMENTS CONNECTIVITY
Singapore and Thailand are currently undertaking a pilot project to link their real-time retail payment systems, which could potentially pave the way for a broader network of real-time retail payment system linkages among AMS.
The rulebook on the pilot, which is being developed by KPMG, will lay out the broad operating requirements for participants, including system standards and value proposition for the linkage.
In 2018, MAS signed FinTech Cooperation Agreements with the State Bank of Vietnam, Autoriti Monetari Brunei Darussalam, and Otoritas Jasa Keuangan.
These agreements complemented earlier ones with the Philippines Central Bank, Bank of Thailand and the Securities Commission of Malaysia.
FinTech cooperation agreements facilitate the sharing of information on emerging FinTech trends and developments, promote joint innovation projects; and allow for better understanding of the regulatory regime and opportunities in the respective countries.
FINTECH TRAINING PROGRAMMES
Singapore invited ASEAN central banks and regulators to this year's Singapore FinTech Festival, which has a focus on ASEAN, with the intent to catalyse greater financial innovation within the ASEAN region.
Programmes during the week-long festival include ASEAN-themed panel discussions, a showcase of ASEAN innovations at the conference and exhibition, as well as ASEAN FinTech Awards to profile ASEAN FinTech firms.
In addition to pushing for a greater incorporation of FinTech and cyber security-related training programmes at regional training platforms, the refinements to MAS' core training programmes seek to further scale up the capacity of ASEAN central bankers and financial regulators in these areas.