For too long there has been only talk about the rich export potential of Australian funds management. Now, roughly two decades after regional competitors Hong Kong and Singapore built globalised asset management sectors by adopting UCITS standards and slashing tax rates, the Australian government is making its move. It believes an Asia managed funds ‘passport’, designed to make the cross-border trade of funds easier, can strengthen Asia-Pacific markets in ways that UCITS never can while also opening new markets for Australian – and Asian – managers. SIMON MUMME reports.
Talk to Geoff Weir, and it’s soon clear that his aim to negotiate a ‘passport’ streamlining the selling of managed funds throughout Asian markets is not a plan to create a ‘Dublin Down Under’. Australia could do that without consulting its regional neighbours. Its funds managers would adopt the UCITS (Undertakings for Collective Investment in Transferable Securities) structure, add to the 5,000-plus funds sold on that platform in Asia, and we would join Singapore, Hong Kong, Macau and Taiwan in the race to host the Asia-Pacific distribution and client service arms of global funds managers. To be competitive, we would need to slash corporate and personal tax rates to match generous breaks provided in equatorial Asia. But the government and Weir, director of the Australian Financial Centre Task Force, an outworking of the Johnson Report on the potential of Australia to become a financial centre, say Asia-Pacific nations should not just be gateways to the savings of their people.
Neither should they be tempted to build financial systems on the steroids of light taxes on the financial sector and light-touch regulation, which invite devastating collapse, such as that experienced by Iceland in 2008. The aim of the passport is to enable participating countries to build thriving local funds management industries by determining their own regulations and not relying heavily on UCITS rules. “We need to appeal to the self-interest of these countries,” he says, so they awaken to their potential to become more than distribution markets. Australia’s hand is clear in this, too: the passport would improve domestic managers’ access to participating markets in Asia, which will most likely be Hong Kong, Singapore and Taiwan as other centres, such as Shanghai, cultivate local expertise and form the terms upon which they will deal with foreign funds managers. Weir has no illusions about the difficulty of this task.