Asia will generate much of the world’s wealth over the next five years. Just three economies in Asia – China, India and Japan – are forecast to grow at double the rate of the rest of the world in the five years to 2015. Strong economic growth, a growing middle class and an ageing population create a massive potential market for Australian investment products and fund management skills. With 60 per cent of the world’s population, Asia has just 13 per cent of the world’s funds under management. A barrier to success is the inability of an Australian fund manager to obtain a financial services licence in almost all Asian countries without undertaking the full application and compliance process and satisfying all the local requirements. This is in stark contrast with Europe, which has had a framework for regulatory recognition in place since 2001 and is attracting strong inflows from Asia.

Over the past three years about 40 per cent of all net sales of compliant European funds have been sourced from Asia. This is where trade policy becomes important, and it’s not about tariffs and subsidies. The review of Australia as a financial services centre, chaired by prominent Australian business leader in Asia, Mark Johnson, proposed that an Asia region funds passport be developed to help Australian fund managers access Asian markets. The Asia region funds passport would take the form of a multilateral framework that would enable an investment fund in one country that signed the passport framework to offer the same products in each of the signatory countries. The passport would enable Australia to export our expertise more easily to Asia.

It would also give credentialled Asian funds managers access to the Australian market, increasing competition, improving services, and push management fees down. One of the most important drivers of successful trade policy is the will and enthusiasm of industry to support the reform. A report prepared by the Financial Services Council and released by the Prime Minister at the recent APEC meeting in Japan demonstrates strong support for the passport in Asia. In the wealth management industry, 86 per cent believed the establishment of an Asia Funds Passport was important to the funds management industry’s regional growth. With this enthusiasm as a base, negotiation should begin on the necessary common regulatory and tax requirements.