Barriers to entry and financial integration in Asia and RCEP countries Alex Erskine, Erskinomics Consulting Pty Ltd 10 – 11 July 2017 Some highlights from ACFS paper Barriers to entry and financial integration in Asia and RCEP countries, 5 July 2017 https://australiancentre.com.au/publication/barriers-entry-financial-integration-asia-rcep-countries/

Presentation outline ACFS paper compiled mainly by mid-2016 Background on the RCEP negotiations and trade in financial services Focus on barriers to trade in financial services and on the “prudential carve-out”, broadly interpreted to include policy choices for the exchange rate, consumer protection and financial stability Review effectiveness of frameworks for promoting financial integration Suggest implications for RCEP negotiations

Countries negotiating the RCEP   APEC RCEP Hong Kong, China China Chinese Taipei Korea Russia TPP India Australia Canada Japan Chile New Zealand Mexico ASEAN Peru Brunei Darussalam United States of America Malaysia Singapore Viet Nam Cambodia Indonesia Lao P.D.R. Philippines Myanmar Thailand Timor-Leste and 20+ Pacific Islands Papua New Guinea The 10 ASEAN countries and the “Plus Six” Focus on barriers to trade in financial services

RCEP countries have a wide range of incomes and generally above- average financial development

Modes of Supply for trade in services Mode 3 and Mode 4 are the most important for trade in financial services These don’t fit easily with Balance of Payments and trade data (which anyway is poor) Especially need more surveys of operations of foreign affiliates

Measures of barriers to trade in financial services World Bank (WB) – Services Trade Restrictions Index (STRI)* OECD – Services Trade Restrictiveness Index (STRI)* Also Economic Research Institute for ASEAN and East Asia (ERIA) for trade negotiation/agreement coverage and degree of ambition * The WB and OECD STRIs differ in coverage and can differ in interpretations of laws and regulations

WB STRIs are lower for countries with higher GDP pc and financial development

WB STRIs differ with exchange rate regimes

Ambiguous association between WB STRIs and consumer protection regimes

Association of WB STRIs and financial stability regimes unclear: Goldilocks or anti-liberalisation?

Case studies of frameworks that promote financial integration (plus FTAs & other means to boost cooperation) Asia Region Funds Passport (ARFP) ASEAN initiatives on financial integration Pilot scheme to facilitate cross- border sales of retail funds in Asia region “Competing” with EU Undertakings for Collective Investment in Transferable Securities (UCITS) scheme, China-HK Mutual Recognition of Funds (MRF) and ASEAN Collective Investment Scheme (CIS) Framework ASEAN 1967 AFAS 1995 and AEC 2007/2015/2025 ABIF 2014 and QABs (2 by 2018- 2019 or before 2025) based on bilateral agreements Joint Review 2015 by ASEAN Secretariat and WB

Conclusions To most effectively promote financial integration To most effectively lower barriers to trade in financial services Build into RCEP mechanisms that involve negotiators, regulators and the private sector in structured follow-up of reviews of barriers to trade in financial services, with accountability and processes [Plus suggestions to use RCEP to advance ARFP, FinTech, financial inclusion & data improvements] Negotiators be cognisant of exchange rate regime relevance Focus on countries that have “unnecessarily high” barriers to trade in view of their exchange rate regime Especially as countries transition from relatively fixed to more flexible/floating exchange rates