Representatives from Australia, Japan, South Korea and New Zealand have this week signed the final Memorandum of Cooperation (Memorandum) setting out the internationally agreed rules and cooperation mechanisms for the Asia Region Funds Passport (Passport).

The Passport, once fully implemented, will be the most far-reaching multilateral regulatory framework in the Asia-Pacific region allowing for the cross-border marketing and distribution of collective investment schemes.

By signing the Memorandum, the signatories (Participants) have set in motion the implementation of the Passport, which is expected to be operational by the end of 2017.

The Memorandum

The Memorandum comes into effect on 30 June 2016. Any eligible country that signs the Memorandum before then will be considered an "Original Participant".

The Memorandum, which is available on the APEC website, sets out the various "Passport Arrangements" to which the Participants must give effect within 18 months of becoming a Participant. These "Passport Arrangements" relate to the laws and regulations applicable to the cross-border offering of "Passport Funds" within the economies of Participants.

Participants will be required to implement any legislative arrangements necessary to give effect to the "Passport Rules" set out in Annex 3 of the Memorandum, which regulate the operation of "Passport Funds".

As an "Original Participant", Australia will have 18 months from 30 June 2016 to implement the necessary legislative arrangements and give effect to the "Passport Arrangements".

Growing Investment Management in Asia

While Australia, Japan, South Korea and New Zealand are the initial signatories to the Memorandum, it is expected that Thailand, Singapore and the Philippines will follow shortly.

The Passport is widely seen as a key building block to increasing financial integration across the Asia-Pacific region and, in particular, to facilitating the flow of capital into the region's equity and debt markets.

The Passport is considered a key enabler for the growth of regional savings and the creation of investment products specifically designed in the region, for the region's growing retirement population and wealthy middle class looking for investment solutions to meet their specific needs.

The Passport presents a powerful opportunity for fund managers from participating economies to target new markets across the region.

The Asia-Pacific Economic Cooperation (APEC) estimates that the introduction of the Passport will create approximately 170,000 new jobs in the Asia-Pacific region over the next five years and save Asian investors US$20 billion per annum in investment management costs.