Special update on the 5th ASEAN Finance Ministers’ and Central Bank Governors’ Meeting (AFMGM)

Published on 18 April 2019

The 5th ASEAN Finance Ministers’ and Central Bank Governors’ Meeting (AFMGM) was held in Chiang Rai on 5 April 2019 under Thailand’s 2019 Chairmanship theme “Advancing Partnership for Sustainability”.

Key Outcomes of the Meeting

  1. Economic Update and Policy Challenges
    1. ASEAN continued to grow by 5.1% in 2018, anchored by strong domestic demand and investments.
    2. The Working Committees under the Senior Level Committee on Financial Integration continue to conduct the macroeconomic and financial risk monitoring exercise to maintain stability in the region’s financial system.
    3. Continued engagement with the ASEAN+3 Macroeconomic Research Office (AMRO) in:
      • Closely monitoring the economic and financial development in the region
      • Strengthening the surveillance and operational capabilities of AMRO
    4. The continued support of the Chiang Mai Initiative Multilateralisation (CMIM) as an effective regional financial safety net and a key component of the Global Financial Safety Net
  1. Financial Integration and Liberalisation
    1. The Protocol to Implement the Eighth Package of Commitments on Financial Services under the ASEAN Framework Agreement on Services (AFAS) was signed by all ASEAN Finance Ministers on 5 April 2019.
      • Negotiations for the 9th Protocol have commenced.
    2. Banking:
      • Conclusion of two new bilateral agreements under the ASEAN Banking Integration Framework (ABIF). The two agreements came into effect with the signing of the 8th Protocol to Implement the Eighth Package of Commitments on Financial Services under AFAS.
    3. The Financial Services Commitments Scoremap which allows for a comprehensive monitoring of the openness of our financial services sector was introduced. The Scoremap has shown progressive liberalisation in the insurance, banking and capital markets subsectors.
    4. The revised Terms of Reference for the Working Committee on Financial Services Liberalisation (WC-FSL) endorsed to streamline the WC-FSL’s operations and remain relevant to the strategic objectives of the AEC Blueprint 2025.
    5. The Financial Services Annex of the Regional Comprehensive Economic Partnership (RCEP) negotiations to be concluded by end 2019.
  1. Trade and Investment Facilitation
    1. Capital Account Liberalisation: The Working Committee on Capital Account Liberalisation (WC-CAL) continue to promote the use of local currencies to enhance trade and direct investment flows to the region.
      • Three existing bilateral agreements on local currency settlement were concluded. Letters of Intent were signed to initiate discussions on the establishment of a local currency settlement framework between:
        1. Bangko Sentral ng Pilipinas (BSP) and Bank Indonesia (BI);
        2. the BSP and Bank Negara Malaysia (BNM);
        3. the BSP and the Bank of Thailand (BOT)
      • The Guiding Principles on Local Currency Settlement Framework to be completed by the end of 2019. The Guiding Principles will guide AMS in establishing bilateral local currency settlement arrangements in the region.
      • The policy paper titled “Capital Account Safeguard Measures in the ASEAN Context” was published. The paper reflects ASEAN’s collective views on capital account safeguard measures and highlighted the importance of sufficient policy space in preserving economic and financial stability.
    2. The progress on customs cooperation:
      • Ongoing development of the live operation of ASEAN Single Window (ASW).
      • The completion of all AMS of the ratification of Protocol 7 (Customs Transit System) of the ASEAN Framework Agreement on the Facilitation of Goods in Transit (AFAFGIT).
      • The implementation of the ASEAN Harmonised Tariff Nomenclature 2017 (AHTN 2017).
      • The remaining AMS to join the live operation for the exchange of the ASEAN Trade in Goods Agreement (ATIGA) e-form D via the ASW by the end of 2019.
      • All AMS are to complete the ratification of Protocol 2 (Designation of Frontier Posts) of AFAFGIT to support the operationalisation of the live run of the ASEAN Customs Transit System in 2019.
    3. The progress on taxation cooperation:
      • The ASEAN Forum on Taxation (AFT) to :
        1. complete the bilateral networks of Avoidance of Double Taxation Agreements (DTAs) among AMS
        2. improve the implementation of Exchange of Information (EOI) for tax purposes in accordance with international EOI standards.
      • The AFT is conducting a study on ASEAN Interest Withholding Tax Structure and the AFT has been urged to further enhance the withholding tax structure among AMS to promote the broadening of the investor base in ASEAN debt issuances.
      • The AFT is developing a Standardised Certificate of Residence (CoR) which would facilitate tax treaty benefit claims among members more efficiently.
    4. The progress on insurance:
      • The Handbook on ASEAN Insurers offering Cross-border Marine, Aviation and Goods in Transit (MAT) Insurance produced by the ASEAN Insurance Forum (AIFo) was endorsed. The handbook aims to provide greater clarity to the industry on MAT definition, regulatory framework and consumer protection mechanisms among AMS.
      • The completion of the Guiding Principles for the implementation of insurance liberalisation.
      • Ongoing efforts by AIFo on developing the Roadmap for the ASEAN Insurance Integration Framework (AIIF).
    5. The progress on capital market:
      • The ASEAN Capital Markets Forum (ACMF) Pass to facilitate cross-border movement of investment advisers was launched and came into effect on 1 January 2019.
      • An MoU on cross-border publication of research reports was signed.
      • ACMF has set up the ACMF Industry Consultative Panels to engage the private sector to ensure the commercial viability of ACMF’s initiatives.
  2. Financing, Payment and Service Connectivity
    1. The Working Committee on Payment and Settlement Systems (WC-PSS) continues its ongoing efforts in creating an enabling environment that promotes regional linkages and safe payment systems. The ASEAN Payments Policy Framework is being developed to guide cross-border real-time retail payments across the AMS.
    2. The WC-PSS is working on the regional framework to facilitate the integration of real-time payment systems in ASEAN. Recent collaborations, which include Thailand, Cambodia, Lao PDR and Singapore, explored the interoperability of QR codes to promote usage of innovative retail payment schemes throughout the region. Furthermore, the Thailand-Singapore payment system linkage is expected to enter live-operation by the first half of 2020.
  3. Infrastructure Financing
    1. The ASEAN Infrastructure Fund (AIF) works on accelerating infrastructure development and financing in ASEAN through the mobilisation of private capital. The AIF’s two innovative windows are:
      • Inclusive Finance Facility, which would offer limited concessional loans to Cambodia, Myanmar and Lao PDR; and
      • ASEAN Catalytic Green Finance Facility (ACGF), which can help catalyse private sector financing into regional infrastructure projects.
    2. Working Committee on Capital Market Development (WC-CMD) established two new working groups:
      • Working Group on Infrastructure Financing to enhance the role of ASEAN capital markets in supporting infrastructure financing including by utilising Islamic finance
      • Working Group on Sustainable Financing

      ASEAN Capital Markets Forum (ACMF) and WC-CMD will collaborate closely with each other and external stakeholders to:

      • Develop standardised contractual terms for project documents and project finance documents, and infrastructure investment benchmarks and indices
      • Explore the development of a register of investors for both green and infrastructure projects and a catalogue on the pipeline of infrastructure projects
    3. The ASEAN Workshop on Innovative Financing Approaches for Sustainable Infrastructure was held on 11 February 2019. Experts’ recommendations from the workshop recommended for consideration by WC-CMD and ACMF.
    1. The initiative by ACMF to create the Roadmap for ASEAN Sustainable Capital Markets was endorsed. The Roadmap will provide a common vision and comprehensive direction to strengthen ASEAN’s commitment to promoting an ecosystem for sustainable capital market development. ACMF has been promoting sustainable capital markets with the adoption of the ASEAN Green, Social and Sustainability Bond Standards.
    2. A report by WC-CMD on sustainable financing in ASEAN to be presented at the next AFMGM for endorsement. Financial institutions urged to incorporate Environmental-Social-Governance (ESG) elements into their business strategy.
  4. Financial Inclusion
    1. On-going efforts by the Working Committee on Financial Inclusion (WC-FINC) towards more financial inclusion in the region and the presence of enabling regulations and infrastructure.
    2. The Guidance Notes on Digital Financial Services (DFS) and the Guidance Notes on Financial Education and Consumer Protection (FCEP), published early this year, recognises technology as a strategic enabler of financial inclusion and should be implemented with the consideration of consumer protection. Guidance Notes on Monitoring Financial Inclusion to be developed.
    3. Efforts are being made by the ASEAN Insurance Regulators’ Meeting (AIRM) to advance initiatives to support AMS in enhancing insurance awareness and closing the gap for people excluded from mainstream commercial and social insurance schemes through activities such as developing a Framework for Microinsurance Product.
  5. Disaster Risk Financing
    1. Phase 2 Plan of Action of the ASEAN Disaster Risk Financing and Insurance (ADRFI), which will support the provision of disaster risk financing and insurance solutions in the region, has been endorsed.
    2. An MoU to collaborate in the set-up and implementation of the Southeast Asia Disaster Risk Insurance Facility (SEADRIF) was signed by five AMS and Japan, with the World Bank as lead advisor.
  6. Cyber Resilience
    1. ASEAN central banks are urged to actively participate in the Cybersecurity Resilience and Information Sharing Platform (CRISP) as well as other global platforms such as CERES (Central Banks, Regulators, and Supervisors) Forum to enhance regional and global cyber risk information sharing.
  7. Digital Asset Oversight
    1. ACMF is developing the ASEAN Framework for Cooperation on Digital Asset Oversight to exchange views and share information on regulatory development, and to provide information for investors’ protection.