Input from BI/WC-PSS/WC-FINC/WC-CMD/BOT/MAS/MOF SIN

Draft as of3 April 2017

Input from BI/WC-PSS/WC-FINC/WC-CMD/BOT/MAS/MOF SIN

Joint Statement of the 3rdASEAN Finance Ministers’ and Central Bank Governors’ Meeting (AFMGM), Cebu, the Philippines, 7 April 2017

Introduction

1.We, the ASEAN Finance Ministers and Central Bank Governors, convened the Joint Meeting of the ASEAN Finance Ministers and Central Bank Governors under the co-chairmanship of H.E. Carlos G. Dominguez III, the Secretary of Finance of the Philippines, and H.E. Amando M. Tetangco, Jr., Governor of the BangkoSentral Ng Pilipinas.

2.[We, the ASEAN Finance Ministers and Central Bank Governors together with the ASEAN Deputy Secretary-General, expressed our gratitude to the Honourable Mr. Rodrigo Roa Duterte, the President of the Philippines, for meeting us at the [A1]….]

3.2.We stood firm inour commitment to promote economic growth and strengthen financial stability in the ASEAN region, givenuncertainties in the global economy. We exchanged views with the Asian Development Bank (ADB), the World Bank, the International Monetary Fund (IMF) and the ASEAN+3 Macroeconomic Research Office (AMRO) on the economic outlook, potential macroeconomic risks, opportunities, policy challenges, and thematic issuesrelatived to the global economy relevant to our region, in our effort to fostersustainable and inclusivegrowth.

4.3.We remain committed to achieving the goals of ASEAN Economic Community (AEC) 2025 as well as implementing the policy actions, milestones and targetsdetailed in the Strategic Action Plans (SAPs)for ASEAN Financial Integration 2016 - 2025 to promote financial integration, financial inclusion, and financial stability in our region. We endorsed the Key Performance Indicators for Financial Integration 2025 that have developed by the Working Committees and the Senior Level Committee for Financial Integration to measure the benefit of the SAPs implementation. [We also endorsed the SAPs for Taxation Cooperation to ensure greater ASEAN’s cooperation in taxation; thus, facilitate the economic integration in the region[A2].]

Regional Economic Update and Policy Challenges

5.4.We noted that the ASEAN economy continued to grow by 4.5percent in 2016[A3], amidchallenges in the global economy. Domestic demand will remain a key driver for our regional growth while structuralereforms, public spending, and fiscal stimulus will support investment in ASEAN. Despite the positive regional economic trends, we are aware ofdownside risks fromtrade policies towardsprotectionism, normalisation of interest rates, as well as geopolitical risks, which may result in increased volatilities in capital outflows from emerging Asian economies which can lead to currency weakening, and higher long-term interest rates which may result in increasing inflation.[A4]

6.5.We reiterated our commitment to implementing appropriate monetary, fiscal and macroprudentialpolicies tosustain a resilient and inclusiveeconomic growth while maintainingmacroeconomic and financial stability. We agreed to intensify our financialcooperation and integration initiatives.Therefore regionalism can work for all of us in to reinforcingethe our region’s resilience against market vulnerabilitiesglobal uncertainties, external shocks, and financial market volatilitiesy.

Roadmap for Monetary and Financial Integration of ASEAN (RIA-Fin)

7.6.We commendedthe significant progress made by the Working Committees under the Roadmap for Monetary and Financial Integration of ASEAN (RIA-Fin) in supporting further integration of the regionalfinancial sectors and the ASEAN economy, promoting financial inclusion through the areas of financial literacy, innovation, and access to finance, and strengthening financial stability in the region in banking sector and beyond.

8.7.Weare pleased with the progress and efforts related to the RIA-Fin governed under the Senior Level Committee for Financial Integration and commended the capacity building programmes and initiatives supported through the Steering Committee on Capacity Building (SCCB) to fortify the ASEAN financial integration process.

Capital Market Development

9.8.We welcomed the progress made by the Working Committee on Capital Market Development (WC-CMD) in developing and deepening bond markets in the ASEAN region, particularly in facilitating retail access to domestic bond markets. We noted that the ASEAN bond market scorecard has continued to effectively serve as a monitoring tool to capture the progress of bond market development in the region and provide basis for other related initiatives. We also recognised the efforts of WC-CMD and theASEAN Capital Markets Forum (ACMF) to enhance the ASEAN Collective Investment Scheme (CIS) Frameworkby further harmonising disclosure standards, reducing investment restrictions, and covering wide-ranging types of investment funds for ASEAN Qualified CIS.We look forward to the implementation of the enhancements, and to welcoming additional signatories to the ASEAN CIS Framework in 2018.

10.9.We are pleased with the progress of implementation of the ACMF Action Plan 2016 – 2020 that aims to create investment and business opportunities through greater connectivity, inclusiveness, and resilience of capital markets within ASEAN. We took note thatACMF’s initiative on the ASEAN Green Finance will help support sustainable regional growth and meet investor interest for green investments. Thus, for global recognition, we support the cooperation of the ACMF and the International Capital Market Association (ICMA) in introducing ASEAN green bond standards based on ICMA Green Bond Principlesto be applied across capital markets in the region.We noted the efforts of the ACMF to foster greater mobility of capital market professionals with a goal to improve intra-ASEAN connectivity by allowing more services to be provided to investors in ASEAN by regional capital market professionals, starting with a phased approach for the movements of investment consultants/ analysts, and fund managers.

10.We alsoacknowledged the progress of ACMF on capacity building through the ACMF Market Development Programme (A-MDP) as well as the newly revised ASEAN Corporate Governance Scorecard in response to the new principles and recommendations of the G20/OECD Principles of Corporate Governance.

We welcomed the significant progress of WC-CMD on Strategic Action Plan for ASEAN Financial Integration 2025 by implementing relevant 2016 policy actions and reviewing 2017 targets. We noted that WC-CMD has completed and even exceeded some targets in SAP such as availability of bond market benchmarks at regular intervals, availability of post-trade bond price and granting retail investors’ access to purchase government bonds. Also, we acknowledged WC-CMD continuing work to increase the role of capital markets in supporting infrastructure finance in ASEAN in order to reduce the burden for banks and fiscal budgets, which will include promoting project bond issuance by encouraging wider adoption of standardized contractual clauses in project and loan documentation for infrastructure projects..

We also acknowledged the progress of WC-CMD on ASEAN Green Bond Initiatives. We noted WC-CMD 2017-2018 work plan including the plan for ASEAN Green Bond. We acknowledged Thailand’s study on “Implications and Recommendations for Public Sector to Promote Green Bonds in ASEAN” and also the ADB’s sharing a study on ”International experiences and best practices for ASEAN on Green Bonds”. We also supported the effort of WC-CMD to ensure the Green Bond initiatives developed efficiently, by coordinating and working closely with ASEAN Capital Markets Forum (ACMF), ASEAN+3 and ADB on this issue. [A5]

Financial Services Liberalisation

11.We noted the progress of ratification ofthe Protocol to Implement the Sixth and Seventh Package of Commitments on Financial Services under the ASEAN Framework Agreement on Services (AFAS), and encouraged remaining ASEAN Member States (AMS) to expedite their ratification processes. We welcomed the launching of negotiations for the Eighth Packageand looked forward to AMS’ commitments to substantially liberalise catastrophe reinsurance and for remaining AMS to substantially liberalise international Maritime, Aviation and Transit (MAT) insurance, as well as the signing of the implementing protocol at the 4th AFMGM in April 2018. We commended the initiative of the Working Committee on Financial Services Liberalisation (WC-FSL) to facilitate AFAS financial services commitments, including a summary sheet to highlight AMS’ new commitments in each round of AFAS and its ongoing work to develop a cool map as a monitoring tool for the implementation of AFAS financial services commitments.[A6]

12. We commended theinitiative of theWorking Committee on Financial Services Liberalisation (WC-FSL)to develop a cool map asaenhance the monitoring tool for the commitments and their implementation of AFAS financial services commitments. We hope that this will help members in keeping track of their progressive liberalisation efforts.[A7]

13.We welcomed the progress of AMS’ negotiations on financial services obligations for the ASEAN Trade in Services Agreement (ATISA) as well as various ASEAN+1 Free Trade Agreements (FTAs),particularly the Regional Comprehensive Economic Partnership (RCEP) and the ASEAN-Hong Kong FTA (AHKFTA).and the ASEAN Trade in Services Agreement (ATISA).

ASEAN Banking Integration Framework

14.We welcomed the first and second meetings[A8]of Working Committee on ASEAN Banking Integration Framework (WC-ABIF), with the establishment of four taskforces in line with the work-scope of work in the SAP,[A9] which includePprudential Rregulation, Ssupervisory Aagreements, Ddata and Ssurveillance, and Ccapacity Bbuilding.

15.We are pleased with the completion of negotiations between Indonesia and Malaysia and between Malaysia and the Philippines under the ASEAN Banking Integration Framework (ABIF). Additionally, we look forward to the conclusion of other bilateral ABIF negotiations between other AMS initiated between Indonesia and the Philippines, and the Philippines and Thailand. [A10]

15.

Capital Account Liberalisation

16.We werepleased with the progress made byAMS in facilitating freer flow of capital across ASEAN, which promotes greater investment and trade andthussupportings the integration of our markets with the global economy. We commended the Working Committee on Capital Account Liberalisation (WC-CAL) on enhancing the CAL Heat Map methodologyas an improved liberalisation monitoring tool and looked forward to its full implementation.

17.We welcomed the finalisation ofthe Enhanced Policy Dialogue Process which will sustain the AMS’ efforts in identifying and implementing safeguard measures on CAL. This will help ensureing that liberalisation efforts bring about economic benefits and supportfinancial integration while also promoting financial stability. We also welcomed the development of a CAL Learning Roadmap as a guide for building AMS’ capacity in implementing CAL initiatives and enhancing their readiness for further liberalisation. We recognised the initial discussions of the WC-CAL on the proposal to include local currencies usage for trade and investment in its work plan and agenda.

16.18.We welcomed that the WC-CAL’s work plan will include initiatives to include discussions on local currencies usage for trade and investment. This multilateral network of bilateral arrangements has already been implemented between Malaysia and Thailand since 2016. Furthermore, Indonesia has already initiated discussions with Malaysia and Thailand.

Payment and Settlement Systems

17.19.We acknowledged the progress of the Working Committee on Payments and Settlements System (WC-PSS) through the establishment of the taskforce on Payment System Linkages and Interoperability, taskforce on Capital Market Settlement and the taskforce on Policy Harmonisation and Standardisation. We support continuality of the efforts to improve ASEAN payment and settlement mechanism towards efficiency in order to facilitate cross-border trade and other transactions in the region.

Financial Inclusion

18.20.We welcomed the inaugural meeting of the Working Committee of the Financial Inclusion (WC-FINC) in May 2016 and its establishment of four sub-working committees on national financial inclusion strategy, capacity building, digital financial services, andas well as financial education and consumer protection developed in line with the SAP for Financial Integration. We appreciated subsequent work progress of each sub-committee such as the ASEAN FINC Framework, the upcoming ASEAN Financial Inclusion Forum this month,the development of the ASEAN digital financial services study framework, and the establishment of the ASEAN financial education portal. We are pleased with the progress of efforts to improve the measurement methodology of financial inclusion, including establishment of a customised FINDEX survey for ASEAN to facilitate more meaningful assessment and monitoring.

19.21.We looked forward to further implementationgof strategies and activities under the WC-FINC’s work plan, which will bring about greater financial inclusion to ASEAN, as well asandclose collaboration and coordination between WC-FINC and other relevant working committees and partners. We reiterated our commitment for financial inclusion as a policy priority and important pillar of ASEAN financial cooperation indicated in the AEC Blueprint 2025.

Strengthening ASEAN Finance Cooperation and Economic Integration

Enhancing Regional Surveillance

22.We commended the AEC 2025 Monitoring and Evaluation (M&E) Framework and its implementation as a new mechanism, comprised of compliance monitoring, which replaced the AEC 2015 Scorecard, outcome monitoring, and impact evaluation, to ensure the timely and effective implementation of the AEC Blueprint 2025. We urgedthe AMS and external partners to continue to support the ASEAN Integration Monitoring Directorateof the ASEAN Secretariat as the implementing body of the AEC 2025 M&E Framework in fulfilling its mandate in monitoring and surveillance.

20.23. We are pleased with the SLC works on risk monitoring report to identify and monitor macroeconomic and financial stability risks within the purview of Working Committees and assess the impact of such risks on the ASEAN financial integration agenda, amidst higher uncertainty in the global economy and financial markets.

24.We appreciatedAMRO’s for their works on macroeconomic and financial surveillance as well as their economic assessment forofthe risks facing the East Asian region. We recognised the significant enhancement in the surveillance work of AMROassince it became an international organisation. Weandencouraged AMROto continue strengthening its surveillance and operational capabilitiescityto fulfill its mandate ofand contributinge to the enhancement ofthe Chiang Mai Initiative Multilateralisation (CMIM) as an effective and readily-available regional financing facilityarrangement.We pledged to work with our Plus Three partners to support AMRO, to further strengthen the CMIM and make progress in better understanding how the CMIM can be better integrated into the Global Financial Safety Net, to help safeguardand to ensure macroeconomic and financial stability as well as financial inclusion in the region alongside promoting financial inclusion.[A11]

We pledged to work with our Plus Three partners to support AMRO, to further strengthen the CMIM as an essential part of the regional financial safety net and to explore how the CMIM can be better integrated into the Global Financial Safety Net to ensure macroeconomic and financial stability as well as financial inclusion in the region.[A12]

Infrastructure Financing

22.25.We commended the progress of work under the ASEAN Infrastructure Fund (AIF) which, among others, included the completion of equity contributions, initiation of product diversification, and the prospects of credit rating of the AIF. Wereiteratedthe AIF’ssignificancevery important role[A13] in strengthening the regional physical connectivity, and narrowing the infrastructure development gap in the region. We were pleased with the seven approvedseven projects on the AIF project list, covereding the areas of transport, energy, and urban development. We strongly encourage the AIF Administrator to finish the country consultations to expedite the finalisation of the 2017 project pipeline development.

23.We noted the efforts of the AIF to enhance its operations and administration whilst ensuring financial sustainability, and encouraged the AIF to continue working with the ADB and other relevant partners and stakeholders for the 2017 key tasks, particularly those related to credit ratings,preparations for bond issuance, capital adequacy framework, continuation of project processing and product diversification.

26.

Cooperation on Customs Matters

24.[We welcomed the signing of the Protocol 2, Designation of Frontier Posts, under the ASEAN Framework Agreement on the Facilitation of Goods in Transit which would further facilitate trade in goods within the ASEAN region. We noted the progress of the ASEAN Customs Transit System (ACTS), aiming to provide the end-to-end seamless flow of goods in transit in the ASEAN region, and its project implementation in the pilot countries AMS[A14]. [A15][A16]]

25.We welcomed the endorsement of the six strategic directions in the Broad Direction for Customs Activities 2016 – 2025 by the ASEAN Directors-General of Customs in May 2016. We noted that this Broad Direction would strengthen cooperation among ASEAN Customs administration, promote trade facilitation in the region by streamlining and simplifying border procedures and enhance partnership between Customs and the business community. We also noted the progress in the implementation of the ASEAN Single Window (ASW) with the development of live data exchange of electronic ATIGA Form D in the production environment and the establishment of the Project Management Office to operationalize the ASW in the long term.

27.

Cooperation on Taxation

26.28.We urge all AMS to continue with their commitment under the AEC Blueprint 2025 to complete and improve the network of ASEAN bilateral avoidance of double taxation agreements, and work towards the enhancement of the withholding tax structure to promote the broadening of investor base in ASEAN debt issuance. We acknowledged the AMS’s efforts to ensurehance transparency in taxation through[A17]the implementation of exchange of information (EOI)in their countriesin line with international standards. We welcomed AFT’s plan to further explore thepossibility of the Global Taxpayer Identification Number (TIN) to improve tax collection and enhance monitoring capacitytransactions[A18] andto discuss measures tothat addressBase Erosion and Profit Shifting (BEPS) issuesforto ensure fiscal health.

27.29.[We endorsed the six broad strategies of taxation action plans; thus commended the full endorsement of the SAP 2016 – 2025 for ASEAN Taxation Cooperation[A19].] We also noted the progress of collaboration in excise taxation through the Terms of Reference (TOR) of the Sub-Forum for Excise Taxation and we look forward to the full endorsement of the TOR as well as solid progress in the excise cooperation.

Cooperation in Insurance

28.30.Wecommendedthe progress of ASEAN insurance cooperation achieved by the ASEAN Insurance Regulators’ Meeting (AIRM),particularly the development of insurance regulatory and supervisory frameworks through observance of the International Association of Insurance Supervisors (IAIS)insurance core principles.We recognised the Regulators‘ efforts on capacity building and research through the cooperation with the ASEAN Insurance Training and Research Institute (AITRI) to enhance knowledge and capacity of ASEAN insurance supervisors and insurance personnel.