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Asia beckons

It's great to see, in what others see as a fairly dry world, that asset servicing is heading up the agenda not just in the west, but also in the east.  SWIFT is hosting two half day conferences for custodians and asset managers in August, the first in Singapore on August 5th and the second in Hong Kong on August 8th.

My interest, which I'll declare straight away, is that I'm privileged to have been asked to be the keynote speaker at both events.  If anyone is interested in attending, or knows someone in the region that might be interested, it's free and you can get an invite and agenda at or by emailing (Singpaore) or (Hong Kong).

Both conferences will talk about the most recent trends and innovations in asset servicing of corporate actions with particular emphasis on proxy voting and tax reclamation.

The buzz in the tax industry is of course the V-STP concept which gives custodians the opportunity to automate tax processing even though 60% of the work involved is still manual.  V-STP was launched at SIBOS in Boston and will no doubt have some updates and highlights at Vienna.  But two things are striking here.  First that V-STP is getting some traction in Asia specifically on the subject of withholding tax and second, that the model is being viewed as a potential paradigm ("business model" for us mere mortals) for automating other corporate actions processes.

In a recent article in Financial-i, it was noted by a journalist that V-STP is nothing new.  well thats true - in a way - the same way that mobile phones were nothing new when they came out - just an aggregation of electronic components that already existed.  Could you live without yours today?  If we all stuck to the "nothing new" sceptic principle then we'd never really get anywhere (which ironically is where the industry has been for the last decade or so in tax processing).  The point about V-STP is that it puts together existing concepts in a new way that allows you to solve problems that you couldn't otherwise solve.  In withholding tax, the fact is that, whatever software or internal solutions a custodian has, the process is and remains 60% manual.  There's no way around that - unless you think about it in a different way.

Its clear that there's a logic to why SIBOS will be in Asia next year and I think, by design or accident, SWIFT have got the timing just about right.  While the inbound investment curve is still almost vertical, the markets, China, Vietnam, Indonesia, Australia, India etc are all at that point of experience that the effect of encouraging inward investment in a competitive regional environment, starts the process of thinking about being more sophisticated about double tax treaties and the entitlements they create.  It was that commercial imperative that governments figured out in Europe and the US which has led to the large number of intra-European and US-European treaties.  No-one wants to have their market disadvantaged by having a high differential tax rate, but equally, the very low recovery rates around today mean that governments are still the net beneficiaries.  Thats because the most common mistake in the investor community is confusing the treaty and the entitlement with the process of accessing its benefit.

The treaties only create the entitlement possibility. Its the jurisdictional authorities that determine the process by which those entitlements can be achieved.  As new treaties are created, many of which will be with Asian jurisdictions, it'll be interesting to see how the processes will be designed to get at those entitlements effectively.  Its that that will differentiate in the region for competitive inbound investment.  Of course, the converse is true too.  The regional funds and investors that benefit from domestic success, invest outwards into the mature markets too and so put pressure on these to make processes more efficient. 

So, I'm looking forward to my visit to the region and I hope to post some blog entries while I'm over there which can give some insight into how asset servicing is viewed - priority or not.  I suspect I can guess the answer and if I'm right, we could see Asia/Pacific leading the way to new ways of making the industry more successful.


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