COOPERATION IN FINANCE AND BANKING (COFAB)

  1. During the year under review, Committee on Finance and Banking (COFAB) held their 17th Meeting in Phuket, Thailand on 27-29 June 1989 and 18th Meeting in Bangkok, Thailand on 29-31 May 1990 to review the progress of implementation of the initiatives endorsed by the Third ASEAN Summit in 1987 in the areas of finance and banking and other related activities.

  2. ASEAN Member countries continued in their efforts to further liberalize the use of ASEAN currencies in intra-ASEAN trade. Presently, those member countries which have daily official foreign exchange quotation now include currencies of other member countries in their daily quotation.

  3. With respect to the ASEAN-Japan Development Fund (AJDF), COFAB as assigned by the ASEAN Economic Ministers submitted progress report of the utilization of the Fund to the 21st Meeting of the AEM. Loans have now been committed to projects under Category B (national projects) by Indonesia and Malaysia and disbursed by Malaysia. The Philippines and Thailand are in the process of finalizing their respective negotiations with the Japanese authorities. The 21st AEM urged for expeditious settlement of all the outstanding issues between Japan and ASEAN member countries concerned with regard to the implementation of the AJDF. As for the other portion of the Fund which is to be utilized for the Category A - regional projects, COFAB was requested by the AEM to examine ways and means to expedite its implementation. With regard to the equity investment under the AJDF to be made by the Japan-ASEAN Investment Company (JAIC), the ASEAN Finance Corporation (AFC) has agreed to provide the information to COFAB for the purpose of monitoring the equity portion of the AJDF.

  4. The ASEAN Reinsurance Corporation (ASEAN Re) which was another initiative endorsed by the Third ASEAN Summit continues to receive the necessary supports from member countries to ensure its success. The ASEAN Re was registered in October 1989 and took over the business of the ASEAN Reinsurance Pool. Having commenced its business since January 1989, the ASEAN Re continues to rely mainly on ceding companies, retrocesionaries and intermediaries in this region, where there is potential for ASEAN Re to grow.

  5. On Cross Border Leasing, Guidelines on Taxation on Leasing for ASEAN Countries have been formulated by the Working Group on Tax Matters and endorsed by COFAB. These guidelines aim at providing a framework for determination of a lease for tax purpose and tax treatment of a cross-border leasing among member countries.

    Cooperation in Customs Matters

  6. The ASEAN Working Group on Customs Matters (AWGCM) held their 14th Meeting in Manila on 8-11 May 1990. Member countries continue to update and exchange the information in the areas of prevention, investigation and repression of customs offences including those involving drug trafficking; customs procedures relating to imports and exports and drawback and warehousing system. This information has been useful and provided foundations for further work in customs cooperation, particularly in the area of customs procedures. A study on Analysis of Customs Export and Import Procedures in ASEAN by UNCTAD has been completed identifying the needs and potential areas for simplification an harmonization of customs procedures of member countries. The Meeting adopted the suggestion that a Regional Seminar on Harmonization and Simplification of Procedures be held using the UNCTAD paper as a basis for discussion.

  7. Realizing that simplification and harmonization in Customs procedures within ASEAN are vital in promoting regional as well as international trade it is the consensus among member countries that the setting up of a centralized customs institute in achieving such objectives is most proper. Consequently a project proposal on "ASEAN Customs institute for Training and Research (ACITAR)" has been put up for consideration.

  8. Along the same vein, member countries have also embarked upon a study to identify the differences and similarities of customs procedures and requirements which are related to the ASEAN Preferential Trading Arrangements (PTA). Through this study, further measures could be taken to enhance the intra-ASEAN trade under the PTA.

  9. During the period under review, a number of seminars and workshops have been held under the UNDP/UNCTAD-assisted project on Assistance to ASEAN COFAB on Customs Training and Development. The seminar on GATT Customs Valuation Code was held in Jakarta in November 1989 to exchange views on the implications of the switching from present practice to GATT Customs Valuation Code has resulted in a set of recommendations for consideration of member countries as an input in Uruguay Round.

    Cooperation in Tax Matters

  10. At their 9th Meeting in Pangkor Island/Kuala Lumpur on 18-21 June 1989, the ASEAN Working Group on Tax Matters held a discussion on the issue of Taxation of Banks and Financial Institutions: Major Issues and Problems. Among the issues discussed were: structures of banking and finance industries; governing laws and regulations and tax implications; banking supervision, tax regimes, tax treatment of interest transactions by local bank and its affiliate; bad debt and non-performing loans; and withholding tax. Extensive Discussion centered around such problems as banking audits, interest exemption, allocation of head office expenses, bank secrecy provisions, tax treatment on, purchase/ disposal of stocks/securities and tax treatment on swap transaction. The views exchanged are useful to member countries encountering similar problems.

  11. Ensuing from a request by COIME, the AWGTM also gave their view to COFAB regarding the issue of inconsistency between the provision on the equity requirements under the existing Double Taxation Agreements (DTAS) of some member countries and that stipulated in the Revised Basic Agreement on ASEAN Industrial Joint Venture (BAAIJV).

  12. A joint session on "the Role of Accountants and Tax Authorities in Educating the Public on their Responsibility and Liability to Taxation" was also held between the AWGTM and the ASEAN Federation of Accountants (AFA). There was a candid exchange of views on the role of account- ants and their accountability.

  13. The 10th Meeting on 2-4 May 1990 in Phuket, Thailand discussed the main topic on "Problems and Measures in Collecting Taxes from Foreign Contractors". One major problem en- countered by all member countries was the determination of taxable income of foreign contractors. In tackling this problem, tax withholding scheme was found to be an efficient measure in preventing tax evasion.

  14. The Meeting submitted to COFAB the offer by Universite de Sherbrook of Canada to host a week-long seminar on negotiation of bilateral fiscal treaties. This was endorsed by the 18th COFAB Meeting.

    Cooperation in Insurance

  15. The ASEAN Insurance Commissioners held their 15th Meeting on 9-11 October 1989 in Kuala Lumpur to review the progress of activities. under their purview.

  16. With respect to the insurance statistics, a Report on 1987 ASEAN Insurance Business Summary and analysis has been completed and adopted by the AICs. This Project is carried out jointly by the Technical Committee of the AICs and the Insurance Institute for Asia and Pacific.

  17. The project on Mortality Studies of Assured Lives which is now in its 10th year provides a basis for the life insurance industry in ASEAN countries to underwrite business based on the actual mortality experience of insured lives. At the 15th AICs Meeting, the Committee for Mortality Studies of Assured Lives presented the report on the trends of mortality rates being experienced by insured lives in each participating country, extending over a nine year period, ended 31 December 1987 or 31 December 1988 for some countries. The AICs took note of the report and also approved the 1990 programme.

  18. Member countries continued to exchange and update the information pertaining to the insurance laws of their respective countries. This information now includes tax laws on insurance.

  19. During the period under review, the insurance education and training of insurance supervisory staff remained a major focus of the AICs. A course on Financial Management and Surveillance was held in Singapore on 31 July - 4 August 1989. A Senior Management Workshop was also held in Thailand, from 17 - 20 April 1990. The workshop, participated by the Commissioners themselves with senior executives from the insurance industries as observers, provided an excellent opportunity for the ASEAN Insurance Commissioners to focus their minds on the challenges of the 1990s and the impact they will have on the ASEAN economies and insurance industries. The AICs Meeting further considered cooperation with other third countries in the area of insurance, and agreed that cooperation projects be more actively pursued.

  20. The Commissioners also discussed and exchanged views on various issues such as requirements/provisions on Incurred But Not Reported (IBNR) claims, requirements/provisions on holding companies, limitation of life insurance coverage relating to AIDS and treatment of accrued interest on non performing loans granted by insurers and insurance guarantee funds.

  21. The ASEAN Insurance Council (AIC) which held its Annual Meeting concurrently with the Commissioners' Meeting gave a report on the various cooperation activities undertaken by the industries, These include the progress of the ASEAN Re, the publication of the ASEAN Insurance Journal, the ASEAN Life Insurance Seminars, the setting up of study groups on special risks and the publication of the 1989 ASEAN Insurance Directory.



For more information, please refer to the project details