HONG KONG (Reuters) – Asia is proving new and fertile ground for Western lobbyists and public affairs consultancies who are helping shape post-crisis financial reforms in a region where regulators traditionally operate behind closed doors.
As the reform agenda has become increasingly global, regulators in Asia are having to juggle local issues such as poor corporate governance and rampant insider trading, while implementing extensive G20 reforms – from overhauling the derivatives markets to clamping down on shadow banking.
All this is going on across several markets, each with their own rules and watchdogs, making for disproportionately high compliance costs – a combined $89 billion last year for financial services firms operating in Hong Kong, Singapore, Japan and China, according to estimates by law firm Berwin Leighton Paisner and Oxford Economics research group. The more developed European markets of the UK, Germany, France, Spain and Italy had combined compliance costs of $68 billion.
This is a potential gold-mine for lobbyists who have created an industry out of influencing policymakers in the West.
“The financial services public affairs industry in Asia is growing significantly,” said Andrew Naylor, Asia-Pacific director at London-headquartered lobby firm Cicero Group. “The regulatory debate is much more global, and Asian jurisdictions are playing an important role in shaping it.”
The challenge in Asia is that information on policy developments can be hard to find. Lobbyists recalled times when foreign executives in Vietnam and Indonesia, for example, were horrified to learn of devastating rule changes that appeared virtually overnight.
“A key issue for the industry is knowing what changes are on the horizon,” said Naylor. “No-one likes surprises.”
Lobbyists and bankers said it was not uncommon for regulators in smaller markets to freeze out foreign firms using Washington DC-style pressure tactics that can be critical, demanding and legalistic. “Western lobbying techniques don’t go down well here,” said Aaron Franz, a director at Southeast Asia public affairs firm Vriens & Partners. “They tend to come off as threatening.”
Lobby groups that honed their tactics in the rough-and-tumble of Western financial realpolitik have had to deploy a more delicate touch in Asia. Written exchanges tend to be gentler and more appreciative in tone, and play to the national interest of often suspicious regulators.
Groups like ICI Global and the Asia Securities Industry & Financial Markets Association (ASIFMA) typically engage Asian regulators through formal private meetings with officials at their government offices – inviting a Vietnamese or Indonesian government official for a casual glass of wine is not advised, say lobbyists.
Franz discourages clients from airing problems in the international media, a common and effective pressure tactic in the West that often alienates Asian regulators. “This sets up the dialogue as ‘Us versus Them’,” he said.
Lobby groups in Asia also spend a lot of time on education around technical issues, such as bond market development – a long-term strategy that positions them as a useful resource for developing market regulators, who may lack expertise.