Chapter 11: Professional and financial services
- Professional and financial services represent significant exports for Australia, and Australia is well placed to become a financial centre for Southeast Asia.
- Southeast Asian professional and financial services are growing quickly, representing great opportunities for investment in fintech and financial inclusion initiatives.
- Governments can support greater two-way movement of professional services and professionals through facilitation of mutual recognition agreements.
The professional services sector (including legal, accounting, architecture, engineering and consulting services) is growing strongly in Southeast Asia. This reflects fast economic growth rates, rising trade and investment, the development of a range of industries, and major corporations coming to the region for supply chain reasons, all of which necessitates demand for professional services. Major international professional services firms are increasing their engagement in the region as a result.
Professional services are also an expanding sector between Southeast Asia and Australia, underpinning the smooth trade of goods and services. In 2022, Australia's professional services exports to ASEAN were worth A$2.1 billion and imports were worth A$2.5 billion,227 and exports to the region grew by 24 per cent over five years to 2022.228 As an economic hub to the region, Singapore drives the majority of Australia's trade with Southeast Asia in professional services, making up 89 per cent of Australian professional services exports to Southeast Asia and 71 per cent of imports from Southeast Asia in 2022.229 The Philippines and Malaysia rank as Australia's next two largest sources of professional services in the region.230
Australian companies like Acclime Group are working across Southeast Asian markets to provide practical support to help businesses navigate local laws and regulations (see Acclime Group case study).
“Acclime particularly values the two-way referrals from in-country DFAT and Austrade teams ...” (Acclime)
As professional services are often delivered by professionals in country, mutual recognition agreements (MRAs) help facilitate this trade through streamlining the recognition of professional qualifications, licensing and registration processes.231 Australia's MRAs with Southeast Asian counterparts across key professional services are patchy, with engineers and accountants better covered than architects and surveyors (see case study below).232 While governments do not negotiate the MRAs, they have a role to play in facilitating them, including through trade agreement settings.
Case study: Acclime Group facilitating investment into the region
Acclime Group is an Asia-focused premier corporate services specialist that provides practical advice and support to companies seeking to invest in Southeast Asia – from an understanding of local laws and tax regulations, and information on contracts and work permits, to an appreciation of cultural factors.
Acclime was created by Hong Kong–based Australian, Martin Crawford, to bring together the best service providers for inward investors across Asia. One of the first members of the Acclime Group – Domicile Corporate Services – was founded by an Australian, Matthew Lourey, in Vietnam. Acclime Group now has more than 500 staff across seven offices in Southeast Asia – Cambodia, Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam – and generates revenue of around A$30 million per annum. Acclime has plans to expand to Laos.
Acclime has successfully tapped into the growing demand for professional corporate services as more foreign companies see the potential and explore opportunities to expand into the region. They also supporting a growing number of Southeast Asia companies entering the Australian market. They have built a strong client base of innovative tech companies, including renewable energy, fintech, e-commerce and life sciences.
Managing Partner of Acclime Vietnam, Matthew Lourey, said, 'In-depth knowledge and experience of each specific market is an important part of Acclime's success and has allowed Acclime to address and avoid challenges for our clients. Acclime particularly values the two-way referrals from in-country DFAT and Austrade teams and has participated in a number of DFAT-funded programs in the region.'
Over Acclime's 20-plus years operating in Southeast Asia, the company has learned that the region cannot be treated as one market. In addition to different language and business cultures, each country has its own very different and localised legal and regulatory requirements. Applying this to its own operations as well as its advice to clients, Acclime has built teams in each country with the experience and capabilities to respond to these market-specific requirements.
Case study: Engineers building mutual recognition
Through the inclusion of professional services annexes in its modern free trade agreements, Australia has sought to provide further opportunities for its professional bodies to engage in dialogue with their counterparts on streamlining the recognition of qualifications, licensing and registration processes while maintaining domestic standards, including through mutual recognition agreements in professions of mutual interest. This dialogue also provides opportunities to share best practice.
Under the professional services annex of the Indonesia–Australia Comprehensive Economic Partnership Agreement, Engineers Australia and Persatuan Insinyur Indonesia (Institute of Engineers Indonesia) were able to recently conclude a mutual recognition agreement (MRA) in July 2023.
In addition to streamlining the two-way movement of engineers, Engineers Australia CEO, Romilly Madew AO, said, 'This landmark agreement will see Australia and Indonesia share the benefits of the immense knowledge and skill of our respective engineering professions. It has significant advantages for engineers in both nations, with a faster pathway to being recognised with Chartered status and registration to practice.'
Singapore stands out in Southeast Asia as a financial services hub and is ranked by the Global Financial Centres Index (GFCI) as the third-largest financial centre globally.233 The Singapore Economic Development Board offers foreign investors access to its Connections Concierge, which links potential investors with relevant and pre-screened professional and financial service providers.234 Singapore is seeking to boost its own financial services sector, including through a S$100 million grant to develop local talent, enhance its asset class strengths, digitise financial infrastructure, and help catalyse Asia's transition to net zero economies.235
Financial services are less developed in other Southeast Asian countries in comparison, with Kuala Lumpur at 58th, Bangkok at 71st, Jakarta at 83rd and Manila at 108th in the GFCI rankings.236 Figure 11.1 shows the value of financial and insurance services exports from Singapore, Indonesia, Thailand, Malaysia and the Philippines in 2021.
Australia has a sophisticated and resilient financial services sector, with deep and liquid markets, and is ideally positioned as a financial centre for Southeast Asia. Through its mandated retirement savings scheme (superannuation), Australia has developed a world-class investment management sector. It also has financial sector regulation that is recognised as world best practice. According to the GFCI, Sydney and Melbourne are ranked as the 15th- and 28th-largest financial centres in the world.237 New government reforms are aimed at further modernising Australia's financial system so that it is better positioned to help attract investment, including new systems and regulatory frameworks that prepare the economy for the advent of new digital products and services.238
Australia's financial, insurance and pension services exports to ASEAN were worth A$406 million in 2022 and imports were worth A$423 million.239 These statistics undervalue financial services trade because services are also embedded in goods, and many services are provided by Australian investors in the region (known as 'foreign affiliates abroad'), and vice versa.240
Figure 11.1 Southeast Asian countries' financial and insurance services exports, by value and as a percentage of total services exports, 2021
Note: Other Southeast Asian nations excluded due to lack of data or negligible trade in financial services.
Source: World Bank indicators; International Monetary Fund, Balance of Payments Statistics Yearbook 2021.
There are great prospects in Southeast Asia in fintech. Southeast Asian banks and insurance companies are rapidly digitalising services to meet demand from increasingly connected and affluent consumers (see projected revenue trends in Figure 11.2). In 2022, digital financial services overtook e-commerce in terms of securing funding and capital raising across Southeast Asia.241
Financial services are becoming integrated into 'super apps', such as Grab and GoTo, that offer their own online payment services and financial products in addition to ride sharing and delivery services. ASEAN has already launched its payment connectivity initiative to promote financial integration. The central banks of Indonesia, Malaysia and Thailand have launched a pilot cross-border QR code that allows consumers and merchants to make and receive payments for goods and services instantly.
With the Malaysian, Singaporean and South African central banks, the Reserve Bank of Australia is exploring whether using a shared program for issuing multiple wholesale central bank digital currencies could improve the efficiency, speed and transparency of cross-border payments.242
As detailed in Chapter 10 – 'Digital economy', financial inclusion is of increasing concern for most Southeast Asian countries and is the target of a growing number of startups in the region. This reflects the fact that in many of the key Southeast Asian markets, more people have a smartphone than a bank account (for example, 80 per cent of Indonesians have a smartphone while only 50 per cent have a bank account).243
While still relatively nascent, there are clear opportunities for Australian financial services providers to engage in the region on financial inclusion, as the experience of Raiz Invest demonstrates (see case study).
Southeast Asia represents a major opportunity to make gains in women's financial inclusion. The gender gap is particularly pronounced in Southeast Asia. Of the 1.2 billion women around the world who have no bank account or who do not actively use one, 12 per cent (or 117 million) live in Indonesia, Vietnam, Cambodia and the Philippines. As the Women's World Banking case study highlights, Australia is also utilising its development program to boost the financial inclusion of Southeast Asian women.
Figure 11.2 Projected revenue trend in digital financial services in Southeast Asia, 2019–2025
Note: Combined revenue across Indonesia, Malaysia, Singapore, Thailand, the Philippines and Vietnam.
Source: Macquarie Bank, 'Delivering digital financial inclusion in Southeast Asia', Macquarie Bank Perspectives, 31 May 2022.
Case study: Raiz Invest Limited – learning lessons from the region
Raiz Invest Limited (Raiz) is a micro-investment fintech app that seeks to make investing more accessible for people.
Since launching in Australia in 2016, Raiz has achieved solid growth, with more than 2.5 million downloads, 2.4 million sign-ups, 685,000 active monthly customers, and funds of over A$1.1 billion under management.
Raiz identified a large opportunity initially in Indonesia and Malaysia, where large and growing middle classes and strong growth projections were juxtaposed against varying levels of financial literacy and inclusion, and relatively low levels of consumer investment. With financial education core to its business model, Raiz sought to expand its unique fintech model to both markets.
Raiz's journey to the region began with an owner-operated venture in Indonesia. Raiz was the first Australian fintech to successfully secure a licence in Indonesia. CEO and Managing Director, Brendan Malone, acknowledges the company underestimated the value that could have been added through a joint venture with a local partner in the early stages of establishing a business in Indonesia. He said, 'Deep Southeast Asia literacy, including through local partners and strategic selection of board members, is highly important to early establishment decisions.'
Learning from this experience, Raiz has adapted its market entry approach in other Southeast Asian markets, using a new operating model that includes a lower equity position and local partners. Raiz is now in a joint venture with Malaysian company Jewel (a subsidiary of PNB Equity Resource Corporation). They achieved a steady growth in users of 9.2 per cent in Malaysia in the past year and, as of April 2023, had more than 115,000 active users, and just shy of A$14 million in funds under management.
Raiz has emphasised the importance of investing time and resources on the ground to best facilitate market entry, including to understand and navigate regulatory and licensing processes effectively. Building on the lessons learned, Raiz is now exploring joint ventures in Thailand and Vietnam.
Case study: Advancing women's economic empowerment in Southeast Asia with Women's World Banking
Women's World Banking is a commercially orientated non-government organisation that serves women on low incomes through a network of financial service providers.
Their mission is to empower women on low incomes through financial inclusion. In 2016, Women's World Banking and DFAT teamed up to build a more secure and prosperous future for women on low incomes in Southeast Asia.
Activities include work on payroll account activation in Cambodia, government-to-person savings account activation in Indonesia, digital financial services for young adult women in Cambodia, and training Indonesian midwives to become banking agents. They have partnered with financial service providers to develop financial products, such as savings solutions, e-wallet payroll and remittances products, to act as crucial safety nets during times of crisis, and to help women on low incomes in Southeast Asia build resilience for themselves and their families.
Women's World Banking has worked closely with the governments of Indonesia and Cambodia to strengthen regulatory capacity and ensure women on low incomes are included in the country's financial and digital financial inclusion strategies and initiatives. As a result, it was able to contribute directly to priority-setting during Indonesia's G20 presidency in 2022.
Mary Ellen Iskenderian, CEO of Women's World Banking, said, 'DFAT funding has been critical for Women's World Banking's presence in Southeast Asia and allowed us to develop innovative solutions for more than 2 million women on low incomes in the region. Our pioneering, gender-focused financial inclusion work, bolstered by the partnership with the Australian Government, has enabled us to forge relationships with both public and private sector partners across the region.'
The current DFAT – Women's World Banking partnership (2020–2024) aims to cement enduring gains in women's financial inclusion for a post-pandemic world.
Pathways to 2040
In addition to the cross-cutting recommendations outlined in Chapter 2, which will have a broad economic impact, this chapter has additional specific recommendations on professional and financial services.
Policies and mutual recognition agreements (MRAs) to facilitate movement of professionals only work where countries have similar standards. While there are opportunities to support skills development in the region to meet Australian standards, the lack of nationwide equivalence of standards makes it difficult to conclude full MRAs. Some Australian professional bodies deal with this by offering pathways to accreditation, including through micro-credentialing, rather than full recognition. Professional services annexes in a number of Australia's modern free trade agreements with the region also provide platforms that encourage dialogue aimed at streamlining the two-way movement of professionals.
In 2022, Australia's Skills Priority List almost doubled in size to 286 assessed occupations in national shortage.244 The 2023 Review of the Migration System recommends that longer-term migration planning (for example, 10 years) would bring more stability and predictability on skills needs.245 Meeting these skills needs could be partly assisted by facilitation of MRAs for priority sectors with Southeast Asian partners.
There are opportunities for professional bodies, supported by governments (including through grants), to scope which sectors and countries are best suited for such MRAs, and to negotiate and implement more MRAs for professional service suppliers. The challenge is to ensure that MRAs streamline rather than duplicate licensing and qualification requirements.
- Australian governments to support mutual recognition of professional qualifications, licensing and registration in priority professional services sectors, including through advocacy and grants to professional bodies.
Even once MRAs are in place, the process of credentialing can be slow. Utilising digital, trusted platforms to facilitate the digital credentialing and certification of qualifications of professionals will further reduce barriers to mobility.
- Australian governments and Southeast Asian counterparts to work with professional bodies to ensure digitalisation of credentialing and certification of qualifications.
Australia and Southeast Asia's bilateral and multilateral free trade agreements offer protections, legal guarantees and opportunities for service suppliers to tap into respective services markets. This includes assured levels of foreign equity in each sector, rules for settling disputes, compensation for losses due to conflict and civil strife, and freedom to transfer investment-related capital.
Australian service suppliers, including companies in the financial services sector, face caps on how much equity they can have in investments in the region, sometimes requiring them to enter joint ventures with local companies. Some countries also place restrictions on the composition and residency of members of management boards and on roles that can be filled by expatriates.
- Use review mechanisms in Australia's existing free trade agreements with Southeast Asian countries to remove barriers affecting professional and financial services, such as foreign equity caps and restrictions on the composition of boards and residency of board members.
As highlighted above, there are growing opportunities for Australia to engage with Southeast Asia on emerging cross-border digital currencies, including cross-border QR codes that allow consumers and merchants to make and receive payments for goods and services instantly. Australia should look at opportunities to capitalise on emerging innovations in Southeast Asia in this area, which would help facilitate two-way movements of payments on goods and services, including in the tourism industry.
- Explore opportunities for the Australian Government to work with Southeast Asian partners in harmonising emerging digital cross-border payment systems.
227 Australian Bureau of Statistics (ABS), International Trade: Supplementary Information, Calendar Year, ABS website, 2022, accessed 13 July 2023.
228 Australian Bureau of Statistics (ABS), International Trade: Supplementary Information, Calendar Year, ABS website, 2022, accessed 13 July 2023.
229 Australian Bureau of Statistics (ABS), International Trade: Supplementary Information, Calendar Year, ABS website, 2022, accessed 13 July 2023.
230 Australian Bureau of Statistics (ABS), International Trade: Supplementary Information, Calendar Year, ABS website, 2022, accessed 13 July 2023.
231 C Ziguras and J Barker, Mutual Recognition for Professional Qualifications and Licensure in APEC: Experiences, Impediments and Opportunities, Australian APEC Study Centre, forthcoming, accessed 6 June 2023.
232 Australian APEC Studies Centre, APEC Inventory of Mutual Recognition Agreements for Professional Qualifications, APEC website, n.d., accessed 25 May 2023.
239 Australian Bureau of Statistics (ABS), International Trade: Supplementary Information, Calendar Year, ABS website, 2022, accessed 13 July 2023.
240 Department of Foreign Affairs and Trade (DFAT) and Austrade, 'Economic activity of Australian businesses abroad 2018-19', DFAT website, n.d., accessed 20 February 2023.2020.
241 E Wiradharma, Riding the wave of Indonesia's financial services growth, EY Indonesia, 2022, accessed 20 May 2023.
242 Bank for International Settlements (BIS) Innovation Hub, Project Dunbar: International settlements using multi-CBDCs, BIS, 2022, accessed 25 May 2023
244 A Albanese and B O'Connor, '2022 Skills Priority List almost doubles occupations with skills shortages' [media release], Australian Government, 6 October 2022, accessed 15 May 2023.