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 D.C.-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.
"It's not about pushing back," said Rebecca Terner Lentchner, head of ASIFMA's policy and regulatory affairs team. "It's about looking at Asia's development objectives and providing information and insight where we can."
Highlighting the group's growing influence, Hong Kong Exchanges and Clearing said this year, after lengthy dialogue with ASIFMA and others, that it would review its position on introducing equity market trading controls, said brokers familiar with the matter.
Little choice but to listen
To be sure, not everyone sees the expansion of Western lobbying into Asia as a force for good.
"One of the reasons why the crisis was so severe was because regulators listened to what the industry wanted," said Kenneth Haar of Corporate Europe Observatory, an EU think-tank. "There's a risk of regulatory capture. Asian regulators need to make sure they get advice from various sources."
But some Asian watchdogs do believe the work of lobby groups generally improves the rule-making process.
Toshihiko Kurosu, a deputy director at Japan's Ministry of Economy, Trade and Industry, cited the International Swaps and Derivatives Association (ISDA) as one group helping to smooth global implementation of cross-border derivatives trading rules.
The group was instrumental in defusing a potentially explosive stand-off a year ago that could have forced European banks to stop trading and quickly liquidate their positions.
Amid growing uncertainty, European banks drew up contingency plans in the event that India's central bank refused to concede to post-crisis EU demands that it believed violated its sovereignty, according to bankers at the time.
After several meetings with Indian government officials including the Reserve Bank of India (RBI), Keith Noyes, ISDA's Asia Pacific director, was able to help persuade the regulator to cooperate with the EU just days before a deadline - allowing European banks to continue trading in India. The RBI declined to comment.
The sheer complexity and magnitude of post-crisis reforms has left Asian regulators with little choice but to listen to the industry, say regulatory experts.
Eight of 11 financial lobby groups identified by Corporate Europe Observatory in April as being very active in Europe are now present in Asia. ASIFMA said it tripled its headcount in the region in the past two years.
Financial firms spent around $600 million on lobbyists' services in the United States and Europe last year, according to data from U.S. research group the Center for Responsive Politics and Corporate Europe Observatory. Asia Pacific data was not available, though trade groups can command sizeable fees.
ASIFMA, for example, charges around $176,000 a year for a top-tier bank membership, said the Asia head of compliance at a major U.S. institution. "Lobbying firms are making a difference in Asia. They allow you to raise an issue without sticking your head above the parapet," he said.
Hong Kong's Securities and Futures Commission (SFC), once notorious among bankers for ignoring consultation responses, has begun to engage more closely with industry, according to one individual at the watchdog, and now holds regular catch-ups with ASIFMA and other industry groups.
Lobbyists including the Global Financial Markets Association - the U.S.-headquartered umbrella group that includes ASIFMA - ISDA and the Alternative Investment Management Association, a London-based hedge fund group, for example, won concessions on derivatives rules drawn up by the SFC and the Hong Kong Monetary Authority, including narrowing the product scope and territorial reach of the proposal.
As is often the case in Asia, personal relationship building can be crucial, too. Because Asian policymakers are less accessible than those in the United States and Europe, executives with connections to regulatory officials are attractive candidates for lobby groups.
Take Qiumei Yang, who last year established ICI Global's Asian arm. Her's was not the only group pressing China in May to relax rules on cross-border investment, but her previous experience working at China's Securities Regulatory Commission gave her access to the country's foreign exchange regulator.
"I think it's a bit easier for me because of my background," said Yang. "Personal relationships always help in Asia."