SINGAPORE — An international forum of public and private sector financial leaders has released a set of regulatory reforms to address the long-term capital shortfalls faced globally. And one of the proposals resembles the Central Provident Fund (CPF) scheme in Singapore.

The Group of Thirty (G-30) stated in its report yesterday that the world’s major economies, including the United States, the United Kingdom, Germany, France, Japan, China, India and Brazil, may need to raise US$18.8 trillion (S$23.3 trillion) in long-term investment funding by 2020.

In 2010, US$11.7 trillion in long-term investment was needed, and the risk of not bridging the financing gap would be a global slowdown.

One of the 15 proposed reforms is the setting up of a compulsory auto-enrolled savings programme aimed at fostering the development of long-term pension and insurance-based savings.

These would aggregate more savings into funds with long investment horizons, in particular, where household wealth is concentrated in bank deposits and other short-term instruments.

Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam was part of the steering committee for the group, and he urged emerging economies to strengthen financial regulations. “Two facts are clear today — there is an abundance of liquid savings still on the sidelines, including pension funds looking for much-needed yields; and there is at the same time no lack of global need for real-sector investments to spur economic growth,” he said.

“What is critically needed therefore is stronger bridges between global savings and long-term investment ... Our report proposes a series of reform measures, including strengthening the legal and regulatory infrastructures needed for deeper capital markets in the emerging economies, and for governments and multilateral institutions to develop instruments to mitigate the risks involved in long-term investments,” he added.

The reforms include the creation of new instruments to enable the public sector to leverage private sector capital for long-term financing and the creation of dedicated long-term financing institutions. Both are aimed at creating new financial pools that can strengthen the flow of capital into long-term investments by governments, institutional and individual investors.

Recognising that volatile short-term capital flows can cause financial instability, Mr Tharman said: “We believe policymakers should move gradually toward liberalisation of capital accounts in emerging markets, while using appropriate macroprudential ... tools to avoid bubbles in asset markets and promote financial stability.”

The group stressed that the reforms are especially critical given the need for global economies to invest in infrastructure, education, research and development, housing and business expansion in order to meet even moderate consensus growth forecasts.

“Action is needed because the prospects for efficiently securing adequate long-term finance have been reduced by turbulent economic conditions ... confronted in recent years, including fiscal consolidation, bank deleveraging and the requirements of new banking regulations,” said Mr Jean-Claude Trichet, G-30 Chairman and former European Central Bank President.

Although the reforms may have merits for Western economies, Barclays Capital economist Leong Wai Ho told TODAY that some could have a destabilising effect on Asian economies, especially those that are dependent on trade. “The aim of the countries in the G-30 is to implement controls in the short term and prevent the flow of hot money, but in Singapore, we have to keep capital markets open, as a reduction in cash flow would reduce trade activity,” he said.

Mr Leong said that Singapore was “the moderate voice in the G-30” and applauded the group for proposing the sharing of best practices and the surveillance of the markets, which were also among the proposed reforms.