Modernising Asia's commercial laws will help unlock the region's full economic potential, said Home Affairs and Law Minister K. Shanmugam yesterday.
He told a Singapore Academy of Law conference that a survey showed that different legal systems and regulatory standards were the the single biggest barrier holding back investments into Asia.
"If we had greater convergence, the investment flows would be much more," he added.
Mr Shanmugam pointed out that the Asian Business Law Institute (Abli) launched on Thursday can help in this area.
The Abli aims to address Asia's diverse regulatory standards and legal systems, which can increase uncertainty, add costs and impede cross-border trade.
It can help lay the groundwork for "dialogue between countries... on harmonisation and for businesses to change their practices in a way that can help reduce their costs and increase the business flows", Mr Shanmugam said.
This is becoming significant as the Asean Economic Community's 2025 blueprint "commits Asean to legal convergence on e-commerce and other regulatory standards", he added. "But to fully address Asean's existing challenges and deepen integration, serious action has to be taken to improve its current legal infrastructure."
Chief Justice Robert French of Australia's High Court told the conference that international conventions and free-trade agreements provide "an important framework for developing convergent business laws".
Singapore has taken steps to promote legal convergence by adopting several instruments geared towards harmonising international laws.
"Our International Arbitration Act is based on the UNCITRAL Model Law for Arbitration. We have kept our arbitration regime relevant to support commercial entities," Mr Shanmugam said.
Singapore, which hosts around 7,000 multinational companies, has also become a legal hub through its efforts to support transnational businesses and their operations.
There are 800 local law firms, more than 6,000 lawyers and 130 international law firms employing 1,000 foreign lawyers here.
Cross-border commercial dispute resolution options such as the Singapore International Commercial Court, the Singapore International Arbitration Centre and the Singapore International Mediation Centre are already part of the country's legal infrastructure.
"With the launch of Abli, Singapore companies will benefit by being in the centre of research and practical guidance in the field of Asian legal development. SMEs could look forward to greater clarity, familiarity and transparency in cross-border business," Mr Gerald Singham, deputy managing partner at law firm Rodyk & Davidson, said.
Rajah & Tann deputy managing partner Patrick Ang sees the divergence in legal systems and laws in Asia as a deterrent to investors.
"For investors, legal certainty is key. When I make an investment, will investment laws protect my investment if something goes wrong?" he said.
"If Asean can get its act together after the Asean Economic Community and get some of their laws for trade and commerce to converge, that would facilitate investors' interest. That will increase legal work for us," he said.