Collaborative Initiatives

Voluntary Action Plan for Supporting Freer and Stable Capital Flows: APEC Finance Ministers welcomed the progress made on the development of the Voluntary Action Plan for Supporting Freer and Stable Capital Flows (VAP). Two important studies have been commissioned which will, consistent with the APEC Economic Leaders' direction, assist in developing a pragmatic VAP which incorporates the useful lessons of the past 22 months as well as formulate appropriate good practice guidelines for monitoring capital flows, including short-term flows.

Following the conclusion of this information-gathering phase, APEC Finance Ministers look forward to a report on the shape and content of a VAP when they hold their 7th meeting in 2000.

Regional Forum on Pension Funds: The Second Regional Forum on Pension Fund Reform was held in 26-27 April 1999 in Vina del Mar, Chile. This collaborative initiative has been the first activity stemming from the Finance Ministers process to receive technical support from APEC. The Forum organised by Chile and Mexico was attended by APEC economy representatives, experts in the field and representatives of International Financial Institutions such as the International Monetary Fund, the World Bank and the Asian Development Bank. The participants addressed important and interesting topics and have shed new light on several crucial questions and challenges facing the reform of retirement systems throughout the region.

Some of the issues discussed in Vina del Mar were: a) the cost and political aspects of the transition from public to private systems and its possible financing; b) withdrawal policies, the payment of benefits and the role of the insurance sector; c) the roles that both public and private sectors play in pension fund administration, including the performance of the public sector as a safety net provider; d) the possibilities of individual election regarding investments of pensions funds; e) the role of specialised financial institutions in pension fund administration; f) the fiscal effects of guaranteed minimum pensions; and g) the composition of investment portfolio of pension funds and the role of regulation and the market in product differentiation.

APEC Seminar on Pension Fund Reform: APEC Finance Ministers welcome Thailand's proposal to host an APEC Seminar on Pension Fund Reform to be held in Bangkok in March 2000 to exchange views on pension fund reform and other relevant issues from APEC member economies, focusing on the integration of social security, pension and provident funds together with supervisory and regulatory considerations. Government and private sectors as well as experts are expected to share their related knowledge, ideas, and experiences in the seminar. The seminar would be beneficial, particularly to Thailand and other APEC economies that are developing or may be considering developing pension fund reform programmes.

Supporting the Development of Credit Rating Agencies: We launched this initiative in Cebu prior to the eruption of the financial crisis in Asia in recognition of the important role credit rating agencies (CRAs) play in developing capital markets in the region. In Kananaskis, we discussed the performance of CRAs in the light of the Asian financial crisis. In Kuala Lumpur, our Economic Leaders called for the review of the practices of international rating agencies to promote their effectiveness and to contribute to sustainable capital flows.

We note the Philippines' report on the outcome of the APEC Consultative Workshop held in Manila in February 1999, which was also attended by multilateral financial institutions, international regulatory bodies and CRAs operating in the region. We agree that further work on this initiative is necessary and should contribute to the broader context of international architecture discussions, particularly in the area of strengthening transparency and disclosure standards by all market participants.

As a first step, we task our Deputies to survey the codes of conduct and practices currently in use by various CRAs. Such a survey should cover various issues, including (a) transparency and accountability of the ratings process; (b) conflicts of interest; (c) credibility and reliability of ratings; and (d) unsolicited ratings. We have also identified actions to strengthen information and disclosure standards in our respective economies. These should include efforts to foster a credit culture, promote alternative sources of information about credit risks and actively participate in international initiatives to harmonise accounting and disclosure standards.

Collaborative Initiative on the Development of Domestic Bond Markets: We launched this initiative to promote the development of domestic debt markets to promote more efficient financial intermediation within APEC economies and the global financial system. A key priority is to develop deeper, long-term, more stable and transparent debt markets in Asia to recycle the very significant Asian savings, which stand at more than 30% of GDP. Hong Kong, China hosted a workshop in December 1998, attended by 14 APEC members and international financial institutions. Members agreed to pursue two projects as part of further work. One was the drafting of a compendium of sound practices and the other was to develop a web-site to serve as a resource centre and facilitate information sharing. Another workshop will be held in Hong Kong around late May 1999 to follow up on the implementation of the two projects.

Collaborative Initiative on Strengthening Corporate Governance: Ministers' recognition of the need to strengthen corporate governance in member economies led to the establishment of the APEC Core Group on Corporate Governance, led by Malaysia in collaboration with Australia, United States, the World Bank Group and the Asian Development Bank. The Core Group tabled a report " Strengthening Corporate Governance in the APEC region" at this meeting setting out measures that can be adopted by economies wishing to strengthen their corporate governance systems, with particular emphasis on developing member economies. The report also includes an annex on the outcomes of the Corporate Governance Symposium hosted by Australia in November 1998. The Symposium brought together senior business people from member economies to identify priorities for reform in this area.

Survey of Adequacy of Banking Supervisory Regimes in APEC Economies: Recognising that sound banking supervision is important in ensuring financial stability, the initiative to assess the adequacy of banking sector supervisory regimes was agreed upon at the APEC Finance Ministers Meeting' in Kananaskis, Canada, in May 1998. The objective of the survey was to identify gaps or shortcomings in the supervisory framework of APEC members, which could form the basis for designing future training programmes conducted under the APEC umbrella to ensure a core of well qualified bank supervisors, which is essential to the maintenance of a strong and well-supervised banking system. Findings from the survey indicated a high degree of compliance with the requirements of the Basle Core Principles for Effective Banking Supervision. In the traditional scope of supervision such as licensing, ownership, approval of management, regulations on credit and internal controls and statistical requirements, most respondents already have well established systems in place. Weaknesses were found mainly in the area of supervising market risk and consolidated supervision. It was noted that bilateral discussions and MOUs appear to be the most common form of cooperation and consultation among supervisors, and there is further room for improvement in fostering such cooperation.

APEC privatisation forum: Thailand proposed an initiative to the APEC Finance and Central Bank Deputies Meeting in Kuala Lumpur Malaysia in November 1998 to support the privatisation process through institutional strengthening, and promote investment opportunities. It is believed that such an initiative would provide an opportunity to cooperate on issues related to privatisation and to develop a common and consistent understanding of principles of market liberalisation and the role of market competition. Further cooperation would enable best practices to be developed and shared, enhancing the transaction process and strengthening the institutional capabilities of member economies to manage the process.

The Core Group meeting was held on 22 March 1999 in Kuala Lumpur and attended by Chinese Taipei, Malaysia, New Zealand, Thailand, Vietnam, the ADB and the World Bank. The Core Group has proposed that cooperation on privatisation occur through APEC Privatisation Forum (APEC-PF) reporting to the APEC Finance Ministers. Thailand reported the result of Core Group meeting later on 24 March 1999 to the APEC Technical Working Group. The initiative is highly welcomed by the Technical Working Group.

As a starting point, two issues under privatisation policy, being "market reform, liberalisation and competition" and "regulatory frameworks and reform" will be discussed at the inaugural APEC-PF meeting.