Collaborative Initiatives
Voluntary Action Plan for Promoting Freer and More Stable Capital Flows: At the 1997 APEC Finance Ministers' Meeting in Cebu, Ministers agreed that Deputies would prepare a Voluntary Action Plan (VAP) for promoting the freer and more stable flow of capital in the APEC region. The objectives of the VAP include enhancing APEC economies' understanding of the benefits and risks associated with cross-border capital flows; developing a sound understanding of the policies needed to maximise the benefits and minimise the risks associated with cross-border capital flows; and encouraging the implementation of policies to promote robust and open economies in the APEC region.
The VAP is structured in two parts. Part 1 comprises a report analysing the benefits and risks associated with cross-border capital flows and the policies that can assist economies to derive maximum benefit from accessing international capital markets while minimising the risks. Part 2 of the VAP is intended to actively encourage the implementation of policies to promote robust and open economies within the APEC region through a process of policy dialogue. It is envisaged that this process will assist economies to implement key international standards and to explore approaches to the promotion of sound and efficient financial markets. The policy dialogue will be based on particular policy issues or international standards, depending on the priorities identified by economies. It is proposed that the first stage of policy dialogue occur in the second half of 2001.
Development of Domestic Bond Markets: This initiative was launched in 1998 to promote the development of domestic debt markets for more efficient financial intermediation within APEC economies and the global financial system. An initial survey of the state of economies' bond markets identified various impediments to their development. A workshop in Hong Kong, China in December 1998 recommended preparation of a compendium of sound practices and a website to serve as a resource center and facilitate information exchange. Another workshop held in Hong Kong, China in August 1999 finalized the "Compendium of Sound Practices: Guidelines to Facilitate the Development of Domestic Bond Markets in APEC Member Economies", which was published in September 1999.
Bank Failure Management: Recent international financial crises have highlighted the importance of sound domestic financial systems and the need for strong, safe and reliable supervisory and regulatory frameworks. Much of the work being undertaken regarding banking regulation and supervision has focused on ways to prevent bank failure and financial system distress. This initiative plans to address the issue of how to manage bank failures when they occur. A report on bank failure management will be prepared, based on how different economies, in different stages, faced financial sector instability and the results they obtained. The report will be presented to APEC Economic Leaders in 2001.
Financial Regulators Training Initiative: The Finance Ministers in 1998 endorsed the APEC financial regulator initiative. Supported by the ADB, this initiative has been steered by advisory groups of bank supervisors and securities regulators. In the first phase of this initiative, the Advisors sponsored an Action Plan for the training of the bank supervisors and securities regulators. This action plan has formed the basis of implementation of the training programs over 1998-2000. The major emphasis of this training initiative has been to develop sustainable and cost effective training process and standardized courses. Specialized training programs have been held to disseminate guidelines and best practices for management of the national training process and to impart training in bank supervision and regulation and securities regulation. The initiative has further encouraged cooperation between international and regional providers of training and among regulators and training providers.
The Finance Ministers have extended this initiative for a period of two years. The advisory groups are to meet in November 2000 to finalize the action plans for training of bank supervision and securities regulators for Phase 2. Carrying forward the work undertaken in Phase 1, Phase 2 is expected to broaden the scope of the training initiative in order to amplify and deepen its impact. In the banking sector, model courses and self study materials will be developed for banking regulations and supervision, credit and market analysis, bank examination, and treasury management and operations. Similarly, materials will be developed for primary and secondary markets, securities regulations and enforcement. These model courses will be prepared in line with the international best practices and will be disseminated through the website. To support the regional training programs, the ADB will be assisting, on a pilot basis, with national level training programs in Philippines, Indonesia and People's Republic of China. The ADB has subcontracted a bank supervision expert to coordinate the course material and training. Simultaneously, model courses will be developed for training regulators in primary and secondary market issues, and enforcement and investigation areas.
Managing Regulatory Change in Life Insurance and Pensions: In recent years, the life insurance industry has become an important component of financial systems in Asia, and there is potential for further growth. The industry can play a significant role in deepening domestic capital markets, better marshalling domestic savings to meet national objectives, and better developing self-financing, private safety nets. This new initiative aims to encourage a well-functioning life insurance industry in the region. Good prudential regulation would assist capital market stability and efficiency, while leaving the industry free to grow strongly. A series of targeted symposiums and training programs will be held over the coming three years to promote improved regulation and actuarial standards and to assess international best practices in risk management, disclosure and accountability.
Strengthening Corporate Governance in the APEC region: This initiative, launched by APEC Finance Ministers at their 1998 meeting in Kananaskis, aims to help member economies of APEC respond to the challenge of achieving global best practice in corporate governance. At their 1999 meeting in Langkawi, Ministers endorsed the recommendations of the report on Strengthening Corporate Governance in the APEC region, which identified the leading issues in Asian corporate governance. Following on from this report, a policy dialogue will be held in March 2001 to promote understanding of corporate governance issues in the region.
Insolvency Law: The Asian financial crisis highlighted weak enforcement and implementation of existing insolvency laws. In recent times measures have been introduced to substantially improve insolvency laws of many economies in the APEC region. The existence of sound insolvency laws will reduce uncertainty for investors and will further promote the process of free trade and investment liberalization. APEC Finance Ministers aim to raise awareness of the importance of establishing and implementing strong insolvency regimes in the region. Australia, in conjunction with the OECD and the World Bank, hosted a symposium on "Insolvency Systems in Asia - an Efficiency Perspective" in November 1999. The symposium was attended by policy makers, members of the judiciary, private sector practitioners, insolvency experts and academics from the region. Indonesia will host a follow-up symposium in early 2001.
Company Accounting and Financial Reporting Task Force: In the years leading up to the 1997/98 financial crisis, inadequate financial and accounting disclosures, auditing practices and regulatory enforcement played an important underlying role in contributing to weak market discipline. APEC Finance Ministers have established a Company Accounting and Financial Reporting Task Force to consider issues related to promoting high quality internationally acceptable standards of accounting and disclosure and auditing practices by business. The Task Force will report to Ministers in 2001. Chinese Taipei will host a workshop on the topic in 2001.
Supporting the Development of Credit Rating Agencies (CRAs) and Strengthening Disclosure Standards: APEC Finance Ministers launched this initiative at their 1997 meeting in Cebu in recognition of the important role CRAs play in developing capital markets in the region. Work on this initiative has progressed under the broader context of international financial architecture discussions, particularly in the area of strengthening transparency and disclosure standards by all market participants. Towards this end and to respond to APEC Economic Leaders' request for a review of the practices of international rating agencies, a survey was undertaken of the codes of conduct and practices currently in use by various CRAs. Interviews have been conducted among international and national CRAs operating in the APEC region on issues such as (a) transparency and accountability in the ratings process; (b) potential sources of conflicts of interest; (c) credibility and reliability of ratings; and (d) unsolicited ratings. A Workshop will be held next month in Manila, the results of which will be reported to APEC Leaders.
Workshop on Public Sector Management: As part of APEC's work on strengthening markets, including efforts to improve private and public sector governance, New Zealand hosted a Workshop on Public Sector Management in May 2000. Given the importance of the public sector in all APEC economies, improving the management of the public sector is central to improving the broader economic performance of member economies. The Workshop provided the opportunity to share reform experiences, effective practices, particularly in financial management and improving public sector productivity, successes and challenges.
Privatization Forum: Thailand hosted the inaugural meeting of the APEC Privatization Forum in November 1999, and Indonesia hosted the second meeting in May 2000. The Forum aims to share experiences and expertise on privatization, including governance and regulation of state enterprises.
Third Regional Forum on Pension Fund Reform: Thailand hosted the Third Regional Forum on Pension Fund Reform in March 2000 following on from forums hosted by Mexico and Chile in 1998 and 1999 respectively. The Third Forum focused on the integration of social security, pension and provident funds together with supervisory and regulatory considerations.
Social Safety Nets: The social consequences of the Asian crisis and other economic and natural events have highlighted the importance of social safety nets as cornerstones of effective public policy. APEC Finance Ministers are seeking to establish a set of guidelines on the use and implementation of safety net policies and programs, taking into account recent economy experiences. Guidelines will be presented to APEC Economic Leaders at their meeting in November 2000.
APEC Initiative on Fighting Financial Crimes: At Bandar Seri Begawan, Ministers agreed that APEC can play a significant role in the fight against the abuse of the financial system. In this regard a collaborative initiative was launched which will conduct a survey of the adequacy of legal and regulatory frameworks in fighting financial crimes, building on work already completed by APEC members of the Asia-Pacific Group on Money Laundering (APG). Results of the survey will be reported to Ministers in 2001. It was further agreed to incorporate elements tied to detection and the combating of money laundering into the model curriculum being developed through the APEC Bank Supervisors Training Initiative, and to develop course content to address abuses of the financial system. The Working Group will promote a policy dialogue, as part of the VAP Part 2 initiative, on the FATF 40 Recommendations based on the APG mutual evaluation results.
Electronic Financial Transactions Systems: IT lowers the costs and speeds up delivery of financial services products, thereby contributing to overall greater efficiency and convenience of the financial sector. In the light of the growing importance attached to achieving "Paperless Trading" and as part of APEC's concerted initiatives towards that goal, Ministers agreed at Bandar Seri Begawan to launch a working group on electronic financial transactions systems. Building on the work of other competent bodies, the working group will formulate programs to foster the use of electronic means for conducting financial transactions.
The working group, consisting of financial experts from interested economies, will be co-chaired by Japan and Hong Kong, China.