Experts urge closer regional cooperation

They urged Asian policy-makers to cooperate more closely in the equity and bond markets to mitigate the risks.
Delivering the keynote address yesterday at the 20th anniversary of the Securities and Exchange Commission of Thailand, Sir Howard Davies, the first chairman of the Financial Services Authority of the United Kingdom, expressed his concern over the slow progress in fixing the global financial system.
Many believe that free-market practices have largely caused the global financial crisis although it had also previously supported rapid growth of the global economy.
“The big underlying question, though, is how we rebuild a consensus on the right relationship between public authorities and the financial sector. How do we keep the best of the old, which did create great prosperity, while correcting its failures and making financial markets more robust and sustainable? How do we avoid throwing out the baby of growth, along with the dirty bath water of financial excess?” he said.
Davies said that immediately after the crisis, the world saw the creation of the Group of 20 as a new controlling group, with the strengthening of the Financial Stability Board (FSB) under it. There was a sense that governments were coming together well, perhaps motivated by fear, to rebuild the system.
Since then, progress has been far slower. Europe has become preoccupied with its own problems. US regulatory reforms are proceeding slowly, and with little international coordination, he lamented.
He suggested that in the long run, the benefits of open global markets are considerable. There is no obviously superior way of ensuring that capital flows to the most rewarding opportunities.
He urged governments to recognise that the degree of interdependence among financial markets remains very high, and that one-country solutions are unlikely to be effective for long. So global solutions, albeit recognising different local realities, should be explored wherever possible.
He said a stronger global centre was needed to coordinate regulatory change. The FSB’s status and authority are unclear. It should be given legal status and more resources, and the ability to coordinate regulatory changes locally.
He also agreed that there is a need for more regional regulatory coordination under the global bodies. “The Chiang Mai Initiative is an interesting example. I see regional coordination as complementary to global coordination, not as in conflict with it,” he said, referring to the emergency loans and currency-swap agreement among Asean+3.
Jose Isidro Camacho, vice chairman of Credit Suisse Asia Pacific and former secretary of finance of the Philippines, called for Asian policy-makers seriously to consider taking the initiative to establish regional bond and equity funds that will invest exclusively in non-local currency Asian bonds issued by Asian banks, corporates, quasi-government entities and even some of the region’s governments.
He said most of the region’s domestic financial markets were very liquid but cross-regional investment was still very limited. “We have the financial resources to support continued economic growth in the region but there remain many barriers for such cross-regional capital flows.”
Vorapol Socatiyanurak, secretary-general of Thailand’s Securities and Exchange Commission, said it had committed its efforts to developing the Thai capital market as a gateway for regional investment. The SEC has revised regulations regarding holding companies to simplify the setting up of such businesses.
The SEC is in the process of drafting a new law to promote mergers and acquisitions, he said.
To promote integration of Asean capital markets, recently securities regulators and the stock exchanges of Malaysia, Singapore and Thailand signed a memorandum of understanding on an expedited review framework for secondary listings to speed up the processing of secondary listing applications, Vorapol said.
Meanwhile, Finance Minister Kittiratt Na-Ranong urged participants in capital markets to shift from serving for their own profits to serving a whole economy, market stability and risk management.