24 May 1998

Australia contributes to APEC Finance Ministers’ work to aid asian recovery

Treasurer Peter Costello today announced Australia’s contribution to the efforts of APEC’s Finance Ministers responding to the Asian crisis, to improve economic policies, build resilient financial sector institutions, and improve corporate governance.

“These measures are practical, realistic means to build institutional capacities in our region. This is inevitably a long task, but it provides the best basis to return the region to sustainable strong growth,” the Treasurer said.

Completing Australia’s participation in the 1998 two-day meeting of APEC Finance Ministers in Kananaskis, Alberta, Canada, Mr Costello announced contributions by Australia’s internationally respected financial regulators to new APEC programs to improve the training of regulators in the banking and securities sectors.

The APEC program will help build stronger financial sectors through improving the standards of prudential regulation, the Treasurer said. The program will work by:

• improving training curricula;
• contributing to regional training efforts through institutions such as the South East Asian Central Banks Research and Training Centre (SEACEN) and the Asia Pacific Regional Committee of the International Organisation of Securities Commissions;
• better co-ordinating regional and bilateral training efforts; and
• improving the training culture in national financial sector regulatory agencies.

“Australia’s financial regulators in the Reserve Bank and the Australian Securities Commission are widely respected as world class,” Mr Costello said.

Australia will help the implementation of the APEC Action Plans for training securities and banking regulators through active participation of the RBA and the ASC in regional tuition and domestic training programs. The RBA, in particular, will maintain an active program of bilateral assistance through staff exchanges – a process the APEC study shows to be particularly helpful to those countries with large un-met training needs. (This role will pass to the new Australian Prudential Regulation Authority when it is established under new regulatory arrangements arising from the Financial System (Wallis) Inquiry.)

Mr Costello also announced that Australia would take a prominent role in a new APEC Finance Ministers’ collaborative initiative to improve corporate governance:

“Corporate governance includes legislative, regulatory and ethical guidelines that govern the relations between directors, shareholders, creditors and related parties of companies,” the Treasurer said. “Studies of the Asian crisis repeatedly show that problems in corporate governance were an important cause of misallocated investments and the spread of financial contagion across a handful of Asian economies once they were subjected to external shocks. In response, economies will need to address inadequacies in regional bankruptcy laws, disclosure laws and practices, accounting standards, and the like.”

APEC Finance Ministers have decided to institute a new collaborative initiative to help identify the areas in which corporate governance improvements are most needed, and to assist implementing those reforms.

“Australia has a good structure of corporate governance, which the Government is further strengthening though its Corporate Law Economic Reform Program,” Mr Costello said. “We are able to share our experiences and to help our neighbours in a difficult reform task. But this is a complicated area, in which solutions have to be specific to the particular legal and institutional frameworks in each country, and in which there will be no single model for all circumstances.”

“Australia will host a seminar oriented to bringing business people together to identify governance reform needs. In the light of what we find through these early processes, we will identify ways to develop practical mutual assistance later in the life of the project.”

“The Finance Minsters meeting provided a forum to conduct a dialogue on what had gone wrong in Asia, and what policy reforms were necessary to return the region as quickly as possible to its former robust growth. There is a high degree of agreement on the extensive structural reforms and macroeconomic policies necessary to assure speedy recovery,” the Treasurer said. “There was widespread agreement that the reform programs Korea and Thailand were decisively implementing with the assistance of IMF funding were laying the foundations of success, and there was also widespread agreement that Indonesia had to stay the course with the type of reforms to which it had committed.”

“There is much more work still to be done to settle an improved division of labour between institutions such as the IMF and the multilateral development banks,” the Treasurer said. “But there is already a considerable evolution in the ideas that will shape economic policy in all the world’s competitive economies. Ideas of transparency inform most countries’ thinking about how they have to run their fiscal policies, their monetary policies and their industry policies. Policies will increasingly tend to conform to global ‘best practices’ of fiscal principles, of financial sector regulatory practice. Australia has been at the forefront in these developments, with its own policy framework such as the Charter of Fiscal Honesty widely regarded as international best practice in relation to ensuring transparency and discipline on fiscal policy.”

Kananaskis Village