International supervision of financial markets sought

International supervision of financial markets sought

By Riyadi

NUSA DUA, Bali (JP): Indonesia and Australia called on the
international community on Wednesday to establish an effective
global mechanism to supervise and regulate international
financial markets to guard against another devastating crisis.

Speaking at the opening of the fourth meeting of the Australia
Indonesia Ministerial Forum here, Indonesian Minister of Foreign
Affairs Ali Alatas said governments should assume a major role in
directing the pace and course of financial liberalization.

"We cannot and should not leave the conduct and processes of
financial liberalization solely to market forces, certainly not
to speculative money traders," Alatas said.

"In this regard, an effective mechanism to supervise and
regulate international capital markets is needed so that they
would become more open and predictable."

The mechanism, he added, should also be able to carry out
surveillance of international hedge fund operations.

He said the international community currently has such a
mechanism for international trade of goods through the World
Trade Organization.

"There is no reason we cannot have a similar mechanism in the
financial and monetary fields," Alatas asserted.

"In short, it is imperative that a new international financial
architecture be established."

Australian foreign minister Alexander Downer supported Alatas'
argument, saying Australia also wanted to see a new international
financial structure which would ensure transparency of the
operation of hedge funds.

"We believe that there has to be some improvement in the
monitoring the transparency of the hedge funds... We have been
consulting during the last few weeks with a number of countries
about this issue," Downer said after the meeting.

He noted that Australia and Indonesia supported the lead of
what is known as the Group of 22 in pursuing improvements in the
international financial system.

Discussion of the new international financial system under
this group was important, considering that developed countries in
G-7 neglected the voices of developing economies in mapping out
the liberalization of the financial sector.

Downer said there were concerns about the G-7 which "has just
reached agreement among themselves and tells us all how to
behave".

"I do think in any case that it is important for G-7 countries
to take a serious note of what other significant economies have
to sound on this issue," especially those economies affected by
the crisis.

"I think their views need to be heard," Downer added.

Alatas said the people of East and Southeast Asia had borne
the brunt of the financial crisis as the exchange rates of some
currencies went into a tailspin and massive volumes of capital
flowed out of the region at enormous speed.

Citing a report from the United Nations Conference on Trade
and Development, Alatas said the Asian crisis did not stem from
the resistance of the afflicted economies to a globalizing world
and the discipline of global market forces.

He believed the catalyst was the failure to manage the
integration of their financial systems into global capital
markets with the same prudence and skill they earlier displayed
in managing trade liberalization.

Alatas added that the crisis which began in Southeast Asia was
showing its global character as it affected the world economy.

A new international financial system to monitor the operation
of hedge funds was important to ensure the crisis which swept
through Southeast and East Asia would not recur and inflict
devastation again, he believed.

Coordinating Minister for Economy, Finance and Industry
Ginandjar Kartasasmita, who led the Indonesian delegation at the
bilateral ministerial meeting, noted that the international
financial system was part of the meeting's agenda.

"We will discuss ways in which we can strengthen the
international financial system, so that the likelihood of future
financial crisis is reduced," he said in the opening address.