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.