Malaysia puts in offer for services liberalization

Malaysia puts in offer for services liberalization

GENEVA (AFP): Malaysia has submitted a long awaited improved
offer on financial services liberalization, trade officials said
ahead of a key negotiating meeting yesterday aimed at forging a
global deal.

Indonesia, the Philippines and Brazil, other key players in
the talks, have not yet followed suit.

But the hope is that they will act at the World Trade
Organization's Committee on Financial Services meeting which
brings together high-level negotiators, a source close to the
negotiations said.

The Wednesday session, following two days of bilateral talks
here, should provide clues as to whether representatives from 97
countries can meet a Dec. 12 deadline for wrapping up an
agreement on financial services, which covers the multi-trillion-
dollar markets of banking, insurance and asset management.

The Malaysian proposal, circulated at bilateral talks, has
left some insiders unimpressed.

"It is a bit disappointing," said a trade official who has
seen the document. "It does not allow foreign firms to have
control over their activities in the banking sector."

However, the proposal does permit new foreign majority
shareholdings in the domestic insurance sector, an improvement
from Kuala Lumpur's previous stance.

The official said the offer "is not the final version. We still
have one month".

Attention in the last few months has focussed on emerging
economies in Southeast Asia, which are submerged in an economic
crisis that has taken them, and their Western trading partners,
by surprise.

Commitments from the so-called Tiger economies (as well as
large Latin American countries), in the shape of concrete
concessions, are seen as vital to winning U.S. approval for an
agreement.

Washington walked away from a global liberalization pact in
1995, blaming the paucity of attractive proposals from these
countries as justification for its refusal to offer
most-favored-nation (MFN) treatment to all foreigners.

MFN applies the principle of non-discrimination to all
partners. The United States wants binding commitments allowing
its bankers and insurers to set up majority-owned branches
overseas. It also wants guarantees that majority ownership rules
for firms that have already made investments will be honored in
the event of changes in a country's financial services
legislative landscape.

Observers say East Asia's financial troubles have spawned a
realization in regional trade ministries that a WTO agreement
would boost confidence among foreign investors looking for
governments to shore up financial regulatory mechanisms.

"This feeling is shared by the (Southeast Asian) negotiators.
They are trying hard. The will is there (to further liberalize),
but it's a question of tactics," the source said, adding that "we
need to keep on encouraging developing countries."

Thailand said it would try its best to put in a better market
access package in November, although not much is expected, given
the country's particularly severe economic problems and recent
political upheavals.

The trade official acknowledged that "at the end of the day,
we might have to talk about phased-in market opening offers" from
certain Asian countries.

At the start of this week, 30 improved offers had been tabled
by 44 countries (counting the European Union as 15) since
negotiations resumed in April. Singapore, Hong Kong and South
Korea fall into this category. The latest to jump on the
bandwagon are South Africa, Israel, Tunisia, Costa Rica, Uruguay
and Peru.

The negotiations sprang out of commitments originally made at
the end of the Uruguay Round of trade talks in 1993 (under the
WTO's predecessor, the General Agreement on Tariffs and Trade)
when 82 governments made offers to open up their markets to
foreign financial service providers.

The stakes for a deal are enormous. Daily foreign exchange
transactions are estimated to top US$1.2 trillion.

Total world banking assets are put at $20 trillion, insurance
premiums at $2 trillion and the market value of listed bonds at
$10 trillion.