RI warns G-15 of portfolio investment risks
RI warns G-15 of portfolio investment risks
BUENOS AIRES (JP): Indonesia is using the current Group of 15 Ministerial Meeting to draw attention to the possible hazards of portfolio investment affecting many developing nations.
During the G-15 Ministerial Meeting here on Saturday, Indonesian delegates introduced the issue and discussed the possible consequences on the developing world.
Indonesian Foreign Minister Ali Alatas noted that increased globalization and modernization have introduced more and more foreign investors to stock markets in developing countries.
"Investments come at a swift speed into the stock exchanges. However, these portfolio investments could just as quickly withdraw," Alatas explained.
"Such an event could very well shake the economy of that country due to the sudden drop in stock values," he said.
Alatas is currently leading the Indonesian delegation to the fifth G-15 Summit which is being held in the Argentinean capital.
The Summit, which begins today, was preceded on Saturday by a one-day ministerial meeting.
The G-15 was established in 1989 as a forum for heads of state and government to forge South-South cooperation and rejuvenate North-South dialog.
The group is comprised of Algeria, Argentina, Brazil, Chile, Egypt, India, Indonesia, Jamaica, Malaysia, Mexico, Nigeria, Peru Senegal, Venezuela and Zimbabwe.
Alatas said that developing countries generally welcome the influx of foreign investment, though the ease and speed with which large portfolio investments can be withdrawn have caused worries to a number of countries with fragile economies.
By using a telephone or fax machine, foreign investors can transfer enormous sums of money from one end of the world to the other, leaving developing markets in possible financial peril.
"Indonesia brought this matter to the attention of the G-15 members, and most of the delegates agreed with this analysis," Alatas told journalists after Saturday's meeting.
The minister pointed out that the flight of portfolio investments can be spurred by the slightest rumor which might reduce an investor's sense of security.
"Whether there is truly a negative development in the economy in which they are investing or merely psychological apprehension, they can withdraw their investment at any time," he said.
However, when asked whether a solution had been discussed, Alatas replied: "Well, we don't know what the answer is yet, but the main thing is that we have to be aware of this." (mds)