Transparency, market creation needed: Advisor
Transparency, market creation needed: Advisor
By Meidyatama Suryodiningrat
VANCOUVER, Canada (JP): Opening more domestic markets and
creating better transparency are the best remedies for Asia to
recover from its financial crisis, according to a member of the
Asia Pacific Economic Cooperation (APEC) advisory council.
"They (Asian markets) need to develop stronger indigenous
capital markets, thus reducing dollar-based financing," said
Robert E. Denham a member of the APEC Business Advisory Council
(ABAC).
He also stressed the importance of strengthening small and
medium enterprises (SMEs) by paying more attention to financing
needs.
"They need to get a fair share of the capital market," he
said.
South Korea is the latest country in the Asia-Pacific region
to be hit by financial woes following similar events that
occurred in Thailand, the Philippines, Malaysia and Indonesia.
Denham, who is chairman of the American company Salmon Inc.
and also a member the OECD private advisory group, maintained
that the financial slump in many of the countries should not be
perceived as a result of liberalization.
He pointed out that it was often a result of financial and
business institutions overextending. "It is the result of
extending credit more out of hope, than from sound banking
analysis," Denham remarked.
Denham and other ABAC members are in Vancouver to meet with
the 18 leaders of APEC on Monday afternoon.
When asked how such a crisis could be avoided in the future,
Denham said such trends could be detected if "high quality and
timely information" was available to analysts and economists so
they could accurately diagnose the state of the economy.
"Better quality data on the solvency of financial institutions
is needed," he said adding that "one of the reasons for the
crisis is insolvent companies."
Denham further noted the need for central banks to release
data on forward currency trading.
While Denham believes that was only governments who could
produce the necessary data, the press had an important role to
play in serving as a check.
"A government does itself no favors by restricting the press
and allowing the (financial) problems to fester," he said.
When asked why the turmoil still persisted despite the promise
of aid from the International Monetary Fund (IMF), Denham said it
was caused by persisting ambiguities and a perceived lack of
commitment.
He noted that in most cases, the IMF assistance has only
recently begun and many of the arrangements had not been fully
"fleshed out".
He further underlined the need for governments to show a
genuine political commitment to make painful, but necessary,
sacrifices during the adjustments.
"The commitment of the economy in undertaking these
adjustments in a thorough manner has not been established," he
added without elaborating.
Denham was more guarded in his optimism that Asian markets
could recover quickly from the crisis.
"The Asian economy has been so great that people had begun to
believe that the economy could only go one way: up!" he remarked.
Denham warned against overconfidence without making basic
changes in the economy.
"Many are putting on a brave face but that doesn't change the
fact that there is a lot of fundamental reassessments going on,"
he said. (mds)