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)