Following is the full text of the speech (English only) by the Acting Financial Secretary, Mr Stephen Ip, at World Bank, PECC and HKMA Conference on "A Public-Private Dialogue for Decision-Makers on Financial Co-operation and Regionalism in East Asia" today (September 11):
Senator Stevenson, distinguished speakers, ladies and gentlemen,
I am delighted to be here today to launch this important and very timely conference on financial co-operation and regionalism in East Asia. Timely, because the latest global economic slowdown has heightened the need for closer co-operation between our economies. But before getting too serious, I would first like to extend a very warm welcome to you all, especially our visitors from overseas. I know you will enjoy your stay in Hong Kong, even if the heavens open up as they have for much of the summer.
This conference is part of a series promoted by the World Bank and the Pacific Economic Co-operation Council, together with various regional partners, to encourage frank and informal discussions between the public and private sectors on issues of mutual interest. In a region in which private initiative has been a driving force behind economic growth, it is only right that the private sector should play an important role in promoting the conference themes - financial co-operation, liberalisation and competition - topics on which it has much to say.
We don't have to look too far or think too hard to see why greater co-operation is necessary. Our region, with its largely open markets and dependence on exports, is highly sensitive to the current economic slowdown. Over the past few years, we have seen the devastating effects on both 'strong' and 'weak' economies of financial crisis resulting from a mixture of external shocks and internal weakness. And while economies have done much on their own to strengthen their domestic financial systems and institutions, more can be achieved, including through bilateral means. However, the real challenge is to work collectively and co-operatively for the good of the whole region: through assisting each other, exchanging information, pooling experience and resources, removing barriers and opening channels of communication.
This is not always an easy matter in a region as diverse and as complex as our own, but we share a common interest in stability and growth. And we should not underestimate what has already been achieved. At the official level, financial co-operation can be traced back at least to the 1970s, with the introduction of the ASEAN Swap Arrangement. The pace has intensified since then, particularly over the past few years. Now, in the light of the experience of the Asian financial crisis, discussions are under way on co-operation in economic and market surveillance, regional financial integration, monitoring of capital flows and the production of early warning signals. We look forward to seeing more concrete proposals being developed on these in the near future.
Some areas will require more long-term treatment, and a good deal of patience, such as the establishment of an Asian Monetary Fund and the creation of an Asian Currency Unit, which are only at the intellectual discussion stage. Still more remote is the possibility of an Asian Monetary Union. Nevertheless, there is no reason why we should not start addressing the subject at the conceptual level, particularly at a time when monetary union is in progress in another continent which is just as diverse and complex. So, I am pleased to see from your programme that the concept is no longer regarded as just an impractical pipe dream, but an option to be explored.
Meanwhile, there are more immediate and more practical tasks to be getting on with. One of these is corporate restructuring, especially in the banking sector, and improvements in corporate governance to help our economies avoid the excesses, and deal more effectively with the shocks that characterised the last financial crisis. This is a task that involves co-operation at the international and regional levels, as well as a great deal of initiative and strong will on the part of regulators and the private sector. It's encouraging to see that a lot of progress has been made. However, as the tough questions to be addressed at this conference suggest, much still needs to be done.
A further task, also on your agenda, is the development of an Asian capital market. This is particularly important as a deep, liquid, efficient and integrated regional market would be one of the strongest safeguards against the sort of financial crisis recently experienced in Asia. Hong Kong takes a special interest in this development, as leader, through the HKMA, of an APEC Collaborative Initiative on the Development of Domestic Bond Markets. One of the outcomes of this project so far has been the production of a compendium of sound practices to facilitate the development of domestic bond markets in the region.
Another key aspect of financial co-operation is the development and application of information technology to our regional infrastructure - something in which we all have a role to play. Hong Kong, I believe, has already made a useful contribution with the launch, last December, of the world's first Payment versus Payment foreign exchange transaction system. It allows the full range of US dollar transactions to be carried out quickly, efficiently, and safely during Asian hours without the Herstatt or settlement risk inherent in the time difference between Asian and US markets. The response to this facility by banks and corporations in the region suggests that it fills an important gap in international payments and settlement. And we are exploring the possibility of extending the facility to other major currencies, such as the euro and the yen.
Ladies and gentlemen, I said earlier that this conference takes place at a time of great global uncertainty, and follows the worst regional crisis in our recent history. It is only natural there should be anxiety and self-questioning. One of the lingering questions has been whether the Asian financial crisis marked the end of the so-called 'East Asian miracle'. While 'miracle' is not a word I would have used, the qualities contributing to the enormous success of this region over the past generation are still there: high savings rates, heavy investment in human resources and education, flexible and diligent workforces, and market-friendly economic policies. All these have not changed, despite the latest shocks. And the lessons we have learned from the shocks should help us to develop these qualities further. I am confident that Asia will continue to grow in the future. With greater regional co-operation, we can help ensure that this growth will be healthy, balanced, and, above all, sustained.
End/Tuesday, September 11, 2001