Business

Tuesday August 11, 2009

PM urges global regulators to ensure no repeat of economic crisis

By YAP LENG KUEN


Najib: They must work together to ensure compatible, sustainable and effective surveillance


PM: Global reform agenda must ensure balance

KUALA LUMPUR: Regulators around the world must begin to work together to create a comprehensive approach to ensure compatible, sustainable and effective regulatory surveillance.

“At the global level, there must be strong oversight of markets and risk-taking activities in common terms, adequate ring-fencing of capital and client assets when such activities are conducted across borders, and shared procedures for intervention when there are signs of irrational excess,” Prime Minister Datuk Seri Najib Tun Razak said during his keynote address on the Global Financial Crisis – The Way Forward at the two-day World Capital Markets Symposium organised by the Securities Commission and attended by 500 people from 30 countries.

He said the governance structure of global regulators should be corrected, and noted that the current approach favoured the traditional economic superpowers.

Datuk Seri Najib Tun Abdul Razak delivering his keynote address at the World Capital Markets Symposium

“The global reform agenda must ensure there is more balanced and equitable decision-making,” he said, adding that global regulators should also ensure markets did not operate in a manner that jeopardised the financial stability of small and developing economies or impacted the ability of domestic markets to operate in a fair and orderly manner.

“Markets are too large, too inter-connected and too complex to operate on a laissez-faire basis,” he said. “Global regulators should err on the side of investor protection and financial stability rather than rely on a ‘buyer beware’ regulatory regime.”

He called for a rational approach towards global regulation to ensure that the outcome truly represented a worldwide financial perspective which promoted financially stable, equitable and socially inclusive growth.

Najib pointed out that the financial situation marked a watershed in the economic positioning between the Asian nations, with their high surpluses and savings; and the Western countries, with deficits and cultures of consumption.

“A second aspect of the global reform agenda must recognise and address this fundamental difference in societal participation and structural imbalance in the global trade for goods and services,” he said, adding that this could be a difficult task.

“These market stereotypes can most directly be overcome through shifting the focus of global reform efforts from mending damaged balance sheets in the West towards creating new growth opportunities in Asian countries with surplus savings.”

Stressing that it was in the world’s interest to position Asia as the engine of growth, Najib cautioned that a consistent and coordinated global policy was required to ensure that Asia was able to increase its consumption without affecting its creditworthiness.

There must also be steps to ensure that Asia was able to reduce its current account surpluses without being vulnerable to speculative attacks on the capital account.

“As of April 2009, Asia was estimated to have amassed US$2.7 trillion in sovereign wealth fund assets. The political interests of these funds, in conjunction with their size, have generated some tension through their high profile acquisition of assets, particularly in the resource-based and strategic sectors.

“As opposed to a threat, the funds should be viewed as representing the vanguard of prudent national savings management,” he said, adding that the changing pattern of capital exports would transform Asia into a highly connected and more stable network of vibrant capital markets.

Najib saw the rapid development of Asian capital markets as central to the evolution of a genuine and thriving private sector in Asia. “As more assets make their way into public ownership via the capital market, there will naturally be increased requirements for higher levels of transparency and accountability on the management of these assets,” he noted.

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