Academic journal article Law and Policy in International Business

Keynote Address

Academic journal article Law and Policy in International Business

Keynote Address

Article excerpt

I am delighted to be here this afternoon to speak to you about

strengthening financial systems in Asia. You have been discussing

various aspects of this issue for the last several days, and, I ask myself,

how can I come in at this stage of a conference and have something

new to contribute? I look around the room and at the list of who is

here; am I the only economist in the room? I see a couple of others -- I

am not completely alone, but I take it that this is overwhelmingly a

gathering of lawyers. So I thought that maybe as an economist I would

say a little bit about the context in which we see the work that lawyers

are doing, so as to think about the infrastructure for markets in this

region and what that means. Then I will talk a little bit about what we in

the U.S. government are trying to do to promote financial market

development and integration in Asia and, more generally, around the

world in emerging markets.

I do think that these two issues taken together -- one, the subject,

financial markets, and, two, the region, the Asia-Pacific region -- are

really at the center of the vital economic issues facing the United States

going forward. Why? Because Asia is such a dynamic region. It is

important for us to be engaged there. Our future depends on building

the kinds of bridges and relationships across the Pacific that we have

long enjoyed across the Atlantic. At the same time, the financial sector

is the nervous system of the global economy. The United States has

strengths in that area. We have the strongest, most innovative firms in

the world in the financial services industry, so we have a very large stake

in that. But the intent is not just here. Policy-makers throughout the

emerging economies are recognizing the importance of broad, deep,

well-functioning financial markets -- for growth and for stability. And in

recognition of that, the Group of 7 (G-7) have taken a strong interest in

strengthening financial markets in the emerging markets area. It has

become an important issue in the Asia Pacific Economic Cooperation

(APEC) forum, the International Monetary Fund (IMF) is focusing

additional attention on it, and the World Bank and the Asian

Development Bank (AsDB) are renewing and revitalizing their longstanding

programs in support of financial markets.

A sound banking system is at the core of a strong financial system.

But also critical, and I think sometimes not given enough emphasis in

an Asian context, are deep and efficient capital markets; that is, markets

for equity and long-term debt. In Asia, the equity markets are growing,

but there is a substantial gap, especially in the availability of long-term

debt. Addressing this gap is going to be critical to dealing with what I

know is the preoccupation of every finance minister in the emerging

Asian economies: meeting the huge infrastructure investment

requirements of the region. So let me say something about the importance of

sound financial markets in a general context, and then come back to

the question of debt and infrastructure.

Efficient and sound financial markets are, of course, important to

bridge the gap between savers and borrowers. Asia has the strongest

flow of saving that the world has probably ever seen. The opportunity,

the challenge to financial markets to mobilize and channel this savings

flow efficiently is really a tremendous challenge and a very important

one that calls for all of the most creative efforts that a liberalized

financial market can generate. If you do not have well-developed,

efficient, functioning markets, you are going to face high

intermediation costs. …

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