• APEC finance to boost infra, capital markets

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    ASIAN financial leaders are strengthening links with finance ministers in the region to promote funding for their infrastructure and capital market development, a move in line with a Philippine-led economic initiative supported by the Asia-Pacific Economic Cooperation (APEC) Business Advisory Council (ABAC).

    Hiroyuki Suzuki, chair of ABAC’s Finance and Economics Working Group, said in Makati City over the weekend the team has been working closely with the region’s finance officials and providing input into the Cebu Action Plan (CAP)—a Philippine reform initiative that aims to make economies in Asia Pacific more transparent, resilient, and integrated.

    The action plan’s initiatives focus on expanding the Micro Small and Medium Enterprises’ (MSMEs’) access to finance; promoting financial inclusion; developing the capital markets, the pensions and insurance industries; increasing private sector investment in infrastructure and facilitating disaster risk financing.

    The multi-year, four-pillar program is expected to be launched at the annual APEC Finance Ministers’ Process Meeting next month in Cebu, central Philippines.

    Suzuki said the consensus toward strengthening collaboration in the financial industry emerged at last week’s meeting of the ABAC in Melbourne, Australia, where more than 300 senior finance leaders and experts converged to discuss common issues in the region.

    Infra financing network
    Suzuki pointed out that the private sector is supporting the finance ministries’ idea of establishing a Financial Infrastructure Development Network (FIDN).

    It will be a network of experts from industry, multilateral institutions and government that will help build credit information systems to help entrepreneurs use their transaction records to obtain loans.

    “One of the recommendations that we made was to establish a credit bureau across the economies, or maybe standardize the disclosure of information,” Suzuki said.

    FIDN will also work to help improve the legal framework to enable wider use of movable assets as collateral, he added.

    “Of course, international data is going to be a big issue in terms of security . . . Some mishandling of private information will cause a lot of trouble . . . broad issues that cannot be solved alone by the finance ministry. It will need the help of, for example, the justice ministry,” Suzuki explained.

    In line with the Cebu initiative, a credit bureau called Credit Information Corp. (CIC) has also been established in the Philippines, said a coordinator at ABAC’s Asia-Pacific Financial Forum (APFF).

    “The next step to make it effective is to ask all users of the service to get familiar with it because you can’t have a credit bureau that nobody knows how to use. What we’re doing is … we’ve started bringing together bankers associations and organizations representing MSMEs to understand how to use the services of the CIC,” Julius Caesar Parrenas, coordinator at APFF and senior advisor at Nomura Institute of Capital Markets Research, said.

    Attracting investors to infra projects
    Another initiative envisioned under the CAP is the holding of dialogues among representatives of the private sector, governments and international organizations, including the Asian Development Bank (ADB), the Organization for Economic Cooperation and Development (OECD) and the World Bank.

    The aim is to help developing economies design infrastructure projects that can attract private investors.

    “The question is, why is money not flowing into infrastructure? First, there are not enough bankable infrastructure projects available. That is being dealt with . . . how can governments design the projects so that they are attractive to the private sector?” Parrenas said.

    Above all that, CAP dialogues will also help governments and international regulatory bodies formulate regulations and policies more conducive for pension funds and insurance firms to invest in infrastructure, he added.

    Developing capital markets
    Under the Cebu action plan, private sector participation is important in supporting government efforts to develop the capital markets, which provide the means for raising the funds for infrastructure and for broadening the diversity and stability of the financial system.

    ABAC’s APFF has developed self-assessment templates to assist governments in identifying and providing the information that investors need to increase their investment in the region’s capital markets.

    The private sector is also urged to collaborate with multilateral institutions to help governments identify legal reforms that will enable investors to more widely use hedging and risk management instruments, such as derivatives that will help create deeper and more liquid securities markets.

    Financial industry chief executive officers and experts from across the region will be joining finance ministers in Cebu in September to discuss ways of collaboration in promoting these and other initiatives under the CAP.

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