APEC FINANCIERS GROUP MEETING
3-5 APRIL 1997
MACTAN ISLAND, REPUBLIC OF THE PHILIPPINES

AGREEMENTS AND RECOMMENDATIONS

I. INFRASTRUCTURE FINANCING

1. REGIONAL INFORMATION CENTER

The potential benefits of an information center that would act as a clearing house of information on infrastructure-related financing was acceptable to the AFG in principle. Such benefits could still be captured even if information centers were put in each interested APEC economy instead of a singular regional information center.

For the APEC economies who are interested in attracting cross-border flows for the purpose of financing infrastructure-related projects, these economies are strongly encouraged to develop a local website which will provide adequate information to potential investors.

It is recommended that the data provided in the web page be consistent with the needs of market players, providing at the minimum: (1) project descriptions and details, and (2) contact persons.

In economies where such web page is to be created, it is requested that Finance Ministers designate a government and a private institution to maintain the web page to address the need for data integrity. to ensure further action. AFG members agreed to be responsible for prodding their respective governments.

The Philippines has volunteered to submit to the body of a technical report on the requirements in establishing an information center for infrastructure-related projects within the next two months for the body's consideration.

Progress reports on the status of the local websites as well as general recommendations regarding the improvement of the information centers are requested to be presented in the next year's meeting in Canada.

2. DEVELOPMENT OF DOMESTIC BOND MARKETS

The development of domestic bond markets is viewed as essential enough to be addressed on its own and not necessarily viewed only within the context of infrastructure finance.

In view of its urgency, this voluntary initiative must be treated as a priority over the medium-term rather than over the long-term as originally classified. This does not imply, however, that absolute standards will be imposed upon APEC economies to give recognition of the fact that the development is strictly voluntary and that APEC economies are at different stages of market development.

To provide the AFG members a broader perspective, a survey is needed to evaluate the current status of bond markets within each of the APEC economies. The survey design will specifically take full advantage of the results outlined in the paper prepared by the IBSA (Australia) relating to the factors that either stimulate or hinder bond market development, specifically :

-- Existence of market-makers;
-- Liquidity benchmarks;
-- Registry, clearing & settlements infrastructure;
-- Factors stifling secondary market trading;
-- Linkages across markets of different instruments.

After the resolution of the relevant technical, legal and other impediments, a benchmark sovereign issue will be taken to be a signal of progress towards bond market development.

3. ACCESS TO EQUITY MARKETS

To create a venue for the discussion of professional developments and the exchange of "best practice" experiences, merchant bank associations and capital market institutes among the APEC economies are strongly encouraged to establish a regular dialogue.

In order to stimulate increased access to equity markets, the easing if not outright waiving of profitability record requirements for listing of infrastructure companies and projects should be studied further. In conjunction with such an effort, the feasibility of adopting 144a instruments among APEC economies may also be explored.

The adoption of less restrictive listing requirements and/or issuance of 144a instruments ought to be balanced by a sound investors' protection system.

II. FINANCIAL SYSTEM AND CAPITAL MARKET DEVELOPMENT

1. INFORMATION DISCLOSURE AND STANDARDIZATION OF ACCOUNTING FRAMEWORK

The AFG endorses the need for uniformity of accounting principles and disclosure requirements across member economies. It is specifically emphasized that the current practice of reconciling divergent accounting systems is costly and otherwise avoidable if uniformity is achieved.

There is a consensus to make this a priority initiative and to hasten the move towards full and comparable disclosure. As an initial step, minimum standards may be adopted, subsequently graduating to the full stringent standard over a period of time.

The FAS-30 standard used by the banking community is suggested as a model which non-financial industries may wish to consider as an initial and minimum standard.

It is clear that the burden of information disclosure is upon issuers and global participants as a matter of general premise.

2. CREDIT AND BOND RATING SYSTEM

The existence of a strong and credible rating agency within each economy is strongly encourages. It is further suggested that such agencies be established as a medium-term priority as a matter of recourse.

It is recommended that APEC rating agencies establish a venue that would allow for the continuous systematic exchange of best practices among such institutions.

3. HUMAN RESOURCES DEVELOPMENT AND SPECIALIZED TRAINING FACILITY

The Philippines, as a Chair of the Education Committee of the ASEAN Banking Council volunteered to periodically provide an inventory of training offerings available within APEC and to disseminate such information to the member economies. This would allow APEC economies to share professional know-how in their specific areas of expertise without the need to establish a permanent training center.

It was emphasized that such training offerings be extended to market players, regulators and even to university students where applicable in an effort to create an environment of cooperation where the best practices and the latest developments are understood and appreciated.

There is a need to address the freer flow of intellectual capital.

4. LINKAGES OF DOMESTIC CLEARING AND SETTLEMENTS

A recommendation will be made to the Finance Ministers to hasten the move towards RTGS (Real-Time Gross Settlements) and scripless registration of bonds and securities. This will enable the introduction of DVP (Delivery Versus Payment) systems. Eventually, all economies are enjoined to move towards IOSCO standards in DVP, BES and central depository.

It is also requested that reports on the status of the clearing system of each economy be included on the meeting next year in Canada.

There is a need for an institutional set-up for coordination between regulatory authorities and the private sector.

III. FREER FLOW OF CAPITAL AND DATA DISSEMINATION

1. CROSS-LISTING OF SECURITIES

Cross-listing is presently available in some markets. It has been observed, however, that the primary constraint in listing is the strict requirement on disclosure and accounting. Dialogue between regulator and issuers is thus encouraged.

In markets where cross-listing is already available, it is requested that a short descriptive paper be prepared identifying the features that are essential for its establishment and maintaining its sustainability. Since the equity side is the focal point, the recommendation is that stock exchanges in the various APEC economies undertake the task of preparing the short descriptive paper.

2. BIS STANDARDS

It has been noted that the current structure of the BIS Capital Adequacy standards reflects a discriminatory treatment against non-OECD economies with respect to the assignment of risk weights.

This uneven treatment impacts negatively upon the cost and availability of capital across national borders, a consequence that is totally avoidable if an even treatment is provided.

It was noted specifically that this matter was brought up in the Tokyo meeting but has not been accorded the necessary further action it deserves.

3. DATA DISSEMINATION

We recognize the importance of well-organized basic macro and micro statistical data, and keep up-to-date information available to public sector investors. We also recommend that multilateral agencies and source economies contribute necessary funding and know-how in host economies' effort to offer better statistical services, if such assistance is sought.

To facilitate access to date, the AFG endorses the subscription to the IMF Bulletin Board System.

For further information, contact the Director (Public Affairs), APEC Secretariat, Singapore at telephone number 65 276 1880, facsimile number 65 276 1775, or email [email protected]. These documents and other information about APEC is available on http://www/apecsec.org.sg

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