Business council to put focus on global finance next year

By Yoke Har Lee

The Apec Business Advisory Council (Abac) will next year attempt to deal with one of the world's most controversial and complicated tasks: figuring out how to tackle the global financial system.

One aspect of the global theme Abac will look at is the destructive impact of speculative capital flows, such as those of hedge funds.

The incoming chairman of Abac, Brunei's Timothy Ong, said he wanted to avoid adding to the "verbiage and rhetoric" about the ills of the financial system.

An obvious concern since the Asian financial crisis, he said, was the impact short-term volatile capital flows had on economies. "There is a universal acceptance there is this volatility. The problem arises as to what we can do about this. In framing our response, we have to bear in mind what's being desired and what's do-able."

He said the emerging view was that some rules were needed for hedge fund activities, although what they should be or how they should be implemented was another matter.

"The biggest challenge, once we have decided what these rules are, is the need to secure international agreement for them ...

"What is clear is that the world still doesn't understand how the entire global financial system operates ... such that it would allow us to anticipate the future problems."

Asked if Abac would find a way to accommodate a type of Asian recovery fund, said to be keenly promoted by several Asian countries, Mr Ong said: "The concept sounds fine. But the key is in the detail. Should it be a recovery or stabilisation fund or forum? I think the word 'recovery' might become outdated by then."

Mr Ong said several things needed to be observed if such a fund/forum was being pursued.

They are:

* Major economies must be committed to it.

* The forum should be inclusive rather than exclusive.

* Such a fund should complement rather than take away the role of multilateral organisations such the International Monetary Fund and the World Bank.

Abac will also focus on the domestic financial systems and how countries can immediately cope with the volatility of capital and financial flows, he said.

One of the ways Abac plans to do this is by setting benchmarks for international best practices covering governance, regulatory regimes and human resource development, among others.

Abac this year set the scene for the official process, according to outgoing chairman Philip Burdon. The centrepiece of Abac was its food system, a comprehensive approach to tackling issues related to freeing trade in the food sector.

This included rural infrastructure development, the ability to raise the standard of food production, and effective distribution. To build a fair environment to trade food, Abac recommended an export subsidy-free zone and the abolition of unfair trade practices in food.

The leaders' communique endorsed Abac's recommendation and the acceptance that export subsidies and unfair trade practices should be nipped.

As Brunei takes over the chair, Mr Ong said he wanted to concentrate on what could be delivered rather than try to be overly ambitious.

"We don't want to cover too much, we are not trying to solve the world's problems. We need to select things which have relevance to Abac as a whole, not the individual countries."

The key priorities of the new Abac work programme are to focus on liberalisation within the context of capacity-building; improving the financial system; dealing with technology and finding ways to accommodate technology which has radically altered the way economies create wealth; and Abac's bread-and-butter function of facilitating business transactions across the region.

The first meeting to set the new Abac agenda will be held in Thailand next February, Mr Ong said.

As to how the Apec CEO Summit fitted into Abac, Mr Ong said the summit was a creature distinct from Abac.

Abac represents the official process, whereby the private sector can influence the leaders of Apec.

The summit, Mr Burdon said, brought together business people to focus on issues relevant to Apec. Its existence depended on businessmen in each host country keeping the momentum going.