Globalisation, and the risks that it brings, require a more proactive approach by international financial institutions, particularly in a region that has recently emerged from financial turmoil. With the opening of two new representative offices here in September, the presence of these international institutions in Hong Kong has expanded considerably - recognition both of the needs of the region and of Hong Kong's role in addressing them.
As globalisation presents greater risks as well as greater opportunities, the roles of the international financial institutions are changing. Clearly there is a need to give greater emphasis to strengthening the international financial architecture in order that these institutions can identify, contain and manage the risks that globalisation poses to global financial stability. Specifically this involves more effective surveillance of economic and financial market performance, the formulation of more appropriate global standards and the promotion of their compliance, and the provision of advice and assistance in economic - in particular, financial sector - reform where this is found lacking.
The three international financial institutions with clear responsibility for this work are the International Monetary Fund (IMF), the International Bank for Reconstruction and Development (IBRD) and the Bank for International Settlements (BIS). Readers may be aware of the fact that all three of these international financial institutions now have a presence in Hong Kong. The BIS, the central bank of all central banks, established its first, and currently its only, representative office outside of its head office in Basle in 1998 here in Hong Kong. The IBRD, together with the International Finance Corporation (IFC) have just established in Hong Kong in September this year their first Joint Regional Office in Asia. At around the same time this year, the IMF established a Sub-Office in Hong Kong, although this is subsidiary to the Resident Representative Office in Beijing which in turn is only one of over 70 resident representative offices of the IMF globally.
Having regard to their individual roles in international finance, the three international financial institutions have assigned different mandates to their offices in Hong Kong. Although not all of these mandates are directly relevant to the maintenance of global financial stability, they have an important bearing on it, through providing timely market information and sophisticated facilities that enhance the effectiveness of this work. I am confident that the usefulness of these offices will quickly be demonstrated and that there will be a need in time to expand the scope of their activities. Indeed, after only a little over two years in Hong Kong, the BIS Representative Office in Asia is already expanding its operations here through the establishment of dealing facilities that will serve the region better. Hong Kong is an important international financial centre in Asia where the pulse of financial activity in this important time zone can be clearly felt and systemically monitored, enabling problems to be diagnosed early in the day. The fact that the three international financial institutions have all chosen to establish a presence in Hong Kong is also a very good indication of the importance they attach to Hong Kong as an international financial centre.
There is still much to do in reforming the international financial architecture if the chance of recurrence of the type of contagious financial turmoil that occurred in Asia in 1997-1998 is to be minimised. There have been a lot of discussions within the three international financial institutions and in many international financial forums since the crisis erupted about how this is to be done. Many useful suggestions on actions to be taken have been put forward and agreed. They now have to be implemented. They have to be incorporated into the programmes of structural reforms in individual economies in this region where the crisis started, and in economies in other regions. And one important objective of all this is to ensure that national and regional initiatives towards reform are consistent with global standards. Hong Kong has been very active in participating in the discussions and promoting global financial reform. Hong Kong also meets the highest of the global standards in financial management and the supervision of financial activities. We set a very good example for others. The presence of the leading international financial institutions in Hong Kong will enable Hong Kong to play an even more significant role in the promotion of global financial stability.
Joseph Yam
2 November 2000
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