Köhler calls for a public-private partnership to promote greater financial stability Köhler stresses crisis prevention

• Pages: 181-183

Page 181

In remarks to the Institute of International Finance (IIF) meeting in Hong Kong on May 31, IMF Managing Director Horst Köhler stressed the IMF's commitment to work constructively with private market participants in a new public-private partnership. Köhler emphasized that the IMF was giving highest priority to work on early warnings of potential crises, and also discussed efforts under way to refine the framework for private sector involvement in crisis prevention and resolution. Following are excerpts of his remarks.

I welcome the decision to hold this meeting in Hong Kong, as a demonstration of its important role in regional and international financial markets. That is also the reason that the IMF decided to open an office here last October, with the help and encouragement of the Chinese and Hong Kong SAR authorities. This has strengthened our monitoring of regional and global financial markets at a time when careful attention to market developments is particularly needed.

Global and regional economic outlook

The current slowdown in world economic activity is testing the resilience of emerging market economies. Here in Asia, the past two years have brought a sharp recovery from the financial crises of 1997 and 1998.As a result of domestic policy reforms and strong export demand from the advanced economies, growth in Asia has resumed, fiscal and external positions have strengthened, and many countries have regained access to international capital markets.Now there are concerns that the weakening of exports and capital inflows may trigger a reversal of these gains. I believe that Asia will weather the storm. In most Asian countries, the risk of a new crisis has been greatlyPage 182 reduced through stronger macroeconomic fundamentals and the adoption of more flexible exchange rate policies.Unfortunately, the record is mixed when it comes to financial sector reform, improving governance, and strengthening the investment climate, and these remain sources of vulnerability in some cases. But it is clear that markets do differentiate, and countries that stay the course on these essential reforms should experience relatively good growth performance.

And it goes without saying that political stability and respect for law and order are crucial for investment, growth, and job creation.

Asian countries have...