Action Agenda

The December 2005 Forum meeting concluded by the participants agreeing on a seven-point action plan for EMCs:

1. Liberalise But "Immunise"
   The Forum concluded that domestic deregulation and liberalisation of the capital account are both desirable and linked and that reforms in each area must be pursued in tandem. The Forum proposed a threefold strategy of "immunisation, prevention and isolation" in light of the threats arising from the "network effects" set in motion during major financial crises.
2. Match Finance Type to Finance Need
   Recognizing there is a "ladder" of capital supply for small, medium and large enterprises (from family and "angel" funding through bank loans and private equity to IPOs), the Forum concluded that to get maximum benefit from capital flows, it is crucial to distinguish between different types of equity and risk capital and distinctive development needs and to match the two effectively. With regard to new forms of hybrid capital the Forum concluded there is a potentially important and increasing role for portfolio equity finance, particularly in smaller EMCs.
3. Unlock and Mobilise Domestic Savings
   The Forum concluded that, particularly in Asia, it is essential to gradually reverse the present pattern of net capital transfers from emerging market countries to OECD countries and that Asian capital must be used to fund domestic public and private investment in Asia.
4. Develop Strong Domestic Capital Markets
   The Forum called for the greater mobilisation of domestic capital, especially in Asia and for the development of stronger domestic and regional capital markets.
5. Adopt a More Dynamic and "Aligned" Approach to Infrastructure Development
   The Forum concluded there is a strong case for aligning governments and private companies by opening up a greater role for private-public partnerships (PPPs) than has previously existed in emerging market economies; that this approach would facilitate FDI in situations where there are political or social sensitivities; that PPPs would help capture the benefits of private sector experience; and that this approach has not been sufficiently promoted by international financial institutions.
6. Develop Stronger Regulatory and Governance Structures
   The Forum concluded it is essential to address broader issues of ethics in corporate and public life in emerging market countries; that there is a need for guidelines and for ways and means to monitor their effectiveness; that ethical values must be de-politicized and embedded in society; and that the international community, individual nations, financial institutions and companies must work together to exert common pressure.
7. "Think Globally, Act Regionally"
   The Forum concluded that regional cooperation offers several kinds of solutions and opportunities. Because the knock-on damage of financial crises is generally regional, effective regional responses involving larger as well as smaller regional players are essential. The Forum concluded that regional capital markets must play valuable roles in assisting EMCs, especially those too small to develop such domestic markets themselves and must provide improved and more transparent financial information. The Forum also concluded that fiscal policies and exchange rate and regulatory regimes would benefit from the development of mutually supportive regional approaches.