Within the domain of banking and financial policies: The New Economy is all about transforming the activities of governments, consumers, and firms. Financing new activities and new firms, and withdrawing funds from inefficient activities, are key to the process of transformation, as demonstrated in this Report using both empirical and anecdotal methods. Research suggests that poor supervisory oversight and lack of financial skills undermine the conduct and performance of the financial system and hold back New Economy transformation.
To ameliorate these conditions, economies should develop on-going relationships with established supervisory training and exchange mechanisms (IMF, WB and central bank-to-central bank). 3 Research suggests that best practice in finance rebounds to benefit all users of financial transactions (that is, the whole economy benefits when the financial system works well). Thin non-bank financial markets (bond, stock, and venture) stymie the New Economy, particularly holding-back new firms. Transparent public listing requirements, along with strong accounting standards will help deepen financial markets.
Economies should give priority attention to, in an orderly way, liberalizing barriers to cross-border financial transactions and institutions to bring in best practice. 4 Within the domain of pro-competitive market policy and legal regime: The New Economy depends on transparency, transformation, and greater dispersion of information. Legal regimes and competition policy are essential to ensure that corrupt, unfair, or anti-competitive practices do not imperil the benefits. Rules are important to guide behavior, but they must preserve the private sector’s incentives to innovate.
Research suggests that competition-policy regimes must work internationally for the network benefits of the New Economy to avail. APEC members should discuss how the APEC Principles to Enhance Competition Policy and Regulatory Reform operate in marketplace of the New Economy where more and more transactions cross international borders. Research suggests that legal reforms comprise both letter and spirit.
Economies pursuing reforms should look to international forums (such as UNCITRAL, OECD, Hague) for legal precedent and legislative language, but policy must also support an overall climate of the “rule of law” where transparency of law is crucial, the belief that the law applies equally to all and will be enforced. 3 A proposed APEC Financial Institute could be a focal point to ensure that all APEC members have training in these critical aspects of the New Economy. Some members do not see the importance of limited APEC resources being directed toward such an endeavor.
Others have worried that it could crowd out efforts to develop other training capacity, perhaps through the Bank for International Settlements or Asian Development Bank. It is clear that the matter of financial regulatory capacity is sufficiently critical to justify resource allocation and sufficiently huge to permit multiple capacity building efforts. 4 This is consistent with the recommendation reached in the Finance Ministers Process of APEC following the 1997-1998 Asian-Pacific financial crises. - 7-