Speech

Remarks by Michel Camdessus at the Inaugural Seminar of the IMF-Singapore Regional Training Institute

May 4, 1998

Singapore, May 4, 1998

Let me begin by expressing my gratitude to the Government of Singapore and the Monetary Authority of Singapore for their hard work and generous support in helping to bring this new institute to life. As you know, Singapore is one of the most successful Asian economies—in many respects a model of macroeconomic stability and sustained, high-quality growth for countries around the world. Moreover, as its own economy has developed and grown, Singapore has established a commendable tradition of providing technical assistance and financial support to other countries in the region. Its current support for Indonesia is one prominent example. Now Singapore has joined the IMF in establishing a new vehicle for helping countries of Asia and the Pacific develop stronger, sounder economies—the IMF–Singapore Regional Training Institute. And we at the IMF are very pleased to have Singapore as our partner in this new enterprise.

Inaugural ceremonies are traditionally a time to speak of hopes and aspirations; about purposes and goals. So let me say a few words about the opportunities and challenges facing Asian and Pacific countries and the vocation of the STI.

Asia has been a showcase of the benefits of globalization. In 1996, when private capital flows to developing and transition economies reached an all-time high of $235 billion, nearly half went to Asia. Clearly, some of those flows were not being invested wisely. But the fact remains: over the last several decades, liberalization of the external sector has allowed many countries in Asia to accelerate investment and growth, create more jobs, and reduce poverty. In Indonesia, for example, the share of the population living below the poverty line has dropped from 60 percent in 1970 to 10 percent last year. In Korea, absolute poverty is now less than 5 percent, and the literacy rate has increased from around 30 percent in the mid-1950s to over 95 percent today. Globalization has certainly helped make such human progress possible.

These benefits in Asia have had a mirror reflection in advanced economies—in the form of buoyant export markets, the creation of new jobs, higher investment returns, and new opportunities for portfolio diversification. And for the world economy, globalization has provided a more efficient allocation of global resources, and hence faster growth, and at times, a cushion against global recession. Such was the case in 1991–93, when the dynamism of a number of emerging market economies helped sustain global economic activity despite successive downturns in industrial economies.

More recently, however, the experience in Asia has also highlighted the risks for countries tapping the global capital markets. And so attention has naturally shifted from the benefits of globalization to the many ways in which countries can reduce their vulnerability to its risks. Among these are:

• one, enhancing the quality and timeliness of economic and financial data and its availability to the public—so that governments have reliable information on which to base policy decisions, and markets have better information on which to base investment decisions;

• two, building up the institutional capacity of central banks and finance ministries and other key government agencies to design and implement sound economic and financial policies;

• three, strengthening domestic financial systems, so that weaknesses in the system will not tie policymakers’ hands when policies need to be tightened, while ensuring that saving is channeled into productive investment;

• four, enhancing openness and transparency in government, financial, and corporate sectors; and

• five, ensuring that capital account liberalization proceeds in an orderly and properly sequenced way so that countries can benefit from opportunities to accelerate growth, while minimizing the risk of financial crisis.

At the same time, however, Asia and the Pacific is a region of great diversity and the challenges countries in the region face differ markedly. Some have been part of the global financial system for many years. Others are just at the threshold of global financial markets, and are planning how they can maximize the benefits that globalization offers, while minimizing the risks. Still others are on the road to full-fledged market economies. As we create this new institution, we are very aware of these differences, and we will make sure that the Institute meets the needs of all parts of the region.

To meet these diverse needs, the STI will offer a range of courses and seminars geared to the major policy issues facing Asian countries. We begin with today’s Inaugural Seminar on "Capital Flows: Challenges and Opportunities for Asia"—in which we are fortunate to have internationally-renowned experts from Singapore, Japan, and the United States—and the more technical seminar on capital account liberalization that will take place over the following two days. Then, the first year’s program will continue with 10 other courses and seminars on macroeconomic adjustment and structural reform, financial programming, the problems of transition economies, monetary and exchange operations, central banking issues, banking supervision, public finance, and macroeconomic accounting and statistics. However, the program will remain flexible and under constant review so that special courses and seminars can be organized on topical issues of direct relevance to countries in the region, as needed.

We hope to expand this program gradually over the coming years. Moreover, our very positive experience in planning and opening the STI—as well as with the already well established Joint Vienna Institute—encourages us to consider opening similar centers in other parts of the world. This would enhance the Fund’s capacity to address the training needs of other member countries, in keeping with our continuing commitment to the development of human capital around the world.

Looking ahead, I have no doubt that Asia will again be a showcase, not just of high growth and sizeable capital inflows—although surely those will again be among the region’s trademarks—but of what countries can do to improve their policies, strengthen domestic institutions, and thereby strengthen the foundations for sustained, high-quality growth. That is our vision for the STI, and I thank you for coming to take part in it.