About the Post

Author Information

Credit crisis has lessons for Asia: SM Goh

Region can learn about risk and crisis management from recent US sub-prime turmoil

ASIA has escaped relatively unscathed from the recent global credit crisis, as it has not yet developed newfangled complex financial instruments, said Senior Minister Goh Chok Tong yesterday.

But Asia can glean some lessons about risk and crisis management from the recent credit market turmoil, he said.

He was giving the keynote address at the one-day inaugural Barclays Asia Forum at the Shangri-La Hotel yesterday, attended by almost 400 Barclays clients from institutions and corporations across the region.

‘The current sub-prime crisis shows that we cannot afford to be less than vigilant in the financial industry.

There are some lessons we can learn here,’ said Mr Goh.

Asia was relatively shielded from so-called sub-prime crisis, which involves United States housing loans with relatively high risks of default – which were rolled into complex financial instruments.

The main reason for this is that Asia has yet to move into sophisticated structured credit financing in a big way, said Mr Goh.

But rather than shy away from such instruments, Asia should ‘press on with its efforts to develop the capital markets’ and create robust and efficient systems, he said.

Asia will inevitably see more sophisticated products coming to the fore, he said.

‘So market players and regulators alike must refine their understanding of the attendant risks,’ he said.

They need to understand how shocks can be transmitted through these products and develop tools to deal with these risks.

The central bank, the financial regulator and the guardian of the public purse must also work closely together to set up frameworks that minimise damage to the system in case financial institutions run into trouble.

Mr Goh said Asia’s growth is unlikely to be derailed by ‘potential wild cards in the region’ such as North Korea’s nuclear programme, tense cross-strait relations between Taiwan and mainland China, and instability in Myanmar.

Indeed, Asia’s share of the world’s economy has been rising steadily, increasing from 19 per cent in 1980 to 36 per cent today, and is expected to reach 45 per cent by 2010.

But Asia faces key challenges to its growth, such as global financial imbalances arising from large capital inflows to Asia, noted Mr Goh. This has created inflationary pressures and asset bubbles in the stock and housing markets.

He also noted that Asean countries will get a competitive boost when Asean evolves into a single market and production base with free flow of goods, services, investment and skilled labour by 2015.

‘Challenges remain but I see none which are insurmountable,’ concluded Mr Goh.

 

Source: The Straits Times 2 Nov 07

No comments yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: