2008 15th APEC Finance Ministers' Meeting
Joint Ministerial Statement
5-6 November 2008
TRUJILLO, PERU
I. Introduction
We, the finance ministers of the APEC economies, convened our 15th annual
meeting in Trujillo, Peru on 5-6 November 2008 under the chairmanship
of Mr Luis Miguel Valdivieso Montano, Minister for Economy and Finance of Peru. The
meeting was also attended by representatives of the International Monetary Fund
(IMF), the World Bank, the Asian Development Bank (ADB), the Inter American
Development Bank (IADB), the Andean Development Corporation (ADC), and the APEC
Business Advisory Council (ABAC).
We discussed extensively the turmoil on global financial markets from the
perspective of both short-term immediate actions as well as longer term action
for reform of the regulatory and institutional regimes for the world's
financial sectors. We strongly endorse the recommendations of the
Financial Stability Forum (FSF) and the G7 Finance Ministers and Central Bank
Governors Plan of Action and their subsequent support by the International
Monetary and Financial Committee (IMFC) and the G20 special session. We welcome
the measures taken by economies and international organisations to stabilize
financial markets and ensure the smooth running of the real economy.
The current financial turmoil affects all our economies. We
pledge to work collaboratively and to coordinate actions. We support the
critical role of the IMF in assisting economies affected by this turmoil. We
also agree to continue our active participation in the international financial
policy dialogues and look forward to the forthcoming Summit on Financial Markets
and the World Economy on 15 November 2008.
Our ongoing objective is to realise the APEC region's economic potential by
drawing together the common interests of member economies and exploring
opportunities for cooperation and capacity building. It is important that the
work of finance ministers continues to be aligned with the broader APEC agenda
and processes. The Regional Economic Integration Agenda represents one avenue to
align this work.
In our discussions, we considered two policy themes, consistent with the
Hanoi Medium-Term Agenda: results-based budgeting as an instrument to improve
the quality of public expenditure; and capital market reform.
We are committed to financial sector development and reforms oriented to
improve the competitiveness and efficient operation of markets. We welcome the
outcomes of the Ministerial Meeting on Structural Reform and will continue to
support the APEC Economic Committee's work in this area.
Prosperity within APEC economies, and globally, depends on maintaining our
commitment to free and open trade and investment. An open and rules-based global
trading system makes an important contribution to global growth and development.
We will resist protectionist measures in all areas that could reverse the
economic progress we have made over the last decade. We call for a
prompt, ambitious, comprehensive and balanced conclusion to the WTO Doha
Development Agenda negotiations.
II. Global and Regional Economic Developments
During the year, APEC economies have had to deal with both the global
financial crisis and high and volatile commodity prices.
Financial market crisis
The turmoil has created severe dislocations in broader credit and funding
markets, impacting the global financial system and leading to decisive actions
from governments and central banks. We discussed ways to respond to the turmoil,
focusing on weaknesses in existing regulatory and supervisory frameworks, and
drawing and acknowledging valuable lessons for APEC economies, particularly with
regard to transparency and disclosure by financial institutions, risk management
and the role of credit ratings.
We recognize that as financial systems deepen and become more complex,
regulatory and supervisory tools must evolve. We welcome the recommendations of
the FSF, and look forward to the findings of the G20 Study Group on the credit
market crisis; especially those relevant to our financial systems.
While the risks to the stability of the international financial system remain
elevated, the pressures in wholesale funding markets are beginning to ease.
The focus of global financial market risk now appears to have shifted from
losses due to US sub-prime mortgage defaults and the associated seizure in
credit markets, to the adverse impact from a more generalized slowdown in global
economic activity.
We are determined to respond to any deterioration in our economies by taking
all necessary measures quickly, decisively and responsibly. We recognize
the need to put in place policies that will restore financial systems and
support economic activity.
Food and commodity prices
Although commodity prices have fallen recently, we recognise that the level
and volatility of food and commodity prices continue to place pressure on APEC
economies. We therefore support the steps taken by the UN to tackle the global
food crisis, the World Bank's New Deal on Global Food Policy, and the ADB's
commitments to providing budgetary support to the hardest-hit APEC economies.
We also recognize that it is necessary to ensure that regulatory frameworks,
transport infrastructure and logistics capability are able to support the
efficient movement, handling and marketing of food commodities across the entire
food chain. We therefore tasked the APEC Policy Support Unit to undertake
research into behind-the-border impediments within food supply chains.
III. 15th APEC Finance Ministers' Process Policy Themes
1. Improving the quality of public expenditure
We discussed the ongoing challenge of handling fiscal risks, especially
during the current financial crisis. A key long-term tool for managing public
expenditure is results-based budgeting (RBB). RBB aims to improve the efficiency
and effectiveness of public expenditure by linking the funding of general
government entities to the results they deliver. We discussed our experience
with RBB, recognising the importance of focusing on outcomes as opposed to
inputs and introducing performance benchmarks into budget processes.
Preconditions for success involve establishing a strong financial management
framework; strengthening the skills base to administer the RBB system; providing
appropriate flexibility to line agencies; and ensuring transparent
reporting arrangements are in place. For this process to succeed, budget data
must be accurate and complete.
During the year, some principles were discussed in regard to the quality of
public expenditure. These included: the importance of priority setting; having
the flexibility and ability to change priorities; undertaking regular
expenditure reviews; having accurate, comprehensive and benchmarked data
collection at the beginning of the program; and maintaining proper accounting
and reporting financial transactions. We also identified the importance of
targeting expenditure as a key tool to achieve a better allocation of public
resources.
2. Reforming capital markets
We focused our discussion on the reform of capital markets bearing in mind
the current financial turmoil. Sound macroeconomic and taxation policies, legal
and regulatory frameworks, market infrastructure, financial education, and
strong transparency and disclosure standards all play critical roles in
supporting financial market development and, in particular, the broadening and
diversification of the investor base.
Based on the recommendations of the FSF, financial supervisory frameworks,
accounting standards and minimum capital requirements should be reviewed, and
strong prudential standards should be applied to all significant financial
institutions. To that end we encourage participation in the IMF/World Bank
Financial Sector Assessment Programs (FSAP), taking into account the level and
pace of development and the specific conditions of each member economy.
We commit to strengthening the legal, regulatory and institutional mechanisms
to deal swiftly with distressed financial institutions. Extending policy efforts
of APEC economies to develop capital markets, we strengthened our commitment to
broadening and diversifying the investor base. Greater participation of
specialised institutions such as pension funds, insurance companies, fund
managers and securitisation originators is needed to provide depth and
innovation in markets. We also acknowledge the importance of enlargement of
local currency-denominated bond markets.
We acknowledge the important multilateral initiatives in the IMF and OECD on
sovereign wealth funds (SWFs). We welcome the Generally Accepted Principles and
Practices or "Santiago Principles" developed by the International Working
Group on SWFs. These principles will help promote better understanding of SWF
institutional and operational practices, reduce protectionist pressure, and
contribute to global financial stability. We support the OECD Report by the
Investment Committee on SWFs and the guidance provided to recipient economies on
preserving and expanding an open environment for investments by SWFs.
By increasing the supply of long-term assets to institutional and
retail investors, private financing of infrastructure can play an important role
in developing capital markets and increasing the efficiency of financial market
intermediation. Public-private partnerships (PPPs) are recognised as a means for
meeting the infrastructure requirements of both emerging and developed APEC
economies, and as a means of fostering the development of capital markets with
alternative long-term financial assets.
APEC capacity building activities undertaken over the past two years have
aided the development of the regulatory and fiscal frameworks needed to support
the expansion in the use of PPPs.
We welcome a set of common principles that APEC economies may wish to use as
a reference when formulating guidelines to developing well-functioning PPP
markets. These principles cover issues such as property rights frameworks;
adequate allocation of risks; establishing dedicated PPP units to manage any
contingent liabilities created by PPPs, and develop robust quantitative and
qualitative methods for identifying and assessing possible PPP projects;
adopting a flexible, streamlined and transparent tendering processes; and
removing barriers to institutional investment in non‑government debt and
equity markets.
IV. Other Matters and the Venue FOR the Next Meeting
We appreciate the ADB's renewed efforts emphasized in the Long Term
Strategic Framework Strategy 2020 which redirects the ADB's focus onto the
region's three critical agendas: inclusive economic growth, environmentally
sustainable growth, and regional integration.
We are committed to fighting corruption, money laundering, terrorist
financing, and other criminal abuse of the financial system. In this regard, we
will continue to aggressively work to implement international anti-money
laundering and counter-financing of terrorism standards and to comply with
relevant United Nations Security Council Resolutions. We support the Financial
Action Task Force's new mandate to include responding to new threats which
affect the integrity of the financial system, such as proliferation finance. We
welcome APEC's work on securing remittances and cross border payments,
detecting cash couriers and bulk cash smugglers, and preventing the terrorist
abuse of non-profit organisations.
Climate change is one of the major international challenges with implications
for both the environment and the global economy. We welcome and support the
establishment of the Climate Investment Fund including the Clean Technology Fund
and the Strategic Climate Fund, administered by the World Bank. We also support
the climate initiatives of the ADB.
We thank Peru for hosting the APEC Finance Ministers' Process this year. We
will meet again for our 16th meeting in Singapore in October 2009.
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