1. We, the Finance Ministers of the Asia-Pacific Economic Cooperation forum met in Cebu, Philippines to discuss the economic opportunities and challenges facing an increasingly integrated world and how these could be appropriately addressed by APEC member economies at the individual and regional levels. As with the three previous meetings, our discussions were conducted in the spirit of cooperation, consensus-building and collegiality.
  2. The President of the Republic of the Philippines, His Excellency Fidel V. Ramos opened the meeting by welcoming us and emphasizing the importance of the finance ministers' agenda in fulfilling the vision of the APEC Economic Leaders as expressed in the Subic Declaration of November 1996. He stressed that the continued rapid development of the region required freer movement of capital, the development of domestic capital markets and the increased private provision of infrastructure. He further pointed out that infrastructure development when carried out on a broad front helps reduce poverty and promotes equitable development.
  3. We exchanged views on three key and closely intertwined challenges facing the APEC economies: supporting freer and stable flows of capital; facilitating private sector participation in infrastructure development; and promoting the development of financial and capital markets. The Managing Director of the International Monetary Fund (IMF) joined our discussion on macroeconomic issues and policies for supporting the freer flow of capital while the President of the Asian Development Bank (ADB) joined our discussion on private sector financing of infrastructure and capital markets development. We also had a constructive exchange of views with the APEC Financiers Group and key representatives of the APEC Business Advisory Council (ABAC) and the Pacific Economic Cooperation Council (PECC). 
CURRENT MACROECONOMIC ISSUES AND POLICIES FOR SUPPORTING THE FREER FLOW OF CAPITAL
  1. The APEC region continued to expand more rapidly than the rest of the world in 1996, notwithstanding the slowing of growth in some member economies. In assessing the economic outlook of the region, we agreed that the slowdown in these economies does not hamper the positive outlook for sustained growth, given that overheating pressures in these economies have abated. This growth is also supported by increased private capital flows to many member economies, which in some cases reached new records in 1996. The increase reflects the strong growth prospects and continued prudent policies in APEC economies, the general trend towards deeper financial integration and increased portfolio diversification in international capital markets, and lower interest rates in industrial economies.
  2. Indeed the significant increase in private capital flows over the past decade has widened employment and investment opportunities, increased the ability of governments to meet social needs and contributed significantly to overall regional economic growth. We must continue our efforts to ensure that the region's economic growth is sustained and more importantly, translated into increasingly improved standards of living for our peoples. At the same time, private capital flows have also posed challenges to macroeconomic management. In this context, we renewed our common recognition of the importance of macroeconomic stability and sustainable growth-oriented policies in sustaining capital flows to the region and making our economies more resilient to external shocks. Timely policy adjustment is also important since delay can cause market corrections to become more costly. While the primary burden of such adjustment falls on our respective economy's domestic policies, increasing economic interdependence makes it important for us to take advantage of opportunities for enhanced policy cooperation, where appropriate. In some cases, such cooperation is useful in addressing potentially adverse spillover effects on others.
  3. We welcome the adoption of the Special Data Dissemination Standard (SDDS) by the IMF. This standard can enhance market confidence by facilitating the prompt dissemination of macroeconomic and financial data through a standard bulletin board on the Internet. Since pledging support on this last year, thirteen APEC member economies have already subscribed to the SDDS. We shall work towards a wider application of this standard within APEC.
  4. We also welcome the approval of the New Arrangements to Borrow (NAB) by the Executive Board of the IMF which enhances the IMF's ability to safeguard the international monetary system. We reiterate the importance of the eleventh review of IMF quotas, including adjustments which take into account the relative position of member economies, to ensure that the IMF has sufficient ordinary resources for future operations.
  5. We also discussed the need to strengthen domestic financial institutions and markets in order to mobilize savings more effectively and expand the array of investment options available to domestic and foreign investors. Our discussions concluded that market development and integration must proceed hand in hand with steps to strengthen prudential regulation and supervision of financial markets.
  6. In discussing developments in exchange and financial markets, we noted that the major misalignments in the exchange markets that existed in the spring of 1995 have been corrected. We discussed the effects of this development on the economic performance of member economies, especially those whose currencies are closely linked. We emphasized that the most important foundation for exchange market stability is the consistent application of sound macroeconomic policies aimed at achieving non-inflationary growth and sustainable balance of payment positions.
  7. Lastly, we discussed international efforts to promote financial stability. We noted the ongoing work of the Basle Committee, the International Organization of Securities Commissions (IOSCO) and the International Association of Insurance Supervisors (IAIS) to strengthen supervision and regulation of internationally-active financial institutions and to increase cooperation among regulators in order to reduce systemic risks in global financial markets. We also noted the efforts of the Working Party on Financial Stability in Emerging Economies, in which a number of APEC economies are participating. We look forward to receiving their conclusions and recommendations with a view to considering how we might apply them.

FACILITATING PRIVATE SECTOR PARTICIPATION IN INFRASTRUCTURE DEVELOPMENT AND PROMOTING FINANCIAL AND CAPITAL MARKET DEVELOPMENT: VOLUNTARY PRINCIPLES AND COLLABORATIVE INITIATIVES

  1. In response to the APEC Economic Leaders' call to us in Subic to develop concrete and practical measures to accelerate the development of financial and capital markets in the region and to stimulate private sector participation in infrastructure development, we agreed on a set of voluntary principles and collaborative initiatives to further these objectives. These principles were developed based on extensive studies by the ADB and build on our findings in Kyoto. We agreed to adopt them on a voluntary basis with due respect for our diversity and different levels of development. They would guide us in pursuing our individual and collaborative efforts in both areas. These principles are set forth in Annexes 1 and 2.
  2. The collaborative initiatives can provide effective mechanisms for joint training and funding, the exchange of expertise, experiences, information and best practices among us. They can also promote harmonization of approaches and standards, consistent with the voluntary principles. We believe that these initiatives are valuable undertakings that will help our economies and region to respond to the challenges of globalization and technological innovation. Individual economies may choose to participate in these collaborative initiatives based on their needs and interests. We agreed to give due regard to ongoing efforts in other APEC, regional and international fora in promoting these initiatives.
IMPLEMENTATION OF INITIATIVES AGREED IN KYOTO
  1. Computerized Information Network. We welcome the launching of the Computerized Information Network among APEC Finance Ministries that we endorsed in Kyoto. This network will facilitate information sharing among the economic and financial authorities of APEC member economies about overall economic developments in the region. It will also facilitate the dissemination of macroeconomic and financial information to the public via bulletin boards on the Internet. We greatly appreciate the efforts of the core group chaired by Japan and the offer of Singapore to maintain the APEC Finance Ministries Homepage.
  2. Joint APEC/OECD Symposium on International Business Taxation. We discussed the Australian report on the Joint APEC/OECD Symposium on International Business Taxation held in Sydney in November 1996, which reviewed emerging tax issues in a globalized economy. We acknowledged that developments in emerging electronic payments systems, which permit transactions in cyberspace, as well as rapid financial innovation, could have fiscal implications, which need to be addressed. We call on our tax authorities, in coordination with the appropriate international and regional multilateral organizations, such as the OECD and the ADB, to continue working on these issues. In this regard, we look forward to the holding of another Joint APEC/OECD Symposium next year and to receiving a report for discussion at our next meeting.
INITIATIVES AGREED IN CEBU
  1. To facilitate increased private sector participation in infrastructure, promote the development of our financial and capital markets, and support the freer flow of capital, we agreed to the collaborative initiatives outlined below.
  2. Enhanced Cooperation Among Export Financing Institutions. Export financing institutions can play a catalytic role in attracting private funds and in helping shape the region's economic climate to reduce risks while providing an adequate return on investment. We agreed that interested member economies may conduct dialogues, seminars and institution-building programs, maintaining consistency with international arrangements. In this context, economies in the region may seek technical expertise and cooperation from more experienced economies and relevant international bodies.
  3. Strengthening Financial Market Supervision. We recognize that our regulatory and supervisory capabilities have to keep up with the rapid changes in international financial markets. Regional and international expert bodies as well as national regulatory and supervisory authorities already provide a significant range of technical assistance and expertise. We ask for the cooperation of such expert bodies to consult with interested APEC economies to identify important gaps in available training resources. We call on our Deputies to formulate a strategy for addressing these gaps.
  4. Strengthening Clearing and Settlement Infrastructure. Well-developed clearing and settlement systems are indispensable to the development of capital markets. Member economies with relevant experiences in strengthening clearing and settlement infrastructure will share these with interested economies and provide technical support with the assistance of the appropriate international and regional multilateral institutions.
  5. Supporting Development of Rating Agencies and Strengthening Information Disclosure Standards. Independent rating agencies play an important role in developing the region's capital markets and attracting cross-border capital flows. We will examine current experiences with credit rating agencies within the region relative to international best practices. We will encourage the adoption of best practices as well as full information disclosure by issuers.
  6. Regional Forum on Pension Fund Reform. We welcome the consideration of issues related to pension reform in APEC member economies, including these issues related to sustainability, the relative roles of the private and public sectors in pension fund management, implications for domestic savings and capital market development and the prudential regulation of pension fund investments. We will examine the benefits and costs associated with alternative approaches, and their implications on national budgets and income distribution. A symposium on this issue will be held in 1997, to report to our next meeting.
  7. Regional Forum on Securitization. We recognize that securitization can be a viable form of financing economic growth. However, some member economies may be faced with structural, regulatory, fiscal and other constraints that inhibit its development. Interested economies will participate in a forum to be hosted by Malaysia in 1997 to assess the level of securitization activities within each participating economy, identify impediments to their growth and development, and identify measures to remove such impediments. The findings of the forum may be embodied in a voluntary action plan.
  8. Voluntary Action Plan for Supporting the Freer and Stable Flow of Capital. We recognize the importance of a freer and stable flow of capital to economic development in the region. Accordingly, we ask our Deputies to prepare a voluntary action plan, for reducing barriers to capital flows in the region.
OTHER ISSUES
  1. On Customs Matters. We welcome the substantial achievements of the Sub-Committee on Customs Procedures towards trade facilitation, including technical assistance programs in harmonization and simplification of customs procedures. In this regard, we invite the Sub-Committee to begin exploring new areas of cooperation such as risk management, common data elements for cargo clearance, and express consignments. As many of us have responsibility for customs matters, we recognize the scope for enhancing mutual cooperation in the region not only in the area of trade facilitation and technical cooperation, but also in combating commercial fraud and the illicit trade of drugs and firearms. Trade facilitation and enforcement must be coordinated to establish and maintain a truly liberalized environment. We therefore encourage customs authorities in the region to explore ways of further strengthening cooperation in this field.
  2. WTO Financial Services Negotiations. Recognizing that lower barriers among financial markets will contribute to the freer flow of capital and accelerate capital market development, we express support for the resumption this month of financial services negotiations in the World Trade Organization. We urge all WTO members to look forward to full MFN agreements based on improved market access commitments and national treatment. Accordingly, they will aim to achieve significantly improved market access commitments with a broader level of participation in the agreed time frame.
  3. Anti-Money Laundering. Money laundering remains a priority concern because of the threat it can pose to the integrity of legitimate financial institutions. In this regard, we welcome the establishment of the Asia-Pacific Group on Money Laundering of which several APEC economies are members. We pointed out however that money laundering is a global phenomenon and in this regard, we encourage all other economies to join in a determined global effort to effectively address it . We ask the assistance of the relevant international organizations to integrate support for anti-money laundering activities in their operations to strengthen the integrity of financial systems.
FUTURE MEETINGS AND OTHER MATTERS
  1. We believe our agreement on the voluntary principles and collaborative initiatives in Cebu has further advanced our objectives. We look forward to meeting again next year in Canada to discuss progress in these areas as we continue to pursue concrete and practical measures. In this regard, we call on our Deputies to work actively with the designated lead economies to further refine work in their respective collaborative initiatives and to report back to us in our next meeting.
  2. We appreciate the significant contributions the ADB and the IMF made to this meeting. We would like them to continue their efforts as we prepare for next year's meeting. In this context, we welcome the role played by ADB in documenting best practices for private financing of infrastructure projects, disseminating information among member economies, and acting as a catalyst in mobilizing private sector funds for infrastructure. Moreover, in light of increased private sector participation in infrastructure, the role of public sector entities is increasingly being transformed from a direct provider of infrastructure services to that of regulator. ADB should seriously consider providing technical and other appropriate assistance to public sector entities to effectively discharge this role. We believe that MFIs can play a vital role in helping member economies implement the various collaborative initiatives to be undertaken.
  3. We affirm the important role of the APEC Financiers Group in the APEC Finance Ministers process not only as advisors but also as active partners in achieving our common objectives. We welcome the participation for the first time of key representatives of the APEC Business Advisory Council (ABAC) and the Pacific Economic Cooperation Council (PECC) in our consultation process. We noted their recommendations which include among others, developing a regional database on infrastructure projects, harmonizing disclosure of investment information, and the formulation and adoption of voluntary investment principles. We look forward to a continuing close cooperation with them in our future meetings.
  4. We express our appreciation to H.E. President Fidel V. Ramos and the Filipino people for their warm hospitality and excellent arrangements during the meeting. We also thank the Chairman of the APEC Finance Ministers Meeting, Secretary Roberto F. de Ocampo, for his valuable contribution to the success of this meeting.
  5. Finally, we will report to the APEC Economic Leaders again on the activities of the APEC Finance Ministers Meeting, on the occasion of their next meeting this year in Canada.