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Forum on Asian Insolvency Reform V, Beijing, China

 

April 27-28, 2006

 

Weak insolvency systems have been identified as one of the key shortcomings of the investment climate in Asian markets.  As a result, the Organization for Economic Co-operation and Development (OECD), with input from, inter alia, the World Bank, the Asian Development Bank and the government of Australia, organized the Forum on Asian Insolvency Reform (FAIR).  The first FAIR (FAIR I) was held in 2001.  FAIR provides senior policy makers, judges, academics, businesspeople and private-sector practitioners with an opportunity to debate and discuss insolvency reform in Asia.  Participants include representatives from Bangladesh, China, Chinese Taipei, Hong Kong China, India, Indonesia, Malaysia, Nepal, Pakistan, Philippines, Singapore, Thailand and Vietnam, as well as from OECD member countries and relevant international organizations.   The emphasis of FAIR is on policy dialogue and exchange of experiences, with a view to:

 

  • Assisting the development of an Asian agenda for insolvency reform;
  • Building a regional policy constituency and commitment to reforms;
  • Disseminating regional experiences and comparative progress reviews, in order to increase the understanding for viable policy options; and
  • Monitoring progress and helping to keep insolvency, restructuring and the related legal changes at the heart of reform efforts. 

While the FAIR was originally developed as a crisis management forum, recent years have seen many Asian economies (most notably, China) boom.   One of the most clearly-emerging themes from this year’s event was that, for these countries, effective insolvency systems are no longer tools for staving off crisis but, rather, are inducements to foreign investment and are the building blocks for creating greater depth in the capital markets and attracting a wider array of sophisticated financial intermediation.  In this way, the FAIR has had to, and indeed has, re-invented itself as a forum in which policy-makers can hear from a variety of experts on the various options that are available to them in designing insolvency systems. 

 

The FAIR also facilitates identification of country-specific technical-assistance needs, which could then be addressed by bilateral donors or multilateral institutions.

 

FAIR V

 

The fifth meeting of FAIR took place on 27-28 April 2006 in Beijing, in co-operation with the Enterprise Research Institute of the Development Research Centre of the State Council of People’s Republic of China.  Participants examined the main policy issues arising in legal and institutional reforms of the Asian insolvency systems in the last decade and distilled lessons stemming from international guidance and experience.   Particular attention was paid to new developments and insolvency reforms in China.  The World Bank’s delegation was led by Vijay S. Tata of the Legal Vice-Presidency’s Finance, Private-Sector and Infrastructure group.

 

In particular response to the rapid growth in many Asian economies and the divergent levels of development amongst Asian economies, the following topics, among others, were addressed at FAIR V:

 

  • How to balance the state’s role in facilitating business rehabilitation with its role as a creditor seeking repayment;
  • The relative importance of trade suppliers as a distinct class of unsecured creditors;
  • How to deal with unsecured employee claims in the absence of a broad social safety net and in economies transitioning out of ‘cradle to grave’ benefits provided by the state; and
  • Finding the balance between free-market capitalism and effective state regulation of the insolvency process.

Proposal for a Regional Network on Asian Insolvency Reform

 

In addition, an initiative was put forward by the Government of Australia - and formally supported by the World Bank at FAIR V and, subsequently, at the 22nd  Finance Ministers’ Meeting Technical Working Group of APEC – to establish a regional network on an electronic platform.  The purpose of this network will be to ensure access to information on insolvency development for policy-makers throughout the region.

 

This proposal will be discussed at the 13th Annual APEC Finance Ministers’ Meeting in Ho Chi Minh City, Vietnam, in September, 2006.   In the coming months, FAIR participants (including the Bank) will look at establishing a regional network to continue this policy dialogue electronically.

 

 

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Updated as of: August 23, 2006

 

 

 

 




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