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Third South Asian capital markets moot: SAFE role in mobilising support of capital markets
 Muzaffar Hameed May 24, 2010, 10:03:08 AM 

ARTICLE : The South Asian Federation of Exchanges (SAFE) - a representative organisation comprising mainly of the stock and commodity exchanges and other depository and clearing institutions of the South Asian region, held its flagship conference, "South Asian Capital Market Conference", at Mauritius from April 22 to 25, 2010.

The conference was organised on the theme of 'Expanding Asset Classes and Growth Opportunities in South Asia', which was aimed at modernising the Saarc capital markets, and for promoting the portfolio investments in the region. The conference was quite successful as it was not only well attended from a host of global and regional players, associated with the investment industry, but also from the perspective of a very large representation from the Pakistani capital market institutions.

Prominent personalities of Pakistan who attended the proceedings of the conference were; Dr Ishrat Husain, former Governor of State Bank of Pakistan; Zubyr Soomro, former country head of Citibank Pakistan; Zafar Shaikh, Director General of National Savings Directorate and the heads of other stock and commodity exchanges of Pakistan.

Similarly, the conference was also attended by many other important institutions from Bangladesh, Bhutan, India, Maldives, Nepal and Sri Lanka, such as the representatives from Chittagong and Dhaka stock exchanges, the Royal Securities Exchange of Bhutan, FT India related exchanges such MCX, MCX-SX, GBoT, Bourse Africa and the exchange domain systems, the Securities and Exchange Board of India, Nepal Stock Exchange, Capital Market Development Authority of Maldives, and the Securities and Exchange Commission of Sri Lanka etc.

As the focus of the conference was to present the region as an investment destination of choice for the global investors, therefore, the presence of a large number of Pakistani institutions and professionals enabled our country to showcase the strengths of our capital markets in a very meaningful and positive way. This led to quite an interest in the Pakistani markets from all those who attended the conference, including the global, African and Mauritius based companies and investment houses.

The role of Pakistan in the holding of this conference was critical as the permanent Secretariat of SAFE is located at Islamabad, which is being looked after by its dynamic Secretary General Aftab Ahmad Chaudhry, who is serving the federation on regular basis and is quite instrumental in mobilising the support of almost all important capital market entities of the country as well as that of the region.

Another factor for the success of the conference was that the chairmanship of the South Asian Federation of Exchanges was held by the Managing Director of Karachi Stock Exchange, Adnan Afridi, who is also a very articulate spokesman for the investment industry of Pakistan. Because of the presence of these two important offices of SAFE in Pakistan, there was a certain degree of interest and enthusiasm from the Pakistani contingent, which was assembled by the chairman and the SG of SAFE to represent our country at this important annual moot of SAFE.

It may be mentioned that the SAFE is a Saarc recognised body, which was accorded this status through the decision of the 27th Council of Ministers during December 2007. In line with the objectives of Saarc, the federation stands to promote regional harmonisation for all the stock and commodity markets of the area.

Founded in 2000 under the initiative of Chittagong Stock Exchange, the SAFE now comprises 17 stock and commodity exchanges, 5 clearing and depository institutions and one affiliate member. The secretariat of the federation was moved to and established on permanent basis at Islamabad, during 2005, and since then the Federation has grown from strength to strength.

The major objectives of the federation include the promotion of co-operation amongst the members in order to develop the respective capital markets and to work towards common standards for listing, trading, clearing, settlement and investors' protection and best business practices in the region's securities markets.

The agenda for promoting co-operation and development of the regional stock markets has also been under the consideration of the SAARC Secretariat for some time. In the recent past, the Saarc finance ministers during their second meeting held in New Delhi on September 15, 2007, had considered the recommendations of the Saarc Finance Secretaries and asked the Saarc Secretariat to look into the subject of 'the management of the stock exchange systems and regulation of the securities markets'.

Accordingly, Saarc Secretariat organised a Colloquium on this subject during April 21 to 22, 2008 at the SAARC Secretariat, Katmandu, Nepal, and prepared a report for the consideration of Inter-governmental Expert Group. In this report, the SAARC Secretariat stated that the colloquium had identified the matter of initiating a study for the codification of the differences in the securities laws and regulations in various member countries of the region.

The colloquium had also recommended that the study would reference the securities regulations of each of Saarc member countries with the international benchmark standards of G-30 recommendations and IOSCO principles. The colloquium had also recommended that subsequent to this exercise, the Saarc Secretariat may undertake the process of bringing in the necessary harmonisation of the securities laws and regulations in the region.

Besides this, the colloquium had also recommended that each country should develop their own Institutes of Capital Markets so as to develop the skills and know how of all those involved in the business of the securities markets of the respective countries, and then a regional institute may be set up for certifying qualifications from the member countries on uniform standards.

In this backdrop, while it is quite clear that the Saarc Secretariat had been instrumental in advocating an increase in co-operation between the stock markets of the region, however no fruitful results have been achieved so far on this front.

Furthermore, the regional regulators, who co-ordinate their efforts through the 'South Asian Securities Regulators Forum,' have also not decided on the 'things to do' items for the regional integration because of which the goal of achieving standardisation in the regional securities regulations has not been achieved. Side by side with this, the region has not seen the kind of liberalisation in the capital control policies which could have afforded the easy flow of portfolio investments within the region.

As progress on both of these factors is quite critical, therefore no meaningful progress can be achieved with regards to the opening of the economies of the region for facilitating the integration of the financial services industry of the SAARC without the involvement of these two prime regulators of the financial services industries.

On the other hand, SAFE is slowly engaged in expanding the mutual and bilateral co-operation between the stock and commodity markets of the region as can be seen from the progress that it has achieved during the initial ten years of its progress.

During all these years, SAFE has grown from a handful of members to a total of 23 members today, has introduced a distinct regional index under the name of Dow Jones SAFE 100 index, has advocated and promoted the regional investments and has also come up with different models for the integration of our markets.

However, as all such efforts needed the blessings from both the Saarc Secretariat as well as the regional governments/regulators for the implementation of various initiatives, the lack of such support has obviously resulted in the wastage of efforts of SAFE as neither Saarc nor the regional governments/regulators have patronised and prioritised the initiatives promoted by SAFE.

One such example of the wastage of efforts of SAFE has been the lack of adoption of the study on 'the model listing standards for the region'. This study was conducted and finalised with the technical assistance from a World Bank affiliated donor agency to SAFE.); however, its non-adoption by the regional regulators underscores the point that more is needed to be done both by the Saarc Secretariat as well as the regional governments/regulators.

Until and unless the agenda of SAFE for the seedier integration of the region's capital markets is not supported by the regional governments and the Saarc Secretariat, no meaningful progress can be achieved by our policy makers. On the sidelines of a very successful conference, SAFE also held its annual executive committee as well as the general body meetings.

While part of the agenda for these meetings related to the appointment of the new office-bearers such as the chairman and the secretary general for the federation, however, during both of these meetings SAFE took a stock of its performance and achievements during the last ten year and approved plans for the next ten years during the short, medium and long term horizons.

SAFE aims to achieve certain short-term objectives till the end of December 2011, medium-term objectives by the end of December 2014, and long-term objectives by the end of December 2020. These objectives range from the creation of a distinct corporate identity for SAFE to the ultimate harmonisation/integration of our capital markets. Besides these objectives, SAFE also aims to get the apex body status of Saarc, and intends to align its efforts with the agenda of the Saarc heads of states meetings so as to get maximum support for its initiatives.

Considering the objectives of SAFE, it is highly recommended that the Government of Pakistan provides all out support to its initiatives so as to enable our country to reap maximum benefits from the presence of the SAFE's Secretariat in Pakistan as well as to promote the growth of our markets and the economy on the whole.

Given the political atmosphere and the situation of our region, the time period of next ten years for the integration of our capital markets may appear to be an ambitious target, but as long as SAFE continues to work with the same zeal and devotion, the goal may well be within its reach. All that is needed is the constant support of the Saarc Secretariat and the regional governments for the agenda of SAFE during the next ten years of our lives ahead.-BR

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