Chairman of the Capital Markets Board of Turkey
Chairman of the IOSCO Emerging Markets Committee

Good Morning & Welcome Honorable Minister, EMC Members and Distinguished Guests,
I would like to express my warmest welcome to all participants to this year’s 2002 IOSCO Emerging Markets Committee (EMC) Meeting and Conference.

Also, at this point I would like to express my deepest gratitude to the Securities Commission of Malaysia for hosting this meeting and for their kind hospitality and congratulate them for the organization of this event. I am delighted to be here with you in Kuala Lumpur – the capital city of and principal gateway into Malaysia. I hope that this year’s conference will be a memorable and efficient one to remember.

The IOSCO Emerging Markets Committee meeting is scheduled to take place during 29 – 31 October 2002. As usual, the conference will take place prior to this meeting. The theme of this year’s conference is ‘Strengthening Investor Confidence in Emerging Markets’ and has been chosen in accordance with recent turbulent developments in the global financial markets and its effects on the emerging market jurisdictions.

Investor confidence provides the foundation on which the securities market has been built. If investors don’t feel confident, they will shift their investments from abstract and intangible goods like corporate securities to tangible assets like gold or real estate, or even under their mattresses.
The importance of investor confidence to the success of securities markets has been recognized by many experienced policymakers and businesspeople. Recent developments, especially in the US, have highlighted the significance of investor confidence once again. The announcements of accounting frauds and other irregularities at some large corporations forced regulators and business leaders to rethink the importance of maintaining investor confidence in the market.

Without fairness and level playing field for investors it is impossible to run a fast-growth, high investment economy. A market based-economic system without excessive regulation and strong financial markets with broad based investor participation are the basis for economic growth. Investor confidence is built in a long time but is lost very rapidly. We shouldn’t forget that investor confidence is at the heart of such a market based economic system.

It is evident that to restore investor confidence and trust in the markets and corporations institutional reforms are needed. Moreover, effective enforcement and regulation by securities regulators is also essential.

From an emerging market standpoint, the most effective policy to restore investor confidence and overcome the fragility of local financial markets is to undertake reforms that will restructure the financial sectors, operate under rules of genuine transparency, and reinforce an institutional framework that supports the market based economies. These local reforms would be most successful when implemented in tandem with global reforms.

At this point I would like to remind you that, in an increasingly integrated world, the resilience of the global economy is only as strong as the weakest of its components. In other words, the weaknesses of some countries could have adverse effects on the health of the global economy due to spillover effects.

The economic crises in some countries around the world in the past have clearly demonstrated that both government and private sectors have an interest in reducing the turbulence of global financial markets. While governments continue to debate the form that the new global financial architecture should take, the private sector is making its own contribution to improving the resistance of the world financial system to crisis.

For emerging markets, in order to adapt to this new financial environment and to promote financial stability, the legal and institutional framework need to enable the improvement of governance systems and to adapt best business practices. A strong governance system must ensure that timely and accurate disclosure and transparency are made on all material matters regarding the corporation. These matters consist of the financial situation, performance and ownership of the corporation, and the equitable treatment of all shareholders including minority and foreign shareholders.

Good corporate governance, and effective regulation, contribute both to the attractiveness of a country in terms of inward investment and business development, and also to the efficiency of its capital markets, and their effectiveness in the service of the real economy.

As the Chairman of the EMC, I would like to remind you that IOSCO is aware of the importance of the corporate governance that is essential to the development of robust, well-regulated capital markets. EMC had prepared a Status Report on Corporate Governance Practices that provides information on corporate governance practices and trends among the emerging market countries, with the goal of encouraging adherence to internationally acceptable principles of corporate governance and gives special attention to the role of transparency and disclosure rules, listing requirements, and codes of best practices to attract capital flows in emerging markets.
The status report was approved by EMC in 2001 and at the 2002 meeting in Istanbul EMC passed on a resolution to recommend its members adopt corporate governance principles in their legislations, regulations or codes of good practices, using the OECD Principles of Corporate Governance as a benchmark of what constitutes good corporate governance practices. The following years EMC will continue to study on the issue of implementation of good corporate governance principles.

Moreover, across many countries, policymakers have begun efforts to encourage companies to adopt higher governance standards. In this regard, the establishment of a corporate governance index for listed companies is a hot topic of discussion in many markets. For most, state regulators or legislators have driven the reform. In some cases this has been reinforced by shareholder pressure. In some cases both state regulators and shareholder pressure have been effective.

For developing an effective corporate governance regime which will serve to promote healthy and vibrant capital markets, it is important to focus attention on the way things are done, and by whom they are done, just as much as on the formal framework. There are three useful guidelines for ensuring good corporate governance practices: Shareholder Accountability, External and Independent Audit and Transparency.

Especially for emerging markets enhancing transparency and accountability is an important and vital task. The recent Enron and Worldcom events arising from governance failure and corporate misconduct have underlined the importance of building strong institutional framework for transparency and disclosure even in developed markets. At this point I would like to say that Sarbanes Oxley Act of 2002 is a big step taken towards the better protection of investors by improving the accuracy and reliability of corporate disclosures.

I believe that IOSCO EMC meeting and the public panels will provide a platform for discussing all these issues in an efficient manner. I am also pleased to inform you that this year’s public panels will provide you with excellent opportunities to engage directly with top financial experts and securities regulators from all around the world in a detailed discussion on recent issues affecting emerging markets. Challenges and opportunities that have arisen in financial markets due to the recent trends will be discussed in order to provide you with in-depth insights into financial developments. There will be three panels each focusing at a specific issue.

The first panel will focus on issues relating to investing in emerging markets. Emerging market countries play a very significant role in today’s global financial markets. Many private sector and government analysts point to emerging markets as a potential major source of economic growth and profit. However changes in the economic environment and in investor confidence both impact investment levels within emerging market jurisdictions. In deed investor preferences and investor’s appetite for risk impact the flow of capital to emerging markets jurisdictions. This panel will provide you with valuable insights into all the issues regarding investment in emerging markets.

The second panel will focus on auditor independence and corporate governance in light of recent corporate failures in an emerging markets context. As was highlighted by the recent corporate bankruptcies in the US proper corporate governance practices including accounting and auditing standards are vital to the proper functioning of financial markets. Good corporate governance, effective regulation contribute both to the attractiveness of a country in terms of inward investment and business developments and also to the efficiency of its capital markets and their effectiveness in the service of the real economy. This panel will provide you with a better understanding of the issues that are arising including the regulatory reforms in the US.

Finally the third panel will discuss the growing migration of capital raising and trading activity to internationally positioned exchanges from an emerging markets standpoint of view. As you know, stock exchanges are under enormous pressure due to the internationalization of equity raising, listing requirements and trading activity. These trends have led to increased mergers and consolidation of domestic activity to global financial markets. Therefore this panel will examine the possible consequences of these developments for exchanges in emerging markets countries.

Again at this stage, I would like to express my sincere thanks to all our distinguished speakers who will be sharing their views on the issues to be discussed.

I wish you all a very pleasant and relaxed conference.

Thank you all.