Yang Berhormat Datuk Seri Utama Dr Rais Yatim, Minister in the Prime Minister’s Department,

Dogan Cansizlar, Chairman, IOSCO Emerging Markets Committee,

My fellow securities regulators, distinguished guest speakers, ladies and gentlemen:

I would like to extend a very warm welcome to all of you this morning to this international conference on strengthening investor confidence in emerging markets, which is being held in conjunction with the annual meetings of the International Organisation of Securities Commissions’ (IOSCO) Emerging Markets Committee (EMC).

I am particularly delighted to be able to welcome so many guests and participants from abroad who have joined us for this conference, as well for the meetings to come. This is a very significant event which Malaysia is extremely honoured to host.

IOSCO, as the largest grouping of securities regulators in the world, plays a tremendously important role in ensuring the integrity of global financial markets through its many international regulatory initiatives.

For instance, IOSCO’s objectives and principles of securities regulation is highly regarded as a key component of international financial regulatory standards and is being actively used by the likes of the International Monetary Fund and the World Bank in guiding their assessment of national financial systems worldwide.

More recently, IOSCO has endorsed a multilateral memorandum of understanding designed to facilitate and enhance information-sharing and co-operation among its members. This initiative was spurred by the events of September 11th to minimise any uncertainty within the world’s markets in the event that such situations might arise.

IOSCO has also recently established a task force to look into the development of Islamic capital market products and activities around the world and to examine their regulatory implications. Malaysia, which has the privilege of chairing this task force, will host its inaugural meeting this Friday following the conclusion of the EMC meetings.

(As an aside, Malaysia’s involvement in IOSCO began almost as soon as we were established, and it is an involvement that we value greatly. This is, in fact, the second time that we have hosted the annual meetings of the EMC; the last was in 1998 when Malaysia itself held the chair of the committee. Now, as chair of IOSCO’s Asia-Pacific Regional Committee, we hope to forge greater links and closer co-operation with our emerging and developed-market colleagues from around the region.)

IOSCO’s EMC is its biggest committee outside of the plenary, comprising regulators from 73 emerging market jurisdictions from Latin America, Africa, the Middle East, Asia and Europe. In one sense, the committee represents nearly three-quarters of the world’s population!

The annual meetings are clearly an important forum for securities markets regulators to discuss and deliberate on issues that affect the performance and development of emerging markets. And they are especially timely in light of the current global environment of uncertainty that continues to affect both developed and emerging markets alike.

Emerging markets already face a number of challenges as they enter the new millennium; achieving critical mass in a more interlinked and global economy is clearly one.

Take market size for example. At the end of 2001, emerging stockmarkets accounted for less than 10% of global market capitalisation. Is there not a more equitable distribution of the global wealth pie for these 78 markets than this?

Indeed, the extent of this predicament becomes very apparent when you consider that China, the world’s most populous country and largest emerging stockmarket to boot, has a market capitalisation less than a quarter of the size of some of the larger developed markets.

When you look at liquidity, the disparity is even more striking. To give you an indication of how much liquidity has dried up in emerging markets, consider the fact that from a global proportion of around 18% of stockmarket turnover value at end-1994, these markets now account for just over 5% of the world’s turnover.

It is crucial therefore that we take focused, definite and concerted steps to reverse this situation if emerging markets are to remain a relevant part of the global financial community.

But these particular issues aside, perhaps the biggest challenge that emerging markets face going forward is that of retaining and building up investor confidence. And as we all know, once lost, confidence is frightfully difficult to regain.

The importance of confidence should never be underestimated. Given the way in which financial markets work, the situation in which emerging markets find themselves is, perhaps, best summed up by Epicurus who, in the third century BC, said,

It is not so much our friend’s help that helps us, as the confidence of their help.

Many emerging markets are taking considerable steps to bolster confidence through improvements to their market foundations and the broader market environment. Malaysia, for example, has put into force an explicit code of corporate governance based on international best practices, instituted quarterly reporting and a disclosure-based reporting framework, as well as established an independent accounting standard-setting board, among other things.

But as I have said before, it is important that we engage with investors and other participants in emerging markets so that they are able to get a direct feel and appreciation of the situation “on the ground”.

And what better way to do it than during a congregation of securities regulators from over 70 emerging markets in Asia, Latin America, Africa and Europe, who are here in Kuala Lumpur to discuss global capital market and international regulatory issues.

The meetings are of course closed-door. But we believe that the discussion of these very important issues should not be restricted to among securities regulators alone. In the interests of strengthening confidence, it is crucial that we enhance channels of communication between the private and public sectors, and thus widen the discussion to include market participants as well.

Today’s conference is our contribution towards enhancing those channels and to promote greater debate and deliberation on what are clearly areas of direct relevance and interest to us all. We are fortunate not only to have such a large presence of our international regulatory counterparts here in Kuala Lumpur but also a set of truly distinguished and highly-significant speakers who will address you on several key topics.

Let me briefly touch on the agenda for today’s conference, to give you a flavour of what is to come. The first session of the conference will examine the outlook for emerging market performance, we as well as the current views of fund managers towards emerging markets.

The second session will examine the regulatory reforms that are taking place in the United States, and assess the implications of the current focus on corporate governance and disclosure issues on the work being undertaken in emerging markets to improve standards in these areas.

The third session will look at the implications for emerging markets as a result of exchanges moving towards more commercially oriented strategies such as mergers and alliances.

By the end of the day, we will have shared experiences on the latest efforts to restore investor confidence and ensure corporate accountability. We will have been brought up to date on the latest developments on exchange demutualisation, mergers as well as other linkages and alliances. And, we will finally know what fund managers really think about emerging markets.

As the American Nobel laureate scientist Linus Pauling once said,