Ladies and gentlemen
Good morning and welcome to this very timely conference.
Following the regional financial crisis, a lot of attention has been put on strengthening monetary, fiscal and financial architecture.
But until recently, little attention has been given to the importance of insolvency systems in maintaining financial stability.
The recent work of the World Bank and the OECD in the area of insolvency is certainly very timely, and is important to sustained improvement of the global financial system.
The Australian Government is very pleased to be a co‑host with APEC, OECD, the World Bank and AusAID for this very important conference: Insolvency Systems in Asia: An Efficiency Perspective.
It is with great pleasure that I welcome conference delegates from around the globe to my home town of Sydney. I think this city is one of the most beautiful and exciting places in the world.
I encourage you to set aside some time in the next couple of days to venture outside the hotel and see what Sydney has to offer. You will see that there is much activity here as Sydney prepares to host the Olympic Games next year, when the eyes of the world will be upon us.
Of course, it is not only big sporting events like the Olympics that attract world attention. An increasing number and a variety of creditors and borrowers are constantly looking at opportunities all around the world.
The process of globalisation and technological change has led to rapidly increasing monetary flows between countries and an unprecedented expansion of global investment and trade.
And this has meant much greater economic interdependence between nations.
Globalisation provides great opportunities for growth. To recognise this, the Government this year set up the Australian Centre for Global Finance right here in Sydney. Its aim is to promote Australia as a global financial centre, and to give policy advice on globalisation to the Government.
Although globalisation creates great opportunities, it can also create new risks of instability. So I am telling you nothing new when I say the soundness of national insolvency frameworks are central to the efforts of governments and regulators. Inefficient insolvency laws that produce uncertain or unfair outcomes can seriously impede trade liberalisation and can seriously deter the international flow of capital.
And it is not just Joe Hockey saying this.
At their meeting in May this year at Langkawi, APEC Finance Ministers said that insolvency law reforms were particularly important to speedy corporate restructuring, and better management of credit flows.
They welcomed Australia's offer to host this joint conference, and encouraged the full participation of member economies.
It is gratifying to see so many representatives from APEC countries here today.
Ladies and gentlemen, all of us have an interest in ensuring the international community remains able to manage the risks inherent in the growth of private capital flows, the integration of domestic capital markets and the acceleration of financial innovation.
The collapse of the Bank of Credit and Commerce in 1991 and Barings in 1995 illustrate the potential for massive disruption when private enterprises go belly up. And the recent financial crises in Asia and elsewhere exposed weaknesses in insolvency frameworks.
As world capital markets become more integrated, the international policy community has begun to focus on the operation of insolvency laws.
For example, last year at their Birmingham meeting, G7 Finance Ministers encouraged development of bankruptcy laws and recommended that domestic corporate governance and bankruptcy systems be put under the spotlight.
The World Bank, as many of you will be aware, has launched an initiative to identify guidelines for insolvency in developing countries, and you will be hearing more about that work this morning.
And the IMF is looking at measures to prevent and then to resolve financial crises.
One theme emerging from this work is that effective national insolvency regimes do not only contribute to better crisis management, but they also play a role in crisis prevention. They do this by providing predictability, and in so doing, providing a way of making sure that smaller corporate problems don't become an enormous national meltdown.
Another theme is policing. In other words, good domestic insolvency laws mean nothing if they can't be enforced. Insolvency reforms must encompass not only the substantive laws, but also the institutional arrangements needed to ensure that the laws are respected.
And this brings me to Australia's role in reforming international insolvency systems.
I am pleased to say we have been at the centre of several initiatives, in particular the Australian Research Council's funding of a study to examine insolvency law and its practice in Asia. The findings of that study were published in 1997.
We also strongly supported the development of model legislative provisions on cross‑border insolvency that were produced by the United Nations Commission on International Trade Law (or UNCITRAL). Recently Australia proposed that UNCITRAL work towards developing model insolvency laws, which could then be adopted by other countries. A working group to consider this proposal will meet next month.
And finally, AusAID has assisted with many insolvency regional training programs.
Even though Australia's own insolvency framework works well in most instances, there is always room for improvement. I envisage there will be a review of Australia's framework for liquidation, voluntary administration and reconstruction of companies.
Such a review would encompass such issues as the implementation of the UNCITRAL Model Law on Cross‑border Insolvency; updating of the regulatory system for insolvency practitioners; fine‑tuning of our voluntary administration scheme; the examination of the liability of companies in corporate groups to creditors; and the review of the reconstruction parts of our Corporations Law.
This review would be the last phase of the Government's Corporate Law Economic Reform Program (know in Australia as CLERP).
But before launching into this review, however, I am keen to bed down some of the issues in the CLERP 6 program, which covers financial service providers and markets.
Significant resources are being devoted to this project and I am keen to make progress before we initiate more corporate law reforms. In addition, we have CLERP 7 - which seeks to cut red tape for business very much on the horizon. I anticipate that a discussion paper on CLERP 7 will be released shortly. This is a much smaller initiative than the CLERP 6 program.
So ladies and gentlemen, you can see that there is much happening on the corporate law front. Given the importance of an effective insolvency regime, I am keen to review Australia's regime in the future. But as I say, the Government will be resolving and finalising some its current initiatives first.
Of course, Australia is not alone in recognising the importance of insolvency systems.
Indeed there is a lot happening in legislative and policy developments around the world, and particularly, in the Asia‑Pacific region.
Several countries in our region have recently undertaken, or will be undertaking, reviews of their insolvency laws and their corporate rescue regimes.
It is conferences like this that benefit enormously from the experiences of our Asian neighbours. At events like this, we can all discuss experience and compare war stories from the insolvency front.
This conference presents a chance to discuss the cultural and domestic factors that must be taken into account when considering insolvency reform.
Indeed exchanges such as this can only complement and help the initiatives of bodies such as the OECD and the World Bank aimed at strengthening the international financial system.
I note you have a very full program this morning. I wish you all an enjoyable and fruitful experience at this important event.
I encourage you all not only to participate in the formal sessions, but also to meet and share your experiences and perspective with others at the social functions throughout the conference.
Sydney looks forward to the challenges your Olympic athletes will bring here next year, and I'm sure many of you will watch them closely. Although I wish them good luck, I hope their success will not be at the expense of the Australians!
Thank you.