Launch of Professor Roman Tomasics book "Insolvency Law in East Asia"

I’m delighted to have been invited to launch Insolvency Law in East Asia. This new book has been edited by Professor Roman Tomasic, Research Professor in the Faculty of Business and Law at Victoria University.

This is a very timely publication, coming as it does at a pivotal time in the economic and political history of the region.

East Asia has emerged as a key engine of global growth, contributing 43 per cent of the growth in the world economy since the year 2000. East Asia has also been responsible for over one-quarter of the growth in global trade over the last five years.

The region is not only important globally, but it is also highly important to Australia. East Asia is our main regional trading partner, taking around 58 per cent of our exports and providing around 47 per cent of our imports.  Australia has a strong interest in the long term economic wellbeing of East Asia.

Any nation which wants to foster sustainable investment and growth needs, as one of its economic cornerstones, an effective system of insolvency laws, as well as the institutional framework to support those laws.

An economy needs a predictable framework to give potential investors — whether domestic or foreign — the confidence that, even if their investment goes pear-shaped, the issue will be resolved quickly and fairly. 

The Asian financial crisis highlighted the critical importance of strong insolvency systems to deal with issues in the corporate sector before they cause system-wide failure.

Like Professor Tomasic, the Australian Government has taken a strong interest in insolvency laws, especially insolvency laws in Asia, for some years. 
In November 1999, the Australian Treasury hosted, together with the OECD and a range of other sponsors, a seminar in Sydney called “Insolvency in Asia: An efficiency perspective”. 

During the keynote speech at that event, the then Minister for Financial Services and Regulation, Joe Hockey, noted that the Australian Research Council had supported Professor Tomasic and a colleague in a study of insolvency law and its practice in Asia published in 1997.

Another topic of discussion at the Sydney seminar was Australia’s proposal to the United Nations Commission on International Trade Law to prepare a text on domestic insolvency laws.  The idea had its detractors — some people thought it was far too ambitious. 

But the project was successfully completed.  At this year’s Forum on Asian Insolvency Reform in Beijing — which is now a regular event which has its genesis in the 1999 Sydney seminar — the work of UNCITRAL was on the agenda.  And Professor Tomasic was one of the speakers at that conference.

Since the 1997 study, many countries in the region have made significant reforms to their insolvency systems.  This new work we are launching today provides an excellent overview of the current situation. 

But unfortunately some countries, despite making wholesale changes to their statutes, have made limited practical improvements.  One of the key challenges now is to find ways to address the gap between what the law says should happen and what actually happens on the ground. 

Of course, addressing this ‘implementation gap’ by changing the behaviour and thinking of the regulators, the courts and businesspeople, is much more difficult than simply passing a law.

At the 2006 Forum for Asian Insolvency Reform — otherwise known as FAIR — Treasury sought comments on its proposal to set up a regional network on insolvency reform.

This network would enable officials in developing Asian economies to share information on a regular basis about developments in our region.  It would cover not only law reform, but institutional changes, education and other capacity-building and technical assistance initiatives. 

The proposal was strongly supported by the FAIR participants. Treasury is currently developing the details of the arrangements and hopes to have the network underway next year under the auspices of APEC.

Better communication is the key to better cooperation.  The descriptions of the situation in the various economies within our region, brought together in Insolvency Law in East Asia and written by such accomplished authors, will help not only practitioners working in the field on particular cases, but also those seeking to improve their own systems. 

Learning what worked well, and what didn’t work so well, in other jurisdictions is an important source of information for policy advisers. 

I notice that Insolvency Law in East Asia includes a chapter on the Australian insolvency system. This is very apt.  Australia is — in a very real sense — an integral part of the East Asian region and we have a major stake in its stability and prosperity. 

As a number of you may be aware, late last year I announced an integrated package of reforms to the Australian insolvency system.  With elements such as the voluntary administration framework, Australian laws have long been regarded as world leading.  In this regard, it is important that our laws continue to recognise market developments. 

Well-functioning financial markets are critical to the region’s long-term economic prospects. They promote economic growth and stability by channelling domestic and foreign savings into productive investment opportunities… they enable individuals and firms to manage risk… and they sharpen incentives within firms to improve governance and efficiency. And as I mentioned earlier, robust, open and well-regulated financial markets can also reduce vulnerability to financial disturbances.

This why the Australian Government is participating in a range of regional forums and initiatives designed to assist other economies.

I don’t have time today to go into detail about our efforts in this arena. I would just like to note that we recognise that raising the quality of local institutions and frameworks cannot be achieved overnight. Nor is it feasible to simply import practices and institutions from other countries and cultures. Rather, we are working on a patient, staged and comprehensive approach to reform.

I congratulate Professor Tomasic and the contributors on Insolvency Law in East Asia. This volume adds another chapter to what is becoming a long history of Australian academics, insolvency practitioners and officials working in their own ways with regional partners to improve insolvency systems in our region — for the benefit of all our economies. 

I’d like to think that a comparable work written in ten years’ time will reveal even more developments in insolvency systems of the East Asian region. And that those systems will be all the better for the efforts we are putting in now to further enhance communication and understanding around the region — for the benefit of developing economies and, ultimately, for the benefit of all Australians.

It’s now my pleasure to officially launch Insolvency Law in East Asia.

Thank you.