Conference on ASEAN Equity Study Asian Development Bank Securities Commission, Malaysia Centennial G

1
Conference on ASEAN Equity StudyAsian
Development BankSecurities Commission,
MalaysiaCentennial GroupFramework, Stock-take
and Preliminary Views

• Andrew Sheng
• 29 March 2007

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Contents

• Purpose of Study -
• Chatham House Rules
• Listening to Market - this Conference
• Listening to Public Sector - Next Conference
• Finding the Process of Integration - Third
  Conference
• II. Framework to think about ASEAN Equity
  Market Integration
• III. The Changing Global Environment
• Stock-take of ASEAN market participants
• 2005 GMA Study and Recommendations
• Some Possible Options Forward
• Thanks go to Asian Development Bank, Securities
  Commission Malaysia and Centennial Group for
  organizing this Conference

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Mega-trends Globalization and Capital Markets

• Globalization in Financial Markets has
  accelerated due to
• Demography - Aging Population seeks higher
  returns and diversified risks through investing
  in Emerging Markets
• Information Technology - lowering cost of
  transactions
• Financial Deregulation and Innovation - reducing
  friction and improving risk management
• Regulatory Arbitrage - rise of Hedge Funds and
  Private Equity improves market turnover, creates
  competition to improve issuer performance but
  creates new challenges
• Financial Markets are exhibiting market
  concentration in key hubs with three Time Zones
  (New York, London and Asia)
• ASEAN has huge potential and savings, but if we
  do not work together, the market could be
  marginalized.
• We need to find a way of working together.

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East Asian Capital Market remains small
East Asia 16.1
ASEAN 1.4
EU 26.2
EUZone 17.5
NAFTA 43.2
USA 39.5
UK 6.8
Source World Bank
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Getting to Shared Objectives, Common Principles,
Products and Platforms require Process of
Discovery

• Globalization has created choice from domestic
  markets to regional markets and global markets.
• We do not know what the final architecture and
  form of ASEAN Capital Market Integration will be
  like.
• So, we must begin a process of search, through
  working together.
• THE PROCESS IS THE PASSAGE.
• This paper is a preliminary work-in-progress
  towards that Process of Discovery.

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Market Architecture Centralized (Star) Network
Dominant Player
MARKET
MARKET
MARKET
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MARKET
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Centralized Network
MARKET
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Decentralised Network Several Larger Hubs
more choice
MARKET
MARKET
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Network C
Network B
MARKET
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MARKET
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Network A
MARKET
Network D
MARKET
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MARKET
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Distributed Network Internet no key hub
MARKET
MARKET
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Applying Network Theory to Capital Markets

• Capital Markets act as hubs to facilitate links
  and flows at lower transaction costs with better
  protection of property rights

Inflow
Outflow
Transmitter Capital Market Hub
SOURCE Node
SINK Node
Supplier of Capital
User of Capital
Node-link-hub reduces transaction costs and
brings benefits to all users
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Roadblocks in Deepening the East Asia Capital
Markets

• Shallow and lack of integration due to
• Large differences in market practices,
  institutional development and regulatory
  standards, laws and processes.
• High transactions costs.
• Barriers to entry and regulatory obstacles to
  financial innovation.
• Conflict between national interests (closed
  markets) vs. integration (openness).
• Bureaucratic differences and lack of cooperation
  between public and private interests.
• No common philosophy and roadmap to integration.

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Six Degrees of Separation

• How to develop Common Vision?
• Common Standards and Common Rules whose rules?
• Principal-Agent Dilemma how to align
  incentives?
• Lower Transaction Costs how to lower barriers
  to network transactions with each other?
• Common Processes how to achieve institutional
  convergence?
• How to improve robustness and resilience?

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(1) Common Vision vs. Winner-Take-All

• Network effects of Winner-Take-All work against
  integration, because smaller nodes fear market
  dominance.
• Having a single person or one countrys vision of
  what ASEAN or Asian market integration is all
  about, does not work. We need a shared vision.
• That Vision could be common standards,
  principles, products or platform must be owned
  by all potential members.
• Since we do not know what that Vision is like, we
  must begin the Process of consultation,
  cooperation and learning to work together and to
  trust each other - hence this stock-take and
  listening to all players.

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(2) Common Standards International Standards
Exist, but need huge coordination domestically to
achieve Convergence

• To ensure Common Standards in financial sector
  requires the coordination by three key bodies
  (1) Ministry of Finance, (2) Central Banks and
  (3) Securities Regulators.

Holy Trinity
Coordination of Fiscal Policies Tax Codes
Coordination of Banking Regulations
Ministries of Finance
Global Core Standards
National Standards
Securities Regulators
Central Bankers
Coordination of Exchange Rate Policies
Coordination of Securities Regulations Common
Standards of Accounting
Coordination of Market Information
Implementation of Common Laws
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(3) Principal-Agent Dilemma alignment of
incentives

• We cannot avoid that one of the more efficient
  exchanges is to go through a hub. For example,
  which is Asian Time-Zone Financial Hub?
• Smaller markets fear that the Winner-Take-All
  hub would take away their domestic liquidity,
  rather than remembering that networking may
  increase liquidity in all Asian markets.
• Hence, we need to align incentives to cooperate
  by (different options)-
• Having common ownership of the Hub
• Allowing development of several Hubs, with each
  specializing in different products and services
• Leading Hubs distributing greater public goods
• A commonly agreed mechanism to ensure that
  Principal-Agent (members) can resolve disputes
  when benefits and interests are not aligned.

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(4) Lowering Transactions or Friction Costs

• Markets that have become dominant in global
  trading are also efficient because they have the
  lowest transactions/friction costs for exchanges
  and transactions, i.e. market participants are
  free to transact with relatively few legal or
  regulatory obstacles or barriers.
• Many of the barriers or friction costs to higher
  liquidity are due to regulatory or protective
  barriers that create market segmentation and
  therefore lower efficiency.
• There is a need to identify a sequencing of
  convergence of transactions costs so that ASEAN
  network effects are maximized. Each market has
  to identify the key barriers and friction costs
  and work with others to reduce these costs,
  taking into consideration the network benefits.

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(5) Common Platforms encourage interconnectivity
and interoperability

• Common trading, clearing, settlement and payment
  technology is now readily available G-30
  Basle/IOSCO standards for real-time platforms
  (common trading and clearing and
  settlement/payment systems) that can work
  together in real time and generate huge common
  liquidity and high transparency.

Common Platforms Infrastructure
Inflow
Outflow
SOURCES
USERS
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(6) Common Ownership and Resilience

• Market networks are about building market
  institutions that would involve political, and
  social-cultural change. It is also about change
  management.
• Change Management is all about Ownership, so that
  we all have a stake in building more prosperous
  ASEAN Capital Market, with higher efficiency
  (lower transaction or friction costs), higher
  transparency and liquidity, and also robustness
  (resilience to shocks).
• This is a process that must take into
  consideration political perceptions and
  realities.
• How to build these political and social support
  is a key question.
• OWNERSHIP STAKE through cross holdings in mutual
  win-win situation may be a way forward.

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Raising the Game through improving Domestic
Markets

• Regional Integration will require massive
  coordination of many jurisdictions - of balancing
  vested interests, building coalitions, changing
  laws, standards, and ultimately market and
  bureaucratic behaviour.
• Each economy has responsibility to
• Using international rules and standards to raise
  and enforce domestic market standards, codes, and
  rules of the game and
• put in place the property rights infrastructure
  of a market economy that is fair, transparent,
  robust, flexible, and efficient.
• Asian Development Bank and larger markets can
  help smaller markets achieve these goals through
  technical assistance
• The first step of process reform begins at home!

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Benefits from Participating in Regional or Global
Game

• Global players (oil producers, India China,
  pension funds, hedge funds and private equity)
  are keen to participate in Emerging Markets that
  offer higher liquidity and transaction efficiency
  in order to diversify their risks
• Emerging Markets can learn and improve their own
  Capital Markets and institutions through
• Joint Ventures or welcoming foreign investors
• Learning through doing - participating in
  regional institutions through different channels
• Using foreign or regional financial institutions
  to invest in and train upgrade domestic players
  infrastructure
• Development is learning to achieve Adaptive
  Efficiency

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Framework for Assessing Readiness of ASEAN
Countries for Equity Market Integration

• Strategic Objectives
• Strategic Options
• Strategic Risks/Constraints
• Reform Programme

• Are countries clear about what they want out of
  regional integration?
• Is there consensus on how they wish to position
  ASEAN?
• What are the key strategic choices that they
  face?
• What are the implications of these options on
  national interest, institutional infrastructure?
• What steps are they taking towards regional
  market integration?

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Strategic Objectives(Country Responses)

• No clear and unanimous view of goals for
  integration - debate on speed (fast track vs..
  gradualism).
• Larger players feel aims include the following
• To develop deep financial markets
• To enhance capacity building in priority areas
• To achieve cross border collaboration among ASEAN
  capital markets
• Larger market size which will bring about
  increased liquidity
• Greater access by firms to cheaper sources of
  funding
• Expansion of investor base and investment
  choices.
• Smaller players feel that they may not be ready
  for integration
• Not yet on par with the other exchanges in the
  region and participation in an integrated market
  as premature and too far-fetched, with more
  risk than gain in present circumstances.
• more concerned with strengthening its national
  financial infrastructure than to be outward
  looking.

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Strategic Risks and Constraints National
Viewpoints

• Disparity in Size and Sophistication means fear
  of losing even more domestic business to stronger
  entrants
• Smaller market capitalization
• Lack of scale and lack of balanced/ diverse mix
  of companies to compete regionally
• Fear of dominance of foreign invest
• Some markets are still a long way from regaining
  their pre-crisis position in terms of market
  capitalization and issuances growth.
• Too many small companies and hence not efficient
  for large funds to invest in a meaningful size. T
• How to revive investor confidence and enhance the
  investability of the market.
• How to improve public float, deeper market depth
  and raise the level of skills in the equity
  market intermediaries?

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Reform Programmes at National Level

• ASEAN countries are aware that they have to
  attain high standards of corporate governance,
  transparency, efficiency and innovativeness in
  order to keep up with global competition.
• Capital market master plans have been launched to
  drive the change momentum.
• Bilateral strategic alliances with other
  exchanges are being established to lay the
  groundwork for more substantive cross border
  transactions .
• National resources are allocated for
  participation in the ASEAN initiatives under the
  umbrella of the ASEAN Finance Ministers Forum

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National Views on How to Proceed

• Listing of more regional companies
• Make available more ETFs and sub-indices (small
  and mid-cap)
• List bigger companies with exciting growth
  prospects
• More bilateral tie-ups to draw more foreign funds
  and kick-start more co-trading links among
  exchanges in the region (in line with the vision
  of the ASEAN MOF for an interlinked regional
  securities market by 2010). Settlement
  procedures should not be cumbersome
• Allowing qualified institutional investors(
  pension, life insurance, social security and
  other funds) to invest abroad in countries whose
  regulators or exchanges are members of IOSCO or
  WFE.
• Leveling playing field between domestic and
  foreign intermediaries
• Participation in ASEAN Capital Market Forum
  framework for mutual recognition and
  harmonization of standards in information
  disclosure, accounting and auditing,
  comparability of credit rating, securities
  distribution rules, and cross-recognition of
  qualifications and certification of capital
  market professionals.
• Signing of MOUs with foreign stock exchanges in
  North Asia to seek greater cooperation and mutual
  recognition, initially through information
  sharing and technical assistance.

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Preliminary Views

• Participants surveyed are still cautious about
  regional integration until they have completed
  the right things in getting their national
  systems up to par with others in terms of
  standards, technology, legal and regulatory
  structure as well as skills. The time frame which
  they have given themselves to complete their
  reforms is 5-10 years
• So far, participants are more comfortable with
  signing bilateral agreements to co-operate in
  easy-win areas like information sharing.
  Multilateral agreements are deemed as more
  difficult and complex.
• There are efforts to gradually reduce transaction
  costs, but little effort to evaluate the friction
  costs of over-regulation and protection.
• Co-ordination between regulatory authorities
  needs to be improved and procedures streamlined
• Soft skills in the market intermediaries are
  still lacking.

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ADB-Commissioned GMA Regional Capital Markets
Report2005 Highlight of Views and
Recommendations
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Main GMA Message

• A high level strategy should be developed to
  promote regional integration co-operation in
  order for East Asian countries to gain from
  globalization of financial markets
• Individually, each East Asian market lacks market
  size even as a group (ASEAN3) they are still
  smaller than the international exchanges

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If nothing is done,East Asian equity markets will
soon be marginalized

• The larger listed companies in the region will be
  migrating out of East Asian exchanges or seek to
  cross list in the super-exchanges in the US and
  Europe, attracted by the access to international
  capital and price liquidity
• The demutualised exchanges in East Asia are
  already seeking alliances with exchanges in the
  major trading blocks, which may preclude their
  participation in a future regional integration
  initiative
• East Asia will be left with a a 2nd tier of
  fragmented small exchanges, confined to trading
  in domestic securities, for which growth will be
  relatively flat

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The trend of looking outside East Asia is
already apparent

• Data shows that the East Asian markets have so,
  far, developed stronger financial ties with the
  advanced markets in Western Europe and the US,
  rather than strong links with one another
• The larger issuers in East Asia recognize that to
  compete globally, they need to dual list in their
  domestic market and in one other super-exchange
  internationally
• The larger cross-listing centers (such as the
  NYSE and the LSE) attract a greater value of FDI
  and have the capacity to implement a wider range
  of technology to support their network of
  alliances and partnerships in an intensely
  competitive trading environment.

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The Lessons of Europe East Asia Differs

• Europe
• European regionalism was motivated by the aim of
  political and economic union
• Europe has established institutions of
  transnational governance
• ( European Commission, European Parliament,
  European Court, European Central Bank)

• East Asia
• Political and economic union is not on the agenda
  of East Asia, except for ASEAN
• East Asia is weakly institutionalized it will
  have to rely on inter-governmental agreements for
  integration, not on transnational organizations

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Financial Integration - its Challenges and
Timeframe

• Financial integration in Europe took 15 years
  and is still ongoing, even with the legal and
  regulatory support as well as competitive
  pressures exerted by an economic union
• Without similar support and pressures for market
  integration, the East Asian region may take
  anything up to 10 years simply to reach an
  agreement on the strategic objectives before
  substantive integration activities can begin
• By that time, the more advanced exchanges in the
  region may have developed close alliances with
  major exchanges outside the region
• East Asia would have missed this window of
  opportunity for integration

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Strategic Approach for Regional Integration in
East Asia

• First and foremost, the East Asian countries must
  agree on a shared goal for strengthening regional
  capital market integration
• Next, the East Asian markets have to develop, in
  addition to their domestic action plans, a
  strategic approach for exchange integration
• The exchanges, regulators and market players have
  to agree and align their institutions to this
  strategic approach and to continually update the
  strategy and related initiatives as market
  conditions, or competitive pressures,change

33
Key Enabling Factors for Strategic Approach to
Exchange Integration

• Harmonization of securities market regulation, in
  line with international standards, best practices
  and agreed core principles
• Allow open access to national markets by any
  exchange within the East Asian integration region
• Allow listed exchanges to merge with or acquire
  other exchanges in the integration region
• Footnote
• Difficult for players within independent East
  Asian markets to voluntarily agree to above,
  without force of law to drive progress

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Approach to Regional IntegrationOption 1
Open Membership vs. Initial Core Group

• Exchange integration - better chance of success
  if participating exchanges are of similar size,
  development geographical proximity
• The creation of Euronext, comprising 3 initial
  exchanges, was already a difficult and lengthy
  process
• Most feasible option for East Asia start with 3
  or 4 of the developed exchanges (which are
  sufficiently developed) in terms of
• Market size
• Infrastructure
• Regulatory framework
• Common thinking
• Other markets can still be included in strategic
  development and strategic/regulatory
  harmonization initiatives

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Option 2 Exchange Integration vs. Alliance

• EU Experience exchange integration was driven
  by mix of legal, regulatory pressures
  commercial willingness
• East Asia exchange integration could take form
  of merging some or all participating exchanges
  into a single East Asian regional exchange ( like
  Euronext)
• Barriers would still be significant
• Legal regulatory differences
• Tax laws
• Lack of common currency
• National and political boundaries
• Cost structures
• In nearly all East Asian markets, the prestige
  and political interest in maintaining a national
  exchange outweighs the need to seek cross border
  exchange mergers

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Option 2a Exchange Alliance

• Instead of exchange mergers, partial integration
  through an Exchange Alliance may be more
  acceptable to East Asian countries.
• An example is Norex (a shared trading system),
  which is an alliance-based exchange in which 4
  Nordic exchanges participate and share resources
  but each market retains its national exchange
• Globex is another jointly founded alliance to
  create a new trading system that supplements
  existing trading systems in each market. Members
  of the alliance benefit from a single point of
  access to the various products traded on the
  system

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Exchange Alliance Model

• Key Commonalities
• Adopt common name marketing approach through
  joint venture agreement
• Agree on use of common listing standards
  trading rules
• Adopt common trading system, if possible
• Commit to trading all equities ( and later,
  bonds) through this common trading system
• Adopt a co-operative organizational structure,
  with individual exchanges retaining their
  existing legal autonomy management structures
• Respective national regulators provide
  supervision via the national exchanges of the
  alliance

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An Exchange Alliance overcomes major barriers
concerns of exchange mergers

• National Political Interests
• Issuers list via national exchanges, using
  Alliances common prospectus listing
  requirements
• Individual exchanges retain existing legal
  autonomy and management structures
• Other exchanges can join the alliance later
  exchange alliance is scalable
• Settlement depository services could still be
  provided by national markets this overcomes
  concern that primary record of hodings will be
  outside the national market
• Common Currency - A common currency is not
  required
• Costs Competitiveness
• Lowers operational costs
• Expands liquidity pool and creates a broader
  index
• Increases trading volumes through cross-border
  activity
• Increases accessible investor base

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Market Surveillance of Exchange Alliance

• A single common surveillance system across
  markets would be difficult owing to differing
  stages of development and emphasis across even
  the four developed Asian exchanges
• Strategic options
• Continuation of bilateral MOUs to co-operate and
  share information under defined circumstances
• Implement a standard surveillance system in each
  national market to make available information of
  minimum defined level
• Pool surveillance data from different markets in
  a common database for access by participating
  regulators

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Regulatory and Legal Requirements for Integrated
Capital Market Operations and Implementation

• I. Role of Market Regulator
• Fostering common regulatory standards
• Promoting cross-border co-operation (bilateral or
  multilateral MOUs)
• Approval of cross-border access between markets
• II.Harmonization of Regulatory and Legal
  Frameworks Essential Areas
• IOSCO Objectives Principles - consistent
  approach to regulation, approval monitoring of
  issuers, intermediaries, trading /settlement
• Market Abuse Provisions ensure investors have
  same safeguards in all markets encourage
  transparency
• Settlement Finality Ensure commonly agreed
  legal/operational definition of finality of
  settlements. Adhere to BIS core principles
• Capital controls removal of capital controls
  relating especially to foreign portfolio
  investment, shares purchased abroad by residents,
  shares issuance abroad etc

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Regulatory and Legal Requirements for Integrated
Capital Market Operations and Implementation

• III. Use of International Standards ( regulatory,
  accounting, corporate governance) to create a
  credible East Asian regional market
• Essential areas
• CPSS-IOSCO Settlement Standards- to achieve a
  common approach to Clearing Settlement
  standards across East Asian regional markets
• IAS and GAAP to achieve consistent approach to
  company reporting and investor information across
  East Asian regional market
• BIS Risk Management Standards compulsory for
  central banks in each market to adopt and enforce
  BIS standards for financial institutions

42
Clearing Settlement of East Asian Bonds and
Equities A Case for AsiaClear

• The GMA report has provided a lengthy discussion
  on the viability of establishing a regional
  clearing, settlement and depository in East Asia.
• Premature to go into this area until the other
  critical issues for regional exchange alliance
  are addressed at the First ADB Conference.

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Development of a Regional Market Integration Plan

• Step 1 Agreeing on Strategic Objectives
• 1. Integrated Wholesale Market Objectives
• 1.1 Enable corporate issuers to raise finance on
  competitive terms across region
• Current Status
• No strategic regional plan to attract corporate
  issuers from outside region,or to market
  equity/bond listings across multiple East Asian
  markets
• HK and Singapore most successful in attracting
  foreign listings but nos. are low

44
Development of a Regional Market Integration Plan

• 1.2 Provide single point access to all
  Participating East Asian markets
• Current status
• No provision for single-point access
• Where national rules provide or remote
  membership, firms required to maintain local
  presence and use local trading/settlement systems
• No strategy to create consolidated infrastructure
  for listing and trading
• 1.3 Allow investment service providers to offer
  services across national borders without
  significant barriers
• Current status
• National market laws generally favour domestic
  institutions and create obstacles for non-local
  institutions
• No concept of Regional Passport for service
  providers to operate across region

45
Development of a Regional Market Integration Plan

• 1.4 Establish a sound and well-integrated
  prudential framework for investment by fund
  managers
• Current status
• No consistent prudential framework across the
  region
• Efforts are focused at domestic level
• 1.5 Create environment for legal certainty to
  protect securities trades and settlements against
  unnecessary counterparty risk
• Current status
• Implementation of IOSCO standards and best
  practice varies across region due to different
  legal regimes
• Concept of Central Counterparty institutions as
  in Europe to minimize settlement risk not
  favoured by East Asian region

46
Development of a Regional Market Integration Plan

• 2. Objectives for an Open and Secure Retail
  Market
• 2.1 Provide consumers with the information and
  safeguards to participate in an integrated East
  Asian financial market
• Current status
• In the absence of overarching legal, regulatory
  and surveillance framework across the region,
  these measures are focused at domestic level.
• 2.2 Remove unjustified barriers to cross-border
  provision of retail financial services
• Current status
• No strategy for unfettered access to cross border
  provision of retail services
• Demand for such access by retail investors has
  not been assessed

47
Development of a Regional Market Integration Plan

• 2.3 Create legal conditions for electronic
  commerce on a Pan-East Asia scale
• Current status
• No overall strategy for a consistent legal
  framework for electronic commerce in the region
• This technical area is being addressed by each
  market separately
• 2.4 State-of-the-art prudential rules and
  regulations
• No strategic plan undertaken by national
  regulators to apply best practice in this area
  across the region
• There are pockets of excellence in domestic
  markets

48
Development of a Regional Market Integration Plan

• Step 2 Establishing an Effective Structure for
  Analysis and Decision Making
• The favoured option for a structured approach to
  integration is one driven by a combination of
  Governments, exchanges, market participants and
  national regulators.
• ASEAN 3 would be the logical regional forum to
  drive the process covering
• Analysis of strategic options and implementation
  approaches
• Market consultation
• Policy making
• Agreement and decision making
• (Pg 195 has a suggested baseline organization
  structure to undertake this process)

49
Role of Various Stakeholders in the Regional
Integration Process

• Leadership will be critical at an individual and
  institutional level to drive the Process
• Role of Inter Governmental Body (comprising
  Ministers of Finance)
• To reach agreement on strategic objectives,
  policies and specific initiatives
• Role of Parallel ASEAN3 Inter Governmental Body
• To ensure consensus amongst participating
  markets to ensure alignment with long term
  economic integration in the region to
  communicate with international community
• Role of National Securities Regulators
• To reach agreement on policies and strategies
  relating to regulation and surveillance issues at
  regional and domestic levels to agree on set of
  core principles to be applied across the region,
  ensuring due consultation with all parties

50
Getting Key Stakeholders Involved

• Role of East Asian Securities Institute/Securities
  Committee
• A new body to provide long term focus and project
  management for integration strategies assess and
  report on results of working groups propose
  draft objectives and policies to Inter
  Governmental bodies
• Role of Consultative Committee
• An independent committee to provide a view on
  overall process and help to resolve deadlocks at
  decision making level. Members are industry
  leaders and heads of each major exchange who are
  knowledgeable about strategic aspects of
  securities market, government policies, law and
  economic development
• Role of EMEAP
• To provide input and support from regions
  central banks on market development and payment
  systems

51
Getting Stakeholders Involved

• Role of Multilateral Agencies
• Organizations such as the ADB, World Bank and IMF
  could provide inputs to the ASI/Securities
  Committee and technical advisory support to
  working groups, including regulatory standards
  compliance assessments
• Role of Standards Bodies
• International standards setting bodies ( such as
  IOSCO, BIS) would be able to advise on areas of
  difference between markets to ensure adoption of
  best practice to provide a point of reference
  for technical integration and to provide
  indication of future direction
• Role of Technical Working Groups
• To analyze, consult and report on the initiatives
  under their purview, and to interact with other
  working groups
• Role of Consultative Groups
• These comprise market participants with direct
  interest in the initiatives (regulators,
  exchanges,investment managers, bankers
  associations etc),

52
Development of a Regional Market Integration Plan

• Step 3 Agreeing on Policy Assumptions and Limits
  of Possible Strategies
• Recognizing and agreeing on the policy
  constraints at the outset will help to guide the
  potential integration process by defining the
  limits of possible strategies.
• GMA suggests a checklist of the key hurdles that
  integration initiatives will face (See pgs 198
  199)
• An agreed final list of potential policy
  constraints will be useful for
• Assessing feasibility of achieving strategic
  integration initiatives
• Deciding to proceed with a particular integration
  initiative
• GMA emphasizes the importance of a
  well-coordinated decision making structure with a
  strategic vision from the start.

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Preliminary Thoughts

• Getting Agreement on Common Objectives and Vision
  is a Process
• Agreeing that we need to take care of Market
  Disparities and achieve Common Goals to generate
  liquid, transparent, highly efficient and low
  transaction cost markets will require creative
  thinking that-
• Recognizes different policy constraints
• Need to build ownership
• Need to build framework to generate best
  cooperative efforts in terms of technical
  assistance, skills building and supervisory and
  infrastructure capacity
• . At end of the first Conference, tentative
  conclusions will be tabled.

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