United States will launch a new international economic initiative to promote greater liberalisation of the financial sectors in Malaysia and other emerging economies of Asia.

Deputy US Treasury Secretary Kenneth Dam who is on a three-nation visit to Malaysia, China and South Korea this week will meet with government officials to discuss the new Bush Administration international economic policy.

I will be hoping to enlist key Asian policymakers in an international effort to persuade leaders here and elsewhere to embrace greater openness to financial services trade and investment and financial sector liberalisation.

We believe that well-developed and competitive financial sectors must be the engine of growth in this decade, he said.

Dam was speaking to Malaysian reporters during a media roundtable session at the US Embassy in Kuala Lumpur today.

When asked why Asian countries which saw the financial liberalisation as a major cause of the Asian economic crisis in 1998 should accept the US initiative, he said the crisis showed that some countries did not have adequate supervision of their financial institutions.

I think thats being remedied. Partly its education, partly its technical assistance and so forth, he said.

My intention is to spotlight what I see as early successes in Asian financial markets and to draw attention to where increased competition and better, more transparent regulation can clear a path to stronger economic growth.

No assumption

Dam said the initiative will help Asian countries make best use of their deep pools of domestic savings and encourage freer trade and investment in financial services to enhance capital market efficiency.

It will bolster financial sector stability, stimulate innovation and provide businesses and consumers with the broadest range of financial products at the lowest cost.

He pointed out that the US is not making any assumption in the initiative as to what countries such as Malaysia may choose to do where opening the capital account is concerned. The capital account of a country is its foreign investments minus its investments abroad.

What we say is that its important for foreign firms to be treated like domestic firms with regards to the capital account, he said.

Dam explained that it is possible to have a large foreign financial participation while maintaining a restriction on current account transaction.

[Current account is a record of receipts from the sale of goods and services to foreigners, the payments of goods and services bought from foreigners, the interest payments paid to and received from the rest of the world and net transfers paid to foreigners.]

Malaysia proved a point as it is very focused on capital account but they also have substantial financial participation by foreign firms and it intends to move forward in the area of capital market like what the [Malaysian] 10-year capital market outline program is all about, he said.

The 10-year Capital Market Masterplan, launched Feb 22 last year, provided the framework for the development of the Malaysian capital in the near future.

The plan aims to open up the Malaysian capital market by the competitiveness of domestic financial institutions through selective deregulations and liberalisation.