AsianLII [Home] [Databases] [WorldLII] [Search] [Feedback]

Asian Development Bank Law and Policy Resources

You are here:  AsianLII >> Databases >> Asian Development Bank Law and Policy Resources >> 2004 >> [2004] ADBLPRes 7

[Database Search] [Name Search] [Recent Documents] [Noteup] [Help]

Jonghe, Louis de "4th Forum on Asian Insolvency Reform (FAIR)" [2004] ADBLPRes 7 (3 November 2004)

4th Forum on Asian Insolvency Reform (FAIR)

Special Address by
Louis de Jonghe
Country Director, India Resident Mission
Asian Development Bank

Inaugural Session
New Delhi
3 November 2004

Honorable Minister, Mr. Prem Chand Gupta, Secretary Sisodia, Honorable Justice Sarin, Guests on the Panel, Ladies and Gentlemen:

It is a great pleasure and honor to join this distinguished panel and address the Inaugural Session of the 4th Forum on Asian Insolvency Reform. This is the fourth year that the Asian Development Bank (ADB) has joined forces with OECD, the World Bank, and other sponsors to support this annual regional meeting on insolvency. I would like to particularly thank the Government of India for hosting this important event and the Government of Japan for its valuable support.

ADB is committed to join its member countries, development partners, and other stakeholders, to undertake the journey to reform insolvency laws and systems. Indeed, ADB has long been associated with such reform, and most of you present here today are our close partners in these endeavors. ADB has contributed to insolvency law reform, primarily through the provision of country-specific technical assistance, as well as through our loan projects with insolvency components, since the 1970's. In addition to country-specific assistance, ADB's work concerning insolvency and secured transactions has helped to articulate some of the core principles that underlie all well-functioning financial systems. In the next two days you will learn more about ADB's efforts on the insolvency front, particularly in the area of cross-border insolvency.

Ladies and Gentlemen, as you know, better substantive laws on insolvency are a necessary condition for the development of a market-based economy, but alone, cannot achieve this in the absence of a proper enforcement machinery. ADB believes that any law reform, including insolvency law reform, must be considered in the broader context of existing systems that can facilitate interaction among citizens, the private sector, and state institutions. Insolvency must also be considered in the context of a country's level of development and immediate needs. What Asia needs, or wishes to accomplish with its insolvency law reforms, must be viewed in the context of existing conditions for the application and enforcement of those reforms. Governments play a key role in shaping the legal, institutional and regulatory framework within which insolvency law systems are developed. If the fundamental conditions for such a framework are not in place, the insolvency regime is unlikely to be sound.

Together with the World Bank, ADB can claim a comparative advantage because insolvency law reform initiatives are an integral part of ADB's broader assistance at the national and regional levels. ADB is using its comparative advantage in finance and law to support pro-poor economic growth by focusing on the conditions for creating more employment in the Asian region.

ADB has a long-standing commitment to law and policy reform in the region as a means of strengthening fair and equitable interactions between citizens, the private sector, and state institutions. We have made consistent efforts to help the poor to become more productive by supporting policies that emphasize social inclusion, reform of the administrative organs of government to make them more responsive to citizens' needs, and to take measures to promote an environment for private sector development.

For example, legal empowerment has been used as a method of enhancing the position of the poor by reforming the land registration system in Cambodia, redefining land tenure relationships in the province of Sindh in Pakistan, and exploring the relationship between legal proof of existence and access to resources, services, and opportunities in Bangladesh, Cambodia, East Timor and Nepal.

Also, courts in many of ADB's developing member countries do not always have the institutional capacity to act as effective, independent and equal arms of the state. The justice sector is often chronically under-funded and expenditures on justice and law and order do not always form part of development priorities. As a result, the capacity of the judiciary to function effectively is generally weak. Serious procedural delays in reaching decisions are frequent. ADB is providing assistance in all of these areas. For example, technical assistance has been provided to the courts in Pakistan for introducing modern delay reduction techniques. In the Philippines, ADB is supporting efforts to make the judiciary financially independent while increasing transparency in use of funds. ADB has also supported judicial training in Viet Nam, Cambodia, the People's Republic of China, and Mongolia.

Ladies and Gentlemen, before I conclude, allow me to share with you two examples of ADB assistance to India in the areas that are relevant to the theme of this conference. In the financial sector in India, ADB has focused on increasing allocative efficiency, reducing intermediation costs, and enhancing competition and diversity in banking and capital markets. ADB's direct investments also support revitalization of troubled companies through capital infusion, global best practices on governance and processes, and transfer of technology for resolution strategies. Building on past achievements, the recent emphasis has been on improving access to credit on the one hand, especially to the poor and disadvantaged, and unlocking capital through asset resolution strategies, on the other.

In this regard, an ADB technical assistance (TA) for Developing an Enabling Environment for Structuring Asset Reconstruction Companies in India deserves special mention. As you know, the Asian financial accumulation of non-performing loans (NPL) have together blocked precious capital, thereby increasing costs to the financial system. Such inefficiencies invariably hurt the poor the most. Although the NPL problem in India is not as alarming as in some of the other developing nations, it nevertheless deserves the Government's full attention. I must therefore complement the Indian policy makers who have taken the first steps to address this issue by enacting the Securitization Act, 2002. We are happy to note that an Asset Reconstruction Company (ARC) has already started operations under the provisions of this Act and hope that ADB's technical assistance would contribute to assist the Government in enabling further initiatives in this area.

ADB is also addressing the problem of access to credit by helping to ensure more efficient use of movable property as collateral for credit to small businesses with little land to offer. An ADB technical assistance on Secured Transactions Reform is assisting the Government of India to build on the strong foundations of the Securitisation Act to create a legal framework that will enable such reform, and address the concerns recently expressed by the Supreme Court of India on the operation of creditor rights. An integrated approach to secured transactions and insolvency law reform is important so as to ensure that debtor-creditor relationships are addressed in a way that enables both predictable flow of credit and reorganization under an insolvency law regime.

Ladies and gentlemen, I have provided you with some background on ADB's efforts to support the conditions that ensure that insolvency law reform can be sustainable. However, the direction for such change in insolvency laws will be set by intellectual movements such as FAIR, and your deliberations over the next two days. I wish this meeting every success.

AsianLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback