SINGAPORE,
7 February 2007 — The economic growth of emerging markets in the past
few years has been one of the most significant developments in the
global economic system. However, emerging markets needs to do more to
develop deeper and more liquid capital markets if they are to secure
future economic development. That was the message from John Lipsky,
first deputy managing director of the International Monetary Fund,
(IMF). Lipsky said that a lot had been done to strengthen capital
markets since the Asian financial crisis of 1997-98 and he noted that
reasonably well-developed capital markets are now in place in many
emerging economies. His optimism was based on the fact that by the end
of 2005, the stock of domestically issued bonds in emerging market
countries amounted to $3.9 trillion, constituting an important global
asset class. He said that dedicated emerging-market US mutual
funds have been growing rapidly, from $27 billion in late 2000 to about
$230 billion as of mid-2006; and the stock of domestic securities in
emerging market economies increased by some estimates from 26 percent
to 40 percent of GDP between 1996 and 2006. He said that many emerging
markets were “beginning to overcome the structural weakness and lack of
market credibility that many experts assumed was more or less
permanent, and which it was claimed relegated these economies to
borrowing internationally only in foreign currencies.” The IMF
official argued that, “The growing internationalization of emerging
market securities reflects important structural changes taking place in
the global economy and in global markets.” Growing integration and new
role of emerging market countries in the global economy, and the
growing sophistication of financial markets and risk management,
represented the unexpectedly benign economic and financial environment
of the past few years and Lipsky observed, “We’ve had the fastest
five-year period of global growth in recent times.” He said that
emerging market economies had the opportunity to develop their
financial markets: “It is essential that they fully capitalize on this
unusual moment.” Many emerging economies were praised for taking
the right steps for having substantially improved their macroeconomic
performance by strengthening their monetary and budget policies and by
developing more complete and stable domestic financial markets. | 
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