Senior officials from 25 emerging market countries and the G7 , senior IMF management, as well as leaders from the private creditor and investor community participated in a roundtable discussion on International Capital Markets and Emerging Markets in Washington, DC on April 14, 2008. The audience included a diverse group of market participants from investment banks, hedge funds, pension funds, and other institutional investors.

Mr. Jean-Claude Trichet, President of the European Central Bank (ECB), one of the co-chairs of the Group of Trustees of the Principles, chaired the meeting. He was joined by other Trustees including Mr. William R. Rhodes, Senior Vice Chairman, Citi, Chairman, President, & CEO, Citibank, N.A.; and Mr. Mehmet ÅžimÅŸek, Minister of State in Charge of Economy, Prime Ministry, Republic of Turkey. The meeting was hosted by Charles Dallara, Managing Director of the Institute of International Finance.

President Trichet delivered a keynote address entitled Reflections on the Current Financial Market Turbulence. President Trichet reflected on the numerous factors which reinforced each other to create the current market turbulence including complex structured products and distortions in the incentive structure underpinning the growth of such products. He reminded participants that central banks, including the ECB and the BIS, issued early warnings regarding a significant underpricing of risks in various market segments. He explained that current challenges faced by central bankers in the recent market turmoil are more complex than liquidity management; as current market turbulence challenged central banks with managing "stress and risk aversion." President Trichet cited as an example of joint actions between central banks during the turmoil, the cooperation between the ECB and the US Federal Reserve.

In addition, President Trichet discussed the resilience of emerging markets over the past year; a recurrent theme throughout the course of the roundtable. Similarly to other speakers, President Trichet commended the leadership of emerging market officials and stressed that the lessons of the Asian crisis have been well learned. Despite the resilience observed thus far, President Trichet remarked that ultimately emerging markets will not be completely unscathed as they will face a tighter environment for external financing. President Trichet commented on the recent work done by the Financial Stability Forum (FSF) highlighting the report's recommendations for increased transparency and disclosure on complex structured products.

President Trichet's presentation was followed by a session on Prospects for Continued Resilience of Emerging Markets Amidst Credit Market Turmoil chaired by Minister ÅžimÅŸek. He; Leszek Balcerowicz, Professor, Department of International Comparative Studies, Warsaw School of Economics; and Jose de Gregorio, Governor, Central Bank of Chile all relayed to the participants the significance of sound macroeconomic policies, investor relations and data transparency spearheaded by emerging market officials. Minister ÅžimÅŸek remarked on the more sophisticated debt management practices now employed by an increasing number of emerging markets. Governor de Gregorio focused on the confident and professional response of policymakers thus far, as well as the challenges they face ahead including rising commodity prices and inflation. Professor Balcerowicz also remarked on the challenges facing policymakers, particularly in emerging Europe. One key issue he stressed is that the housing market is financed with borrowing from abroad. He added that in this environment policymakers do not have room for monetary or fiscal relaxation.

Private sector speakers on the panel including Luis Freitas de Oliveira, President, Capital International S.A.; Robert D. Hormats, Vice Chairman, Goldman Sachs (International); Monika Machon, Managing Director, Fixed Income, AIG Investment Europe Ltd. echoed the public sector sentiments of resounding resilience by emerging markets. Many observed that it seemed apparent that emerging market officials have learned the lessons of past financial crises. Mr. Oliveira remarked on the recent trend of protectionist American trade policy. However, he also observed that the US is now dependent on emerging markets for foreign capital. In addition, due to tight credit conditions in the US, it is more difficult for emerging markets to issue international bonds. Ms. Machon remarked that the current crisis is a crisis of confidence versus a crisis of credit or liquidity. She cautioned investors from chasing returns in commodities which would risk creating another bubble.

Mr. Rhodes chaired a session on The Role of Government-owned Investment Vehicles (GIVs) in Global Capital Flows. Mr. Rhodes remarked on the fact that GIVs have been a major source of funds for financial institutions. It is expected they will continue to play a major role in global capital going forward. Despite misconceptions, overall GIVs aim to invest in assets with attractive risk-adjusted returns, not to gain a controlling position in foreign companies.

Public Sector officials Lesetja Kganyago, Director General, National Treasury, Republic of South Africa and Y. Venugopal Reddy, Governor, Reserve Bank of India both discussed their experiences with inflows from sovereign wealth funds coming into their countries. Mr. Kganyago observed that GIVs are like any other investors. He noted the benefits of engagement and communication necessary through investor relations. In addition, Mr. Kganyago observed that investments from GIVs may indirectly end up meeting financial shortfalls in instances where sovereigns may previously have had to borrow from the IMF, and thus the monies are dispensed without the conditionality of IMF loans. Lastly, he added that from a public policy perspective, transparency regarding GIVs should be approached similarly to pension funds. Governor Reddy remarked on the challenges of accepting investment from GIVs considering that sovereigns have yet to develop regulations specific to GIVs. Such evidence may support the need for global standards or global codes.

Private Sector panelists including Jacko Maree, Chief Executive, Standard Bank Group and Richard Cookson, Head of Global Asset Allocation, HSBC, discussed the opportunities for development presented by sovereign wealth funds, as well as key concerns of policymakers in recipient countries. Mr. Maree remarked on the flow from GIVs into the developing world, estimated at $70 billion thus far. Mr. Maree pointed out that it would be unfair to impose regulations on GIVs that have not been imposed on other investment vehicles such as hedge funds. This flow can generally support development of recipient countries, especially for those looking for nontraditional funding. However, there is evidence the GIVs are investing for strategic purposes. Mr. Cookson noted that GIVs investment was part of what amounts to a massive capital transfer from developing to developed countries, and that it would be problematic to extrapolate from current flows and project continued transfers on that scale. In addition, Mr. Cookson, highlighted the long-term nature of GIVs could provide stability to the global financial system.

Mr. Dallara briefed meeting participants on the Interim Report of the IIF Special Committee on Market Best Practices (CMBP) released on April 9, 2008. The interim report reviews the fundamental issues posed by the recent market stress and provides clear indications of the direction of the CMBP's thinking for best-practice recommendations. The work of the CMBP has involved many senior leaders in global finance including CEOs, CROs and CFOs representing most of the major global firms. In addition, the CMBP has worked in consultation with several central banks and regulatory authorities. The CMBP has focused it work in the following areas: transparency and compensation, risk management, rating agencies, and valuation. The first steps of the CMBP were to identify "what went wrong" and then to provide a set of principles and recommendations on strengthened business practices going forward which can help to minimize the risk of future financial crises and help make the financial system more resilient. The final report of the CMBP will be issued in the summer of 2008.

Mr. Robert B. Gray, Chairman, Debt Financing and Advisory at HSBC Bank Plc., presented to the roundtable participants the new IIF report "Investor Relations: An Approach to Effective Communications and Enhanced Transparency." The IIF's work in the area of emerging markets IR and transparency has been guided by the IIF's Working Group on Crisis Prevention and Resolution, chaired by Mr. Gray. The new report covers 38 emerging market countries. Due to increased investor interest in Sub-Saharan African countries, the IIF has expanded its coverage of investor relations practices of selected countries in the region. The report includes assessments of six Sub-Saharan African countries that have already or are expected to issue debt on the international capital markets: Gabon, Ghana, Kenya, Nigeria, Tanzania and Zambia. Noteworthy progress has been made by Morocco who launched the first formal investor relations program in Africa.

Mr. Gray also introduced a new initiative by the Working Group on Crisis Prevention and Resolution : A Project on Reconciliation of past-due Sovereign Debt. Recent cases have highlighted the particular challenge of reconciling past-due sovereign debt when the debt in question is of long standing. In light of recent experience, the IIF working group would seek to establish a methodology that is acceptable to all parties and could provide a template for future debt reconciliations, in line with the principle that timely good faith negotiations are indeed in the interest of all parties.

The roundtable discussion concluded with a luncheon at which Dominique Strauss-Kahn, Managing Director, International Monetary Fund, delivered a Keynote Address on Responding to Global Economic Challenges. Mr. Strauss-Kahn's address occurred on the heels of the Spring Meetings of the IMF and the World Bank. He reflected on the challenges facing the industrial countries and the developing world as growth prospects for the global economy have worsened. Mr. Strauss-Kahn noted that although emerging markets have avoided crisis their growth prospects will eventually be dampened by worsened global growth. He noted the challenges for policymakers to constrain inflation and in some cases prevent food shortages.