Capital is more volatile than ever before: currencies are converted in all its forms, whilst capital is redeployed in a never-ending pursuit for maximum recompense.

We are all familiar with the profound outcome this can have on economies, industries and trade balances; less common is the function that regulatory differences can play. Except that long-standing, inappropriate or incoherent guidelines can impair an entire nation by prompting capital to seek a safer harbor. For instance, a World Trade Organization paper, ‘The Impact of Transparency on Foreign Direct Investment’, concluded that countries can await an important climb in foreign direct investment provided they enhance transparency via combating bribery, corruption, poorly enforced property rights and inefficient regimes.

Transparent and fair regulatory systems are primary to developing deep, liquid capital markets, which sequentially attract market participants, augment efficiency and fuel economic growth and job creation. Wherever the rules are unknown or predictable, investment is downcast and opportunities for hoaxing open up. Investors contest business in markets wherever the ground rules diverge devoid of warning or where only domestic entities identify the rules (or which ones will be enforced).

The case of the US Securities Industry Association (SIA) is a typical example. It has urged regulators and trade negotiators worldwide to set standards, adopt finest practices and craft legal commitments that would augment regulatory transparency globally. Others, such as the Bank for International Settlements and the World Bank, have endorsed regulatory transparency. Furthermore, the UK government published its revised Code of Practice on Consultation in January.

The SIA’s approach to regulatory transparency seeks an arrangement through which good rules contain the greatest chance of being adopted and applied consistently and fairly.

And the payback? Lucid conventions offer market participants with enough symmetric information to abide by the regulations. They assist businesses to develop a truthful depiction of their outlays and proceeds, and call for regulators to articulate their objectives. Opaque systems generate asymmetry and uncertainty: the enemies of money markets. Transparency besides makes for healthier regulation. The larger the range of concerned parties that is solicited for input, the more prepared regulators will be and the better the regulation.

Requesting public remarks does not obligate regulators to pursue it. A mere example is that the SIA regularly files statements with the US Securities and Exchange Commission, disagreeing with a projected rule. Occasionally, the regulators formulate adjustments based on market opinions when the need is felt. It is the communication involving the regulator and the regulated that benefits markets and hence, investors.

Our experience shows that transparent regulatory regimes result in rules that mirror the finest experience and insight of each market and gradually, of all markets. They permit regulators to evaluate all the existing alternatives and to steer clear of initiatives that are detrimental to their markets. As an industry, regulatory transparency should be trusted, and regulated entities should stand ready to help, to advise and to participate. And where does Mauritius stand in all of this? Our weak stance relative to world standards insinuates the obvious.

<B>Nitish BENIMADHU

[email protected]</B>