regulation of private pension funds is based on quantitative investment limits – the so - called draconian regulation. regulators in emerging markets consider investment limits to protect pensioners ’ rights better than regulations based on the “ prudent person ” rule. the latter rule requires managers to follow high fiduciary standards in investing the funds. it allows fund managers to set their own investment guidelines, encourages financial innovation and avoids the pitfalls of government direction of funds and interference with market processes. prescribing quantitative investment limits is generally defended on the basis that the underdevelopment and lack of transparency of local security markets make them susceptible to manipulation and excess volatility ; and that the general public, pension fund trustees, and fund managers lack financial sophistication. investment limits can also be prescribed with a view of obliging pension funds to make a greater contribution to national development in both the real economy and the local financial market. the downside of draconian regulation is that in some parts of the world they have created distortions in asset management, limited opportunities for diversification and, as a consequence, have hampered the performance of retirement funds. ladies and gentlemen, for the regulators, especially in developing countries, it is important to strike a suitable balance between draconian regulation, on the one hand, and absolute liberty in the way funds are managed and invested, on the other. draconian regulation is more appropriate for mandatory systems that are newly created in countries with shallow and dysfunctional financial systems and little tradition of private retirement funds. today, there are numerous means through which governments regulate pension funds and these are not limited to developing countries, but could be found in many developed and emerging market economies. they include prohibiting or limiting investments in assets considered to be risky, volatile or complex, restricting investments in foreign securities and even going as far as prescribing minimum returns. the modern trend is to move away from quantitative investment restrictions and to rather empower the trustees with fiduciary powers to take sensible, prudent, strategic, tactical and socially responsible investment decisions. the regulator ’ s responsibilities are reduced to ensuring high corporate governance standards and reasonable returns on investments. given these trends, one may ask whether the namibian retirement fund industry is ready to assume greater responsibility to manage retirement funds without prescriptive investment regulations. there are, in my view, two compelling reasons why i have to answer this question with a qualified no. it is my considered opinion that we are

michael mambo mukete : role of the bank of namibia in consumer protection issues speech by mr michael mambo mukete, assistant governor of the bank of namibia, at the launch of namibia consumer trust, windhoek, 15 march 2011. * * * director of ceremonies, and the executive director of namibia trust – mr michael gawaseb, the chairperson of namibia consumer trust – mr sandi tjarondo, the board of trustees of consumer rights trust, distinguished invited guests, members of the media, ladies and gentlemen, it is my great pleasure to be here today to witness the launch of namibia consumer trust. my research indicates that this trust is the first of its kind set up to advocate for the rights of consumers in namibia. the launch comes at the most opportune time when many namibians are finding themselves without appropriate avenues to find redress when their rights are infringed and often feel powerless to stand up against giants in the business and the financial sector. it is with this view in mind that the bank of namibia regards this initiative as a welcomed development at a time when concerted efforts are made to assess the regulatory landscape for consumer protection measures. this is because there are dozens pieces of laws developed many decades ago, and most of them surely have outlived their usefulness. it will therefore take much determined effort and coordination not only from the audience in this room, but also across sectoral regulators and government institutions to address the inefficacies in our existing laws. it is worth noting that the law reform and development commission has already issued public invitation to this effect and i wish to urge you all to participate in this indispensable exercise. director of ceremonies, ladies and gentlemen allow me to ask a very rhetoric question, why should financial regulators be concerned about the right of consumers of financial services? lack of information – or “ information asymmetry ” between consumers and financial services providers places customers at a disadvantage. consumer protection therefore seeks to level the playing field between suppliers and consumers of financial services. financial services are in fact often complicated, while often involving large amounts of money for individuals. it is true that the need for consumer protection is not unique to the financial area. nevertheless, there is a considerable difference in degree compared with most other areas, partly because it is often difficult even with hindsight to assess the quality of the financial services. in the namibian case, the challenge we are facing is not only to protect the existing customers