bandid nijathaworn : are there limits to transparency? remarks by mr bandid nijathaworn, deputy governor of the bank of thailand, at the imf conference on central bank communications, mumbai, 23 january 2006. * * * first, let me thank the imf and the reserve bank of india for the invitation. it is a pleasure to be here in mumbai. and i should also congratulate the imf for putting up what seems to be another useful and successful seminar. my contribution today is to speak on limits to transparency. given the limitations of time, i want to begin by looking at the needs of central banks for limiting transparency, especially in the context of central banks ’ own operations. then, i want to speak on the challenge facing central banks in designing appropriate disclosure policy. and finally, i want to share with you my thought on how to approach transparency in the context of monetary policy. transparency has now become an important policy aspect of central banking. not only is transparency linked directly to the governance issue, but greater transparency also imparts important benefits to the effectiveness of central bank policies. in broad terms, three benefits from greater transparency are often cited. first, greater information provided by the central banks allows market participants to accurately evaluate the behavior and the performance of central banks. this is most important for public organizations like central banks. second, financial markets tend to work more efficiently with greater transparency. this is because uncertainty is reduced as market expectations are formed using a more superior set of information. and third, being more transparent also helps raise the quality of central banks ’ own works which directly contributes to enhancing their credibility. however, despite the positive benefits, there are occasions when there would be arguments for central banks to go less than full transparency, especially with regards to their market operations. this is because transparency is not only about providing information as the academia normally assume. but transparency is also about how a central bank is being seen or being known in its operations in financial markets. hence, for its operations to be effective, sometimes less - than - full transparency can be more efficient, for example, in the foreign exchange markets. therefore, from practical considerations, the rationale for limiting central bank transparency includes : first, legal requirements and the risk of impinging on personal privacy, as well as for reasons of market or commercial sensitivity and public interest ; second, the risk of compromising the decision - making process ; for example, saying too much or giving out too

financial crimes. if the perpetrators are members of the government, swift and decisive actions taken against them will make society confident in the government's policy on this issue and thus encourage law enforcement officers to fearlessly do the right things. what i have been talking about so far concerns economic crimes within a country. things get more complicated and much more difficult to combat when it comes to cross - border economic crimes. these require close cooperation of law enforcement authorities in every country. today's united nations congress on crime prevention and criminal justice is a good example of the collaboration effort at the international level. to combat transnational crime, the willingness to collaborate is strong when authorities hold the same view on such crimes. these include crimes such as trafficking in drugs, women and children, as well as trading of illegal weapons. but there are more subtle forms of economic crime where authorities find it difficult to agree on the risks. in such cases, cooperation in combating such crimes would be more difficult. examples of such cases are when bigger nations exploit the natural resources of smaller nations, which have been a practice for over 100 years since the days of colonization. modern fortes of such crimes can be seen in cases where influential businessmen from large countries move into smaller countries under the pretext of technological advancement to exploit the latter's natural resources, which often are claimed for the mutual benefits of both parties. but it is clear that the allocation of such benefits is often not balanced. there is also a case of exploitation of consumers in smaller nations when products which are hazardous to health in bigger nations, have been relocated for production and sale in less developed nations. an example of this is tobaccos and cigarettes, which come under stringent restrictions on sales and advertisement in bigger nations but have been sold in other nations with highly persuasive but subtle advertisement campaigns aimed at teenagers and women. there are also cases of certain medicines which have been banned in more developed markets and yet can still be found on the shelves of other less developed markets. there is no way for the authorities of two nations to agree that such dubious practices constitute economic crimes. but it is clear that they are exploitation of smaller countries by bigger nations with more economic clout and technological advancement. these practices still continue to the detriment of the public in smaller nations. such resentment comes not from the physical harm or destruction of personal properties, but from the feeling that they are living in an unjust world, where the rules favour big nations at the cost of smaller