A mission was requested by the New Zealand authorities to the Cook Islands to focus on policy options for transitioning to high-income status, financial sector stability and regulatory framework, and debt sustainability.1 It evaluated these issues in the context of the medium-term outlook and against the context of a recently developed fiscal framework. The Cook Islands is a self-governing territory in free association with New Zealand, but it is not an IMF member (Box 1).
This technical assistance mission report underlines efforts to estimate the economic and revenue contributions of the international financial services industry in the Cook Islands. This report discusses the data and methodology used and presents the results. One matter that has been raised is that international companies are exempt from all taxes in the Cook Islands. The economic contribution of the international financial services industry can be measured by the value added of resident institutional units engaged, directly or indirectly, in the production of international financial services in the Cook Islands. The production of international financial services generates income which is distributed to the various agents or groups of agents who use that income to acquire goods and services for consumption now or later. The international financial services industry also contributes indirectly to gross domestic product through two channels. The first channel is through the goods and services that the industry purchases from other suppliers, such as electricity, accounting services, telecommunications, etc.
This paper reviews financial sector regulation and supervision in the Cook Islands (CI). The CI has taken a number of measures to strengthen its financial sector regulation. New legislation was passed for the regulation of banking activity, and a Financial Supervisory Commission (FSC) was established. A suite of antimoney laundering legislation was enacted in May 2003 with work ongoing in respect of legislation for combating the financing of terrorism. The new Banking Act and FSC Act provide a good basis for sound financial sector regulation.
This paper focuses on key findings of the detailed assessment of observance of standards and codes in the financial sector of the Cook Islands (CI). The new legal framework in CI represents an important first step in correcting deficiencies, as they are all addressed in the new set of laws. The framework empowers the Financial Services Commission to license, supervise, and regulate the financial sector. It also provides it with enforcement authority in the event of noncompliance with the law, and to cooperate with foreign supervisors where necessary for implementation of comprehensive supervision on a consolidated basis.
The IMF’s Executive Board on May 15 approved an augmentation of Turkey’s three-year Stand-By Arrangement by SDR 6.4 billion (about $8 billion), bringing the total to SDR 15 billion (about $19 billion). The full text of Press Release 01/23, including details of Turkey’s economic program, is available on the IMF’s website (www.imf.org).