27 See, e.g., Abrams and Taylor (2000).

Fear of conflict of interest, insider trading and domination and abuse are, of course, risks that should be addressed in this regard. Conglomerates arc also more complex to supervise than
financial firms operating in only one subsector, because the risks, consumer protection, creditor protection, and corporate governance issues differ in significant details across subsectors.

There are, of course, certain risks and challenges that will confront a unified agency. But the experience of those agencies, particularly in the case of the UK’s Financial Services
Authority which deals with a global financial centre, demonstrates that the challenge can be comfortably met. First of all, there will be a challenge to balance the multiple objectives of a unified supervisory agency. But surely, these objectives would all revolve around risk management, efficiency, consumer protection, and corporate governance issues. Second, possible diseconomies max arise. One frequently mentioned is that politicians and policymakers may be tempted to assign the unified agency functions that are outside it core domain. Another is that the unified agency max become somewhat inefficient due to its monopoly status. But clearly the direct solutions to these problems are not difficult to find. Third, it may be challenging to create a single agency culture, since the mindset of supervisors of different types of specialized financial firms and markets often appear to differ. Still, countries with unified agencies in place have been well aware of this problem and have found solutions for it.

The role of the central bank

Even where there is unified supervision of financial services, by an agency separate from the central bank, in the context of trying to rapidly build an international financial centre, in a developing country like Nigeria, the central bank must ensure that it has up-to-date prudential information on the hanks. The central bank needs up-to-date prudential information on the banks in connection with its conduct of monetary policy, its foreign exchange rate policy and management, and its lender-of-last-resort function and other elements of its role in the payment system. In each of these areas of activity banks will be the primary, and sometimes the only, set of financial services firms with which the central bank will be directly dealing, ‘the central hank will need to have adequate information on the state of banks and the authority to request information (including via regular reporting) from individual banks. Apart from direct contacts with banks, the central bank should in any event maintain close contact with the financial services supervisor, ‘that way, the central bank can obtain additional insight from the financial services supervisor on the state of particular banks, as necessary.

Promoting the Centre

Here are a number of ways that the authorities and the International financial Services Development Council (1FSDC) and the Financial Area Corporation (FAC) can directly promote the financial centre. In particular, the methods would comprise assisting (the centre to access global value chains, devising selective intervention policies that favour the centre firms, and designing special enclave privileges for the centre.

Accessing Global Value Chains

On can visualize the production process of some commodity or service as involving a ‘chain’ of activities beginning with the conceptualization of the product and ending with bringing the product to market. At each stage ‘value’ is added to the chain. In addition, the chain can be cross-border. From such a perspective has emerged the concept of a ‘global value chain.’ A major objective of those at the lower end of a chain is upgrading. Four types of upgrading have been identified in the literature and listed in the order they fall in the usual upgrading path: process upgrading, product upgrading, functional upgrading, and chain upgrading. Process upgrading involves increasing the efficiency of internal processes, making the firm more competitive in making existing products. Product upgrading involves introducing new products or improving old products. Functional upgrading involves changing the mix of activities conducted within the firm, or moving from low-return activities to high-return activities. Finally, chain upgrading occurs when the firm moves to a new and more profitable chain.²⁹ In the modern world, standardized products and processes, electronic linkages and internet connections facilitate global chain relationships. One of the great advantages of accessing global value chains is the benefit of learning from others and hence the possibility of upgrading faster than otherwise. In this process, important are standards and the ability to meet buyer specifications. Indeed, formal benchmarking - measuring firm or cluster performance against specific product quality or productivity targets is widely used in value chains. The lead firms in global value chains often will provide the benchmarks for their suppliers. A standard is this context would be a rule, normally for measuring quality or other aspects of production and performance in general. In the international financial centre business we see both major and minor value chain relationships all the time. For instance, early in its development, Singapore International Monetary Exchange (SIMEX) established a relationship with the Chicago Mercantile Exchange, which was valuable to both. ³⁽⁾ Firms in Dublin, Hamilton, and the Channel Islands, have links with firms in the City of London in niches were the first three are important. Noteworthy is that, to benefit from such global value chain arrangements, a new or developing international financial centre must not only be attractive to other financial firms and markets abroad, but its governance and regulatory environment must also be respected by regulatory authorities of the leading financial centres.

See Gereffi and Korzeniewicz (1994) and Oyelaran-Oyeyinka and McCormick( 2007) ³⁰ See Lee Kuan Yew (2000), p. 77. As Lee Kuan Yew put it, they "convinced the CME to adopt a mutual offset system with SIMEX that enabled round-the-clock trading. This revolutionary concept allowed an investor to establish a position at CME in Chicago and close off at SIMEX in
Singapore, and vice versa, without paying additional margins. The U.S. Commodity Futures trading Commission approved this arrangement."

In addition, to facilitate such linkages, the authorities of the developing financial centre can be proactive in making known their openness to joint ventures, 100 percent foreign ownership of firms, and to allowing foreign firms to participate in certain "sensitive" activities in the local financial centre such as brokerage, underwriting, primary dealership in securities (especially government securities), and membership in the stock exchange. Moreover, the authorities and the 1FSDC can assist the developing centre’s firms in making contacts and structuring relationships with firms and markets abroad in order to motivate the global chains.

Other Selective Intervention Policies

There are other types of selective intervention policies that can promote the centre by reducing operating costs of, and increasing demand for, the centre’s services. First, the authorities can assist the centre with market research, providing information on new products and other knowledge inputs as well as potential clients both domestically and abroad. Second, the authorities could assist in making available, to the firms, critical infrastructure and public services at lower costs than otherwise; for instance, leases, rentals, and user taxes could all be made lower than lull-cost pricing would dictate. Third, the authorities can assist with finance, even if as credit rather than subsidies, for instance, to purchase equipment, train personnel or implement innovation as mentioned already, fourth, the authorities could make a special effort to patronize the centre via demand for it services (fund management, for instance). Possible enclave privileges

It may he very difficult for a new financial centre in a country to make inroads into the global international financial centre business, without granting special enclave privileges to the
centre. mainly because of the difficulties of building credibility with respect to microeconomic incentives and socio-political governance. As stated before, also, in the area of infrastructure and
public services having a Financial Area Corporation (FAC) to attend to some of the tasks could he efficient and effective. For an enclave approach, in addition, special policies, practices, and
procedures would be designed for the financial centre in the areas of taxation, administrative harriers, and the legal environment discussed earlier. Dubai is a case in point where this strategy
has worked.

Conclusion

In this paper, 1 argue that the geographical area in which an international financial centre is located must be attractive as a place where people want to live, work, and visit. In developing such an international financial centre, a country can set up an International Financial Service Development Council to help foster cooperation among the financial services firms and markets,

Sanyal (2007) also suggests a "custom-built" enclave for Mumbai financial centre. The government, the central bank and the regulatory authorities. I outline a strategy for developing such a centre, which involves the following: (1) conceptualizing a financial centre as a cluster; (2) finding a niche for entry at the international level; (3) enhancing competitiveness by building capacity, structuring incentives, and improving the quality of the national governance environment; (4) putting in place high quality financial services supervision and regulation; and (5) promoting the centre by assisting it to access global value chains, implementing other selective intervention policies, and granting it some enclave privileges. Approaching the problem as trying to develop a cluster will encourage focusing the strategy on exploiting the collective efficiency advantages of clustering, namely fostering joint action and experiencing net positive externalities, ‘the developers should find a niche for entry into the international arena, in terms of clientele, products and providers. The point is that aiming to cover the whole world in all financial services would not be efficient. In many eases there may be huge costs with little or no benefits. A financial centre in Nigeria, for instance, can find a niche in Africa beginning with the ECOWAS countries. The clientele would include governments, public enterprises, financial firms and markets, private nonfinancial businesses, foreign companies with operations in Africa, and Africans in the Diaspora. When it comes to the products and providers, all the major categories of financial services and major providers of such services can be attracted to the centre. The specific products would then be left to markets forces, including the ingenuity of the suppliers. Thus services would include: (1) foreign exchange services: (2) loan syndication: (3) stock and bond issues in local and foreign-denominated currencies; (4) fund management of various sorts: (5) money management; (6) mortgage; (7) insurance; and (8) monitoring and rating services on firms, management, individuals, governments and various kinds of securities and instruments. The providers, as a minimum, would be banks, a stock market, insurance companies, and rating organizations of various kinds. These highly diversified organizations can be supplemented by specialist organizations, such as mutual funds, investment trusts, leasing companies, factoring companies, credit rating agencies, professional service consultancies and research and risk analysis service firms. Futures and options exchanges as well as commodity exchanges could follow later, if economically efficient to do so. The idea is to encourage the specialist firms and organizations to emerge or locate from outside to fill any important niche that would strengthen the cluster.

Capacity of the financial centre is built by strengthening the institutions, organizations and mechanisms in the country to support innovation in financial services; investing in human
capital beneficial to the provision of financial services; raising financial capability of citizens, that is, the knowledge, skills and motivation of the population to manage their finances; and
putting in place appropriate physical and technological infrastructure. On infrastructure, in particular, I argue that the effectiveness and efficiency of the intended public sector contribution could be enhanced if a dedicated authority, a Financial Area Corporation (FAC), is created to provide some of the requirements of the financial centre geographical area (cluster). The FAC
could be given land and other capital to build and manage certain office space and perform any other Functions that can be devolved to it with the agreement of the national and local authorities.

The way the FAC finances itself following the initial money capital and land grants—will depend on its duties. Structuring microeconomic incentives involves creating an open environment; keeping taxation at rates similar to those of competitors; keeping administrative barriers to investment and entry minimal: and having a legal environment that is effective and efficient in its operation and docs not result in costs to firms and individuals of doing business in the centre higher than the costs for other competing centres. Openness, in particular, means that there is fair and open access to operate in the centre; the types of business to be conducted by the same organization is not unduly restricted; innovation is encouraged; the authorities do not impose or modify rules without consultation with financial firms of the centre; and there is freedom and flexibility allowed firms in their day-to-day operations.

The national governance environment has to do with macroeconomic policies, socio-political governance, and compliance with international standards and codes relevant for financial sector efficiency and stability. The most relevant standards and codes are listed in Table 2. As regards macroeconomic stability, the attractiveness of the centre will benefit from low
inflation, stable exchange rates, capital mobility and convertibility of the domestic currency or absence of exchange controls. With respect to socio-political governance, I argue that the
authorities of the country trying to develop an international financial centre should try to improve its ratings in surveys and indices of risk of expropriation, general governance, constraints on the executive and corruption. The authorities should design a plan to improve general governance with clear objectives and instruments make it transparent, and implement it resolutely.

The discussion on regulation, supervision and oversight cover approaches to regulation, corporate governance, the organizational structure for regulation and supervision, and the role of the central hank. 1 argue that, most fundamentally, the regulatory environment must ensure that financial firms are able to understand and to measure the risks they take from any given
exposure, to find ways to contain exposure to tolerable and profitable levels, and to protect the solvency of the organization from adverse developments, given exposure. Regarding the balance
between regulation, on the one hand, and market discipline, on the other, I conclude that the relative weights will depend greatly on the available expertise within financial firms and within
regulatory agencies, the nature of the risks faced by the financial firms in the financial centre, and the relative sophistication and efficiency of the pool of others who could monitor the
management of financial firms—such as owners, depositors, customers, and rating agencies. On corporate governance, 1 argue that in the context of a developing country and financial services firms, the duty of managers and directors should be broader than maximizing the value of the firm for shareholders. Loyalty of the organization’ officers to shareholders should not have external economies for the community for which those shareholders do not pay.

In exercising their fiduciary duties to their shareholders, financial services firms and markets should not act in ways that threaten the stability of the economy or reduce confidence in the financial system at large.

On organizational structure, I argue that, for a country like Nigeria, a unified approach would enable it to speed up its development of an international financial centre, working in the
context of the other organizational elements mentioned above, especially the 1FSDC. My argument is on grounds of efficiency—economics of scale in regulatory activity; the benefit of
encouraging financial conglomerates for which unified supervision makes sense; the fact that products across sub-sectors arc becoming more similar and hence directly competitive; that there
will be little or no risk of financial services tailing in-between the cracks; that the gains from clustering and accessing global value chains will be better appreciated and hence facilitated by a
single unified regulator; that foreign regulators also will have to deal with only one supervisory agency; and that the accountability problem is simplified. 1 argue that the risks and challenges
that will confront a unified agency have been met by countries with unified agencies, including most notably the UK. which has a global financial centre.

Even where there is unified supervision of financial services, by an agency separate from the central bank, the central bank will need up-to-date prudential information on the banks in
connection with its lender- of-last-resort function, its role in the payment system, its foreign exchange rate policy and management, and even more importantly because of its primary
responsibility, namely, the conduct of monetary policy.

The authorities and the International Financial Services Development Council (1FSDC) and the Financial Area Corporation (FAC) can directly promote the financial centre. In
particular, I mention that they can help the centre access global value chains, devise selective intervention policies towards the centre, and design special enclave privileges for the centre. The
authorities will foster global value chain arrangements for the centre firms via policies that make the centre firms attractive to other financial firms and markets abroad and by the quality of the
governance and regulatory environment. In addition, the authorities can be proactive in making known their openness to joint ventures, 100 percent foreign ownership of firms, and to allowing
foreign firms to participate in all activities in the local financial centre. Moreover, the authorities and the FSDC can assist the centre’s firms in making contacts with firms and markets abroad.

Selective intervention policies to promote the centre can include assisting the centre with market research, and information on new products and other knowledge inputs; making available critical infrastructure and public services at lower costs, than otherwise; by assisting with finance; and by making a special effort to patronize the centre via demand for it services.

I argue, finally, that it may be rational for a proposed international financial centre in an African country, like Nigeria, to be granted special enclave privileges, mainly because of the difficulties of building credibility with respect to microeconomic incentives and socio-political governance.

I that case, special policies, practices, and procedures can he designed for the financial centre, particularly in the areas of taxation, administrative barriers, and the legal environment.