Some offshore centres have already taken measures to enhance home country supervision.

recognises that off-shore centres and tax havens facilitate an annual illicit capital flight of USD 1 trillion

We also welcomed the work on the potential threats posed to the international financial system by those offshore centers that do not adequately meet international standards.

A first step could be establishing a closed list of “benign” uses of SPEs and OFCs.

We note that the FSF's publication of the OFC Report and grouping has successfully induced many OFCs to initiate positive action.

Measures to induce off-shore centres to comply with internationally agreed standards and codes in the area of transparency and supervision.

In its report, the FSF recommended that the IMF put in place a process for assessing adherence to standards in OFCs.

OFCs accounted for more than one-fifth of all Canadian direct investment abroad in 2003, double the proportion of 13 years earlier.

To date, international efforts on these issues have focused mostly on OFCs, but SPEs are a far larger phenomenon.

Therefore, as we continue to strengthen our own regulatory standards, it will be important for OFCs to strengthen their supervisory systems and standards.

We note however that many OFCs, while committed to concrete action, do not possess sufficient resources to carry out the needed improvements.

FDI inflows were up also in the other major developing regions, Africa (up 4 per cent) and Latin America and the Caribbean (up 6 per cent, excluding offshore financial centres).

According to Statistics Canada, Canadian assets in OFCs, offshore financial centres, increased eightfold, from $11 billion to $88 billion between 1990 and 2003.

We welcome the decision by several OFCs to work closely with the Fund and observe that the initiative has already led them to review their practices.

We note the importance of work underway in the Financial Stability Forum and look forward to recommendations in the areas of highly-leveraged financial institutions, capital flows and offshore financial centers in the spring.