APEC addresses crisis

The sixth APEC summit near Kuala Lumpur, Malaysia, though failing to reach agreement on a US$1.5 trillion deal to fast- track nine key areas of trade, its core program, is by no means a disappointment, given the twist of events preceding the gathering of the 21 developed and developing economies.

The two-day meeting that ended on Wednesday set its priority right by focusing attention on ways of addressing the Asian crisis. This was not a small success as the summit had from the outset been dogged by problems, with U.S. President Bill Clinton pulling out at the last minute due to the Iraq crisis and the U.S.-Japan spat over trade tariffs during the ministerial meeting, and by the controversy over American Vice President Al Gore's admonishment on democracy for the host, Malaysian Prime Minister Mahathir Mohamad.

With seven of its member economies, including the economic powerhouse Japan, being mired in recession this year and probably another bleak set of conditions lasting until later next year, trade liberalization understandably became not only less important but also more sensitive.

The U.S and Japan set in the first positive element by pledging together $10 billion in new aid to support Asian economic recovery, in addition to the $30 billion previously committed by Japan. The APEC leaders seemed fully aware that this gesture is rather a paltry sum given the scale of the crisis. Hence, their declaration also called for more international assistance to help generate jobs and alleviate the social impact of the economic crisis.

Addressing the problems which directly or indirectly caused the financial meltdown and eventually full-blown economic crisis, the leaders called for urgent reform of the global financial system in cooperation with the developing countries, a sound global banking system with better prudential regulations, monitoring of short-term capital flows and a review of international credit rating agencies, so far the opinion leader for currency speculators. They also recommended the establishment of a working group to study investment banks and transparency among hedge funds to ensure sustainable capital flows, an international task force along with the private sector to deal with debt problems and risk control. All these issues are beyond the capacity of the crisis-ridden economies to control.

However, a more conducive international environment and better rules of the game in the global market, though necessary, are not enough. The responsibility also falls squarely on the shoulders of governments themselves. The member economies, the leaders stated, should work harder to implement sound macro-economic policies, strengthen their financial system and to reform outdated business practices or bad corporate governance which accepts corruption and cronysm.

The declaration stopped short of calling for good governance, a concept the World Bank and International Monetary Fund have been promoting since 1997. Vice President Gore, though, ventured to speak up about it to the fury of the hosts and several other members who took the remarks as a gross violation of the non- interference principle.

However painful and embarrassing the admonishment might be to several members, Gore should instead be hailed for conveying such a blunt, yet essential message. The problem is that with the world's economy now being so intertwined, one government cannot simply claim that its political affairs are entirely its own business. We think frank dialog where one member can give an honest piece of advice to another is one of the objectives of the founding of the Asia Pacific Economic Cooperation Forum in 1989.

Studies conducted by various international agencies on the Asian economic crisis have been unanimous in their conclusions of how bad governance, exacerbated by a lack of democracy, had provided fertile soils for corruption, collusion and nepotism that were the root causes of the financial crisis. Good corporate practices are impossible without good governance which in turn can flourish only under a democratic system. What Indonesia is now experiencing in the initial step of its democratization process is a show case of how corruption, collusion and nepotism under Soeharto's authoritarian rule had crippled the economy and how citizens, who are experiencing democracy after having been deceived for more than 30 years, are also taking on the opportunity and the obligation to root out corruption and nepotism.