APEC addresses crisis

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.