APEC calls for rise in oil output

APEC calls for rise in oil output

BANDAR SERI BEGAWAN, Brunei (Agencies): Finance ministers from
21 Asia Pacific Economic Cooperation countries on Sunday appealed
for an oil-production increase to curb high prices which they
said posed risks for developing economies.

In a joint statement at the end of a two day meeting here in
the oil-rich sultanate of Brunei, ministers said they noted the
risks posed by oil price volatility to the world economic
recovery and for developing economies heavily dependent on oil
market conditions.

Oil prices need to be stabilized at sustainable levels, the
ministers said.

"In the light of rising world demand, we call for appropriate
increases in supplies and other necessary measures to promote
long term price stability in the mutual interests of consumers
and producers," the ministers said.

The Organization of Petroleum Exporting Countries (OPEC) met
on Sunday in Vienna to decide how much to lift production in an
attempt to bring down oil prices which hit a 10-year high of
around 35 dollars a barrel this week. OPEC is expected to lift
production by at least 500,000 barrels a day.

"What APEC is looking for is greater long-term stability in
oil prices," said New Zealand Finance Minister Michael Cullen.

"The level of increase in oil prices was seen as a major risk
to the robust growth. But the member economies were not asking
for, or supporting in any shape or form, oil prices dropping as
low as they were, say a couple of years ago, when they dipped as
low as $10 a barrel," Cullen added.

Shigemitsu Sugisaki, deputy managing director of the
International Monetary Fund, said that the main risk to the
fund's bullish outlook this year is that the oil price may feed
into world inflation and reduce growth.

He estimated that another $5-a-barrel rise would cut the rosy
4.75 percent outlook for world growth this year by as much as
one-half percentage point, and it would hit many Asian nations
even harder.

Meanwhile, aside from the positive short-term view of the
economic backdrop, finance ministers acknowledged that the
"challenge of maximizing the benefits and minimizing the
risks...has become more sharply etched."

"Policy fundamentals are what is important," U.S. Treasury
Secretary Lawrence Summers told reporters Sunday, suggesting
other APEC members could follow the example of the U.S.

As a result, the heft of the finance ministers' final
statement reflected a number of shortcomings to the financial
systems, some stemming from the 1997-1998 crisis and others pre-
existing.

The shortcomings continue to leave the group's developing
economies vulnerable to external factors, including oil and a
correction in U.S. stocks, according to ministers.

In terms of restructuring, the APEC finance ministers expanded
their agenda somewhat this year, agreeing to form a working group
on fighting financial crime, and they expounded on a recognition
that "information technology has the potential to increase
economic growth."

But the backbone of the statement was a progress report on
issues that appear perennially, including the need to develop
bond markets and the improvement of social safety nets.

"Our long-term objective remains to build stronger foundations
for sustainable growth in the region by further developing
financial and capital markets," the APEC statement said.

Critics want to see the APEC countries move more quickly on
specific reforms rather than set plans for further study, as they
did this year.

Although such bond-market initiatives have been played up for
years in APEC, Asian bond markets are "totally underdeveloped or
quasi nonexistent," said a Brunei banker attending the meeting.

"This is the difference between the trade part of APEC and the
finance part of APEC. They have agreed on principles but there
has been no real roadmap," said Jesus Esanislao, a business group
representative to APEC.

Although there remains some doubt about APEC trade
commitments, the group said it still plans to drop trade and
investment barriers among its member economies by 2010, or if
economies are considered developing ones, then by 2020.

Thailand's Finance Minister Tarrin Nimmanahaeminda defended
the pace of reform being promoted in APEC. "I think it is a
significant thing that now we begin to talk less about the crisis
and more about recovery and sustainable development," he said.

The APEC grouping comprises 21 member economies: Australia,
Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan,
Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the
Philippines, Russia, Singapore, South Korea, Taiwan, Thailand,
the U.S. and Vietnam.

The finance minister statement will form part of the platform
for the eighth APEC summit, scheduled for Nov. 15-16 in Bandar
Seri Begawan.