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.