APEC ministers warn of significant risks

APEC ministers warn of significant risks

LANGKAWI, Malaysia (AFP): APEC finance ministers warned of "significant risks" for the region despite signs of returning investor confidence and an improved economic outlook as they ended talks here Sunday.

In a joint statement, the ministers also warned of "serious challenges" especially in financial and corporate restructuring and dealing with poverty in crisis-hit economies, notably Indonesia, South Korea, Malaysia, the Philippines and Thailand.

"The financial crisis in the region has abated and there are signs of a return in investor confidence" since they met in Canada last year, the statement said, concluding two days of talks.

"As a result, the economic outlook in the region has improved. There are however, significant risks to the outlook.

"Serious challenges remain, particularly in restructuring the financial and corporate sectors and in dealing with the effects of the crisis on the poor and vulnerable," it added.

APEC ministers urged the International Monetary Fund (IMF) to "consider further the issue of appropriate exchange rate arrangements" taking into account the "recent experiences" of members with collapsing currencies.

"Any regime adopted must be supported by consistent policies and robust financial systems," the statement said.

The highlight of the meeting was an announcement by Japanese Finance Minister Kiichi Miyazawa of a two trillion yen (US$17 billion) credit guarantee scheme for crisis-hit countries seeking funds to restructure companies and develop resources.

Miyazawa said the "partial" guarantee scheme, due to start in October and last about two years, would "accelerate the return of private money" to Asian economies battered by financial turmoil which erupted in mid-1997.

At the same time, he said the scheme should help develop Asian bond markets which "need to be enhanced" in the areas of transparency and disclosure while developing the infrastructure of regional debt markets.

"We recognize the need for further work in this area including developing reliable benchmark yield curves," the statement said.

The joint statement also called for investment in social projects such as health and education to ease the impact of the financial crisis on the poor.

"We remain concerned about unemployment and hardship among the poor and the vulnerable as a result of the crisis," it said. "In some economies, social strains have posed a risk to recovery."

In addition, APEC ministers urged the IMF to devise "guiding principles" for economies that wanted to liberalize and open their capital accounts.

IMF managing director Michel Camdessus, who also took part in the meeting, said there was an "extremely open discussion" on efforts to develop a new international financial architecture "and the problem of associating the private sector to avoidance of crises and resolution of them."

Camdessus said he was "quite impressed" by support for IMF work including experience with exchange controls and "finding the proper guidance for helping countries to go towards a free regime of capital movements and, if controls are needed, the best way of doing that without harming their economies."

Speaking at a joint news conference at the end of meeting, U.S Deputy Treasury Secretary Lawrence Summers said the United States was able to draw "some satisfaction" from the talks with other ministers.

APEC, accounting for about 60 percent of the world economy, groups Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore,Taiwan, Thailand, the United States and Vietnam.