APEC's confidence boost

APEC's confidence boost

The fifth summit of Asia Pacific Economic Cooperation (APEC)
leaders in Vancouver produced much more than most analysts
expected, given the economic backrdrop of the financial crisis
blighting its Asian members. The most outstanding feature is that
the various degrees of economic turmoil gripping Thailand,
Indonesia, Malaysia, the Philippines and South Korea, did not
divert the APEC process from its path toward trade and investment
liberalization, business facilitation and economic and technical
cooperation.

The ministerial meeting that preceded the summit agreed to
move nine new sectors, ranging from energy to telecommunications,
into the fast-track of liberalization. Negotiations continued to
make steady progress in the area of trade and investment
facilitation which is what is mostly needed by the market players
(businesspeople) in the 18 APEC economies. Business facilitation
-- rather than simply tariff reduction -- through the lowering of
costs, elimination of red tape, mutual recognition of standards,
predictable policies and customs modernization and harmonization
is indeed the most effective measure to translate APEC
cooperation into concrete benefits for the members' citizens.

All this shows that even the developing Asian members, which
are currently suffering the downside of financial liberalization,
are not swaying from their strong belief that the massive free
movement of trade and capital has and will continue to bring
great benefits to their economies through job and wealth
creation.

The annual summit had obviously been expected to devote more
attention to the Asian financial turmoil and provide the right
signal to restore market confidence. And that was precisely what
the leaders delivered, both at their summit and in various
bilateral meetings held on the sidelines. They expressed strong
confidence in the strength of the fundamentals for long-term
growth and prospects for the Asia-Pacific region.

The leaders assured the market by pledging to move quickly to
enhance the capacity of the international system to prevent and
respond to financial crises of the kind currently battering Asia.
The summit was saved from becoming bogged down in negotiations on
measures to prevent and deal with such financial crises because a
framework blueprint had been agreed by senior financial officials
at a meeting in Manila early last week. The framework, which was
endorsed by the leaders, covers technical cooperation to promote
financial stability, enhanced regional surveillance and adoption
of new IMF mechanisms on appropriate terms in support of strong
adjustment programs.

The only component of the framework which requires technical
details for implementation is the proposed regional cooperative
financing arrangement to supplement the IMF-led financial rescue
which Asian members have suggested in the form of an Asian
emergency fund. Since the financial tumult is likely to continue
to be the most pressing problem faced by Asian economies for the
next two years and in view of the devastating impact a prolonged
crisis would wreak on the world's economy, it is perhaps timely
to include finance ministers and central bankers in the coming
annual APEC summits.

It is premature to expect an immediate impact of the
collective vote of confidence from the APEC leaders, even though
they include the heads of government from three of the world's
economic powerhouses, the United States, Japan and Canada. Much
will depend on how the crisis-hit members themselves implement
what the leaders stated in their communique as sound
macroeconomic and structural policies, effective financial sector
regulations and prudent and transparent policies.

The most reassuring words, especially for the Asian members
who are facing financial distress, are the pledge by the APEC
leaders that "we are resolved to work together to address these
shared challenges." APEC, notably the U.S., Japan, Canada, should
indeed show concrete leadership in helping resolve the current
financial disarray in Asia. Japan in particular should quickly
tackle its financial sector's problems before they worsen to
plunge the whole of Asia, and eventually most of the world, into
a crisis.