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.