Key Asian rescue draft to be presented at APEC
Key Asian rescue draft to be presented at APEC
SYDNEY (AFP): A strategy to coordinate Asian economic revival involving simultaneous interest rate cuts and budget expansion drawing partly on Japan's new credit line will be put to next month's APEC forum in Malaysia.
The report by the Panel of Independent Experts from Asia- Pacific Economic Cooperation forum nations says the centerpiece of any revival should be "sizable fiscal and monetary stimulus in virtually every country in the region."
"The APEC leaders should agree to stimulate domestic demand in their economies, through new fiscal and monetary initiatives, by two percent of each country's gross domestic product," the report says.
"Growth in the crisis countries in 1999 would be boosted by four percent as a result," it says.
National daily The Australian said in a front page report Wednesday that the recommendations had been sent to summit host Malaysian Prime Minister Mahathir Mohamad with the aim of winning endorsement from APEC, which for the first time includes Russia, undergoing its own financial problems.
The Concerted Asian Recovery Program (CARP) says it will be "a dramatic centerpiece for APEC's summit in November."
The influential Group of 22 has already acknowledged the need to reform the international financial system and devised a broad plan of action, including better bank supervision and more financial transparency, at its recent meeting in Washington.
CARP says fiscal stimulus could be financed through domestic borrowing in a number of countries.
"It can be financed partly from abroad in others through Japan's new credit line of US$30 billion and, if necessary, activation of the 'second lines of defense,' which the major foreign lenders have pledged to the IMF program countries," it says.
Chaired by U.S. trade specialist Fred Bergsten, the panel goes on to say that monetary expansion is the second part of the equation.
Currencies had stabilized and inflation was largely under control, but some countries had been hesitant in shifting their policy stances aggressively for fear of triggering "invidious comparisons vis-a-vis their neighbors and again undermining market confidence".
A concerted region-wide adoption of the new strategy would effectively counter such concerns.
"If all countries reduced their interest rates together, there would be no risk of destabilizing flows from one to another," CARP says.
The United States could contribute by cutting its own rates still further.
Other initiatives suggested by CARP were a corporate governance code, an early warning system for crisis, and full implementation of earlier trade liberalization pledges.
Australian Prime Minister John Howard, who made an election pledge to play a stronger leadership role in Asia, has made clear APEC needs to accelerate trade and economic reforms and endorse a new growth strategy.
Trade Minister Tim Fischer said he had not yet seen the CARP report, but Australia would "push forward a raft of very important economic matters on the regional front" at the APEC meeting.
"We have commenced a good deal of work behind the scenes to help produce more economic transparency, better prudential regulation to assist countries down that pathway, and to help build a parameter and strategy for economic recovery across Asia," he said.
Treasury secretary Ted Evans is set to leave on a regional trip as a special envoy prior to the November 12 start of the forum to push Canberra's agenda.
APEC groups Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, Malaysia, Mexico, New Zealand, the Philippines, Papua New Guinea, Singapore, South Korea, Taiwan, Thailand and the United States. Russia, Vietnam and Peru join the meeting for the first time.