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.