Perspective on Asian crisis (2)

Perspective on Asian crisis (2)

This is the second of two articles based on a paper presented
by Deputy Prime Minister and Minister for Foreign Affairs of the
Netherlands Hans van Mierlo before the Indonesian-Netherlands
Association and the Forum Indonesia-Netherlands on Feb. 11, 1998
in Jakarta.

JAKARTA: Apart from the effects of the crisis on the global
economies, there are other consequences in Asia itself which are,
in my view, far more worrying.

I am speaking of the social consequences of the crisis. In
South Korea it is feared that approximately one million people
will become unemployed this year. In Thailand and other Asian
countries we see the same scenario. Here in Indonesia, even
millions and millions of people have lost their jobs. Those who
have a job are seeing their wages fall; inflation is reducing the
purchasing power of incomes. In Indonesia, but perhaps also
elsewhere, people started to hoard food as shortages threatened.

Due to budgetary restraints, government expenditure on medical
care and education fell, thereby making it increasingly difficult
for people to benefit from such provision. I understand that in
Thailand, the emergence of child labor could be a possible
consequence. Millions of migrant workers are at risk of losing
their jobs. As might be expected, there have already been calls
to expel these foreigners, even though they are often vital to
the economies of their host countries. The social fall-put of the
crisis is enormous and might jeopardize not only the internal
stability of the countries involved, but perhaps also regional
stability.

In some countries it is the absence, in others the inadequacy
of the social safety-net system that makes the social
consequences of the crisis so grim. The governments who have to
cope with these social repercussions are facing a formidable
political challenge.

For me, the crisis underlines the absolute necessity of
adequate safety-net systems. We in the Netherlands have built up
considerable know-how in this field, not only because of
government regulations and legislation, but also because we have
private financial institutions which are active in this field. We
would be most willing to respond to requests for further advice
through both bilateral and multilateral channels where necessary.

You may have noticed that so far I have not mentioned the role
of the European Union. I admit that to an outsider the European
Union has not been as visible in the assistance to tackle this
crisis, as it could have been. As the Union has no institutional
framework to furnish financial support to correct the imbalances
of payment in Asia, the European Member States have provided
their financial assistance through different channels, namely the
IMF, the G-7 and G-10. Nevertheless, the countries of the
European Union are supporting Indonesia in trying to solve the
crisis with quite a substantial stake in the IMF-facility.

Direct talks between the European Union and the Asian
countries could further intensify the exchange of thoughts on how
Europe can assists the Asian government to overcome the crisis.
Therefore, I strongly feel that we should make the financial and
economic melt-down in this region the number one topic of the
forthcoming ASEM-meeting, early April, in London.

I think it is obvious that a small country like the
Netherlands will not be capable of financing the needs such as
social safety-nets alone, nor can we provide financial support to
all those countries who are suffering from the crisis. But we can
make an effort.

First, in general, a number of steps are required to overcome
the current crisis.

* In the first place, a national effort is needed. As stated
before, we in the Netherlands have confidence in the
appropriateness of the IMF measures. We assume that the countries
concerned, taking into account the sound economic base they have,
will implement the IMF recommendations they have agreed upon.
These include pursuing macroeconomic and fiscal policies,
restructuring banking systems, introducing transparency and
improving competitiveness.

* Secondly, regional cooperation is required. We think that
ASEAN can play a pivotal role in this respect. The reaffirmation
at the last summit of the determination to maintain an open trade
and investment environment in ASEAN and to remove barriers in
this respect is a good example. Coordination of a common approach
to the present financial crisis would be another. As far as
cooperation with the EU is concerned, I already mentioned this,
the crisis should be put high on the agenda of the London ASEM-
meeting in April.

* In the third place, international cooperation is important,
not only to overcome the crisis and its social effects, but also
to reduce the risk of these kinds of crisis. In the framework of
the IMF the Netherlands will continue to stress the importance of
a study of the scope for more equitable burden-sharing among the
international financial institutions, bilateral governments and
commercial creditors in financial crises. Furthermore, we will
work towards enhanced surveillance by the IMF, emphasizing that
the IMF should pay more attention to the financial sectors and to
debt management, and that IMF surveillance reports should be made
pubic.

* Furthermore, the international (commercial) financial sector
should bear their shared responsibility. In talks I had two days
ago in Thailand with representatives of the leading Dutch banks,
I noted recognition on this point. The moratorium and the
willingness of banks to roll-over short term loans, are
significant signs of these cooperation. Although commercial banks
hardly will become philanthropical institutions, they acknowledge
the necessity of a positive and realistic approach in this
crisis.

So, what is the concrete Dutch involvement in tackling the
financial crisis?

* As you know, the total financial facility of IMF, Worldbank
and Asian Development Bank is around US$23 billion. Of the IMF-
share ($10 billion), the Netherlands government contributes more
than $300 million for Indonesia.

* Furthermore, the Netherlands in examining the possibility of
setting up, in a multilateral framework, a special Trade
Guarantee facility that could enable Indonesian companies to
continue production of goods and import first necessities.

* Finally the Netherlands government is, where necessary and
appropriate, prepared to advise in the field of social safety-
nets.

The Dutch commercial banks also play a relevant role:

* They participate in the 90-days freezing, the moratorium.

* They have accepted Roll-Over of private loans.

* Especially ABN/AMRO is very active in Indonesia, and for
example member of the Steering Committee of Lender Banks, which
is working on a solution for restructuring the private debts.

In concluding I am positive that all these efforts, both from
the Indonesian side, as well as from the international community,
will help overcome the crisis.

It may take some time, and I am very much aware that the
measures will hurt, but I am confident that they will eventually
be successful.

Window: Therefore, I strongly feel that we should make the
financial and economic melt-down in this region the number one
topic of the forthcoming ASEM-meeting, early April, in London.