APEC vow to push reforms

Business Asia, May 31, 1999 by Reme Ahmad

Pacific-rim nations have taken solace in Asia's partial recovery from two years of financial crisis but warn that major risks loom and deeper reforms are needed.

Ministers from the 21-member Asia-Pacific Economic Cooperation (APEC) forum meeting on a tropical Malaysian island recently pledged not to abandon financial and corporate reforms despite the anticipated return of economic health.

They also called for urgent action to control the threat of volatile capital flows, blamed by host Malaysia for triggering Asia's financial crisis, which erupted in mid-1997.

"While we recognise that efforts to reform the international financial architecture will take time, we see the need for the momentum to be maintained notwithstanding the recent return of stability to financial markets," they said.

The ministers ordered their deputies to present a report on progress in reforming the global financial system at the APEC leaders' summit in Auckland, New Zealand, in September.

However, in a sign of a continuing rift, they failed to agree on whether speculators should be reined in.

The joint statement issued at the end of the two-day APEC meeting balanced the views of the developing economies, keen to see steps to prevent a recurrence of the crisis, and those of the industrialised members which want deeper reforms in Asia.

What the compromise lacked in concrete measures may have been made up for by a spirit of congeniality.

"While there are nuances and differences of view, I do sense some increased convergence," US treasury secretary-designate Mr Lawrence Summers said.

Mr Summers, nominated to replace Mr Robert Rubin when he steps down in July, took advantage of the chance to quash any speculation he would diverge from Mr Rubin's strong-dollar policy.

The joint statement underscored progress since the ministers met last year in the crisis-hit economies of Indonesia, South Korea, Malaysia, the Philippines and Thailand.

The state of play

Following are highlights of the APEC finance ministers' statement at the end of their two-day meeting in Malaysia.

* Since last year's meeting in Canada, the region's financial crisis has abated and there are signs of a return in investor confidence. But significant challenges remain.

* Japan's fiscal policy is providing sizeable stimulus, and its policies must be supportive until deflationary pressures ease and a revival of private demand is firmly under way.

* China's growth has been well maintained. Reforms to state-owned enterprises were welcomed.

* It was recommended that efforts to strengthen the international financial architecture be implemented urgently.