PACIFIC BASIN ECONOMIC COUNCIL
MAIN PAGE | SPEECHES & EDITORIALS | 1999 | CHALLENGE FOR APEC: CLEAR A WAY OUT OF THE CRISIS

Challenge for APEC: Clear a Way Out of the Crisis Robert G. Lees International Herald Tribune Saturday, November 14, 1998 KUALA LUMPUR -- Ministers from the 21 members of the Asia-Pacific Economic Cooperation forum meet here over the weekend before their heads of government and state gather on Tuesday and Wednesday. In the midst of a financial and economic crisis that is far deeper and has spread far wider than any of the ministers anticipated when they met in Vancouver a year ago, there is an urgent need for bold initiatives. Yet several key economies in the 21-nation Asia Pacific Economic Cooperation forum are dogged by weak leadership. Bill Clinton has been largely preoccupied by a domestic scandal and must now face a confrontation with Iraq. In Japan, the world's second-largest economy, many political analysts have reservations about the government's ability to carry out reforms. Political stability and leadership are even more tenuous elsewhere in the region. Japan and some other countries have been hurt by backing away from open markets, openings that helped generate much of the growth and prosperity in Asia over the past few decades. APEC has so far failed to speak with a collective voice to chart a course out of the crisis. This lack of leadership is all the more frustrating just as we see signs of nascent recovery. In many of the region's economies, currency levels have begun to stabilize, current account balances are at record levels, financial sector restructuring and recapitalization are moving ahead, and governments are working with business to encourage investment. In some respects, more reforms have been undertaken in the past year than in the previous 20 combined. New bankruptcy laws in Indonesia and Thailand appear promising. The private sector is focusing on core competencies and profitability. Banking reform in several countries is gathering steam. In addition, the underlying economic fundamentals of the region - high savings rates, a commitment to education, a relentless work ethic - remain strong and provide a firm foundation for renewed growth. At a recent conference in Los Angeles sponsored by the Pacific Basin Economic Council, senior officials from the International Monetary Fund, the World Bank, and several leading chief executives of companies doing business in the region all pointed to these positive developments. Many felt that a ''recovery scenario'' could begin in 1999, with South Korea and Thailand experiencing positive growth by the second half of the year. A strong, positive signal from APEC would hasten this upturn. As the economic indicators continue to turn in the right direction, Asia appears to be facing less of an economic crisis, and more of a crisis of confidence. Investors and potential investors are still shell-shocked by how far and how fast the region fell. APEC's economies collectively account for 55 percent of global economic output and about the same proportion of world trade. The group must take the lead in combating the crisis of confidence. Its leaders must articulate a coherent, well-defined plan for surmounting the crisis, backed up by clear policies. They must convey a sense of mission and a sense of urgency. They must win the confidence of the business community and investors by demonstrating the necessary resolve to put their house in order. If the Kuala Lumpur meeting produces nothing more than the usual mix of bland pronouncements, the organization could begin a slow descent into irrelevancy. Business as usual is no longer an option. The writer is secretary-general of the Pacific Basin Economic Council, which has 1,100 member corporations in 20 economies around the Pacific Rim. He contributed this comment to the International Herald Tribune.