Welcoming Remarks: Robert G. Lees PBEC Secretary General

Introductory Remarks: Where Are We Today? Current Status of the Crisis Dr. Helmut Sohmen PBEC Chairman

Lees: Good morning, everyone. We're somewhat a victim this morning, I think, of Los Angeles's infamous traffic. Someone mentioned to me that coming in from the airport, even the taxi drivers were especially complaining this morning; so I guess that it's pretty rough because they know the turf. But we have a real important day ahead of us today.

Just to give you a little bit of background on what we have been doing this weekend, the Pacific Basin Economic Council meets twice a year, and one of the meetings is an annual gathering that is quite a sight to behold. It is typically, historically, rotated to different economies around the Pacific Rim. Usually we bring together anywhere from 700 to 1000 senior business executives with government and the media and think-tank people to discuss the issues of importance. Then we do a smaller mid-term meeting which is at this time of year, and we held it here in Los Angeles over the last several days. It was quite a successful meeting, and our chairman will be talking about one of the results of that meeting. But for those of you that do not know us, PBEC is the Asia Pacific's oldest regional business organization with now thirty-one years of experience. Before there was an APEC and other organizations, there was PBEC. We have been fighting the good fight over the years to make a business-friendly environment and to bring the people of the Pacific Rim together. In addition to these meetings, on occasion we do a smaller meeting, and that's what we are doing today. That's where we bring smaller groups of people together to talk about an issue that is probably the highest on our agenda. If it's on PBEC's agenda, it is obviously put on that agenda by senior business people who are very, very concerned about the events that are occurring around us.

For this meeting, we had some good support from local organizations such as the Foreign Trade Association, the Asia Society, USC's IBEAR Program, the Hong Kong Association, Japan-America Society, and the World Trade Centers Group, and I want to thank them. We also had support from World Wide Shipping Group, Hughes Electronics Corporation, and the Pacific Century Bank Group. What we hope to do today is to have experts in the field, which in some cases are academic and in some cases have the bottom line responsibility, talk about an issue that is most pressing to all of us and that is the Asian Financial Crisis, which, of course, is no longer the exclusive domain of Asia because it clearly has spread beyond Asia's borders. As Secretary General of the Pacific Basin Economic Council, I travel a lot and meet with our member committees. Even though I talk quite often to very senior government leaders and needless to say the region's top business leaders, I also sometimes take a sidestep and talk to people such as, in the case of Indonesia, the head of UNICEF, the children's fund. I learned that just before the Asian Crisis hit, the United Nations had done a fairly extensive and quite scientifically focused and accurate study on hunger among the children in Indonesia. They determined that just before the crisis hit that about 8% of the total children in Indonesia were actually very hungry. Because the study was so good and was performed so well and again was done the correct way and they felt so good with the results, they decided that 15 months later they would do the same study just to see what the impact of the crisis on the children of Indonesia has been. The Director of UNICEF in Indonesia reported that that figure had gone from 8% of the children being hungry to over 30% of the children. They reckoned that by the end of the year that number could be as high as 40%; so it is very, very serious.

In the trip to Korea, I noticed in a line of day-workers lined up to cut trees and dig ditches, that quite a few individuals standing in line were wearing business suits and carrying a briefcase. I was told and others observed as well that in the briefcase was a worksuit in order to do this manual labor. These were actually laid-off young bankers and finance people and others who didn't have the heart to tell their wives that they had been laid off from their company jobs. So they were going off as if they were still working for the corporation. It's a real tragedy that we have on our hands and one that certainly we are not going to solve today. But if we can do our little part, we're going to do our best.

I personally have seen in travelling the region that a lot of good things are being done in places like Thailand, Korea, Indonesia, Malaysia, and others, but they tend to go somewhat unreported. So we're hoping today to hear what's happening in the region, not dwelling so much on the why's maybe--we've read enough about that--but focussing on what the current activities are and where this will more than likely lead us in the future. We are hoping to get back on track to the Pacific Century. We seem to have gotten somewhat derailed.

So in starting off the program this morning, it is my pleasure to introduce the Chairman of the Pacific Basin Economic Council, Dr. Helmut Sohmen. Dr. Sohmen is chairman of a good company in Hong Kong that's well known called World Wide Shipping Group, which has over the last year or so acquired one of Sweden's largest shipping companies. He is quite involved in the Hong Kong community in many, many, many ways and has been the recipient of many awards for the humanitarian work that he has done. His own homeland of Austria recently honored him with the Schumpeter Award which is an award that is given sporadically to individuals that have really brought fame back to the homeland of Austria. So let me begin by introducing the Chairman of the Pacific Basin Economic Council, Dr. Helmut Sohmen.

Sohmen: Good morning, ladies and gentlemen. Thanks, Bob, for your introduction. Let me add my welcome to yours to all the participants here today. You might say, "Crisis, what crisis?" I would have thought the room would overflow, but I guess it's only the people who really care who are here today. Anyway, I hope you will have a very good discussion. The title of the seminar is that we want to focus on solutions. We are looking forward to the presentations and hopefully to active debate, and perhaps we can take a few additional thoughts back to Honolulu to our headquarters for dissemination to the wider membership that includes solutions that can be applied.

While asking forgiveness from my colleagues who were at our steering committee meeting yesterday, I thought I would repeat what we decided we would put out by way of an official statement by the Pacific Basin Economic Council on the crisis to those of you who are not members but are participating as panelists. We called it Economic Crisis: A PBEC Call to Action. We start off by saying that we continue to have long-term confidence in the ability of the economies affected by the current economic crisis to make the necessary political, economic, and social adjustments that are necessary to overcome the crisis. In other words, PBEC looks at the situation like everybody else. We accept the reality of crisis, but we don't want to say the glass is half-empty. We say the glass is half-full, and certainly there is an opportunity for maintaining the chance of Southeast Asia in particular and East Asia in particular to re-emerge from this crisis. We also want to stress in our statement that our individual members continue to invest in and do business with the affected economies and that we believe that the long-term investment programs that were put into place before the crisis hit will, in some modified form, continue to be put in action.

We are concerned that the crisis, which started as a currency crisis in July 1997, is now spreading to other parts of the world and could endanger the commercial and financial prospects of many of the enterprises of the public at large. There are signs of a downturn in the U.S. economy. We've received some advice and forecasts on that. As you know, predictions for growth in the world's GDP during the next two years have been reduced significantly, and deflationary tendencies and fundamental problems in the financial sector give rise to serious strains in the global economy. We think that what has originally started as a currency crisis has now turned into a global credit crisis and into a confidence crisis. We are concerned with the social impact that the crisis has had in a number of the economies. Of course, the difficulties have played the results out differently in the individual economies. We applaud, we say, individual governments who have already taken firm action to address the reasons for the problems and who are making determined efforts to devise solutions.

Against that background, we are issuing the following call for action. First, we call for strong and courageous political leadership in the Pacific Rim countries, which of course includes Japan and the United States, but also in Europe. We say that such leadership would support economic reforms and other actions essential to regenerating market growth and confidence. We call for the creation of effective social safety nets where needed. We call for the speedy structural adjustment to overcome institutional weaknesses and systemic shortcomings in the various national contexts. Such steps, we say, include further privatization of state-owned enterprises, progress at deregulation and the privatization of government functions, effective anti-corruption policies and practices, the opening of previously closed sectors of national economies to foreign participation, the recapitalization of financial institutions, and better accounting standards and better corporate governance to increase transparency of financial and commercial institutions. We are calling for adequate bankruptcy legislation where that is still missing, and fair judicial and administrative proceedings. We also call for strong determination to resist protectionist sentiments and policies. We say governments must ensure that liberal trade regimes are maintained, that markets are kept open, that administrative barriers to trade are reduced further, that exchange controls should be avoided, and that the rules of the international multilateral trading system should be enhanced.

We will watch carefully the progress that might be made by APEC and by the achievement of APEC by its own stated goals. We continue to support the World Trade Organization in its effort to broaden and deepen the multilateral trading system and widen its membership. We also call for the strengthening of early warning systems in order to recognize incipient national difficulties, better and more standardized data collection, and prompt dissemination of the findings as well as improved surveillance of government actions and necessary publicity. We call for the strengthening of domestic capital market infrastructures, the introduction of urgent measures to allow borrowings by governments, especially in East Asia, and the development of domestic demand-led growth. We also call for greater international cooperation in monitoring the magnitude and impact of volatile, short-term capital flows and developing appropriate regulatory responses, as needed. Finally, we call for enhanced effectiveness of the policies and programs of the IMF and other multilateral institutions to respond flexibly to the individual needs of affected economies. We also say we need a better definition of the IMF's role and authority to reduce particularly the moral hazard problem.

So this is a sort of framework statement that will be published as results of our discussions in the last two days. We would like to await the outcome of this forum to see whether we are on the right track or whether we should add particular specifics that might come out as recommendations from this panel. I very much look forward to the contributions that every one of you will make and I wish you a very productive meeting. Thank you very much.