As Asia sinks, can APEC swim?

By PAUL KEATING

THIS region is experiencing its most serious economic challenge since the end of World War II. The region as a whole has moved into recession. According to the World Bank, no nation in the last 50 years has experienced such precipitate economic collapse as Indonesia. The economy of the world's fourth most populous country may shrink by 20per cent this year. Thailand's GDP is likely to fall by seven per cent, South Korea's by six per cent and Hong Kong's by four per cent.

This economic crisis is already producing devastating social consequences. Tens of millions of Asians have been pushed back into poverty. Human suffering is growing daily. Every child who drops out of school, or misses out on a vaccination against a debilitating disease, will have a human lifetime's impact on the societies of the region. The crisis has also reignited ugly ethnic divisions in societies such as Indonesia's.

The Asian crisis threatens to have a global impact. Deflation is a looming problem. Japan has just posted its worst economic growth figures since World WarII. Russia and Latin America face dangerous strains. Wim Duisenberg of the European Central Bank acknowledges that the international turmoil will have a ``dampening effect'' on European growth. Too much weight is placed on the continuation of unwavering strength in the US economy as it faces what is likely to be a debilitating political crisis. As Alan Greenspan said recently, the US cannot forever be an oasis of prosperity.

The November meeting of the Asia Pacific Economic Cooperation forum should be an ideal vehicle for coordinating action to address these problems. APEC represents all the key Asia Pacific economies. The two largest economies in the world - the US and Japan - and the most populous nation, China, are members. So are the developing economies which have been most directly affected by the crisis.

But unless APEC can show it has the will and capacity to do something about Asia-Pacific economic cooperation during the worst crisis of the past half century, it might as well pack its bags, declare that a decade is enough, and let its officials move on to more productive enterprises. [APEC might loll around in the corners of Asia-Pacific consciousness for a while yet, but]

Unless it can deliver results this year it will have demonstrated only its own impotence. Its pronouncements will no longer be taken seriously. Sometimes organisations lose sight of what they are there for. They become institutionalised and formalised, and the process becomes more important than the goal.

If that happens to APEC it will be a great tragedy. It will rob the region of an institution which is probably irreplaceable in its current format, and one which is capable of facilitating political and strategic dialogue at a time when this is badly needed.

APEC's record so far has not been good. As a source of ideas and responses to the Asian crisis during the last year, APEC has been the invisible man.

[ A debate has been opened within the region on of where blame lies for the economic slump. Does it lie with speculators and outside interests who have abused the growing economic openness in the region? Does it lie with inadequate financial structures, and corruption and cronyism, in some regional economies? Does it lie in unrealistic and overly restrictive demands by multilateral organisations like the IMF? This is a good debate to have. It is impossible to look back at the scarifying developments in Asia over the past 12 months without concluding that the policy responses of governments and international institutions have been seriously flawed. If the consequence of addressing the sort of capital account problems a number of regional countries experienced is to plunge the region, and possibly the world, into recession, then either our understanding of what is happening or our prescriptions for dealing with it are seriously flawed. There must be a better way of responding to such events than by pushing millions of people back into poverty. ] APEC in Kuala Lumpur will inevitably and properly be caught up in discussing questions about economic openness and its consequences.

I believe the Kuala Lumpur meeting needs to deliver results in five areas. First, a primary aim of the meeting should be a reassertion of the idea of APEC as the embodiment of an Asia Pacific community. Economic strains in individual economies are causing countries to focus inwards again, to blame external forces for their problems.

A second outcome should be to provide practical evidence that the region is not putting up the shutters and turning inwards.

Third, APEC has to show that it offers something to the weakest economies as well as the strongest ones.

Fourth, APEC should try to coordinate a broad response to getting trade flowing again.

Fifth, APEC should help shape the broader international debate on some of the questions thrown up by the Asian crisis, including the management of capital flows.

APEC's members include those most seriously hurt by the crisis. The only way we will achieve effective changes to global institutions for the 21st century is if all those affected are included in the dialogue.

The US cannot bear the weight of leading the world alone, and in a healthy international system it should not be expected to do so. [A larger and more sustainable role has to be found for China, India and Japan.] And a more balanced relationship needs to emerge between China, Japan and the US.

This is an edited extract of Paul Keating's speech to the 1998 Pacific Rim Forum in Shanghai on Wednesday.

 

Published by The Age Online Pty Ltd ACN 069 962 885
©1998 David Syme & Co Ltd

 

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