Background: APEC and Asian Contagion
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ELIZABETH FARNSWORTH: Against a spectacular backdrop of water, mountains, and the Vancouver skyline 18 leaders have gathered here for the annual Asia Pacific Economic Cooperation Summit, APEC. While the long-planned meetings are aimed at frittering free trade, this year the economic crisis that continues to spread through Asia is dominating the agenda. At a weekend press conference with Canadian Prime Minister Chretien, President Clinton emphasized repeatedly the need for policies to restore confidence and stem the currency speculation and exodus of dollars that began last summer in Thailand, Indonesia, and Malaysia, and have now spread to Korea, and are even threatening Japan.
PRESIDENT CLINTON: We know how much these huge flows of capital–they’re very massive around the world, and they move based on a perception of what is going to happen in the future. We’re confident of the essence–confidence requires good practices within the countries, strong IMF, and the backup of the other countries.
ELIZABETH FARNSWORTH: And questions about the economic crisis also dominated a foreign and trade minister’s press conference called to announce specific new trade targets.
MAT MILLER: Mat Miller from the Far Eastern Economic Review. For the Korean delegation–
ELIZABETH FARNSWORTH: A reporter asked the Koreans how they explained to their APEC counterpart the decision last week to go to the International Monetary Fund for a multi-billion dollar bail-out loan after previously vowing they’d never accept what they considered a humiliation.
CHUNG HA YOO, Foreign Minister, South Korea: I’d like to emphasize that current–instability has been triggered by the cases of some insolvencies of large companies. I have emphasized within the APEC meeting that there is essential health of the Korean economy. We have very good economic fundamentals, and every indication is that Korea–Korean economy is good now. We have been taken, more or less, by surprise by the speculative winds, and we believe that this is because of some contagion effect. It’s very much psychological.
ELIZABETH FARNSWORTH: The APEC discussions are taking place far from the daily suffering the crisis has caused. But for the thousands of official activists and journalists who have come here from Asia, because it’s a summit, the crisis amounts to much more than a meeting agenda item.
ELIZABETH FARNSWORTH: How has the crisis in Thailand affected you as the editor of The Nation?
KAVI CHONGKITTAVORN, The Nation: (Bangkok) Well, first thing, I would not be able to come here without invitation from another firm.
ELIZABETH FARNSWORTH: Because you couldn’t have afforded the ticket?
KAVI CHONGKITTAVORN: Yes, definitely. And secondly, my salary was cut 20 percent flat and thirdly, I was staff–had to lay off 30 percent.
ELIZABETH FARNSWORTH: 30 percent of your staff you had to lay off. Is that true in newspapers all over the country?
KAVI CHONGKITTAVORN: Yes. Altogether, about 1800 at the moment. It could reach 2,000 by the end of the year. And you’re talking about half of the 5000 registered journalists in Thailand.
ELIZABETH FARNSWORTH: Filipino economist Waldon Bello directs a think tank at Bangkok, where he watched the Thai currency, the baht, lose 40 percent of its value as the crisis unfolded.
WALDON BELLO, Economist: Suddenly, because of the closing down of the theater–thousands and thousands of middle class workers are out of work. We are talking about basically before July 2nd of this year, which was the day the batt got devalued. You know, almost everybody, you know, was still celebrating the Asian miracle. After July 2nd, you know, we had the massive crisis that has now reversed the thing into Asia becoming the drag on the world economy, and the only time that I think to compare this with was the surprise with which hit people, after the, know, after the fall of the Berlin Wall. You know, the way that socialism unraveled so fast within those few months, this is the sort of parallel that I can point out with respect to the Asian miracle.
ELIZABETH FARNSWORTH: Bello is in Vancouver as a part of what’s called the People’s Summit, which faults APEC for not paying enough attention to the plight of labor, women, and the poor. Irene Fernandez, who organizes domestic workers, is one of the representatives from Malaysia, where the currency, the ringat has lost about 30 percent of its value.
IRENE FERNANDEZ, Malaysian Activist: The types of things have gone up tremendously, like when I used to have a hundred ringats a week for–now I have to put out at least a hundred and forty to a hundred and sixty ringats, and that’s because of the–but my purchasing power has come down tremendously. Now, what’s happening is because of the economic crisis that we’re experiencing workers are being laid off; the factories are being closed; and these are particularly the small and medium industries, which — contracting system as part of the global phenomenon that takes place. And these factories are closing down.
WALDON BELLO, Economist: People know that, you know, a major part of this crisis has been created by no way that, you know, the most significant barrier between the domestic, financial market, and the international financial markets were removed – no restrictions on foreign exchange. We have stock markets being opened up, you know, significantly. We have foreign banks like, you know, in the case of Thailand and the Philippines coming in to participate in domestic activities and basically you cleared the way for this very easy entry and exit of foreign capital.
ELIZABETH FARNSWORTH: Inside APEC Malaysia’s prime minister, Mahathir bin Mohamad, expresses similar views.
MAHATHIR BIN MOHAMAD, Prime Minister, Malaysia: What was the cause of this sudden recession: Some say that these countries have weak fundamentals, and these weak fundamentals cause the currencies to devalue and the stock market to shrink. But could all this happen on their own? It’s noticed that some market players decided to pull out ostensibly to prevent themselves from losing their money when the economy corrects. It must be remembered that self-interest is what most markets offer, and self-interest is not far divorced from greed. Greed can overcome good sense in the market.
ELIZABETH FARNSWORTH: Mahathir is the most outspoken of those Asian leaders who want to make it harder to throw capital out of their country quickly. This kind of talk alarms U.S. business leaders, who advise APEC. Salomon Brothers CEO Robert Denham spoke to correspondent Spencer Michels.
ROBERT DENHAM, Salomon Brothers: The one sure policy that will shut down capital markets is restrictions on bringing capital out. No investor wants to invest in a lobster trapping investment if you can only get in but you can’t get out.
ELIZABETH FARNSWORTH: Denham says a global economy is what’s really under debate here and must be defended.
ROBERT DENHAM: We have to learn to live better with the consequences of globalization and manage the consequences of globalization, but the one sure path to economic disaster is to turn our back on globalization.
ELIZABETH FARNSWORTH: Yesterday, President Clinton also pointed to increased globalization and lower trade barriers as the way to get out of the current crisis.
PRESIDENT CLINTON: Maybe the best thing we’re doing to help the situation is the agreements we’ve made to push for lower tariffs and open trade in nine new areas, including environmental technology, which will help what we’re trying to do on climate change, because that will show that we understand that we’re leading the way to growth through increasing trade and investment.
ELIZABETH FARNSWORTH: Hovering over the APEC meeting is the question of Japan. With the collapse today of the country’s fourth largest brokerage firm there is more speculation than ever on whether Japan can resist the spreading contagion. Yoshihisa Komori is an editor with the Tokyo-based Sankei Shimbum newspaper.
YOSHIHISA KOMORI: Fortunately for Japan this is the real epoch-making, symbolic kind of event that demonstrates the inefficient nature aspect of Japan, Incorporated, which is bound to change. It’s bound to have worldwide resistance and repercussion. The fact that the–one of the major, major securities firms went bankrupt signifies the drastic departure, if not the total end of–of the national longstanding Japanese poll not allowing any major member in the financial industry go bankrupt.
ELIZABETH FARNSWORTH: Inoue Reiko, head of Tokyo’s Pacific Asia Resource Center, says many Japanese are worried.
INOUE RIEKO: Already, the concessions have begun by law, but people try to save as far as possible because they are scared of their future. Three or four years ago we could see very fashionable young people but recently the people keep their old clothes, not buying the new fashions, and not running after the new fashions. Even the scene of the town is very visible, a big change. We can find even the homeless people in the streets.
ELIZABETH FARNSWORTH: And so in Vancouver with the ground shifting under their feet, the APEC leaders will meet tomorrow and hope to impart confidence that might rescue the faltering Asian economy.