ASIA'S ECONOMIC WOES
November 25, 1997
At the Asian Pacific Economic Cooperation (APEC) meeting in Vancouver, the 18 member nations endorsed a financial rescue plan for Asia's troubled economies. Following a Spencer Michels report on the developments, Elizabeth Farnsworth speaks with the Deputy Prime Minister of Thailand about Asia's economic health.
A RealAudio version of this segment is available.
November 25, 1997:
A discussion with the Deputy Prime Minister of Thailand.
November 24, 1997:
The APEC shows a grim economic forecast for Asia.
November 21, 1997:
An analyst and the president of the Phillipines discuss Asia's economic state.
October 28, 1997:
The instability of Asian stocks causes worldwide fluctuations.
October 23, 1997:
The Hong Kong stock market drops 10 percent.
November 25, 1996:
APEC agrees to eliminate tariffs on computers and telecommunications equipment.
November 21, 1996
A panel of experts discuss President Clinton's Asia-Pacific Tour.
Browse the NewsHour's coverage of economy, Asia and business.
APEC, the Web site of the Asia-Pacific Economic Cooperation.
The 1997 APEC Conference.
SPENCER MICHELS: In the final day of their summit meeting leaders of 18 nations, while differing on how serious the Asian economic crisis is, continued today to search for ways to rescue their economies and keep their contagion from spreading. Preliminary reports indicate they will endorse a plan to cooperate more fully in detecting economic weakness, provide for quick emergency relief for nations in trouble, and contribute additional moneys toward that relief, beyond the billions the International Monetary Fund has already committed. Former U.S. Treasury Department Official Fred Bergsten, who now heads the Institute for International Economics, has been advising the American APEC delegation.
The IMF's advice.
FRED BERGSTEN, Institute for International Economics: The IMF gives good advice to countries to avoid crises. And they did so in the case of Thailand. The problem is that the countries don't act in time. What you need is other countries, particularly countries in the neighborhood, to lean. So APEC is setting up a machinery for peer pressure, where countries in the region will lean on others to act preventatively to hold off and avoid a crisis that will otherwise engulf the whole region, as it has this time.
SPENCER MICHELS: How important is speed in all of this?
FRED BERGSTEN: Speed is very important. It's important right now to resolve the crisis. In a sense it's a race between market nervousness and the ability of the countries to come to grips with their problems and restore confidence. Over the longer run speed is also important--getting countries to act preemptively before a crisis hits, and therefore avoid systemic risks.
SPENCER MICHELS: In the summer the rapid loss of value in the Thai currency caught the world community by surprise, but now Thailand, the Philippines, Indonesia, Hong Kong, Korea, and even Japan have been hit by currency speculation, failing banks, and falling stock prices. And the leaders here have agreed that more and quicker relief is needed. A key goal of the plan is to offer reassurance and inspire confidence, says APEC adviser Soogil Young, head of a Korean government-sponsored think tank.
SOOGIL YOUNG, Korean Economist: This is an insurance scheme. Why buy insurance, you know? You don't need that, you know, insurance, after all, in the end, but you know that you might. So you buy this, you know, this insurance policy, and you feel very, you know, safer.
SPENCER MICHELS: While working on the APEC aid package President Clinton also took advantage of bilateral meetings with several Asian leaders. For example, with Japan's prime minister, Hashimoto, the President reportedly emphasized Japan would have to boost its own growth to act as the engine of Asian recovery.
PRESIDENT CLINTON: We believe that they must and we feel certain that they will deal with these issues in an appropriate fashion. We just have to--we just want to be in a position to be supported when we can. And that's what we said in Manila, and that's what we did in Indonesia, but I think Japan can leave Asia out of this difficulty with the strength of its economy and the right moves.
An opportunity for change.
SPENCER MICHELS: In fact, U.S. officials and business leaders here say the crisis presents Asia with a valuable opportunity for change. Robert Denham is an APEC adviser and CEO of Salomon Brothers.
ROBERT DENHAM, Salomon Brothers: I think countries learn from searing economic experiences. And what's happening in some Asian countries right now is extremely searing.
SPENCER MICHELS: So maybe there's an upside to this crisis, you're saying?
ROBERT DENHAM: I think Asia will come out of this crisis wiser about economic policies, somewhat more cautious, less likely to engage in the kinds of investments that produce a real estate bubble, and maybe, most importantly, I think Asian countries will learn to attach greater importance to regulation and supervision of their financial institutions because that's been a critical element in each of the places where a crisis has erupted. Over-extended banks--they get to a point they can't make any more loans and can't cover the financing that they've incurred, themselves.ies, somewhat more cautious, less likely to engage in the kinds of investments that produce a real estate bubble, and maybe, most importantly, I think Asian countries will learn to attach greater importance to regulation and supervision of their financial institutions because that's been a critical element in each of the places where a crisis has erupted. Over-extended banks--they get to a point they can't make any more loans and can't cover the financing that they've incurred, themselves.
Trade liberalization continues.
SPENCER MICHELS: Asian businessmen here also praised the APEC leaders' perseverance in the midst of the crisis in pushing forward with their agenda of trade liberalization; that is, lower tariffs and fewer barriers to foreign investment. Timothy Ong of Brunei is an APEC adviser.
TIMOTHY ONG, Brunei Businessman: I think it is a considerable step forward that the leaders have actually identified a number of sectors for early liberalization. And in answer to the question which was raised earlier, what would be the signs that the private sector would be looking forward to, to show seriousness of intent on the part of leaders? It would be further progress towards liberalization even in the light of this financial crisis.
SPENCER MICHELS: And Korean APEC adviser Soogil Young says because of the crisis Korea can undertake difficult reforms, but there's no guarantee of success.
SOOGIL YOUNG: Nothing should be taken for granted. We should be very cautious, careful, but nonetheless, you should have the hope. That's the reason why I am trying to be optimistic, but, you know, if you are overly optimistic, you lose discipline, you become complacent. Economists call that moral hazard.
SPENCER MICHELS: As the leaders return to their home countries, many of them will face hard questions. Basic among them is whether they can implement domestically tough reforms showcased at a very public international forum.