Seminar: Asian & Russian Crisis and Latin America

Thank you for the opportunity to participate in your discussions about the economic and financial crisis.

A few years ago APEC would not have been a presence in Peru or seemed relevant to such discussions. A few years ago an economic crisis in Russia or even Asia would not have been significant in Peru either.

Today the facts of globalisation and interdependence in the world economy have changed that.

The APEC grouping now including both Russia and Peru as well as all the economies of Asia, also Australia, New Zealand, the United States, Canada and Mexico recognises those facts.

APEC seeks to ensure maximum advantage from economic cooperation in this new development.

When they met in Kuala Lumpur, Leaders of the 21 APEC member economies including for the first time President Fujimori, demonstrated a special concern to ensure that the grouping makes a full and leading contribution to recovery from the serious economic and financial crisis recently afflicting so many of its members. This is very much the theme of APEC's current agenda, not only in terms of initiatives directly focussed in the financial area but also in the wider range of economic cooperation activities and capacity building projects that characterise APEC's ongoing work.

I want to say something of APEC's moves to respond to the crisis. First I should explain something of the nature of APEC.

1998 marked the 10 th high level meeting since APEC's establishment as a grouping committed to economic cooperation in pursuit of growth and rising living standards in the Asia-Pacific region. For most of the period, the region has indeed seen very rapidly rising prosperity, with APEC playing a significant supportive role in initiatives for trade and investment liberalisation, business facilitation and economic and technical cooperation to further assist that dynamic trend. These are the "three pillars" of APEC cooperation. These are the basis of APEC activities.

But in Kuala Lumpur, APEC Economic Leaders faced a very different and discouraging set of economic circumstances and outlook. The critics speculated whether APEC could make a difference to individual and collective international efforts to meet the challenges; whether a grouping of disparate economies operating on a consensus basis, as APEC does, could hold the course in the face of the downturn; whether pressures to turn inward and protect individual domestic markets and producers would be resisted.

Leaders' deliberations and directions for work in 1999 showed these concerns to be unfounded. In responding to the challenges of the economic crisis, the Kuala Lumpur Declaration firstly contains clear and firm messages to the relevant global agencies, such as the IMF and World Bank, about Leaders' expectations of their contributions. One example is Leaders' support for use by the multilateral development banks of innovative financial instruments to help catalyze and leverage private capital flows.

In this respect, APEC looks to be an "action forcing process" as one Leader put it, looking to the relevant wider institutions such as the IMF and WTO, to play their part.

Within the ambit of APEC itself, both under the auspices of the APEC Finance Ministers process and also in other APEC fora, the directions by Leaders were unequivocal about the priority to be given to work focused on economic recovery, including key elements:

In this area - HRD development

Then there are APEC programs: to promote asset-backed securitization, develop regional credit rating agencies, strengthen clearing and settlement systems, expand cooperation among export credit agencies, and promote private financing for infrastructure. Initiatives to spark new capital flows discussed in Kuala Lumpur include the US-Japan Asian Growth and Recovery program, which is focused on private sector revitalization, and Japan's $30 billion financial package. APEC is continuing work on a Voluntary Action Plan for Freer and Stable Capital Flows, an exercise that aims to balance the benefits of capital account liberalization and the need for financial stability.

Leaders in Kuala Lumpur also called for a task force to develop proposals in the areas of prudential regulation of financial institutions in industrialized economies, better risk assessment, transparency and disclosure standards for private financial institutions involved in international capital flows, highly leveraged and offshore institutions.

Leaders and Ministers have also focused on human impacts of the crisis: the needs to generate employment and to build and strengthen social safety nets to protect the poor and vulnerable. APEC can claim some credit for the sharp increase in social sector lending commitments from the World Bank and ADB. In addition, under an initiative led by Mexico and Chile, officials and private fund administrators are exchanging ideas on development and reform of pension systems.

New Zealand, which chairs APEC this year following Malaysia and hosts the Leaders' Meeting in Auckland in September, has already launched the follow-up effort by APEC economies on these and other directions by Leaders. A United States proposal for an ad hoc Task Force on the Social Framework for Growth, addressing the social impacts of the crisis, has been accepted; the Human Resources Working Group, chaired by China, is meeting in Santiago next week with a similar focus; discussions on development of domestic bond markets have already been initiated.

Senior APEC Officials meeting in December also agreed on actions in: Individual and Collective Action Plans, Early Voluntary Sectoral Liberalisation (EVSL), economic and technical cooperation, management reform, electronic commerce, recommendations from the APEC Business Advisory Council (ABAC) and the agreement by Leaders to develop a framework for the integration of women in APEC

The key focus of APEC's work in response to the economic crisis is to reinvigorate growth and investment in the region. Pushing forward on trade and investment liberalisation and business facilitation, strengthening markets and on strengthening institutional and human capacity will together contribute to a credible APEC response to the crisis.

Mr Chairman. Time does not permit me to say more. But I believe APEC offers a range of positive new opportunities for small economies like Peru or my own, New Zealand to benefit from and contribute to economic cooperation in our Asia-Pacific region.

I invite participants to visit our website - APEC is not a closed official dialogue - and learn more of these opportunities.