The APEC summit will today begin discussions on tackling the financial crises affecting the south-east Asian economies and now threatening South Korea and Japan.
South Korea, the 11th-largest world economy, has had to seek an International Monetary Fund rescue package and Yamaichi, Japan's fourth-biggest stock brokerage, was last night on the verge of insolvency.
The foreign and trade ministers of the 18 members agreed here over the weekend on a trade liberalisation package to abolish tariffs in nine sectors beginning in 1999. They hoped by this decision to send a strong signal that the financial crises in Asia will not lead to increased protectionism.
President Clinton, who arrived late on Saturday night, has declared the "strengthening and stabilising of Asia's financial markets" as "one of our top priorities". But the US has rejected a proposal by Japan for a new regional fund to aid APEC members overcome financial crises, insisting that countries must take more responsibility for keeping their financial situation in order.
The US has proposed, however, that the IMF sets up "a new window" for short-term financing in emergencies. The APEC leaders are hoping to agree on a framework for avoiding future crises based on stricter regulation of financial markets and additional IMF facilities when needed.
Following a meeting over breakfast yesterday, President Clinton and the Canadian Prime Minister, Mr Jean Chretien, emerged to give a reassuring message that measures will be available to surmount the financial crises affecting Asian economies. These would include a special IMF facility to be discussed among the 18 leaders today and tomorrow.
The famed South Korean economy became the latest victim of financial turmoil in the region on the eve of the APEC summit when it became unable to meet its short-term foreign debt repayments and had to appeal to the IMF for at least $20 billion in standby loans. In an effort to avoid recourse to the IMF, South Korea had appealed in vain to Japan and the US for direct aid.
There are fears, however, that the eventual aid package for Seoul could exceed $50 billion, making it the biggest financial bail-out since the Mexican peso was rescued in 1995.
The South Korean Foreign Minister, Mr Yoo Chong Ha, tried to play down such fears, insisting that since the IMF intervention, the currency had "stabilised". Seoul had been taken by surprise by the crisis, he admitted, but the economic fundamentals were sound.
Before his departure for Vancouver, delayed by the crisis, President Kim Young Sam warned that the austerity measures could cause "bone-carving pain".
The APEC ministerial statement setting out the trade liberalisation package, which was meant to be the main agenda of the summit, was overshadowed by the financial turmoil in the main Asian economies. The ministers "agreed that the recent financial turbulence in the region reinforced the importance for APEC economies to lay the foundation to realise their longer-term growth potential which remains exceptionally strong."
They recommended that the annual meeting of APEC finance ministers be brought forward from next May in view of the "prevailing currency volatility".
The ministers were unable to agree on enlarging the membership of APEC, which stands for Asia Pacific Economic Co-operation, and have left this issue to the heads of state and government.
Russia is pressing its claim for membership but a Japanese official said there was resistance to this from several other countries. Peru and Vietnam are favoured to gain entry at the next enlargement in perhaps 1999.
