APEC Economies Report Beyond Asian Crisis
Progress Report "APEC Economies beyond the Asian Crisis"
APEC Economic Committee
Where Do We Stand
in Understanding the Crisis?
* The controversy revolves around two opposing views.
"The panic camp" holds that the crisis was a self-fulfilling panic caused by inherent instability of international financial markets. "The home-grown camp" holds that the crisis was home-grown in the sense that crisis-affected economies had their own problems. There are views in between.
* Broad common understanding has emerged.
Financial instability, particularly, volatility of short-term capital flows played an important role. At the same time, there were vulnerabilities in such areas as the financial sector and exchange rate policy.
New Way of Looking at the Crisis
* A new angle is to look into structural weaknesses the crisis has highlighted. Its motivation is to maximize long-term growth potential.
The focuses of existing studies are on the causes, and ways of crisis resolution and prevention. This new angle is forward-looking and growth-oriented.
* Long-term growth hinges on how structural weaknesses are addressed.
Although it remains an open question how much structural weaknesses contributed to instigating the crisis, there is no denying that structural weaknesses inhibit future growth.
* Important to identify what structural weaknesses the crisis has shed light on, and to address them head on.
All APEC economies in Asia and beyond confront, albeit to varied extents, similar structural problems the crisis has highlighted for Asian crisis-hit economies.
* The crisis has highlighted major weaknesses in four broad areas:
* the financial sector (such as ineffectual prudential regulations)
* the corporate sector (such as weak corporate governance)
* economic policy making (such as sequencing of liberalization)
* social safety provision (such as securing minimal living standards in times of crises)
* A well-developed SME sector was helpful in weathering the crisis.
Growth Prospects of
* Growth of developing APEC economies is likely to slowdown over the next decade and beyond, according to preliminary results.
That is because these economies shift to higher developmental stages and population grows less rapidly. Upgrading of human resources will have positive effects on growth, however.
* Rich growth potential of the APEC region is underscored, despite some slowdown in growth.
Future development of trade and investment in the APEC region will be examined in the next step.
* Addressing structural weaknesses will make a difference in realizing renewed growth over the longer term.
Reorienting APEC’s Strategy for Cooperation
* The primary focus of APEC response to the crisis should be longer-term issues of attaining robust growth.
APEC does not have a strong comparative advantage over international financial institutions in addressing acute issues of crisis resolution, or fighting a raging fire.
* APEC has a unique potential to assist member economies to redress structural weaknesses, because of diversity.
* APEC should consider that "consolidating the basis for growth in the 21st century" be a priority unifying theme for APEC cooperation for the next few year.
Under the new unifying theme, ECOTECH can be focused on activities directly bearing on strengthening markets and social framework. TILF and ECOTECH can be also promoted in an integral manner.