The IMF, Nationalism and The Timor Currency Crisis
From today APEC leaders will be focusing on the free trade agenda and "stengthening markets" but there is a more serious problem developing with which they will now have to contend.
Escalating violence in East Timor, deep concerns the IMF will stop $ 5.9 billion of promised funds to Indonesia, and fears of boycotts of Asian exports has sent stock and currency markets tumbling across Asia.
Because of this Indonesia is again raising the anti-foreigner banner and the "national unity" card. Afterall, Indonesian's well-know they are the world's fourth most populous nation, they straddle vital sea lanes and are regarded as an anti-communist bulwark in Asia. Put simply, Indonesia is too important to the West to be overruled.
The decision by the US to cease all military ties with Indonesia is, therefore, purely symbolic. Moreover, if outside powers choose to intervene in East Timor without an invitation from Jakarta, they risk not only the lives of their own people but also losing vital relationships with Jakarta.
But Indonesia's stock market has now tumbled 4.5 per cent as investors sold out across the board on mounting worries over East Timor and the free-falling rupiah.
The Thai baht and stock market both fell 1.2 per cent, the Philippines peso lost 1 per cent and the Singapore dollar eased 0.2 per cent.
China is again talking of a 10-20 per cent devaluation by the end of the year meaning cheaper exports and more investment. China has mountains of manufactured goods sitting in warehouses waiting to be sold.
Of course, that is the problem. It's not much use having free trade with no tariff's and no barriers if nobody is buying the goods.
If APEC leaders are sensible all of this will place an entirely different imperative on the APEC talks.
What has also fueled concern in the financial markets was the World Bank's statement that it was "deeply concerned" by the East Timor violence. The market interpreted that remark as a veiled threat that promised money may be withdrawn.
The IMF says the world's financial markets were still "fragile" with potential risks including lingering jitters from the earlier Asian crisis, market volatility and capital flows to the emerging markets well below the rates of boom years.
The East Timor crisis also highlights the impotence of world leaders and international body's to resolve this conflict. In any case, China would be certain to veto any operation under UN auspices.
So what can world leaders do? Most importantly, they must pull the rottweiller IMF and World Bank back from using loans, or lack of them, to manipulate economies and social programmes of Asian and other countries.
If there is one thing Asian's detest it is being told by Westerner's what to do, how to do it and when. Particularly, when they see the Western hedge funds which were used so viciously against them, bailed out by Western central banks when those same hedge funds themselves got into deep trouble. They see that as a crooked financier's scam - good for one, but not the other.
Asian's have also seen the World Bank fail to provide aid to rebuild Serbia because it is not a member of the IMF. In any case, even if it were, the IMF is demanding that it pay back its old Soviet-era debt of over $ 1 billion to the World Bank first.
In my view the IMF earlier sabotaged the Bosnian peace settlement, by refusing to provide any significant funds for reconstruction, just like it and the World Bank had also sabotaged the 1993 Oslo peace accord between Israel and the Palestinians.
After NATO's air campaign against Serbia there was much talk of a new international order. Some said sovereignty need no longer be a bar to outside intervention if government's allowed terrible things to be done within their borders.
But the world's inability to stop the atrocities being committed in East Timor has shown the limits to such a new international order, if one exists.
There is restructuring and reform needed all right - starting with the IMF and World Bank policies. That way the world will be a better place.