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Pacific Leaders Debate Asian Crisis

May 15, 1999

LANGKAWI, Malaysia (AP) _ Finance ministers from Pacific Rim nations debated on Saturday whether to regulate volatile capital flows that some Asian countries consider the chief culprit in the currency crisis that struck the region two years ago.

Officials from 21 countries at the two-day meeting of the Asia-Pacific Economic Cooperation forum were divided over the causes of the Asian economic crisis and are unlikely to agree on how to prevent another one.

Lawrence Summers, the U.S. treasury secretary-designate, was among those expected to resist any calls for regulating world capital markets and putting curbs on hedge funds and currency traders, as the host nation, Malaysia, is demanding.

Malaysian Finance Minister Daim Zainuddin opened the meeting by declaring that APEC should help emerging economies in Asia protect themselves against global financial uncertainties.

APEC’s aim is free trade among developed member nations by 2010 and developing countries by 2020.

Although many of the Asian nations have begun recovering from the regional recession, Daim said: ``We must not be complacent. We must remain vigilant.″

``The APEC finance ministers process will have to ensure its continued relevance by contributing more effectively to making the global financial system safer,″ Daim said.

The finance ministers, who meet annually along with the heads of the World Bank, the International Monetary Fund and the Asian Development Bank, will review the progress of various APEC initiatives and take stock of member demands.

Canadian Finance Minister Paul Martin said that while there was no consensus on long-term capital controls, the bitter wrangling of last year’s APEC negotiations had yet to surface at this meeting.

``The mood is one of cautious confidence, one of pulling together,″ said Martin. ``There is no divisiveness.″

Martin said there was agreement among the finance ministers that certain temporary regulations on capital flows were sometimes necessary. But he said the ministers’ final statement Sunday would not include any agreement on the long-term capital controls sought by Malaysia.

``Everybody recognizes that capital controls are not a substitute for solid economic policies,″ Martin said.

Malaysia has been campaigning for the forum to endorse its diagnosis of the Asian economic crisis, which blames marauding foreign currency traders for attacking weak economies to make quick profits. It believes the world’s wealthier nations must regulate hedge-fund operators and currency traders.

Some nations, such as Australia and Hong Kong, appear to support Malaysia’s prescription. The approach got a boost by World Bank President James Wolfensohn, who told reporters the bank was not opposed to temporary curbs on short-term capital flows.

Summers met with Japan’s Finance Minister Kiichi Miyazawa on Saturday and the two reaffirmed their commitment to strengthening cooperation.

The comments were a far cry from the blistering bilateral talks between the two economic powerhouses last year when the United States blamed Japan for helping trigger the Asian economic crisis in mid-1997. Japan, in turn, accused the United States of bullying.

On Saturday, Japan and the United States agreed to implement structural reforms to enhance the efficiency and competitiveness of their economies, a U.S. Treasury spokeswoman said.

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