Apr 23, 1998

ASIA: 'EARLY WARNING DEVICE' FOR CRISIS NEEDED

Bangkok, Apr 22 (IPS) -- South-east Asian governments are urging greater controls over international financial flows, saying few concrete solutions have been put into place since the regional crisis began nine months ago.

Since July 1997, the crisis has engulfed once-thriving economies like South Korea, Thailand and Indonesia and affected, to varying levels, countries from Japan down to the Philippines.

The extent of the contagion has produced a flood of suggestions from as many experts -- ranging from the creation of a new body to replace the International Monetary Fund (IMF) to new taxes on speculative, short-term capital flows.

So far, most of the proposals that are finding consensus have been limited to greater financial transparency and government disclosure and reporting procedures.  

This week, Asian officials said new mechanisms to tame unregulated markets are needed soon if the world is to prevent a recurrence of the crisis that has sent millions back into poverty.

Since Monday, Asia-Pacific ministers have been meeting here at the UN Economic and Social Commission for Asia-Pacific (ESCAP) to discuss the crisis. The meeting ends on Thursday.

Indonesian Foreign Minister Ali Alatas, whose country has been worst hit by Asia's slowdown, sought a "framework of surveillance and supervision" over private, international financial flows.  

He suggested that a multi-disciplinary team of experts in the region, acting like an "early warning system", could study the roots of monetary and economic turmoil. It could address the needs of developing countries such as finding ways to attain international capital flows needed for growth while minimising the risks in that process, he added.

"At the international level, we need to agree on a framework of surveillance and supervision designed to prevent a recurrence of the present crisis without hampering the further liberalisation of our economies," Alatas said.

Echoing the findings of the UN regional body's 1998 survey, ESCAP executive secretary Adrianus Mooy said "a system of global governance" of private financial flows merited "serious attention". The ESCAP report, released earlier this month, proposed that Asia find own tools to cope with the crisis, including a regional fund and system of intra-regional currency.

Mooy had pointed out that unlike trade in goods that is governed by rules laid down by the World Trade Organisation, currency trading was not subject to rules on the global level.

Leaving private financial flows entirely to market forces cannot be done without "tremendous risks", Alatas added. "Worse, driven by globalisation and interdependence, the contagion effect could reach global proportions."

An IMF report last week said the global effects of Asia's crisis were likely to be more severe than initially thought. Partly due to Asia's problems, it has revised projections for world economic growth this year from 4.3% to 3.1 percent.

The economies of the worst-hit countries like South Korea, Indonesia and Thailand are expected to contract in 1998. Indonesia's economy will shrink by 5 percent, Thailand's by 3.1% and South Korea's by 0.8 percent.

Japanese Foreign Minister Masahiko Koumura said greater international cooperation would help Asian economies cope with unemployment, poverty and unrest in the wake of the crisis.

He added: "The international community urgently needs to act in unison and provide appropriate support for the self-reliant efforts of the countries, while suppressing the urge (of) trade protectionism, so that the economic crisis can be overcome." 

Thai Prime Minister Chuan Leekpai, however, urged Asians to pay as much attention to their internal shortcomings as to the weaknesses of the international market.

But, he said, the crisis made it clear that Asian countries "still remain less prepared and equipped than developed countries to deal with all the problems of globalisation". Given the vagaries of the international financial system, "our economic structures and national development strategies have been found wanting", Chuan said.  

So far, concerns about joblessness in East and South-East Asia, a region unused to massive unemployment, have prompted foreign donors and institutions to extend money for emergency aid and job creation.  

Unlike many western countries, not many nations in the region have insurance or unemployment schemes. Community and family networks have traditionally been relied upon as support systems in times of economic hardship.

But the International Labour Organisation (ILO) says emergency programmes cannot provide enough jobs for the poor during Asia's serious and sudden downturn.  

In Indonesia, for example, an aid programme aims to create a million jobs for some 100 days but figures show that the number of the new unemployed has already reached 5 million people.  

Warning of "disastrous social consequences" because of Asia's inadequate social safety nets, the ILO is urging governments and funding institutions to start creating unemployment insurance systems.