TRANSCRIPT: AMB. WOLF 11/4 WORLDNET ON UPCOMING APEC MEETING
(Kuala Lumpur may be most important Leaders meeting yet)Washington -- This year's Asia-Pacific Economic Cooperation (APEC) leaders meeting in Kuala Lumpur will certainly be the most important meeting in the five years that APEC leaders have met, according to Ambassador John S. Wolf, U.S. Coordinator for APEC.
During a USIA Worldnet interactive broadcast with audiences in Kuala Lumpur, Jakarta, Seoul and Canberra November 4, Wolf said: "While obviously we in the United States attach great significance to the first meeting that took place in Blake Island, the fact is the leaders are coming together in Kuala Lumpur this year at a time of great strain for a number of Asia-Pacific economies, and indeed great strain as well on the international financial system."
"Financial problems in Asia have lasted longer than most have thought," he said, "and they have spread to other parts of the world, including to the United States. That said, though, we are hopeful that we are on the path towards renewed and sustainable economic growth. There are sure to be setbacks along the way, but I believe that the leaders will reaffirm their confidence that the economies of the Asia-Pacific can, and indeed are taking the measures that will put them back on the path of sustainable growth in the years ahead."
President Clinton will discuss with his APEC colleagues the economic growth strategy that he first set out in his September 14 speech to the Council on Foreign Relations, Wolf said. Since then, there have been a number of positive developments, he said, but more needs to be done to cement the process of reform, and there needs to be an accelerated effort by the multilateral community and bilateral donors to help countries deal with the special needs of their vulnerable populations, as well as further efforts to build on the announcements by the G-7 nations last week concerning improvements to the international financial architecture.
"We think it's important to avoid excessive government interference or rigid controls which would shrink the pool of capital that is available, that would make the cost of capital prohibitive for emerging markets," Wolf said.
"We believe also that we need to learn the lesson of the 1930s. Now is not the time for protectionism; it is the time to move forward towards greater market openness and towards the Bogor goals of free and open trade and investment," he said.
In this respect, Wolf said, the United States is looking forward to successful conclusion of the leaders' early voluntary sectoral liberalization initiative.
"The key missing factor is to ensure that there is full participation in all of the aspects of all nine sectors under discussion," he said. "We told the Japanese minister of agriculture when he was here on Monday that early voluntary sectoral liberalization will not succeed unless there is full participation by all the economies in all the sectors, and that if Japan stays outside of fish and forests we find it difficult to see how there can be success. We told them that that's a decision they have to make.
"While participation is voluntary, the ministers last year and leaders all agree that we needed to have a critical mass. And a critical mass must include the world's second largest economy," Wolf continued. "It's not enough just to provide financial assistance to the region; it's also important that there be opening of Japan's markets -- deregulation of its markets to go hand in hand with the banking reform that took place. So we do look forward to Japan's participation, and we are hopeful that they will come to that view too."
Following is a transcript of the program:
(begin transcript)
WORLDNET "DIALOGUE"
UNITED STATES INFORMATION AGENCY
Television and Film Service of Washington, D.C.GUEST: Ambassador John Wolf, U.S. Coordinator for APEC
TOPIC: Scenesetter for Upcoming APEC Meeting
POSTS: Kuala Lumpur, Jakarta, Seoul, Canberra
HOST: Judlyn Lily
DATE: November 4, 1998
TIME: 21:00 - 22:00 ESTMS. LILY: Good morning, and thank you for joining us on this edition of Worldnet's "Dialogue," I'm Judlyn Lily.
In less than two weeks the leaders of the 21-member Asia-Pacific Economic Cooperation forum, or APEC, will meet in Kuala Lumpur, Malaysia. APEC's newest members, Russia, Peru and Vietnam, will contribute to the summit discussions for the first time.
The issue at the very top of this year's summit agenda: the crippling effects of the Asia financial crisis on the region and the rest of the world. How will the APEC leaders work to resolve this regional economic crisis, which has impacted greatly on the U.S. economy, affecting other global markets as well? And what is the U.S. view on APEC's ability to create economic security throughout the region and thus stabilize markets throughout the world? Joining me in Washington here with answers to those questions is our featured guest, Ambassador John Wolf. Ambassador Wolf is the U.S. Coordinator for APEC, preparing U.S. officials and business leaders for the upcoming meetings in Malaysia.
Ambassador Wolf, thank you for taking some time out and sharing your time with us today. I understand you have some opening comments to make before we get started with our discussion.
AMB. WOLF: Thank you, and salma pagey (sp) to my friends in Malaysia -- good morning to the people in Seoul and Canberra and Jakarta.
Yes, I thought I might try and frame a little bit the discussion that we'll have today. This year's APEC meeting will certainly be the most important meeting of leaders in the five years that leaders have met. While obviously we in the United States attach great significance to the first meeting that took place in Blake Island, the fact is the leaders are coming together in Kuala Lumpur this year at a time of great strain for a number of Asia-Pacific economies, and indeed great strain as well on the international financial system.
I think last year when leaders met in Vancouver there was really great hope that the recovery would be well under way by now and that the only question was the shape of the recovery -- would it be U-shaped? Would it be V-shaped? Financial problems in Asia, though, have lasted longer than most have thought, and they have spread to other parts of the world, including to the United States. That said, though, we are hopeful that we are on the path towards renewed and sustainable economic growth. There are sure to be setbacks along the way, but I believe that the leaders will reaffirm their confidence that the economies of the Asia-Pacific can, and indeed are taking the measures that will put them back on the path of sustainable growth in the years ahead. I hope the leaders will commit themselves to measures to be taken domestically and internationally that will provide a solid basis for that growth.
Developed countries and developing countries both have a role to play. President Clinton will discuss with his colleagues the economic growth strategy that he first set out in his September 14 speech to the Council on Foreign Relations.
Since then there have been a number of positive developments, including interest rate cuts in the United States and in Europe, U.S. Congressional passage of authority to provide $18 billion to the IMF, passage of Japan's banking reform legislation. And there are other favorable signs as well in several of the emerging market economies.
Nonetheless, more needs to be done to cement that process of reform, and there needs to be an accelerated effort as well by the multilateral community by bilateral donors as well to help countries deal with the special needs of their vulnerable population, further efforts as well to build on the announcements by the Group of Seven nations last week concerning improvements to the international financial architecture.
We think that it is important to remember that the market decisions that are taking place are decisions that are made by literally tens of thousands of individuals and businesses -- not by any single individual. We think it's important to remember and to avoid -- we think it's important to avoid excessive government interference or rigid controls which would shrink the pool of capital that is available, that would make the cost of capital prohibitive for emerging markets.
We believe also that we need to learn the lesson of the 1930s. Now is not the time for protectionism; it is the time to move forward towards greater market openness and towards the Bogor goals of free and open trade and investment. In this respect we are looking forward to successful conclusion of the leaders' early voluntary sectoral liberalization initiative. There's still more work to be done by my colleagues, those officials and I, but the key missing factor is to ensure that there is full participation in all of the aspects of all nine sectors under discussion.
Finally too I think APEC has a major role to play in fostering development of the fiscal infrastructure and the human infrastructure that is necessary to sustain growth in the Asia-Pacific over time. Opening up the marketplace and building the marketplace go hand in hand.
I want to thank you for joining me today, and I look forward to discussing with you these and other subjects. Thank you very much.
MS. LILY: Thank you, sir. We now go directly to our panelists who are standing by with their questions for Ambassador Wolf. Our first question comes to us from Kuala Lumpur, this year's APEC summit host. Your question please? (Technical difficulties.) Apparently we are having some technical difficulty. We are going to go now to Jakarta for their question. Go ahead Jakarta.
Q: Good evening Mr. Ambassador Wolf. I am here from Indonesia. I have a number of questions to raise. I agree with you that in the Kuala Lumpur meeting the question of the financial problem will have more attention given by the leaders. In this context I would like to ask you in the view of the U.S. what APEC can do in a tangible way to assist those economies to overcome the crisis? Second, how can substantial cooperation be carried out? Do you think an early-warning system arrangement can be established within the APEC? Thank you very much.
AMB. WOLF: I think that APEC can do quite a lot. One point I've often made in discussions with my colleagues is the fact that when leaders come together the leaders come together not as just leaders in the APEC Forum itself, but rather they come together as leaders, and their responsibilities cover the multilateral lending institutions like the IMF and the World Bank, as well as the Asian Development Bank. But I think in the APEC context itself a great deal has happened and we are looking to see what will happen in two weeks in Kuala Lumpur. But if you remember, it was the leaders meeting last November which was the catalyst for the Manila framework which has been the blueprint that we have been following over the last year, the idea that the real first responsibilities were on each country -- each economy to achieve the macroeconomic reforms and to strengthen financial institutions, and that where international help is necessary it would come from the IMF. That went to the leaders and the leaders agree that that was the strategy that should be followed, and it is the strategy which is beginning to show fruit around the region.
And out of the leaders meeting there was agreement to call together the Group of 22, and that has met and there were a number of proposals, many of which were pulled together by the Group of Seven economies last week. When finance ministers met in Cananaskas (sp) in Canada they talked about the importance of the World Bank, the Asian Development Bank and the IMF, looking at the social impact of their programs and trying to help the most vulnerable parts of societies. And now our finance deputies are meeting right now in Kuala Lumpur to discuss how to build on the momentum that has come over the last year, how to expand on the Group of Seven proposals, how to put an Asian-Pacific coloring on some of the discussions that have taken place this fall at the World Bank and IMF, and most recently among the Group of Seven.
So I think there is a lot going on, and we hope that leaders when they meet in a couple of weeks will be able to gather all that together.
In terms of an early-warning system, that's one thing that finance ministers have discussed before, and it certainly is an idea that bears close examination. I know it's one of the items on the discussion list this week: How can we meet together to improve surveillance, how can we meet together to share information, how can we meet together to exchange information on how to move forward like the issues like the Basel standards for bank capital adequacy, and how can we move towards improved transparency of information? And so I think there are a number of things that we can do together in the Asian Pacific that can help us in the future.
MS. LILY: Let's move now to Kuala Lumpur for your opening question. Go ahead please. (Technical difficulties.) We're going to go ahead and go to Seoul now for your first question. Please go ahead, Seoul.
Q: Good evening, Washington. My name is -- (inaudible) -- reporter from -- (inaudible) -- Business Newspaper in Seoul. It has been nine years since the formation of APEC. While the European Union has become the primary vehicle for promoting open trade and economic cooperation in the region, some people view that APEC lacks the influence to advance agendas for economic dynamism in the sense of community. As the leader of APEC, how does the U.S. think about this assessment?
AMB. WOLF: Well, first of all the United States -- I don't think I want to say that we are the leader of APEC -- this is an effort in which we are all in it together, and we welcome this year the dynamic contribution that Korea is playing. I think that President Kim's election has given a new impetus to Korea's participation, and we welcome that and the leadership that you and others play in the forum.
Now, looking at the European Union, the European Union is nearly 50 years old, and those countries have been working a long time together. I would not say -- I would not point myself to the European Union as the example of economic openness and liberalization. Indeed I think that APEC itself in a very short period has played a formative role in multilateral trade negotiations. In 1994, in 1993 leaders at Blake Island called for conclusion of the Uruguay Round, and the Uruguay Round ended shortly thereafter successfully, and the World Trade Organization was created.
In 1996 in Manila leaders in APEC called for the conclusion of an information technology agreement, a half a trillion dollars -- 500 billion U.S. dollars of trade liberalization, and that was agreed at the World Trade Organization's first ministerial in Singapore.
This year we are working -- last year and this year we have been working on early voluntary sectoral liberalization -- a trillion and a half U.S. dollars of liberalization in nine critical sectors. And we will push the international trading community.
But, more importantly, we have a vision, and our vision is a free and open trade and investment in the Asia-Pacific by 2010 for developed countries and 2020 for developing countries. And that vision is done without protectionism. It's open regionalism, and the benefits that come out of our vision will be available all around the world.
Now, how we get there is going to be a difficult process, but that's where our vision takes us. We have pushed hard in APEC, and a number of APEC economies have pushed hard for liberalization -- liberalization in food items, and liberalization in energy, forest products. And that's what EVSL will give out this year, and that's why we are going to push the world community to move forward on significant new liberalization.
MS. LILY: Our next question comes to us from Canberra. What is your question please?
Q: Ambassador, it's Graham Debell (sp) here from the Australian Broadcasting Corporation, Radio Australia. On the EVSLs, the -- as we are speaking in fact up the hill from here Australia's foreign minister is having talks with the Japanese foreign minister, and I think you can take it that he's using slightly blunter language, including the point that you made about the need for full participation in all nine sectors. How damaging would it be for APEC if Japan does refuse to move on forests and fisheries?
AMB. WOLF: We told the Japanese minister of agriculture when he was here on Monday that early voluntary sectoral liberalization will not succeed unless there is full participation by all the economies in all the sectors, and that if Japan stays outside of fish and forests we find it difficult to see how there can be success. We told them that that's a decision they have to make. While participation is voluntary, the ministers last year and leaders all agree that we needed to have a critical mass. And a critical mass must include the world's second largest economy. It's not enough just to provide financial assistance to the region; it's also important that there be opening of Japan's markets -- deregulation of its markets to go hand in hand with the banking reform that took place. So we do look forward to Japan's participation, and we are hopeful that they will come to that view too.
MS. LILY: Let's return now to Kuala Lumpur for their first question.
Q: Good evening, Ambassador Wolf. This is Dorothy Etu (sp) from the Edge in Kuala Lumpur. My question is: In the -- well, as a group -- I know you touched a little just now on what APEC has done thus far. But as a group has APEC done enough to help solve the financial crisis? And what more could and should be done? Thank you.
AMB. WOLF: Well, I guess the answer to that has to be no, we haven't done enough, because the problems aren't solved. But it's not really just for APEC alone to solve the financial crisis.
Indeed APEC was never really created to be the kind of mechanism that would achieve that. First of all, what we do is done voluntarily. Second of all, we don't have the kind of resources or expertise that's available to the International Monetary Fund, the World Bank, the Asian Development Bank. Third of all, the decisions that are necessary to "solve" in your words the financial crisis are really decisions that will take place in each troubled economy. It will be the decisions that are necessary to put back in place macroeconomic stability. It will be the decisions that are necessary to revamp, to fix, to strengthen financial institutions. It will be the decisions that are necessary in each economy to achieve better economic governance, more transparency of decision-making, a legal code that provides the ability to deal with situations where there are bankruptcies. It will require corporations to look not just at their size and their market share, but also at their return on equity and their responsibility to their shareholders. And all of those things collectively, plus -- all of those things collectively plus what we do internationally to help to make the international financial system run more efficiently. All of those things come together. So APEC has a contribution, but APEC is neither able, nor should it be held fully responsible for where we are or how far we have to go.
I think, as I said earlier, that APEC has played a role in propelling us forward, and we hope that at the meetings in Kuala Lumpur next week and the week after that we will take another step forward as well.
MS. LILY: We're talking about the upcoming APEC leaders meeting. It's scheduled for November 17th and 18th in Kuala Lumpur. Malaysia. Our next set of questions will come from our panel in Kuala Lumpur. Go ahead please.
Q: Good evening, Ambassador Wolf. This is -- (inaudible) -- from the New Strait Times. Prime Minister Mahathir Mohamed has mentioned that Malaysia will push to place anti-speculation measures in relation to -- (inaudible) -- currency trade on the agenda this time around. What are your comments on that?
AMB. WOLF: Well, I don't think that we think -- I think we will have to discuss the role that speculation plays in the international financial system. For instance, one person's speculation is on the other side of the transaction -- perhaps the business that needs to hedge its stream of foreign exchange receipts.
I think what we want to be very careful of doing is to avoid those kinds of measures which would so constrain the pool of capital that the cost of borrowing for emerging economies, whether for Malaysia or Indonesia or Korea -- at different stages of development -- nonetheless, if the pool of capital shrinks, the costs go up, and there is much less capital available. And so we will want to look as clearly -- the Group of Seven said we need to look at some of these issues, including greater transparency in the flow of short-term capital. But what exactly we do I think is something that the finance deputies are discussing close by you today in Kuala Lumpur, and it is something that I suspect our leaders will want to discuss in two weeks.
Q: Ambassador Wolf, this is Dorothy Etu (sp). My next question is: In the context of the Asian financial crisis and the recession that has hit many APEC member economies, do you think it's time for APEC to refocus and to reorient itself away from trade liberalization towards broad economic development? Thank you.
AMB. WOLF: Well, I have never actually thought that APEC was just about trade liberalization. I had this discussion with my colleagues just about every time we get together. But as I mentioned in my opening remarks, we in the United States think that the process of opening markets and building markets has to go hand in hand, and you can't separate one from the other.
When Malaysia wanted to move into the business of independent power production, you had to amend your legal code, your laws, to allow private investors to invest in power production, and you had to change the laws that said only Tanaga (sp) could be a producer. Well, in APEC-speak that's called liberalization. And then you had to take measures in terms of regulation in order to set the prices that power producers receive and to deal with things like construction permits and what-not to make it easier for private investors and private construction firms to build those power plants. And in APEC-speak that's called facilitation.
And then the plants had to be built and people had to be trained, the construction had to be financed, and you paid attention to the kind of technology that went into the plant. And all of that host of things in APEC-speak we call economic and technical cooperation. And finally you have a plant and it's capable of producing electricity. But you know, for you, the consumer, for the Edge or for the New Straits Time or for the person in Jahore or in Kwantan (sp) -- they don't actually care what we call that. What they care about, and I think what you probably care about, is that when you flip the switch the electricity actually goes on. And I think APEC needs to be about that, and not a kind of sterile debate about liberalization versus economic and technical cooperation, because for so many things that we want to do they're really inseparable. If you don't do one you can't achieve the other.
Q: Ambassador Wolf, this is -- (inaudible) -- again. Okay, we agree that APEC is not a sterile forum to discuss liberalization alone. What do you think about some quarters trying to bring political issues into the meetings, like if you have noticed several leaders are coming to KL next week mentioned that they will bring up the Anwar Ibrahim issue at this meeting with Prime Minister Mahathir Mohamad. So what are your comments on that?
AMB. WOLF: The leaders talk about what leaders choose to talk about. I think the U.S. views on that issue are well known. But I am here tonight to talk about the issues that we have been working on in anticipation of the APEC meeting. It's obviously been an issue, it obviously is out there. The views of the United States or other Asia-Pacific members are clear and well known. But I think there are important issues in APEC and important issues of economic cooperation, which is the -- that is the reason why the president is going to Kuala Lumpur -- to talk about those issues of economic cooperation. We will continue to speak out whenever appropriate on other issues that we need to speak about.
MS. LILY: Let's go now to Jakarta for their questions.
Q: Yes, good evening, Ambassador Wolf. My name is -- (inaudible) -- I am a journalist from RCTI Television here in Jakarta. Concerning the next meeting of APEC in Kuala Lumpur, do you think with relation to the current crisis, particularly Indonesia, that the APEC leaders could come up -- conclude measures, concrete steps, concrete policies to solve the crisis that is currently hitting Asian countries, such as for instance one of the problems is the issue of capital flight? And do you think it would be wise for APEC member countries to come up with a common standard of interest rates for instance in order to control the capital flight from one country to another country, because most of the capital flight is because in other countries the interest rate is higher than in others? Do you think that these concrete steps would, A, be able to solve the crisis more quickly than waiting for macro restructuring, macro solutions? Thank you.
AMB. WOLF: The process of economic reform is a very difficult one, and I think in each APEC economy, each crisis economy, the measures that will be taken will vary and need to be done according to the individual circumstances. I think that is the approach in the International Monetary Fund and the World Bank -- is to look at the domestic circumstances. The corporate debt problem in Korea is different from the corporate debt problem in Indonesia for instance. In one case its banks owe money to foreign creditors. In the other case in Indonesia it's actually Indonesian corporations that owe that money to foreign creditors. So you have to come up with different solutions. But in every case it means having a sound monetary policy and a sound fiscal policy. It means a whole host of things in terms of domestic adjustment. It means improving economic governance, as I mentioned, and it means having a legal system that has credibility and where people -- not only the citizens of the country but foreign investors -- have confidence in expedient fair result.
So I don't think that APEC can design any single solution that will fit all of the countries of the Asia-Pacific. That role is -- the role of international adviser is really a role that we think is appropriately played by the International Monetary Fund working with the World Bank and the Asian Development Bank.
I suppose when you use the term "capital flight," I would say that capital flees when there is economic and political uncertainty. And in fact having a common interest rate policy is not really a viable alternative. The interest rates in Japan are very, very low. The interest rates in the United States are somewhat higher. The interest rates in Indonesia need to be considerably higher. I guess unless we all operated with one currency and one central bank there will always be variations in interest rates. But the challenge is to find a value for the currency, a value for interest rates, a stability in the domestic marketplace which will encourage people to save and investors to invest. And so this is a process that is done economy by economy.
Q: Mr. Wolf, I am -- (inaudible) -- again from Indonesia. I would like to follow up my colleague's question concerning the tangible methods that APEC may be able to develop. Do you think that it is possible to establish a kind of contingency fund to assist those economies to provide for the contingent effect in the future? That's concerning the financial problem.
On the EVSL, ambassador, supposing that there will be a consensus achieved in Kuala Lumpur concerning the implementation of the nine sectors by 1999. And I would like to ask your comments. Does the U.S. administration have the authority to deliver those sectors according to the end date that might be agreed according to the Bogor Declaration? Thank you.
AMB. WOLF: Two questions. On the contingency fund question, the International Monetary Fund has just established just the kind of contingency fund that you described. It was a proposal that President Clinton made to the International Monetary Fund/World Bank meetings here in Washington last month, and at least in the Group of Seven they've just agreed that that should be a fund that is established. And similarly the World Bank has agreed to set up an emergency fund that will be available to help meet the needs of the most vulnerable groups in economies who are affected by these kinds of financial contingencies. So the international architecture has been improved to deal with just those issues. And we are looking at additional ways that we might be able to be helpful in this financial crisis to deal with some the problems that are still out there.
In terms of early voluntary sectoral liberalization and our authority, we have authority to proceed in most of the sectors that are under discussion. And there is kind of a myth that one or two economies like to put out that we don't have authority for all nine sectors. Well, I would only say that sectoral liberalization is actually quite popular in the United States. We have every confidence that when there is an agreement this year that we will have the authority to execute it on the basis of the critical mass in APEC and a critical mass in the broader international community.
MS. LILY: Thank you, Jakarta. Now let's go to Seoul for more questions.
Q: Good evening this is -- (inaudible) -- South Korea. As you mentioned earlier in this part, the G-7 meetings held in Brussels there was a big discussion for measures to increase the transparency and accountability of governments. How do you think the issue will be important and emerge as it's made public in this APEC meeting? Because the situation of each country's government varies in theory. And how do you think the U.S. government will initiate this issue in this APEC leaders meeting?
AMB. WOLF: I think there's already been a lot of discussion about the importance of transparency, predictability, a sound legal system. Last year I went to the energy ministerial in Canada, and the question before the business community -- and this is even before the crisis had become a real crisis, a visible crisis -- the business community was asked how do we get more foreign direct investment in the energy sector, and they said the answer is greater transparency, openness and predictability. That's a question that every economy has to address. They also said lower prices, by cutting out the impediments to trade. So the answers are out there, and I think that whether we are talking about Korea or Indonesia, Thailand or Malaysia, or the United States for that matter, the issues of transparency -- knowing -- putting information -- adequate information out in the marketplace, and then being prepared to act on that information is really key -- having open procurement and not back-room deals -- really important to market confidence.
There aren't big differences in the general issues. And in fact, because most of the Asia-Pacific economies are trying to attract capital out of that same pool, those countries which are most successful in adopting policies which provide greater openness, greater legal predictability, greater transparency -- those are the economies that are going to be the most successful in gaining access to those foreign direct investment dollars. And they are also likely to be the economies that are most likely to see their domestic savers willing to invest, because every investor wants some degree of predictability. Every investor is concerned about the safety of his or her investment, and that's true whether you are the little saver or whether you're the big investment firm, which after all is only pooling the savings of lots of smaller investors.
Q: Hi, it's -- (inaudible) -- again in Seoul. Recently the economic cooperation between North and South Korea has become very active. So many people are wondering about the possibility of North Korea becoming a member of APEC. What is the position of APEC regarding North Korean membership, and what should North Korea do to become a member of APEC?
AMB. WOLF: Well, I think that's a decision that I am going to be able to leave to my successor somewhere down the road. Last year APEC leaders agreed that three additional economies -- Russia, Peru and Vietnam -- should join APEC this November. And so we are looking forward to those three new economies joining APEC.
At the same time, the leaders agreed that there should then be a 10-year hiatus before new members are considered, a time during which we can deepen the cooperation among the now 21 members of APEC. So I think the question of North Korea is a question for some time in the next century.
Q: It's -- (inaudible) -- again in Seoul. As you probably know, there has been some criticism that the international financial community has been badly prepared to assess the Asian recovery. Some remedies of the IMF and the U.S. has been harshly criticized for not accommodating Asian values. And although South Korea has been attentive to the IMF and U.S. prescriptions, some other Asian countries express their opposition to the IMF and the U.S. Have there been serious questions within the APEC countries regarding the Asian crisis situation? And, if so, what should the APEC countries do to harmonize their views?
AMB. WOLF: I actually think this has been a very productive year, and I think Malaysia and the Malaysian officials who have been chairing APEC meetings to date have provided very sound and straightforward leadership. We have had excellent discussions. I have not really heard a lot of violent criticism of this and that. There is a frustration that we all feel that events have moved faster than many of us anticipated. There is a frustration that the situation hasn't turned around faster than we had hoped. There is an understanding now that the problems in Asia and elsewhere around the world are more entwined and more difficult to disentangle than we might have thought last year. We have learned a great deal about the speed of reactions, about the power of expectation, about the velocity that takes place in the marketplace. We have learned that what we thought were tiny little fissures can explode very rapidly. This is a process painful for tens of millions of people, but it is very different. And so I think the discussions at APEC, I think the discussions in the Group of 22, I think the discussions at the World Bank and the IMF have all been constructive, and I think we are making progress.
And I think Korea is a good example of a country which was on the ropes 11 months ago, but it is now a country with sizeable reserve -- foreign exchange reserves, a growing trade surplus, an improving value of its currency. There are bumps doubtless ahead for Korea, but I think Korea has shown that with strong leadership that has the support and the respect of the Korean people, and with a willingness to take the hard measures that are necessary, that it's possible to pull out of the dive and hopefully to get back on the path to real economic growth. It's not there yet, but it's making the turn.
MS. LILY: Thank you, Seoul. Now let's go to Canberra for more questions.
Q: Ambassador, Graham Debell (sp) from the ABC. Your line that the United States will speak on Anwar Ibrahim when appropriate, will the ministerial and leaders meetings in KL be an appropriate moment for the United States so to speak?
AMB. WOLF: I don't think I really have much more to add to what I've just said.
Q: Can the APEC leaders focus exclusively on economic issues in the Asia-Pacific? Can they ignore such a political and human rights issue right in front of them?
AMB. WOLF: Leaders are leaders, and you know in the United States we rarely try to say -- we make suggestions to the president what he will -- what he might say -- but the president will make his decisions. But I will tell you that the reason the president is going to Malaysia is to attend an APEC meeting, and there are serious issues that we have to discuss, and I know that will be the central focus on what he does.
Q: But not necessarily the only focus?
AMB. WOLF: He's also going to be speaking to the business community.
Q: On Japan you said that if Japan stays out of the sectoral liberalization that it is difficult to see success. How significant then is the Japanese position? Could Japan actually derail the APEC process if it hangs tough?
AMB. WOLF: Well, we are very hopeful that based on the conversations the Japanese officials have had here in Washington and the foreign minister is having today in Canberra, and others have had in a host of APEC economies, that Japan will indeed decide that it will participate in all measures and in all nine sectors.
MS. LILY: On what is that hope based, given the public position that the Japanese have taken, that this is voluntary, and that they do not want to volunteer?
AMB. WOLF: I prefer to look at the opportunities, and the opportunities -- we think that market opening is an essential part of the kind of growth message that Asia-Pacific economies need to send in order to help rebuild market confidence. It's not -- this is a time and this is the place to signal that Asia-Pacific economies are going to continue to go forward towards the goal of free and open trade and investment, and EVSL provides the opportunity this year to make a firm commitment in nine sectors, including sectors which are of enormous economic value to Japan, because Japan is a producer of the goods and services that would be liberalized. They benefit from a number of the sectors. And so we are hopeful that they will see the value of the package and that they will join in forming a balanced package that provides benefits to everyone.
Q: More generally, how well do you think that Japan has performed within APEC as the Asia-Pacific's second largest economy? I note your comment in Los Angeles a couple of days ago about how Japan in terms of dealing with its internal problems has shown a lot of indecision and wavering. Has Japan translated that domestic indecision in a way ringing to its stance within APEC? Has it not pulled its weight?
AMB. WOLF: I think maybe you didn't get all of the speech that I made in Los Angeles to the PBEC meeting, because I did say that in the past there has been indecision and wavering, but that we were quite hopeful that based on the passage of the banking legislation that Japan would now get on with the urgent business of restructuring its financial system, deregulating ad opening up its economy. And so my message was not a negative there; it was really quite the contrary. It was an effort to say they have done a very tough thing now in passing their banking legislation, and now it's time to move forward and implement it.
As for their role in APEC, we have worked closely with Japan during my three years, and that relationship has always been very, very constructive.
Q: I'd just like to ask you a very general one on this APEC meeting. You refer to it as the most important since Seattle. How do we judge it in terms of its success? What does have to achieve to make that mark?
AMB. WOLF: The president is going to talk about a strategy for growth. That strategy for growth is already launched and it has responsibilities for developed countries and developing countries. We are going to want to get broad support from the Asia-Pacific economies for that strategy in a number of specific elements for it. I think maybe I shouldn't -- we hope that there will be a substantive, meaty discussion about these issues, the issues that are related to getting back on the growth path, the issues that are related to building economic cooperation in the Asia-Pacific. That has financial aspects, it has trade aspects, it has other aspects like the natural gas infrastructure initiative that was approved last month or two months ago by the energy ministers -- and the discussion of electronic commerce, which has been shepherded in APEC by Australia and Singapore. All of these are really important issues, and I think we are going -- I hope we can demonstrate that there are real live things that come out of it. Most importantly, I hope that there is that message of confidence that we are moving together toward the visions that our leaders have set.
MS. LILY: Thank you. Now let's return to Kuala Lumpur.
Q: Ambassador Wolf, this is Dorothy again. There has been concern from some quarters that the Anwar issue and trial may overshadow the summit. What are your views on this? Thank you.
AMB. WOLF: Well, the fact that so many people have raised the issue even tonight suggests that it is a real issue. But I guess I would say that APEC is also facing a number of other issues, and we will -- and the reason that the president is going to Kuala Lumpur in 10 days or in two weeks is to attend a multilateral meeting that needs to focus on putting in place a growth strategy. Those are important issues, and I suspect the leaders will spend a whole lot of their time together talking about how we can put in place the infrastructure, the financial architecture of that helps the region to get back on a path of growth.
Q: Yes, Ambassador Wolf, this is -- (inaudible) -- again from Jakarta. Following up on a question from my colleague in Kuala Lumpur, is there going to be a bilateral meeting between Bill Clinton and Prime Minister Mahathir Mohamad? That's question number one.
The second one is you mentioned the importance of transparency, predictability in the legal framework and et cetera, et cetera, and predictability is what is in Indonesia right now lacking. And with the current situation we are here we cannot predict anything, do you think there will be -- will there be any special message that you think you could convey to the Indonesian delegates in APEC?
And my last question. As you mentioned earlier that the current economic crisis Indonesia faces is an internal, individual problem of each country, and you mentioned the need to coordinate with the IMF and the World Bank. So for what the people here feel is that the IMF is not bringing any solution, we are still experiencing our difficulties. So we are starting to doubt whether IMF is the best mechanism to solve our financial problems. Thank you.
AMB. WOLF: I remember number one and number three. I may have a little trouble with number two. But, number one, my understanding is that the chairman of the APEC meetings will be meeting with the former chair -- may be having bilaterals with the former chair and the next chair, but that there will not be a number of bilaterals.
What was the second question?
MS. LILY: It had to do with transparency and predictability, saying they couldn't predict anything in this arena.
AMB. WOLF: Well, that really is -- I mean, that is a key issue. One of the things that you said was that each country's problems are its own. And one of the things that we have learned in this financial crisis that has spread throughout Asia, throughout parts of Asia and then to other parts of the world is that there is some connection that the market sentiment when there is a problem in one place may affect countries elsewhere.
But there are things that one can do to defend or to limit the volatility, and we think that the countries that are showing most clearly that they are putting in place sound macroeconomic policies and strong financial institutions will be the economies of the countries that are least affected by these swings in market sentiment.
I think the questions of transparency and predictability really are important issues in Indonesia. I was reading in the Wall Street Journal I think -- maybe I'm not supposed to do advertisements.
MS. LILY: Go right ahead.
AMB. WOLF: But one of your competitors, that one of the issues in the bank in the debt negotiations between banks and foreign creditors and corporations and foreign creditors is the situation with your new bankruptcy law. It's brand-new -- how will it work? How will the court system resolve these kinds of disputes? And so that is the case where predictability becomes important in terms of encouraging a work-out.
Now, I've got to remember --
MS. LILY: The third question -- he was saying that the economic crisis was an individual problem of the countries and the U.S. has been saying go to the IMF but the IMF hasn't been helping them.
AMB. WOLF: Well, we actually think that the countries that have adopted IMF programs and follow them are beginning to see some signs of promise. So in Indonesia for instance the value of the rupiah has been more or less stable. It has fallen in value a little bit in the last couple of days, but you have had constant monetary policy, and in the months since April/May you have followed very closely your commitments to the IMF, and that's beginning to show some signs of promise. It would have been preferable I think in terms of market reaction had Indonesia been able to follow more closely its first and second programs with the IMF. I think the same can be said for countries like Thailand and Korea. There are positive signs that are out there.
One of the things I learned a long time ago as a young Foreign Service officer when I used to deal more directly with IMF programs, and one of the things that economists will say always is that when adjustment is delayed it always becomes more painful and more expensive to work out the problem later. And I think one of the issues in a number of economies has been the delay and the lack of follow-through on commitments. And when that happens it affects market stability, market confidence, and that affects the stability.
So I am hopeful that Indonesia is on a positive path, and there are some positive signs out there.
Q: Mr. Wolf, many of the Asian countries, including Korea, has hoped some more strict regulation on the short-term capital must be done. But I wonder in such free and open countries in the United States what is the role of government in this matter. And I wonder what kind of detailed and concrete measures President Clinton can make in this meeting on this issue.
AMB. WOLF: Clearly the volatility of short-term capital is an important issue. The finance deputies are discussing today some of the issues that were raised by the Group of Seven statement late last week. The question of short-term capital flows is one of them.
But I'd go back to what I said earlier in the hour -- that is, what I think is important is to avoid measures that so shrink the pool of available capital that the cost to emerging economies go up to a point where they are unable to draw that capital, because that will -- whenever the cost goes up growth has to go down.
MS. LILY: We'll be taking a brief question from Kuala Lumpur with a brief answer.
AMB. WOLF: With a brief answer.
MS. LILY: We are going to Canberra please for a brief question and a brief answer.
Q: Okay, a brief question. Volatility of capital -- last year Dr. Mahathir was very much on his own talking about the vandals of the money market. This time around is the intellectual climate moving along with -- the capital pool is so huge that you can legitimately talk about putting some controls on it without worrying too much about drying it up?
AMB. WOLF: Well, I think the question of how you deal with volatility is one that needs careful study and then careful action, and I am not sure that the solutions to those -- I don't think the answers to the questions nor the solutions are yet part of the intellectual debate.
MS. LILY: I am afraid we will have to stop there with that final comment from you, Ambassador Wolf. And, ambassador, thank you again for being with us today. And with us on Worldnet's "Dialogue," also we'd like to thank our panelists in Kuala Lumpur, Jakarta, Seoul and Canberra for your thoughtful questions. From Washington, I'm Judlyn Lily for Worldnet's "Dialogue." Good day.
(end transcript)
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