BANDAR SERI BEGAWAN. 4 Sept 8: High oil prices and k inflated equity markets are potential risks that could derail the remarkable turnaround of crisis-hit Asian economies, the World Bank said yesterday, reports Reuters.
Cautioning against complacency. the Bank told a meeting of finance deputies from the Asia-Pacific Economic Cooperation (APEC) forum the region needed sustainable demand in Industrial economies, a soft landing in equity markets and lower oil prices.
The officials were meeting ahead of an annual gathering of APEC finance minister taking place in Brunei this weekend. The groupings 21 members account tor 60 per cent of world gross domestic product and 45 per cent of world trade.
While the overall tone of talks was upbeat, with member economies and multilateral agencies
highlighting the positive economic backdrop and policy steps taken by Aslan governments, several officials noted that much needed to be done.
"Recovery has reflected the self-correcting properties of market economies." the Asian Development Bank (ADB) said in a report presented at the meeting.
"Other things being equal, recovery has happened more quickly where there has been a consistency and predictability and where country economic managers have enjoyed a high degree of credibility," it said.
In laying the groundwork for the weekend meeting, finance deputies discussed issues including strengthening corporate governance, managing bank failures and extending an APEC-ADB-funded training programme for financial regulators for another two years.
A New Zealand-led initiative to promote freer and more stable
capital flow's also featured prominently, but formal dialogue on the process is only expected to begin in the second half of next year.
Dubbed the Voluntary Action Plan, the initiative draws on lessons from the 1997 crisis and examines how transparent, credible economic policies and the strengthening of financial markets can minimise the risks of cross-border capital flows, the APEC secretariat said in a statement.
Twelve core standards Identified by the Financial Stability Forum, formed by Group of Seven nations In the wake of the Asian crisis and collapse of hedge fund Long-Term Capital Management, will provide a framework for APEC economies to assess their policies, it said.
More than three years since the crisis erupted, the management of short-term capital flows and highly-leveraged institutions remains a key concern for gov-
ernments that witnessed huge speculative attacks on their currencies, bringing an abrupt end to the era of Asia’s ’miracle economies.’
"The APEC economies share a (■(iinmon interest in building a strong and safe system for glob;il capital flows," a Southeast Aslan central bank official told Reuters as the meeting got under way on Thursday.
We are concerned about the highly leveraged financial institutions and want more prudent liquidity and risk management measures to stabilise hot money flows," the official said.
A Taiwan finance ministry official said most APEC economies had given a positive assessment of their own progress on reform, while multilateral agencies like the IMF had highlighted tire risks of complacency.
He said an initiative on managing bank failures, led by New Zealand and Mexico, hail won
widespread support, notably from Taiwan. Thailand and Indonesia.
Asia’s unexpectedly speedy recovery continues to be marred by Ute slow restructuring of non-performing loans and debt-ridden banks, particularly in crisis-hit Southeast Asia, keeping countries like Thailand. Indonesia and the Philippines off Investors’ radar screens.
A senior Brunel finance mlnls-tiy official told Reuters the finance ministers’ meeting was likely to address such concerns.
"There will be a political commitment by the finance ministers to carry on with reforms. They realise that reforms have benefited in turning around their economies." the official said.
Other officials said Singapore expressed concern about the strength of the Aslan recovery and prodded member economies to implement financial sector reforms to strengthen markets.