Monday, September 29, 2008 US financial crisis haunts Asian leaders; Japan to act
UNITED NATIONS - Japan is worried about a severe credit crunch. India wants regulations tightened. China expects the situation to get worse before it gets better.
The US financial crisis haunted Asian leaders as they took the rostrum at the United Nations General Assembly.
As the United States debated a $700-billion Wall Street bailout package to ease the turmoil reverberating around the globe, the region’s leadership was concerned that financial contagion could cause a repeat of the market turmoil that rocked Asia a decade ago.
The 1997-98 Asian turmoil led to a prolonged global debate for a revamp of the international financial architecture, but no concrete efforts were made to tighten supervision of the financial system, the leaders said.
“There is a need for a new international initiative to bring structural reform in the world’s financial system with more effective regulation and stronger systems of multilateral consultations and surveillance,” Indian Prime Minister Manmohan Singh told the UN summit last week.
Inclusive
“This must be designed in as inclusive a manner as possible,” said the World Bank economist-turned politician.
He said that while industrialized nations could afford periods of slow growth as a result of upheavals in international financial markets, “developing countries certainly cannot.”
The US crisis struck as Asian economies were grappling with a severe food and energy crisis.
Think tanks have shaved Asian economic growth forecasts following the crisis, which peaked this month with the bankruptcy of top investment bank Lehman Brothers,
government rescue of insurance giant AIG and collapse of Washington Mutual under the weight of bad mortgage bets.
Chinese Premier Wen Jiabao, in his speech, warned that the international impact of the US crisis could become “more serious,” stressing the need for concerted efforts to contain the turmoil.
Exports
Chinese exports to the United States have been expanding rapidly and any slowdown due to the crisis could impact growth in the world’s most populous nation.
Even on the financial side, China, the world’s biggest holder of foreign reserves, is closely linked to the United States. It is the second biggest holder of US treasury bills.
New Japanese Prime Minister Taro Aso said the current crisis reminded him of the Asian turmoil, when “the world saw a nightmare in which liquidity suddenly dried up.”
He assured world leaders that Japan, Asia’s largest economy, would invigorate its own recession-struck economy to help spur global growth.
“I will work determinedly to realize this very contribution,” said Aso, who has promised to return to the old ways of his long-dominant ruling party’s use of public money to boost the economically languishing countryside.
For economies such as the Philippines, where oil and food price hikes had sent inflation up and growth down, the US crisis gives greater worry.
Standards
“The light at the end of the tunnel has become an oncoming train, with new shocks to the global financial system,” declared President Arroyo. “It would take time and
perseverance to put the pieces back together.”
Australian Prime Minister Kevin Rudd lamented that the international community had not moved rapidly to reduce risks of systemic financial crises even though the Asian turmoil had exposed such weaknesses.
“The problem is, a decade on, systemic lessons were not learnt,” he said. “And now we face a financial crisis of truly global proportions.”
Rudd called for a set of globally agreed best practice standards of financial regulation.
South Korean Prime Minister Han Seung-Soo warned that the new crisis could result in protectionism, citing reports that the turmoil could plunge the world into a recession similar to the Great Depression of the 1930s.
“Without a doubt, the current instability in the financial markets could have a devastating, domino-like impact on the real economy in this globalized world,” he said.
“We have to be careful however not to rush into protectionist policies either for fear of uncertainty or for self-interest,” he said. (AFP)
