Tuesday, November 25, 1997

Asia-Pacific Economic Cooperation: Pacific leaders prepare endorsement of record global bailout plan

By TERENCE HUNT

Associated Press

VANCOUVER, British Columbia - Anxious to halt a burgeoning crisis, President Clinton and Pacific leaders crafted a blueprint Monday designed to calm turmoil that has rattled world markets and humbled once mighty Asian economies. The plan would implement a $68 billion rescue effort, the largest financial bailout in history.

There were fears the economic troubles could spread. "We need to take this very seriously," Clinton said, "and we have to work very hard. He cautioned that Asia's troubles could affect U.S. interests and the American stock market.

As the 18-nation Asia-Pacific Economic Cooperation forum assembled, ministers circulated a draft communique that would commit the leaders to endorse the huge stabilization program spearheaded by the International Monetary Fund. Clinton said the leaders were examining the rescue plan to see if it will work and "what do we need to do to make it better."

Expressing confidence about Asia's future despite fresh signs of trouble, the communique said, "There is no doubt that the fundamentals for its long term growth and prospects are exceptionally strong." The communique is to be formally ratified Tuesday.

The presidents and prime ministers wrestled with the impact of plunging currency values, stock market declines and bank failures across Asia that raised fears of a global economic slowdown. Canadian Prime Minister Jean Chretien, who as summit host met with nearly all the APEC leaders, said he had asked each colleague if his country faced a recession.

"All my friends ... they don't see a serious recession," Chretien said. "There will be less growth."

On an overcast day, the presidents and prime ministers gathered at the waterfront convention center, a city landmark known for its mountain views and a soaring five sails roofline.

Sounding a somber note, Secretary of State Madeleine Albright said, "We meet amidst predictions that the Asia Miracle will be succeeded by an Asian Meltdown." She urged APEC to "act with patience, persistence and principle" to stabilize the situation.

With it all, Clinton still had Iraq on his mind. Standing with Chinese President Jiang Zemin, Clinton reaffirmed the authority of U.N. inspectors to search for weapons material at palace complexes that Saddam Hussein has sought to make off limits. Clinton said the Iraqi leader had 78 palaces, some of them covering as most land as the District of Columbia. "That's a lot of land, a lot of buildings," Clinton said, adding that U.N. inspectors "ought to be able to do what they think is necessary."

Before the summit's formal opening, Clinton met separately in his hotel suite with the leaders of Asia's economic powerhouses: China's Zemin, Japan's Ryutaro Hashimoto, Indonesia's Suharto and South Korea's Kim Yong-Sam. All the countries have a major stake in stabilizing the current situation.

The international rescue effort will be led by the International Monetary Fund, backed up by supplemental resources from wealthy countries such as the United States and Japan.

The draft communique also endorsed an agreement to make a downpayment on their goal of creating a free trade zone beginning in 2010 by negotiating total elimination of tariffs and other barriers in nine areas, ranging from chemicals to toys to forest products.

Thailand, the Philippines and Indonesia already have obtained IMF emergency rescue funds totaling $48 billion. On Friday, South Korea requested a $20 billion-plus aid package.

The crisis claimed another victim with the collapse of one of Japan's four largest brokerages - Yamaichi - the biggest Japanese company to fail since World War II. The news pushed stock markets lower around the world Monday.

Japanese Finance Minister Hiroshi Mitsuzuka made clear his government won't undertake any corporate rescue missions and that Japan's financial institutions have to resolve their own problems.

Thai Prime Minister Chuan Leekpai, who took office just two weeks ago after the collapse of the previous government, said today he intended to "tackle head-on" his country's problems and predicted the economy would turn around in five to six months.

Asia's economic flu erupted in Thailand after the government suspended more than half of the country's financial institutions because of rising bad loans, particularly in real estate, as a highly speculative market collapsed.

"Thailand has the dubious honor of being seen as setting off this unprecedented financial crisis," Chuan said. But he said the South Korea's distress "has sent a signal that this could happen to any other country."