By Michelle Tan, BASC Research Assistant
The 1997 APEC Economic Leaders’ Meeting (AELM) took place in Vancouver, Canada, in November, in the midst of the 1997 Asian Financial Crisis. Several of the Asian APEC economies had seen the value of their currencies plummet, the value of their stocks plunge, and many of their financial institutions become insolvent. In a noteworthy diversion from the usual APEC agenda of trade and investment liberalization, the leaders of the 18 Asia Pacific member economies endorsed the Manila Framework to cope with the crisis in their Declaration at the end of the summit.
The Manila Framework had been developed by senior finance officials of APEC in Manila a week before the summit meeting. It included three elements: a strong domestic response from each country involved to create an economic environment that could attract capital and maintain confidence; recognition that the role of the IMF should remain central in tackling the crisis and the adoption of new IMF mechanisms on appropriate terms in support of strong adjustment programs; and a cooperative financing mechanism through which member economies would, on a case-by-case basis, backstop IMF financial measures to ensure that adequate resources were available. APEC also pledged to work closely with the IMF, World Bank, Asian Development Bank and market regulators to enhance economic and technical cooperation and thus hopefully improve the regulatory capabilities of domestic financial systems.
APEC received some criticism for what was seen as its inability to deliver a quick and effective response to the crisis. U.S. President Clinton infamously described the crisis as simply “a few glitches on the road” a day before the start of the summit, and APEC leaders failed to support Japan’s proposal for an Asian Monetary Fund due to strong resistance from the U.S. and IMF. Moreover, APEC’s endorsement of the centrality of the IMF to the resolution of the crisis alienated many Asian governments who found it hard to stomach the strict IMF conditionalities.
In the thick of the current Eurozone crisis, in a time of similar grave economic turmoil, APEC is set to hold its annual summit in Hawaii from 12-13 November. President Obama, President Medvedev of Russia and President Hu of China are expected to participate. None of the APEC countries are in the Eurozone, imbalances in the global system cannot be addressed overnight, and the euro crisis can ultimately only be resolved by the Europeans themselves. However, APEC can—and definitely should—still address some of the fundamental issues such as sustaining growth, creating jobs and trade liberalization. A solid and cohesive response to this global financial crisis in our increasingly interconnected world, and a strong declaration of this united intent at the end of the summit, will be a much needed confidence booster for investors and consumers alike in these turbulent times. APEC should draw lessons from past criticisms, and show how it is very much a relevant and responsive trade grouping.