03 November 2010Currency movements likely to dominate APEC talks
SINGAPORE: The issue of currency movements will likely dominate talks when leaders gather at the upcoming Asia Pacific Economic Cooperation (APEC) meeting in Yokohama, Japan on November 13 and 14.
Observers said the subject needs to be urgently addressed as this will impact the flow of trade among APEC economies such as China, the US and Singapore.
The greenback has suffered a severe beating in recent weeks, causing Asian currencies to rise sharply and is creating problems like asset bubbles and stock market speculation.
Dr Aekapol Chongvilaivan, Fellow of Regional Economic Studies at the Institute of Southeast Asian Studies, said: "So long as the huge capital inflows into the Asian economies are backed by economic fundamentals, that's going to be fine. But the problem here is that Asian economies have no absorptive capacity or the ability to accept huge financial resources in a short period of time.
"So in that sense, we need some kind of domestic policy adjustments and international monetary policy cooperation. It's going to be a forum for Asian economies to raise this issue and say, better than having a currency war, why don't we have currency cooperation where Asia Pacific economies can have benefits from."
A suggestion is for APEC leaders to encourage even greater cooperation among the various members' central banks.
APEC believes it will not be sidetracked and is determined to push through with its commitment for a new growth strategy this year.
"This new growth strategy seeks to address ways to achieve better quality growth for the APEC economies. The APEC economies have been doing well...we're addressing the growth needs in a more comprehensive manner. The fact that we're undertaking the review of the Bogor Goals achievement this year is in itself a clear indication that APEC means business," said Ambassador Muhamad Noor, Executive Director of APEC.
***This year marks the target period for APEC's industrialised economies to meet the Bogor Goals, aimed at achieving free and open trade and investment.
Developing countries have till 2020 to realise the Bogor Goals.
Ambassador Muhamad Noor said a thorough and transparent assessment, including reports from WTO and the Asian Development Bank, has been conducted on the progress towards these goals. He added that 13 economies have been assessed. Five industrialized economies and another eight economies have volunteered to be assessed ahead of time, with the final report to be presented to the Leaders at the APEC meeting.
However, he said the 13 assessed economies have shown progress towards achieving the Bogor Goals such as having tariff reductions. He added that this progress has also contributed to higher trade and investment flows in the region, economic growth and improved standards of living through job creation and poverty reduction.
All eyes will be on the upcoming decision on the second round of quantitative easing by the Fed. Observers said if there's more liquidity in the US, Asian currencies will appreciate faster and that will undermine the competitiveness of exports. Experts said this will be an issue leading to the APEC meeting in Yokohama but believe it will be too ambitious to expect concrete solutions to come out of APEC because it operates on a non-binding principle.
AFP
