Asia Times: Heavyweight fight for Asia's champion in G8


	July 21, 2000	atimes.com

Japan

Heavyweight fight for Asia's champion in G8
By Johanna Son

BANGKOK - Asian countries are hoping their voices will be heard at this week's Group of 8 summit in Japan, their aspirations boosted by Tokyo's call to hear views different from those of Western powers.

For its part, Japan hopes to raise its political profile in the international arena and go beyond just being the world's biggest aid donor. Tokyo is an economic giant, but politically much less of a force.

Thus, Japan has been taking pains to say that the summit's agenda will include the bipolarisation of the world into rich and poor and the issues this raises, such as debt relief.

A financial architecture that also works for developing nations is a priority - the G8 summit (from July 21-23) takes place just after the third anniversary of the start of the Asian financial crisis that broke in Thailand in mid-1997.

Indeed, it was after the onset of the crisis that Japan began to speak up on global problems. Among others, it proposed an Asian monetary fund and said countries should rely less on the dollar, rather using the yen in international trade.

At one point the name of Japan's former vice finance minister for international affairs, Eisuke Sakakibara, was floated as a contender for the post of International Monetary Fund (IMF) chief, even though his chances of being chosen were nil. Tokyo's point was that Japan must be seen as a global player.

To drive home the point that Japan supports dialogue between the G8 and the developing world, pre-summit talks between the two groups have been organized for the first time.

The talks will be between the Group of Eight - Britain, the United States, Germany, France, Italy, Japan, Canada, and Russia - and developing-country groups, such as the Non-Aligned Movement (NAM), the Group of 77, the Organization of African Unity (OAU) and the United Nations Conference on Trade and Development (Unctad).

The leaders of these groups - South Africa for NAM, Nigeria for the Group of 77, Algeria for the OAU and Thailand for Unctad - will meet G8 leaders on July 20 before the main summit opens in Okinawa in southern Japan.

''Japan will be the only Asian nation present at the summit. It will also be the host nation, so it is natural that the government will emphasize the Asian perspective. Other Asian countries are expecting this as well,'' foreign affairs analyst Yukio Okamoto was quoted as saying in Tokyo.

But not everyone is ready to accept Japan as Asia's spokesperson.

Tokyo invited China to be an observer in the G8 summit, but Beijing declined, saying it did not want to be part of a club that thinks it can make political decisions for the world.

A Chinese official was quoted as saying Tokyo's economic interests are deeply tied with the US and Europe - and no one had chosen Japan as the ''representative of Asia''.

Still, Japan is being urged to push harder on reforms in the financial system to counter the ill effects of globalization. These include the risks posed by markets that are opened too hastily and capital movements across borders - factors that have been partly blamed for the Asian crisis.

Japanese Finance Minister Kiichi Miyazawa, speaking at the meeting of G7 finance ministers in early July, said: ''Looming in the background of these currency and economic crises is the problem of instability brought about by large and volatile movements of international capital.''

The Asian crisis spread after affected economies experienced a flight of capital equivalent to 11 percent of their GDP. Asian nations are thus keenly seeking a mechanism, which some call ''a cooperative financial system for Asia'', to prevent a repeat.

Japan's 1997 proposal for an Asian monetary fund was shot down by the Americans, but it is not dead. It has gone through several versions, the latest being a currency swap arrangement among East Asian nations arranged at the annual meeting of the Asian Development Bank (ADB) in May in Chiang Mai, northern Thailand.

Included in the scheme are the "Asean Plus 3" group, which means East Asia - the 10 Association of Southeast Asian Nations (Asean) members plus Japan, China and South Korea. In the first week of July, Japan and Thailand agreed on a currency swap deal.

Miyazawa said the accord was not a currency union, ''but when there is a contigency, we have seen a natural rise (of sentiment) in the sense that we should help each other out''.

In whatever name or form, the idea of Asians being able to quickly help each other remains attractive to many countries. This is because many people in East Asia view it as a way of receiving help different from that offered by the IMF, which imposed terms that early in the crisis worsened the situation in South Korea and Thailand.

In Thailand, where the currency meltdown began on July 2, 1997 with the flotation of the baht, people still remember how the US, a major player in the IMF, was slow to come to their aid.

When the crisis spread to Indonesia in October 1997, the US came in ''reluctantly'', as Singapore's senior minister Lee Kwan Yew put it. He said Japan and Singapore let out US$5 billion and the US gave less, giving the wrong signal to the market.

The IMF and the US fear an Asian monetary fund would rival the IMF, and might encourage the very ill-advised policies that led to the crisis in the first place. They are also concerned over how the Japanese-led fund would ensure the wise use of money, doubting that Asian countries are capable of policing their own ranks.

At a forum in Tokyo last month, Singapore's Lee said that any Asian fund needs IMF support to be sustainable, due to the dominance of the US and Western powers in the IMF.

Lee agreed that an Asian group faces the hard task of giving ''bitter medicine'' to its members. ''I'm not against the idea of an Asian Monetary Fund. But if you're going to have one, we have to be very careful deciding on what terms it will extend and on who is administering the conditionalities,'' he said.

Despite the high hopes on Japan, however, it remains to be seen how assertive Tokyo will actually be as G8 host.

"Japan should speak out and make its views known to other G8 countries, not simply listen to what other members say,'' former Japanese Prime Minister Yasuhiro Nakasone told the Japanese newspaper Yomiuri Shimbun.

Likewise, skeptics say that while the G7 finance ministers (without Russia) issued a document called "Strengthening the International Financial Architecture", they have as yet not proposed any major steps. One critic said nothing ''really substantial or new'' emerged, and an Asian fund was not discussed by the finance ministers.

Japan has also been pushing for a reassessment of the IMF's quota distribution and voting rights to show Asia's growing economic clout. An outcome of this campaign will be awaited this week as well.

Other observers have welcomed the fact that the summit will also focus on the North-South "digital divide", saying it is a new initiative, although it is a "safe" one, especially in light of China-Taiwan tensions not being on the agenda.

(Inter Press Service)

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