Peter Costello, Treasurer of Australia, has urged APEC nations to work together to move trade forward by stepping up the effort on free trade and strengthening cooperation between countries to build a regional bonds market.
With the recent stock market instability caused by US sub-prime mortgage lending meltdown and the fear of U.S. economy slowdown, Mr. Costello said APEC nations should discuss and advance on trade issues in addition to strategic and security issues.
Addressing a delegation of business leaders at the APEC business summit yesterday, Mr. Costello pushed for more work by member countries to develop the regional bond market and support groups such as the G7 to give "better voice" for the region in the international financial realm.
"We ought to put a lot more work into it," Mr. Costello said at the meeting alongside Bank of China executive vice president Zhu Min, Asian Development Bank president Haruhiko Kuroda and former Reserve Bank of Australia governor Ian Macfarlane.
Apart from the regional bond market, the speakers also spoke strongly about a number of issues that the APEC nations need to work on as a group such as further cooperation on monetary policy, increase Asian capital investment within Asia and support for a regional financial institution.
"To further build strong and healthy financial systems, we need to work together on the monetary policy at the start," said Mr. Zhu. He also called for more Asian money to be invested in Asia as he quoted that Asia invests roughly $US1.2 trillion outside of Asia but only 10 per cent of that ($US120 billion) is within Asia.
Mr. Zhu also pointed that that Asian countries has accumulated a large amount of foreign exchange reserves which is now up to $US3.2 trillion, approximately two-thirds of the global foreign exchange reserves.
Mr. Kuroda explained that this is because there is no regional financial institution and there is a perception that the IMF did not give sufficient financial support during the late 1990's Asian financial crisis that triggered the Asian countries to pile up foreign exchange reserves.
Mr. Kuroda said at this stage he is "relatively optimistic" that the financial markets in East Asia has sufficient strength to overcome the impact from U.S. sub-prime mortgage crisis and the problem would likely have little impact on Asia because very few assets acquired by Asian banks had been backed by U.S. sub-prime loans.
"No Asian financial market and system appears to be seriously effected," he said.
However, he said if the U.S. economy slows down seriously, then Asian economies, particularly emerging economies in Asia, might be affected.
Mr. Costello commented that countries with the most open and flexible adjustment mechanisms would best be able to cope with any financial instability developed in the future, while others with less flexibility would not.
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