Views Expressed at Meetings of Special Task Force on Asian Currency and Financial Crisis
(Reference for Keidanren Position Paper "Towards Economic Recovery in Asia")

I. Common Proposals across the Asian Countries


  1. Proposals to Japanese government
    1. Expand domestic demand through economic recovery.
    2. Public investment, major tax cuts, financial sector reform and clearing up of non-performing loans

    3. Expand trade insurance coverage, and apply it more flexibly.
      1. In order to stimulate Asian imports of raw and semi-finished materials required for the manufacture of products that contribute to increased Asian exports, Japan should extend short-term insurance coverage to import transactions whether an L/C has been obtained or not. Requirements for insurance coverage should be further relaxed, and insurance should be offered for imports from a greater number of countries.
      2. Insurance coverage for operating-capital loans should be applied more flexibly and actively.

    4. Encourage overseas Japanese affiliates to take advantage of investment financing and two-step loans from Export-Import Bank of Japan.
    5. Improve market access in Japan (through deregulation, streamlining of quarantine procedures, improvement of the tax system, etc.).
      1. Japan should open up Japanese markets to increase imports of agriculture, forestry, and fisheries products, etc. from Asian countries.
      2. Japan should review its preferential duty system to increase imports from Asian countries.

    6. Assist development of supporting industries.
    7. To support the continued economic development of Asian nations over the medium to long term, it is absolutely necessary to foster the growth of the supporting industries, particularly small- and medium-sized enterprises, upon which export industries depend. Needed measures include technical cooperation, yen loans, and investment loans by the Export-Import Bank.

    8. Support development of human resources
      1. Funding for human resource training should be increased, more Japanese specialists should be dispatched abroad, and more persons should be invited to Japan for training programs. To ensure that these latter two activities can be carried out smoothly, existing programs should be improved and executed more flexibly to develop organic coordination among different programs. (A number of different programs are now run by different government agencies, and they are generally not well coordinated with each other.)
      2. Workers should be invited to Japan for job training. Visa requirements for such persons should be relaxed, and application procedures should be simplified.
      3. The government should provide more support for foreign students in Japan to help them continue their studies in Japan.

    9. Share financial expertise.
      1. In the financial sector, government financial authorities should share their expertise with other Asian nations, providing the kind of know-how that private financial institutions do not possess (e.g.: oversight of financial institutions, the central bank settlements system). (Private financial institutions train local personnel by inviting them to Japan and are in other ways actively engaged with their counterparts in other Asian countries, but issues concerning the overall management of a nation's financial system are beyond the scope of these activities.)
      2. ODA should be used to establish a training institution where specialized subjects about finance can be studied. The government should also promote the training of personnel in Japan who are capable of providing instruction in specialized subjects.
      3. Japan should establish a fund similar to the ASEM Trust Fund (US$50 million) which was proposed by the UK in the Second Asia-Europe Meeting (ASEM2) in London in April this year.
      4. In order to share its expertise in business and finance, Japan should dispatch experts in these fields to Asian countries.

    10. Coordinate ODA and economic cooperation by private sector.
    11. In order to promote infrastructure development with private-sector resources, ODA should be used to play a supporting role. In projects carried out on a build-operate-transfer (BOT) basis, for example, ODA could be used to provide needed infrastructure such as power transmission lines.

    12. Support the less advantaged members of society.
    13. Unemployment is expected to rise throughout Asia. In order to prevent a deterioration of law and order, Japan should cooperate with Asian governments in solving the problem of unemployment.

    14. Strengthen public relations to exercise more leadership.
      1. Many people abroad feel that "The Japanese presence is unnoticeable; no one can tell what Japan is trying to achieve." For this reason, it is important that Japan do more to publicize the measures it is taking to overcome the Asian economic crisis.
      2. The Japanese government should press forward with its own political initiatives.

    15. Establish an information gathering system.
      1. In order to ensure quick and accurate gathering of information on financial conditions in Asian countries, the Bank of Japan should establish offices for this purpose in Singapore and elsewhere.
        (The United States has been the most authoritative source of information during the current crisis. Some suspect that Japanese financial authorities have not been completely in command of market information nor of strategic information concerning Asian governments and international financial institutions.)
      2. The Bank of Japan should establish a department capable of quickly dispatching a special task force to travel abroad for the gathering and analysis of economic information when a currency crisis breaks out.

    16. Internationalize the yen.
    17. After restoring confidence in the yen, it is necessary to restructure Japan's financial and capital markets with the needs of users in mind, and to create an environment that will allow the yen to become internationalized. In particular, it is necessary to develop a secondary market for short-term government bonds.

    18. Cooperate in resolving private-sector debt.
    19. Governments of Asian countries have an indispensable role to play in resolving private-sector debt. In addition to coordinating with other governments and with international financial institutions, the Japanese government should also cooperate with debtors and creditors to help bring about a successful rollover of short-term debts.

    20. Restructure and improve government.
    21. Government agencies must improve communication and carry out coordinated investigations and studies in order to formulate effective measures in an efficient manner. The government could also consider creating a new cabinet-level post for a minister of state with responsibility to address currency and financial crisis.

  2. Proposals to governments of Asian nations
    1. Push firmly ahead with economic reforms.
    2. Liberalize and facilitate trade and investment.
      1. Some protectionist moves have been taken in response to deteriorating economic situations, but it is important for the sake of medium- to long-term economic development to expand the ASEAN Industrial Cooperation (AICO) scheme, realize the ASEAN Free Trade Area (AFTA), and take other liberalization measures.
      2. Simplify procedures for obtaining permits and licenses.
      3. Relax and/or abolish restrictions on foreign-owned businesses.
      4. Countries should work to implement the provisions of the Bogor Declaration, including adherence to the standstill principle, implementation of Individual Action Plans, formulation of a transparent and concrete road map, etc. (Developed countries must implement these provisions by the year 2010, while developing countries must implement them by the year 2020.)

    3. Establish risk management system.
    4. Introduce a proper risk management system, if progress is to be made toward the eventual elimination of restrictions on capital transactions.

    5. Reform must be accompanied by strict enforcement of new rules and institutions.
    6. Avoid frequent changes in laws and regulations.
    7. All too frequent changes in laws and regulations frustrate efforts to make sound business judgments.

    8. Carry on with infrastructure development.
      1. Some infrastructure projects started by the private-sector have been canceled or postponed. Asian nations must reduce the risks associated with infrastructure projects by establishing a legal system to govern how such projects are carried out, and they must create an environment that encourages the private sector to become involved in infrastructure projects.
      2. Some countries have been known to demand that monetary amounts for contract awards be specified in their local currency even when the funding for the project in question comes from a government loan denominated in a foreign currency. This situation must be redressed, for it has inflicted foreign exchange losses on some contractors.

    9. Cooperate in resolving private-sector debt.
    10. Involvement by national governments play in resolving the private-sector debt problem is indispensable. They should play an active role by participating in talks between creditors and debtors, especially on rolling over short-term debts.

    11. Prepare better economic statistics.
    12. Asian countries should examine the weak points of economic statistics currently in use. They need to develop an internationally acceptable method for measuring the true level of economic development. In addition, the improved system should be designed so that it can serve as a mechanism to prevent reverse capital flows.

    13. Strengthen the network among the members of ASEAN.
      1. The AICO scheme should be expanded. In order to make ASEAN members more competitive, it is important that a regional division of labor be established.
      2. Efforts to realize AFTA must be continued.

    14. Human resource development
    15. (The Government of Thailand suffers from a serious shortage of personnel. Talented people prefer to enter the private sector rather than take up government service. Indonesia has hired about 70 foreign experts to help formulate financial and fiscal policies.)

    16. Plan legislation to restore market confidence and to prevent capital flight.
    17. In addition, the government should study and introduce the system to encourage the reflux of capital.

    18. Pass bankruptcy legislation.
    19. Develop a securities market.
    20. Take serious measures to resolve private-sector debt problem.
    21. The government should monitor debt servicing and keep creditors informed thereof. Where repayment is in arrears, the government should provide guidance to private-sector debtors to get them to repay debts as stipulated by contract.

    22. Pass legislation requiring full financial disclosure by private companies.
    23. Require companies to make public disclosure of post-audit consolidated profit and loss statements, etc.

  3. Respond by Japanese corporations
    1. Increase imports of raw and semi-finished materials, foodstuffs, and parts.
    2. Maintain operations well integrated in host countries.
    3. Japanese corporations should continue with their operations overseas, thus demonstrating their steadiness in cooperating with their host countries.

    4. Rollover private-sector debt.
    5. Japanese financial institutions and corporations which have been requested to reschedule short-term loans should seek effective and realistic measures to deal with these requests.

    6. Cooperate in of supporting industry development.
    7. Japanese corporations should promote technical cooperation and increase the local procurement ratios of their overseas affiliates in order to foster the development of local industry and help strengthen the international competitiveness of the countries in which they invest.

    8. Promote use of the yen in international transactions
    9. Despite existing problems with the use of the yen in international transactions, efforts should be made to promote the switch of the yen starting in areas where it is possible.

    10. Assistance for human resource development
    11. While working together with the government, it is necessary to proceed actively with human resource development programs at the private-sector level. These should include offering training courses, accepting trainees and providing scholarships.

    12. Increase local procurement rate
    13. Taking steps to raise the local procurement rate is also an important way of strengthening the industrial base of Asian countries. This requires human resource development and the nurturing of supporting industries.

    14. Research on Asian industrial structure
    15. To promote medium- to long-term progress in the Asian region, it is necessary for the economic community to study the industrial structure of the entire Asian region.

    16. Effort by Japanese affiliates to expand exports
    17. Japanese affiliated-companies with operations in other Asian countries should strive to expand exports.

    18. Maintain and increase investments from a long-term perspective
    19. Companies make efforts to maintain and increase the level of investments from a long-term perspective.

    20. Promote assistance for technology transfer
    21. To promote technology transfer through the development of human resources, Japanese companies should actively promote to send technical experts from Japan to other Asian countries and accept people for training in Japan. Also, it is important to set up educational activities regarding such questions as protection of intellectual property rights and smooth the way for technology transfer.

    22. Maintain and increase local employment
    23. Local unemployment problems could lead directly to social instability. Japanese businesses operating in foreign countries should do their utmost to maintain the level of local employment, and there should be a strong effort toward localizing matters of personnel administration.

    24. Contribute to local community
    25. Companies operating in foreign countries must behave as good corporate citizens and respect the local culture and way of life. They should play a part in the social and economic recovery of the host country by contributing in both tangible and intangible ways to the well being of the local community.

  4. Proposals to private-sector firms in Asian countries
    1. Take good-faith measures to restore confidence.
    2. Most private-sector firms are in very difficult straits, but they must make every effort to pay debts as stipulated in contracts. (Some private companies are delaying payment of bills not because they are unable to pay but because they are waiting to see the outcome of economic reforms.)

    3. Build a system of corporate governance.
    4. Companies should build a system of corporate governance that is suited to economic conditions in their home countries.

    5. Establish sound labor-management relations.
    6. As Western corporations take over local firms in Asia, there is worry that these buyouts will result in large numbers of Western-style firings and layoffs. An effort should be made to establish sound labor-management relations, and due consideration should be paid to local economic and social conditions.

    7. Disclosure
    8. Promptly provide creditors with post-audit consolidated profit and loss statements immediately after the annual settlement of accounts, etc.

    9. Inculcate a spirit of obedience to the law.

  5. Proposals to international organizations
    1. Examine the way the IMF provides assistance.
      1. Make IMF decision making procedures more transparent.
      2. Adopt aid measures more suited to conditions in the recipient countries.
      3. Introduce a system for monitoring developing markets. Improve the system of emergency loans.

    2. The World Bank and other institutions should work to create demand.
    3. Enforcement of IMF conditionality has a severely deflationary effect on demand. The World Bank, the Asian Development Bank and other institutions should work to counter this by creating demand.

    4. Build system to study preventive measures against recurrence of currency crisis and reform of financial sector.
    5. Discuss rules for international capital flows.
    6. Studies should be initiated to consider possible rules to prevent disruptive flows of short-term capital.

  6. Proposals to the governments of developed nations
    1. Act in coordination with Asian currency authorities to intervene in Asian financial markets.
      1. IMF as a central bank of the world should strengthen its surveillance ability on rapid capital flows.
      2. They should also examine the possibility of carrying out coordinated intervention to prevent excessive exchange rate fluctuations.

    2. Adjust pace of liberalization of financial and capital systems.
    3. Asian nations are being asked to liberalize their financial and capital systems too quickly. Developing nations should be allowed an appropriate amount of leeway in accordance with actual conditions.

    4. Support the creation of a system for financial and capital transactions.
    5. Developed nations should actively support the creation of a mechanism for financial and capital transactions.

  7. Proposals regarding multilateral cooperation between governments of Asia and those of developed nations
    1. Support establishment of a stable international currency system.
      1. Discussions concerning the Asian currency system
      2. Discussion of the possibility of creating an Asian version of the Bank for International Settlements (BIS)

    2. Investigate a system of international cooperation for the stabilization of capital flows.
    3. The governments should investigate a system of international cooperation for the stabilization of international capital flows.
      (e.g.)


Home Page in English