Many Concerns Left Unanswered After Weekend Summit
November 17, 2008 - 6:58 AM<br />
While welcomed around Asia as a significant first step, the two-day summit in Washington, which brought together leaders from 21 nations, put off many hoped-for concrete goals until their next meeting, to be held in late April after U.S. President George W. Bush is gone and President-elect Barack Obama is in office.
Asian markets reacted little to the summit -- major stock indices were mixed Monday -- perhaps because investor expectations were low.
"To put it harshly, there is little point in trying to figure out ways to prevent a disease once a patient is sick," Credit Suisse Japan analyst Shinichi Ichikawa said in a report released Monday. "The just-concluded summit came up with no specific prescription to alleviate the effects of the most serious international financial crisis."
T.J. Bond, a Merrill Lynch economist in Hong Kong, said some investors were disappointed there was no explicit announcement of coordinated fiscal stimulus measures. The leaders supported the benefits of enacting government spending to stimulate their economies but stopped short of a commitment for all to act at the same time, as some Europeans had favored.
China got a promise of a bigger role for developing countries in global finance -- a longtime goal for Beijing. Its foreign ministry called the summit an "important and positive" step toward "the reform of the international financial structure."
Indian economists and government advisers praised the rise in status of emerging nations at the summit but expressed dismay that more concrete steps hadn’t been taken to help the developing world deal with a crisis that was not of its own making.
The meeting marked an end to the "Atlantic Club," with the U.S. on one side and Europe on the other, said Saumitra Chaudury, a member of the Economic Advisory Council of Prime Minister Manmohan Singh and chief economist at the credit rating agency ICRA Ltd.
"China was in the front row. India was in the second row. That’s nice," he said, but added: "I wish there was more."
If the summit had spelled out a mechanism to kick-start trade finance and fund infrastructure projects across the developing world "everybody would have been much happier," he said. "Symbolism doesn't go that far."
The summit leaders did promise more access for developing countries to financing from the International Monetary Fund and other international organizations, but they gave no figures on the possible size of lending or other details.
Such financing could help governments in South Korea, India, Indonesia and other economies where investor anxiety about a possible scarcity of foreign currency has driven down exchange rates. South Korea's won has fallen by 33 percent against the U.S. dollar this year as investors pulled capital out of the country.
Japan, hoping to raise its profile as a world leader, offered a $100 billion IMF injection. But China gave no indication whether it might respond by heeding appeals to use some of its $2 trillion in reserves to help expand a global bailout fund.
Australia said it was pleased that the meeting did not endorse a retreat to protectionism as a means of shielding countries' domestic economies from cheaper imports.
But the conservative Yomiuri, Japan's largest newspaper, said in an editorial Monday that while the summit was an important chance for the leaders to come together, they failed to address the impact the crisis had had on the role the U.S. dollar plays in international markets, and its impact when it loses value.
"This will definitely be an issue in future discussions," it said.
Meanwhile, The Nikkei, a major business newspaper, said now -- not April -- is the time to act.
"There are two months left in the Bush administration," it said in an editorial. "In that period it is necessary to reassure markets with effective measures."
AP writers Erika Kinetz in Mumbai, Tomoko Hosaka in Tokyo, Rod McGuirk in Canberra and Joe McDonald in Beijing contributed to this report.
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