[asia-apec 1554] APEC on Oil prices

[APEC Monitoring Group]

Singapore Straits Times 10/09/00

Oil prices: Apec sees no threat

Forum nations confident of riding the cycle out and upbeat about economic
outlook; IMF forecasts highest growth for global economy in over a decade



By DOUGLAS WONG IN BANDAR SERI BEGAWAN


FINANCE Ministers of the Asia Pacific Economic Cooperation (Apec) forum are
expected to announce, at the end of their meeting here today, that their
growth outlook is strong and unlikely to be derailed by high oil prices.

The rising oil prices that have hit 10-year highs had found their way into
discussions yesterday.

And there was talk of a sharp split among the ministers over how to approach
the issue.

But New Zealand's Finance Minister Michael Cullen denied there was a split
and told reporters that ""there was a broad consensus among both
oil-producing and oil-consuming members that what we seek is greater
stability in prices over the medium term''.

Enough of the forum's participants must have thought this was achievable,
since the meeting's chairman and Brunei's Industry Minister Pehin Abdul
Rahman Taib told reporters that most of Apec's 21 economies were ""very
optimistic'' about their economic outlook.

More good news came from the International Monetary Fund (IMF) which
reported to the ministers that it was forecasting 4.75 per cent growth for
the global economy this year, the highest in over a decade.

On the same theme, Singapore's Second Minister for Finance Lim Hng Kiang
told The Sunday Times that yesterday's discussion confirmed that the Asian
economic recovery was broad-based, and that the response of Apec governments
had been appropriate.

""After sharing our experiences, we're clearly upbeat about our prospects,''
he said, adding that the risks from oil-price-induced inflation and
over-valued equity markets ""are not a major threat'' to the global economy.

Noting that studies have shown that oil prices of US$30 a barrel would at
most take half of a percentage point off global economic growth, he said:

""It's not something that will knock the world economy off its very strong
growth path.

""We have to ride the cycle out.''

Apec groups a diverse range of economies, from oil producers Brunei,
Indonesia, Malaysia, Mexico, the United States and Russia to major consumers
like Japan, South Korea and Thailand.

While the last two in particular expressed concern about high oil prices,
the producing countries pointed out yesterday that they do not actually have
the capacity to produce more oil now. When prices slumped to US$10 a barrel,
their economies had been hit badly.

Said Mr Lim: ""Nobody is in favour of such massive volatility, so we should
strive for a more stable oil market.''

In reviewing the recent Asian financial crisis, Apec finance ministers were
in broad agreement that national and international systems should be
strengthened, and that social safety nets should be developed.

""We're in an era of very massive capital flows which can be volatile -- but
we were broadly agreed that the benefits outweigh the potential risks, so we
have to live with this by strengthening our systems,'' Mr Lim said.

A number of initiatives, such as better banking standards and training of
financial officials, are under way under Apec to this end.