The Williamsburg Conference 1998
The 1998 Williamsburg Conference Statement: Responding to Asia's Economic Crisis, Queenstown, New Zealand, March 20-23, 1998.
Over the past year, the Asia-Pacific region has been
buffeted by the most serious economic crisis since World
War II. Largely unanticipated, its scope was grossly
underestimated. The crisis is having profound effects
on the region and the rest of the world.
To better understand this crisis and its consequences,
the Asia Society in partnership with the Asia 2000 Foundation
of New Zealand brought together leaders in government,
business, academia and journalism from 18 countries
and economies on both sides of the Pacific for the twenty-sixth
Williamsburg Conference. Held in Queenstown, New Zealand
on 20-23 March, the conference was convened by Tommy
Koh of Singapore, Yoshio Okawara of Japan, and Nicholas
Platt of the United States. This is the first time in
its history that the Williamsburg Conference has been
convened in New Zealand.
Although the participants were especially concerned
about the current economic crisis and avoiding another
one, they examined three other related issues: political
transitions in the region: the role played by the major
powers - namely, China, Japan, and the United States;
and the relationship of Australia, New Zealand and the
Pacific Islands with Asia.
Economic
Crisis
The participants warned that the consequences of the
crisis have yet to be fully felt. There was broad consensus
about the reforms required at the national level, including
strengthened banking systems, effective prudential supervision
and regulatory capacity, and improved transparency and
accountability in business and government. Participants
endorsed the need for continuing trade and investment
liberalization through the APEC and WTO processes.
There was vigorous debate about the appropriate international
responses to the crisis. It was the unanimous view that
the IMF has a central and irreplaceable role in restoring
international and domestic confidence in the affected
economies. There was agreement that the IMF measures
should be tailored to the particular circumstances of
each country. In addition, bilateral, regional and international
assistance will be required to finance trade. Humanitarian
aid may be required to relieve social distress in some
countries.
Discussing the realities and risks of the new global
capital market, the participants agreed on the need
for sound macroeconomic and fiscal policies (particularly
avoiding borrowing short term to finance long-term projects),
and the maintenance of transparent and accountable financial
systems. Greater regional financial cooperation, such
as early warning systems, could also play a role.
Political Transitions
The participants recognized that the current economic
crisis has influenced important political transitions
in some parts of Asia. Indonesia was a subject of particular
concern. Participants noted that countries with a functioning
succession mechanism are better able to cope with the
pressures of change. The participants also agreed that
good governance and improved transparency would encourage
a more participatory and accountable relationship between
government and their people.
Oceania and Asia
Discussion on the links between Australia/New Zealand
and Asia centered on the evolving dynamic nature of
those links and the possibility of "multiple identities."
Neither country is Asian, but both countries are part
of the Asia-Pacific community, and movements of people,
goods and services, investment, and ideas are increasingly
linking these countries to Asia. Participants emphasized
that despite the current financial and economic crisis,
the Asia-Pacific remains at the top of the foreign policy
agenda of Australia and New Zealand.
Williamsburg 1998 saw the South Pacific discussed for
the first time. While globalization may provide niche
opportunities for the countries of the South Pacific,
many of the problems faced by the region - global warming,
drought related to El Niño, pollution from forest
fires, -- are also challenges to many other countries
in the Asia-Pacific region. Participants agreed that
a number of the challenges cannot be controlled or dealt
with by Pacific Island states alone.
The Major Powers
Relations between the United States and Japan are going
through a positive phase based on viable security alliance
arrangements. Relations between the United States and
China have improved following a period of stress. Increasing
interactions among China, Japan, Russia, and the United
States were also noted. The Asian financial crisis has
occurred in a period of strategic calm. Responses of
the major powers to the crisis are important to the
solution to the crisis. However, if such responses are
not coordinated and mutually supporting they have the
potential to cause misunderstanding and friction.
Participants welcomed Japan's contribution to the IMF
rescue packages for Thailand, Indonesia and Korea, as
well as its various forms of bilateral assistance. The
Japanese economy will remain stagnant unless appropriate
initiatives are taken. This stagnation will have significant
implications, given the importance of the Japanese economy
as a driver of regional economic growth. A number of
participants urged Japan to take steps to reflate the
Japanese economy. Others noted that this would be difficult
for Japan given its high level of non-performing assets,
worsening public debt position and aging population.
It was agreed by all that Japan's capacity to reinvigorate
its economy will have a vital impact on regional recovery.
Participants agreed that China's commitment to maintain
the current value of the renminbi is an essential contribution
to Asia's recovery. They also noted that some of the
lessons of the financial crisis might be of value to
China: in particular, that systems for good financial
governance need to be put in place before financial
markets are deregulated.
Participants noted that the United States, if it is
to respond effectively to the crisis, should continue
to support the IMF efforts to restore confidence in
regional economies. It should also keep its markets
open, support further trade liberalization including
"fast-track authority," and maintain its security
commitments to the region.
Conclusion
The future is unpredictable and there is more than one
plausible scenario. However, the participants expressed
confidence in the future of the region of its strong
economic fundamentals. If the affected economies institute
the requisite reforms and restructuring they are likely
to bounce back. A stronger and more competitive Asia
is likely to emerge from the crisis.