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JULY 21, 2000 VOL. 26 NO. 28 | SEARCH ASIAWEEK Tasks for the G7 Besides setting goals, the Okinawa summit must take action When the leaders of the Group of Seven industrial nations pose later this month in Japan for their traditional group photo, they will have reason to smile. The sun seems to be shining all over the globe -- at least on those parts represented by the presidents and prime ministers gathering at the Okinawa resort town of Nago. In Europe, the economy is doing so well that there is talk of the region supplanting the United States as the world's engine of growth. And despite some worries about a market meltdown in North America, the boom continues. Even in long-slumping Japan, Asia's sole G7 representative, the latest Tankan survey of business confidence gives summit host Prime Minister Mori Yoshiro something to cheer about. Elsewhere in Asia, the dark days of the Crisis seem to be fast fading into history. South Korea's central bank now forecasts nearly 9% annual growth. Hong Kong is powering out of recession, registering a 14% expansion in the first quarter. Thailand, where the crash began, has shown a turnaround. Nations like Indonesia and the Philippines would be doing better if their recoveries were not dogged by domestic unrest and weak political leadership. It would be tempting for the G7 summiteers to declare victory and spend their time enjoying Okinawa's splendid beaches. Of course, the leaders must at least appear to have important work to do. So the G7 finance ministers, meeting in Fukuoka last week, want to make combating international financial crime a main topic. A worthy issue, no doubt, but hardly the sort to be bringing together the leaders of the world's most affluent and influential nations. (Maybe it would be good for a summit of the globe's top police officers, though.) More worthwhile, in the realm of finance, would be concerted action on long-mooted suggestions to monitor worldwide capital flows, which wreaked such havoc during the Crisis. That is a key issue Japan should press, on behalf of its Asian neighbors. The Japanese, though, seem eager to make information technology the summit's centerpiece. The topic is timely and on the cutting edge of the global economy, to be sure. It would also be the first time that the G7 and the preceding meeting of finance ministers have addressed IT collectively. The major goals -- spreading technology's benefits through enhanced competition, closing the digital divide between developed and developing nations, helping nurture human potential -- are all worthwhile, if a bit vague. The implications of the worldwide high-tech revolution need to be addressed at the highest levels. Yet the approach underscores a longstanding weakness of the G7 summits. Too often, the participants flit from one topic to another with little continuity or follow through. The big theme of last year's meeting in Germany was debt relief for impoverished nations. It seemed that real progress had been made on solving the developing world's debt burdens. A year on, however, only five of the 40 or so "heavily indebted poor nations" have had any kind of relief. Jubilee 2000, an organization promoting debt cancellation, says that only $15 billion of the $100 billion promised a year ago has been excused. Funding for $600 billion in forgiveness pledged by U.S. President Bill Clinton has been held up by Congress. Meanwhile, Japan seems uninterested in putting the issue under this year's spotlight. So the momentum may fade before even a single country has had its debts canceled. Yet, within the IT ambit, the G7 should assist developing nations by finding specific ways to help them tap into the Internet economy. Tokyo had also wanted to use the Okinawa summit to push its long-standing effort to become a permanent member of the United Nations Security Council. At present, only China among Asian nations holds a permanent seat -- and a veto -- on the powerful body. Such a move, Japan argues, would put it in a better position to serve as a spokesman for Asia on important global matters. But Tokyo has run into opposition from Italy, which worries that if Japan gets a permanent seat, one will have to go to Germany as well. So the subject will likely be off the agenda, unless it gets fresh impetus when the G7 foreign ministers meet this week. Right now, Japan isn't in the best condition to serve as a voice for Asia. Despite glimmerings of a recovery, its economy remains weak. If Moody's downgrades the country's credit rating once again, it will have the lowest one among the G7. Japan's public debt is now about 130% of GDP, higher than any other industrialized nation. Its recent general election did not provide Mori's government with the mandate or the seats in parliament to push any reform program vigorously. Yet Asia, to recover strongly, sorely needs a prospering Japan. The leaders of the G7 should not become complacent about the relatively rosy economic outlook. Important structural reform still lags in many Asian countries, including those -- like South Korea -- that are now back on a growth curve. A host of ideas to retool the global financial architecture, to change the way the International Monetary Fund lends money to cash-starved nations and to develop an Asian "self-help" fund have languished during the past year or so. All these issues deserve serious attention from Okinawa's summiteers -- before another crisis sets in. Write to Asiaweek at mail@web.asiaweek.com
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