Malaysia Plays Maverick Host to Pacific Rim Talks

BANGKOK, Thailand — An explosive mixture of political and economic turmoil promises to turn a normally staid economic gathering--whose participants include President Clinton and his counterparts throughout the Pacific Rim--in Malaysia into a several-ring circus starting this week.

The maverick host, Malaysian Prime Minister Mahathir Mohamad, has set the stage for the annual meeting of the Pacific Rim’s premier free-trade club by jailing his internationally respected top deputy on sodomy charges and imposing policies that fly in the face of the group’s mantra: the free movement of money and goods.

With Mahathir a virtual pariah among world leaders and the target of street protests by his own citizens, and Asia staggering through an economic crisis that has thrown tens of millions into poverty, it’s fair to say the Asia-Pacific Economic Cooperation forum will be happy to just muddle through the week intact.

Clinton and other Pacific Rim leaders arriving for meetings in Kuala Lumpur culminating in a Nov. 17-18 summit are trying hard to distance themselves from the headstrong Muslim leader. Clinton, for example, won’t meet with Mahathir.

Malaysians will try to make things a little less awkward for the visiting dignitaries by temporarily recessing the sodomy and corruption trial of the former deputy prime minister, Anwar Ibrahim, that began last week. But the atmosphere will be heavy with irony and friction as Mahathir and his fellow leaders, trade officials and pro-Anwar forces jockey for attention from the world’s press.

“Mahathir’s problems could easily overshadow the APEC process and the broader economic problems in the region,” said Mike Jendrzejczyk, Washington director for Human Rights Watch/Asia.

Mahathir’s behavior notwithstanding, Asia’s dramatic change of economic fortune has created an identity crisis for APEC, a 9-year-old organization created during a time of seemingly limitless opportunities and wealth.

Mahathir--who until lately was widely praised for pushing Malaysia’s plantation economy toward the 21st century--is not the only APEC leader to question the wisdom of opening borders faster. Retreat from that could jeopardize the group’s goal of an Asia-wide free-trade zone by 2020.

Already, moves by Japan and several other APEC governments to slow the process of economic liberalization threaten to derail the main trade measure being presented at this year’s meeting--rapid tariff reductions in chemicals, telecommunications, forestry and six other industries.

“I have warned others that this time in Kuala Lumpur we should be prepared to hear a stronger note of hesitation about globalization,” said Thai Foreign Minister Surin Pitsuwan, one of Southeast Asia’s younger and more democratically oriented new leaders. “We shouldn’t be surprised if some members are saying that they don’t want to move as fast.”

APEC Faces New Challenges Today

Since its inception, APEC has--in spite of critics who have dismissed it as four adjectives in search of a noun--helped to give Asia’s disparate countries a sense of common purpose and served as a forum to negotiate thorny disputes.

But now APEC must convince its critics that a loosely knit organization born during a time of plenty can offer credible solutions to a region in crisis.

Adding to APEC’s woes is a leadership vacuum created by the economic wildfire and personal scandals that have shaken confidence or toppled governments.

The financial crisis that began in Thailand in July 1997 has deposed leaders in four APEC members: South Korea, Thailand, Indonesia and Japan. And Clinton, whose strong support has lent APEC considerable prominence, is fighting impeachment.

This vacuum has provided an opening for Mahathir, a longtime Asian nationalist who didn’t want the United States allowed into APEC in the first place, to promote his own vision of Asia’s future.

“The fact that Mahathir is hosting APEC with the anti-democratic, anti-market direction of his recent actions doesn’t augur well for those who put APEC together in 1989 to have a vehicle for regionwide globalization and democratization,” said Doug Paal, president of the Washington-based Asia Pacific Policy Center.

But international outrage remains high over Mahathir’s handling of Anwar, a charismatic politician who, as finance minister, had developed close friends among the world’s financial elite, including U.S. Treasury Secretary Robert E. Rubin and World Bank President James Wolfensohn.

Anwar was arrested in September after he publicly criticized Mahathir’s fiscal leadership and called on him to quit. Anwar’s trial began last Monday. He says Mahathir, in a bid to silence his views, fabricated the charges against him.

Clinton concluded that APEC was too important to boycott over Mahathir’s behavior and policies. But the president will not treat the event as an official state visit.

“Our concern about [Anwar’s] situation is very clear,” said John Wolf, the chief U.S. APEC representative and a former ambassador to Malaysia. “But it’s a separate issue, and we hope it remains a separate issue from the whole question of the APEC meeting.”

Other Asian leaders are following suit. In an unusual display of regional discord, Indonesian President B.J. Habibie and Philippine President Joseph Estrada have lashed out at Mahathir. They have since indicated that they will attend the meeting in Malaysia, but Estrada also may try to meet with Anwar.

Mahathir has been clamping down on street demonstrations as the APEC meeting nears, but keeping the lid on criticism will become increasingly difficult as citizen activists begin arriving in the capital for a separate “Asia-Pacific People’s Assembly” to address what they call the dark side of free trade.

During previous APEC sessions, these free-trade critics were relegated to the sidelines. But Asia’s economic collapse gives new credibility to their attacks on globalization.

Wolf, who expects the negotiations over the trade package to go down to the wire in Kuala Lumpur, said a weak APEC commitment to economic liberalization would provide ammunition for trade critics unhappy over the ballooning U.S. trade deficit. U.S. protectionist sentiment has soared in recent days over a flood of Asian and Russian steel.

“Asians need to understand that success . . . will help us here in the U.S. push back against the calls for protectionism that are certain to come with rising trade deficits,” he said.

Lively Debate Likely Over Currency Control

For all the grumbling in Asia about “hot money,” however, Mahathir is unlikely to garner an APEC endorsement for his pet issue--curbing the short-term capital flows that he blames for last year’s currency crisis.

The debate promises to be lively because the concept of currency controls has gained respectability in academic circles and has been considered by some neighboring governments, such as Indonesia.

Thailand and Malaysia are going to call for a “world finance organization” that would regulate global financial transactions, according to the Nation, a Bangkok newspaper.

Proponents of controls point out that the two Asian giants with the most restrictions on currencies, China and Taiwan, have fared the best during the regional crisis. Even the U.S. now backs better regulation and monitoring of capital movements.

But most APEC governments remain opposed to currency restrictions on a regional basis. Although Malaysia’s currency and stock market have stabilized, critics believe that the nation has crippled its prospects by scaring off foreign investors.

Gabriel Singson, governor of the Central Bank of the Philippines, said his country’s 44-year experiment had proved that currency controls are not only ineffective but lead to a black market and corruption.

“You cannot go against the market,” he warned.

APEC’s leaders are expected to endorse some kind of vague statement calling for greater financial oversight and monitoring similar to that embraced by the International Monetary Fund, the World Bank and the Group of 7 industrialized nations.

Takeshi Kondo, managing director of Japan’s giant Itochu Corp. and an APEC supporter, cautioned against building up expectations for this year’s meeting that cannot be met given today’s crisis mentality.

“It is wrong for us to say that unless we do this or that, the [APEC] process will be killed,” he said. “We are in a very difficult position. We need to try to protect the APEC process regardless of the degree of progress in any one year.”