May 16, 1999
Web posted at: 4:04 a.m. EDT (0804 GMT)

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LANGKAWI, Malaysia (CNN) -- Members of the Asia-Pacific Economic Cooperation forum warned on Sunday that Asian economies still face major risks despite signs of recovery from recession this year.

Finance ministers from the 21-member APEC forum issued a joint statement following their two-day meeting in Malaysia, noting that the financial crisis in Asia has abated, amid a return of investor confidence and improved economic outlook.

But the finance ministers, who have been trying to develop strategies to prevent the kind of crisis that crippled many Asian economies over the last two years, warned of "significant risks."

Their statement singled out Japan as a concern. "Policies need to be supportive until deflationary pressures ease and a revival of private demand is firmly underway," it said.

During the meeting, the United States warned against complacency in Asia, urging governments not to relax on reform and Japan in particular to keep up its fight to overcome recession.

The finance ministers said on Sunday they were encouraged by an economic upturn in South Korea, Malaysia, the Philippines, Thailand and Indonesia, and congratulated China for maintaining growth and pursuing financial-sector reform amid the crisis.

Worries over commitment to reform

Earlier, International Monetary Fund Managing Director Michel Camdessus told reporters a consensus was emerging that more countries should participate in a new group to study ways to stabilize the global financial system.

The Group of Seven industrialized countries created the Financial Stability Forum as Brazil was swept deeper into a world financial crisis last year. Asia's developing economies also want to take part in the forum.

Ministers were expected to welcome the IMF's new Contingency Credit Line, a package that allows countries with a certain mix of policies to qualify for quick help.

Some delegates had been concerned that Asian economies will be less committed to reform, now that growth has returned.

"This is the permanent risk," Camdessus said, before the APEC statement was issued. "When success starts appearing, when the markets start coming to a more positive view of the country...something you are starting to see in Asia, then the risk is complacency."

"Ministers at this stage know that this risk of complacency is there, and instead of succumbing to it, they must redouble their efforts to have the reforms behind them as soon as possible," Camdessus said.

APEC includes Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore, South Korea, Taiwan, Thailand, the United States and Vietnam.

U.S. policy on dollar won't change

Also at Sunday's APEC meeting in Malaysia, U.S. treasury secretary-designate Lawrence Summers said there would be no change in U.S. dollar policy and that he was in favor of a strong dollar.

In his first public comment on the issue since he was nominated to succeed Treasury Secretary Robert Rubin when he steps down in July, Summers said a strong currency was in the United States' national interest and had contributed to a strong economic performance.

"As Secretary Rubin and I have both said many times, a strong dollar is very much in America's national interest," Summers told reporters.

"The dollar cannot and should not be a tool of trade policy."

He added a strong currency helped to control inflation and thus, keep interest rates down.

For many years Rubin has consistently expressed his support for a strong dollar, but some in financial markets have wondered whether Summers would continue in his tradition when he takes over the Treasury top job.

Reuters contributed to this report.

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