Asia fears fallout of U.S. war with Iraq

KUALA LUMPUR, Malaysia -- Asian leaders fearful of a U.S. attack on Iraq urged more cooperation and better ties to defend against economic erosion and hedge against any potential fallout.

"No matter how much we predict, how much we try to extrapolate the figures ... this war is going to threaten, to negate all prospects and all plans for future growth anywhere in the world, especially in Asia," Malaysian Trade Minister Rafidah Aziz said Sunday.

Rafidah, speaking to business leaders on the opening day of the East Asia Economic Summit, an annual conference organized by the World Economic Forum, warned that fallout from a new war in the Middle East could be widespread.

It could push up oil prices that are already bumping up against $30 a barrel, harm shipping and derail key economies such as the United States and Japan, which are many Asian nations' biggest trading partners.

As President Bush talks about regime change in Iraq, Asian countries and companies should move closer to "try to make Asia work for Asia," Rafidah said.

Japan's financial services and economics minister, Heizo Takenaka, said a key issue facing the region is dependence on the U.S. market, leaving exporters here exposed to fluctuations in American consumer demand.

Thai Prime Minister Thaksin Shinawatra agreed that Asian nations should work more closely, noting that the "twin calamities" of the Asian financial crisis in 1997-98 and the Sept. 11 attacks were "choking the two main growth engines of the world, the United States and Japan."

Although Asian nations are less integrated than members of the European Union -- most of whom share a single currency, the euro -- Thaksin suggested Asia establish a regional bond market.

The market would serve "as a financial instrument to help in maximizing our continent's potential and prevent exploitation of our reserves by others against the interest of ourselves," Thaksin said.

Malaysian Deputy Prime Minister Abdullah Ahmad Badawi called for a regional secretariat to forge stronger ties between the 10-member Association of Southeast Asian Nations and China, Japan and South Korea -- an informal group dubbed ASEAN Plus Three.

Other ASEAN countries have proffered a lukewarm reception to the proposal, noting it could interfere with the functions of ASEAN's secretariat in Indonesia.

Abdullah said any meaningful reform of global financial institutions -- which many in Asia view as culprits in the last economic calamity -- is unlikely unless the West runs into serious economic trouble on its own.

Separately, Takenaka said he hopes to announce by the end of October a framework for cleaning up bad bank loans that have plagued Japan, Asia's largest economy, for more than a decade.

Japan needs to ascertain whether banks have accurately counted their assets, whether there is enough money in the banking system, and whether bank executives are practicing adequate corporate governance, Takenaka said.

ASEAN's members are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

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