Public investment, major tax cuts, financial sector reform and clearing up of non-performing loans
To support the continued economic development of Asian nations over the medium to long term, it is absolutely necessary to foster the growth of the supporting industries, particularly small- and medium-sized enterprises, upon which export industries depend. Needed measures include technical cooperation, yen loans, and investment loans by the Export-Import Bank.
In order to promote infrastructure development with private-sector resources, ODA should be used to play a supporting role. In projects carried out on a build-operate-transfer (BOT) basis, for example, ODA could be used to provide needed infrastructure such as power transmission lines.
Unemployment is expected to rise throughout Asia. In order to prevent a deterioration of law and order, Japan should cooperate with Asian governments in solving the problem of unemployment.
After restoring confidence in the yen, it is necessary to restructure Japan's financial and capital markets with the needs of users in mind, and to create an environment that will allow the yen to become internationalized. In particular, it is necessary to develop a secondary market for short-term government bonds.
Governments of Asian countries have an indispensable role to play in resolving private-sector debt. In addition to coordinating with other governments and with international financial institutions, the Japanese government should also cooperate with debtors and creditors to help bring about a successful rollover of short-term debts.
Government agencies must improve communication and carry out coordinated investigations and studies in order to formulate effective measures in an efficient manner. The government could also consider creating a new cabinet-level post for a minister of state with responsibility to address currency and financial crisis.
Introduce a proper risk management system, if progress is to be made toward the eventual elimination of restrictions on capital transactions.
All too frequent changes in laws and regulations frustrate efforts to make sound business judgments.
Involvement by national governments play in resolving the private-sector debt problem is indispensable. They should play an active role by participating in talks between creditors and debtors, especially on rolling over short-term debts.
Asian countries should examine the weak points of economic statistics currently in use. They need to develop an internationally acceptable method for measuring the true level of economic development. In addition, the improved system should be designed so that it can serve as a mechanism to prevent reverse capital flows.
(The Government of Thailand suffers from a serious shortage of personnel. Talented people prefer to enter the private sector rather than take up government service. Indonesia has hired about 70 foreign experts to help formulate financial and fiscal policies.)
In addition, the government should study and introduce the system to encourage the reflux of capital.
The government should monitor debt servicing and keep creditors informed thereof. Where repayment is in arrears, the government should provide guidance to private-sector debtors to get them to repay debts as stipulated by contract.
Require companies to make public disclosure of post-audit consolidated profit and loss statements, etc.
Japanese corporations should continue with their operations overseas, thus demonstrating their steadiness in cooperating with their host countries.
Japanese financial institutions and corporations which have been requested to reschedule short-term loans should seek effective and realistic measures to deal with these requests.
Japanese corporations should promote technical cooperation and increase the local procurement ratios of their overseas affiliates in order to foster the development of local industry and help strengthen the international competitiveness of the countries in which they invest.
Despite existing problems with the use of the yen in international transactions, efforts should be made to promote the switch of the yen starting in areas where it is possible.
While working together with the government, it is necessary to proceed actively with human resource development programs at the private-sector level. These should include offering training courses, accepting trainees and providing scholarships.
Taking steps to raise the local procurement rate is also an important way of strengthening the industrial base of Asian countries. This requires human resource development and the nurturing of supporting industries.
To promote medium- to long-term progress in the Asian region, it is necessary for the economic community to study the industrial structure of the entire Asian region.
Japanese affiliated-companies with operations in other Asian countries should strive to expand exports.
Companies make efforts to maintain and increase the level of investments from a long-term perspective.
To promote technology transfer through the development of human resources, Japanese companies should actively promote to send technical experts from Japan to other Asian countries and accept people for training in Japan. Also, it is important to set up educational activities regarding such questions as protection of intellectual property rights and smooth the way for technology transfer.
Local unemployment problems could lead directly to social instability. Japanese businesses operating in foreign countries should do their utmost to maintain the level of local employment, and there should be a strong effort toward localizing matters of personnel administration.
Companies operating in foreign countries must behave as good corporate citizens and respect the local culture and way of life. They should play a part in the social and economic recovery of the host country by contributing in both tangible and intangible ways to the well being of the local community.
Most private-sector firms are in very difficult straits, but they must make every effort to pay debts as stipulated in contracts. (Some private companies are delaying payment of bills not because they are unable to pay but because they are waiting to see the outcome of economic reforms.)
Companies should build a system of corporate governance that is suited to economic conditions in their home countries.
As Western corporations take over local firms in Asia, there is worry that these buyouts will result in large numbers of Western-style firings and layoffs. An effort should be made to establish sound labor-management relations, and due consideration should be paid to local economic and social conditions.
Promptly provide creditors with post-audit consolidated profit and loss statements immediately after the annual settlement of accounts, etc.
Enforcement of IMF conditionality has a severely deflationary effect on demand. The World Bank, the Asian Development Bank and other institutions should work to counter this by creating demand.
Studies should be initiated to consider possible rules to prevent disruptive flows of short-term capital.
Asian nations are being asked to liberalize their financial and capital systems too quickly. Developing nations should be allowed an appropriate amount of leeway in accordance with actual conditions.
Developed nations should actively support the creation of a mechanism for financial and capital transactions.
The governments should investigate a system of international cooperation for the stabilization of international capital flows.
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