Not surprisingly, the most difficult relationship for the Secretariat to work out was that with the Working Groups. Some of the groups had been established in Canberra at the founding meeting, and all were self-financed until a central budget was established in 1992. They were used to operating quasi-independently, and some of them did not want to accept the authority of the Secretariat acting on behalf of the Senior Officials.

It should be kept in mind that the Working Groups were, in effect, international committees with an ever-changing membership. This made the whole issue of accountability very difficult. It was a challenge to set up a system that assured: 1) competitive bidding; 2) disbursements in conformity with the regulations set up by the Secretariat and approved by the Senior Officials; and 3) final reports that the work had been completed.

To complicate matters, many of the projects approved under the 1993 budget had been drawn up hastily to take advantage of available central funding and were not very well thought through. There was also some confusion as to exactly what the funds could be used for. We began by using as a guideline the paper prepared by the United States in connection with the 1993 budget. However, each succeeding SOM mandated ever tighter restrictions on the use of funds. By the Seattle Ministerial Meeting, respective SOMs had narrowed the authorized use of funds to publications and consultants. Some of the member economies became very protective of particular Working Groups and would recommend exceptions for certain projects in direct contradiction to the restrictions they had originally insisted upon.

Most of the professionals working at the Secretariat were assigned as liaison officers to particular Working Groups. Some of the Working Groups quickly adjusted to the new situation and made good use of the Secretariat liaison officers. The hard work and keen analytical skills of Park Jin-Ho, Merry Wickes and Peter Richards were appreciated and utilized by their Working Groups. Other groups treated the liaison officers as interlopers and blamed them for their frustrations with the Secretariat.

Vietnam's economic policy reforms began at the end of the 1970s and by the end of the 1980s the economy was moving towards a free market. The restructuring process has been protracted and difficult, but the changes that have been made are fundamental and radical and have farreaching consequences. The macro-economic reforms have created a conducive business environment, and the free-market economic activities now possible have contributed tremendously to Vietnam's economic growth.

This rapid growth comes at a price, however. The policy changes implemented to restructure the economy were disruptive and have not left the social fabric intact. Fortunately, the definite progress made in raising the living standards of the population enables the economy to withstand some inevitable negative effects on society. Vietnam is thus spared of the chaos and disintegration that some of the East European countries experienced when their economies underwent restructuring.

Nevertheless, more needs to be done before Vietnam can become a full-fledged market economy. Important decisions have to be made with regard to issues such the strategy of long-term development, the role of the state in a market economy, the balance between economic growth and social equity, and natural resources and the environment. This calls for a team of capable and judicious policy-makers with the courage to make difficult decisions for the good of the country.

As a participant in the global economy, Vietnam has to deal with external constraints as well as internal “bottlenecks” to its economic growth and development. These include:

1. • limited foreign exchange, capital involvement, and international assistance because of the continuing U.S. embargo against Vietnam;

2. • the lack of an adequate infrastructure;

3. • the lack of adequate market economy managerial know-how.

With a pragmatic leadership, Vietnam can certainly overcome constraints and consolidate its growth in the near future.

The year 1992/93 was fruitful in political and economic terms for Indochina. Laos and Vietnam acceded to the ASEAN Treaty of Amity and Co-operation and attained observer status in ASEAN. In Cambodia the general election was successfully held under the auspices of the United Nations Transitional Authority in Cambodia (UNTAC) in May 1993 and a new constitution was promulgated with the approval of the newly formed General Assembly in September 1993. Moreover, in July 1993, the United States lifted its objections to Vietnam's return to the International Monetary Fund by authorizing the discharge of Vietnam's debt. All these developments point to better times ahead for Indochina.

Vietnam

Overview

Vietnam's economy grew by 5.3 per cent in 1992 after the launch I of economic reforms in the last few years. Furthermore, for the I first time in its modern economic history, its balance of trade and current account did not show deficits. More remarkable was the fact that these have taken place in spite of the cessation of aid from, and a sharp fall in trade with, the former Eastern Europe and the continuing impact of the U.S. embargo.

The promising performance in 1992 was attributable to high growth in the industrial sector (15 per cent) as a result of rehabilitation and growth of the major industrial sectors after restructuring. In the agricultural sector, growth stabilized at 3 per cent with food production of 24 million tonnes, of which 1.5 million tonnes were exported. The surge in exports of rice, marine products, and crude oil contributed 26 per cent to export growth. Imports grew by more than 14 per cent during the same period. As a result of this, there was no trade deficit in 1992-93. The rapid expansion of exports along with the positive invisibles balance, including transfers, improved the current account in the balance of payments. Moreover, foreign direct investment (FDI) increased significantly, from US$1.2 billion in 1991 to US$2.0 billion in 1992.

In this paper I will try to present a candid overview of the current state of the banking scene from the viewpoint of the central bank, while my colleague, Mr Manggi Habir (Habir, this volume), will present private sector observations. I hope this will be helpful, because the strength of any banking and financial system derives not only from the spirit in which it is established, but also from the maintenance of an open dialogue between all of its participants.

My presentation will begin by outlining the reasons for, and objectives of, the process of bank deregulation, and then turn to discuss the problems faced by the central bank as a result of this deregulation and the steps we are taking in order to deal with them.

The deregulation process: rationale and objectives

Let me begin by re-capping the history of deregulation in the Indonesian banking sector. This process has been implemented step by step over the years, beginning in June, 1983, when Bank Indonesia (BI) liberalised interest rates for both borrowers and depositors; phased out ‘liquidity credits’ (i.e. subsidised refinancing of bank loans); and eliminated the ceilings which had been imposed on bank lending. A market-oriented approach to monetary control was adopted that relied more on the development of indirect monetary instruments such as BI certificates (SBIs), introduced in 1984, and money market securities (SBPUs), introduced in 1985. These two instruments enabled BI to implement its monetary policy using open market operations, but the instruments also served as alternative earning assets for the banks in absorbing their excess liquidity.

The initial reforms had several positive effects on the economy- Most important, the new money market instruments enabled the government to provide a flexible monetary dimension with which to better control important economic variables, such as inflation, interest rates, and capital flows. Moreover, with continuing rapid economic growth, it was necessary for the government to create appropriate conditions for the further development of the banking and finance sector.

Our group from the APEC Secretariat returned to Singapore tired but delighted with the outcome of the Seattle meeting. I held a series of briefings, first with the APEC ambassadors and then with other interested diplomatic missions in Singapore. A delegation from the European Union embassies, led by the German Ambassador, who was clearly there under instructions, called at the Secretariat. He evidently found the whole situation beneath his dignity and looked upon us with disdain through his monocle. Most of his ambassadorial colleagues were delighted to be brought into the picture so that they could report home with some new insights about APEC. Not surprisingly, there was a great deal of interest around the region as to what happened in Seattle.

In my closing weeks, I went to Kuala Lumpur to meet with government officials, and spoke to the first ever joint meeting of the Malaysia–Canada Business Council, the American–Malaysian Chamber of Commerce and the Malaysia–Australia Business Council. I waited until after the Seattle meeting to make my first visit to Malaysia, as I saw no reason to provoke the Malaysian Government. In fact, in Seattle after the Ministerial Meeting, the Malaysian Trade and Industry Minister Seri Rafidah Aziz was most gracious in conveying her compliments for what we had accomplished at the Secretariat. I also spoke at the American Chamber of Commerce meeting in Singapore, and the Hong Kong Chamber of Commerce, and made a quick trip to Hawaii to speak at a CSIS–East-West Center conference.

My last task at the Secretariat was to oversee the negotiations with AT&T for the ACDS. This was achieved in time and I signed the agreement just a few days before leaving to return to the United States.

Ingrid and I went through a round of farewell events, which was not easy, as we had developed strong ties to Singapore in the short time we were there.

Vietnam is a medium-sized country, with an area of about 331,700 square kilometres, and a population of about 70 million. It is blessed with rich natural resources, with considerable reserves of coal, oil and gas, bauxite, and rare earth, as well as luxuriant vegetation throughout the year, thanks to the humid tropical climate.

It also has a large labour force, which is younger in age and better educated compared with other countries at a similar level of per capita income. Good workmanship, creativity, and a high regard for innovation are inherent in the Vietnamese, and this enables them to quickly absorb scientific and technological advances.

Vietnam's ability to safeguard its independence as well as overcome great socio-economic difficulties in past decades provides grounds for believing that with a capable leadership at the helm implementing appropriate and timely policies, the country is able to hasten up its pace of economic development and participate in the world economy.

Vietnam's history saw incessant wars waged till the mid-1970s to safeguard the country's independence and unity. Partially on account of this, many generations of Vietnamese had missed out on the opportunity to learn and accumulate experience in the field of economics. North Vietnam's centrally planned economy was based on that of the Soviet Union and other socialist countries, though this model was greatly altered by war circumstances. In South Vietnam an economy with a colonial structure continued to survive, and it relied on preferential aid and assistance from the powers that participated in the war.

After the unification of the country in 1975, Vietnam was intent on working out a path of development suited to its own unique conditions, and this it did largely by trial and error. Hampered by the deficiencies and innumerable obstacles of an underdeveloped and a war-ravaged economy, Vietnam nevertheless struggled to renew its economy, and this within the context of a rapidly changing world. Finally, a marketoriented economy together with its new institutions has begun to take shape.

In its fifth year of rule, the State Law and Order Restoration Council (SLORC) continued to consolidate its hold on the country and measures to enhance the status and ensure continuity of the top military leadership were undertaken. In the mean time, SLORC's version of democratization has continued. The focus has been on the formulation of a “firm” constitution as a prelude to the transfer of power to a representative government. A constitutional convention was held in January with the overall objectives of establishing a genuine multi-party democracy, promoting justice, liberty, and equality, and instituting the military's participation in the national political leadership role of the future state. The “National Convention” deliberated on the principles underlying the state structure, political representation, and the administrative configuration. Some of these fundamental principles such as the executive presidency, the direct role of the military, and the statutory right of the military chief to assume state power in a national emergency, though endorsed by the National Convention Convening Commission, failed to win unanimous support among the participating groups. Nevertheless, when the Convention adjourned in September these principles appeared to have been established as a basis for further elaboration.

On the opposition front, the National Coalition Government of the Union of Burma (NCGUB) appears to be in disarray with two of its ministers murdered under mysterious circumstances and its foreign minister dismissed in absentia. Although its members were favourably received by officials of some Western governments in private, the parallel government did not receive any official recognition.

The government's unilateral suspension, in April 1992, of military offensives in the Karen state remains in force. On the other hand, the military component of the anti-SLORC coalition Democratic Alliance of Burma (DAB) has suffered a major set-back as the Kachin Independent Organization (KIO), its most powerful military ally, and the government announced a cease-fire in October 1993.

Ministers from Australia, Brunei Darussalam, Canada, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and the United States gathered in Canberra, Australia, on 6–7 November 1989 to discuss how to advance the process of Asia–Pacific Economic Cooperation. A full list of Ministers and Observers attending the Meeting is attached.

Discussions covered a variety of topics under four agenda items:

1. • World and Regional Economic Developments

2. • Global Trade Liberalization — The Role of the Asia–Pacific Region

3. • Opportunity for Regional Cooperation in Specific Areas, and

4. • Future Steps for Asia–Pacific Economic Cooperation

At the conclusion of this first meeting, Ministers expressed satisfaction with the discussions, which demonstrated the value of closer regional consultation and economic co-operation on matters of mutual interest.

Ministers also expressed their recognition of the important contribution ASEAN and its dialogue relationships have played in the development :o date of APEC, and noted the significant role ASEAN institutional mechanisms can continue to play in supporting the present effort to broaden and strengthen regional economic co-operation.

MULTILATERAL TRADE NEGOTIATIONS

The discussions on world and regional developments, and on global trade liberalization, focused particularly on the need to advance the present round of Multilateral Trade Negotiations (MTN). Every economy represented in Canberra relies heavily on a strong and open multilateral trading system, and none believes that Asia–Pacific Economic Cooperation should be directed to the formation of a trading bloc.

Ministers agreed that the further opening of the multilateral trading system was of substantial and common interest for all countries in the region, and that the Uruguay Round represents the most immediate and practical opportunity to pursue this objective on a broad basis. In particular, Ministers reaffirmed their commitment to open markets and to expand trade through the successful conclusion of the Round by December 1990.