GRANT:
As we mentioned to you earlier, the two day APEC Finance Ministers' Meeting is set to kick off in Phuket. Now this meeting has certainly been under the spotlight due to US Treasury Secretary John Snow's visits to Japan and China this week, calling for China to revalue its currency. The value of the Yuan may be discussed in Phuket. There are other issues as well on the table such as fighting the flow of money to terrorist groups. For more on what to expect at the meeting we are joined by Australian Treasurer, Peter Costello. Mr Costello thank you very much for your time. We will talk about the Yuan in just a minute. First of all address the, what is probably in many people's minds the top of the agenda here, and that is cutting off funding to terrorists and prosecuting the war on terror properly in this part of the world. How significant an issue will that be?
TREASURER:
Oh this is a very significant issue. We have got a situation where terrorists can be tracked through the money trail. To some degree they need money to finance their activities, they move money internationally. Now as you increase the capacity to track those funds, you also increase the capacity to cut them off hopefully before they're used. And so assisting countries in the region to develop sophisticated financial tracking systems, to report on those systems, to intercept and to freeze assets is a very big part of the war against terror.
GRANT:
It's easier said that done isn't it? One of the criticisms of the ability of nations in this region to deal with the terror threat is getting countries to actually work together. How do you go about achieving that?
TREASURER:
Obviously you would do it at a regional level through various fora - APEC is one of them. The thing is, that in relation to the financing of terrorists, sometimes it can be done with quite small amounts and so the systems have to be quite sophisticated to pick up money which is being moved by persons of interest and to report it. And in addition of course, the capacity, this has been supported by work at the UN at the international level, the capacity to freeze the assets of terrorists or terrorist like organisations, or organisations that have been proscribed is also very important to try and stop it at its source.
GRANT:
We saw that the sentencing the other day of Abu Bakar Bashir, four years in jail for many would say being involved with Jemaah Islamiah many think that's a lenient sentence, what's your view on that and how much more difficult does it now make it to deal with the terror threat when you can't get adequate sentencing against people that many point the finger at as being directly involved in terrorism?
TREASURER:
Well, I would point out that in relation to the Bali bombing, of course, numbers of people that have been involved have already been brought to trial and there has been very strong cooperation there with Indonesian authorities, also Australian Federal Police have been assisting there and there have been some very tough sentences which have been handed down. Of course as you move back up the chain it's a question of proof, you have to make sure that you have proof of involvement. Sometimes it's harder to find. But it's intelligence cooperation I think that is going to help in these areas as all of the countries realise in this region that they have an interest in stopping terrorism. All of them realise that terrorism threatens their leaders and their peoples and I think the heightening of cooperation and information sharing and swapping is going to assist very much in bringing those people to justice.
GRANT:
Now the China Yuan, we saw Treasury Secretary John Snow from the US up there just this week trying to get China to move on that and revalue the currency. Is it imperative that China moves on the currency and is it actually the great threat to the global economy particularly US jobs, as the US would like to have us believe?
TREASURER:
Well, you can understand American concerns about their current account deficit but we also know that countries that are emerging markets like China have to develop strong financial systems to come fully into the international financial system and as we learnt in 1997 and 1998, the floating of an exchange rate is something that tends to come at the end of that process rather than the beginning of that process. And there's a lot of work to be done of course in strengthening the Chinese financial system. I imagine that the authorities in China are working very hard on that at the moment and you would expect over a period of time as the financial system gets strengthened that it will gradually open up more.
GRANT:
The US is saying it shouldn't be over a period of time. They are saying it should happen now and pointing to China's obligations under the World Trade Organisation to liberalise its markets further. Do you not accept that argument? Do you not think that it is more imperative that China bring this process forward?
TREASURER:
Well, I think that the Chinese are opening up their economy and they are strengthening their financial systems. But we learnt in the 1997-1998 East Asian Financial Crisis that if you just open up the financial system immediately overnight, the transition mechanisms can be very, very abrupt. And you think of China in that context, you realise that there's a lot of work to be done before you become fully fledged, with a floating exchange rate in an international financial system. And I am sure that it's the pacing of these reforms that is very much on the mind of the Chinese authorities at the moment.
GRANT:
It's been a tough time in Asia this year, economically of course, SARS taking a big bite out of things. We have seen a World Bank report saying that growth is going to still be pretty anaemic throughout the rest of the world and growth starting to slow down in Australia as well. An economy that once was called a `miracle economy'. What are your thoughts particularly about recovery in Australian growth, a pick up again, and also on a worldwide scale? Do you think that the economy globally is on the rebound?
TREASURER:
Well, it has been a difficult time for the region because you have had weak growth in the US, Europe turning down again, in this region SARS has had a devastating impact and it is one of the things that has affected the tourism trade into Australia, not because Australia had cases of SARS but because passing through the region, the tourist trade was down so much. In addition to that in Australia of course we have been through a very severe drought. So all of those things have affected our exports and we have shared in the difficulties of the region. But I do think things are strengthening. I think there are signs that the US economy is strengthening. Obviously SARS now appears to be under control. There is the unknown question of terrorism of course because terrorism certainly disrupts normal commercial dealing and it disrupts the tourist markets. But my assessment is that things should strengthen perhaps over the latter part of this year or more into next year in the region. That will be good for the region, as the world recovers, it will be good for Australia as well.
GRANT:
Peter Costello, the Australian Treasurer. Thank you again for speaking to us. Speaking to us from Phuket where he is attending the APEC Finance Ministers' Meeting.
TREASURER:
Thank you.