Mr. Chairman, distinguished colleagues,

Thank you for this opportunity to address this meeting.

In the early 1990s, East Asia achieved remarkable economic success, with performances so outstanding that the World Bank labeled this phenomenon the "East Asian Miracle". Some predicted that Asia would spearhead the world economy in the 21st century. However, in the recent past, the East Asian economy slumped severely in response to sudden and massive capital outflows. When a currency crisis in Thailand in 1997 spread quickly to other Asian nations, leading on into an economic crisis, East Asia, a shining light among developing nations and a model of what could and should be achieved economically, suddenly experienced a major growth slowdown.

The recent currency and economic turmoil spurred by the Asian crisis was the first instance of such crises being caused by the sudden and massive outflow of private sector capital. This was caused by the increasingly global capital movement, and advances in information and financial technology. The Asian crisis was, therefore, not simply a structural problem: such as Asia's foreign capital dependence and its inherent opaque corporate structures. It was rather rooted in the current international financial system, meaning that unless some measures are taken, similar crises could well occur in other regions in the near future.

From this perspective, it is vital that we urgently reconsider the international financial mechanisms. This will involve issues such as how to control global capital movements, and particularly speculative behavior of highly leveraged institutions such as hedge funds; how to ensure exchange market stability; how to establish a system to secure the accuracy and transparency of financial information, and how to build effective safety nets in preparation for such crises, keeping capital supply lines open.

In addition to reconsidering the financial system, we also have to give thought to the effects of economic crisis itself. The crisis, which struck the Asian countries, had a direct impact on the poor and socially vulnerable people - the elderly, women and children - shaking their socioeconomic foundations. Governments cut subsidies for food, education, medicine and other areas directly related to living conditions, while the lack of foreign currency resulted in the short supply of the medicine and medical equipment which Asian countries are dependent on foreign sources to provide. The first to perceive this situation, Japan has provided Indonesia with a total of around four billion yen in grant cooperation for the purchase of medicine and other vital commodities, and has injected around US$810 million to date in support for the so-called "socially vulnerable": for example, working together with non-governmental organizations (NGOs) to provide support for humanitarian, medical and health care measures.

In addition, Japan has developed a US$30 billion capital support scheme known as the New Miyazawa Initiative, designed to meet the various capital needs of the Asian countries in restoring their real economies, and I can report to you that this is being steadily implemented. With the crisis-stricken countries having to undertake structural reforms of their businesses as a medium- to long-term challenge, the employment situation has inevitably deteriorated, and income levels have also fallen down. The New Miyazawa Initiative supports the expansion and reinforcement of social safety nets. Such measures are considered just as important as those to establish sound and stable financial systems, to boost the economy and to combat credit crunches.

The efforts of the international assistance from IMF, as well as Japan, to the crisis-struck Asian nations seem to have had an effect. While I hardly need to reiterate that the countries in question must work toward their own socioeconomic stability, we should be all aware of the importance of international assistance in contributing to strengthening socioeconomic foundations.

To encourage international assistance still further and ensure that adequate assistance goes where it is needed, the content of assistance needs to be constantly scrutinized and reviewed.

I believe that there is a principle in this regard which should be observed by both donor and recipient countries. This is the principle of good governance. In other words, assistance should be efficient, effective, and transparent, and ensure civilian participation. Without these controls, it is almost impossible to ascertain whether assistance is really contributing to the welfare of the people who really need it. Without this information, it is difficult for donor countries to gain the understandings and support of the public, which could threaten the continued provision of an adequate level of assistance. Good governance will inevitably gain weight as the international community comes to recognize the need for assistance.

Distinguished colleagues,

The recent currency and economic crises have revealed to us, in the harshest possible form, one of the effects of the rapid evolution of globalization. We have also been confronted with the need to urgently construct a financial framework to handle such crises. All the countries in the world must work together to prevent and overcome such crises. In closing, allow me to emphasize that effective financial contribution to less privileged countries is a duty and a moral responsibility, and that good governance in both donor and recipient countries is vital in ensuring that this assistance is truly effective.

Thank you for your attention.