TRANSCRIPT
THE HON PETER COSTELLO MP
Treasurer

Interview with Stan Grant, CNN
10^th APEC Finance Ministers’ Meeting
Phuket, Thailand

Thursday, 4 September 2003
10.20 am

SUBJECTS: APEC Finance Ministers’ Meeting; Terrorism; International

Economy.

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.