Dire straits vex Apec states

Reduced family fortunes turned the annual get-together into a nightmare, finds Richard Lloyd Parry

WHEN South-east Asian leaders meet face to face, they are fond of referring to themselves as a family and, superficially at least, there is something to be said for this arch analogy. They range from stately Father Indonesia to more skittish siblings like the Philippines, and eccentric left-wing aunties like Vietnam. Once a year, they get together for a big party with relatives from across the sea at the Asia-Pacific Economic Co-operation (Apec) forum, which took place in Malaysia last week.

Among the most important guests are China (the smiling but scary grandparent) and Japan (the rich uncle, who can always be depended upon to hand out some cash). Then there are the Australasian and American cousins, lead by the clan's big success story, the millionaire United States.

Family gatherings of this size always have their awkward moments, but this year's Apec was truly the party of nightmares. There was a screeching row between the host and the guest of honour, and almost everyone went home in lower spirits and worse temper than when they arrived.

Since South-east Asian currencies began collapsing 18 months ago there has been a devastating reversal in the region's financial success, with formerly powerful young economies reduced to begging for hand-outs from the International Monetary Fund. The crisis has had serious political consequences as well, with democratically elected governments voted from power in Japan, Thailand, the Philippines, South Korea, and a dictator, president Suharto, ousted in Indonesia. But last week's disastrous Apec meeting demonstrated a third, and serious consequence: the diplomatic ill will and resentment between countries which the crisis is creating in a region already dangerously vulnerable to instability and conflict.

In some cases, the three ills - economic, political and diplomatic - are linked, as in the case of Malaysia, the country most drastically affected by the changing relations in the region. Until the advent of the economic crisis, its Prime Minister, Mahathir Mohamad, had more to be proud of than most Asian leaders. But the collapse of his currency, the ringgit, has wiped out years of achievement.

Diplomatically, this had its first noticeable effects on Kuala Lumpur's relationship with its near neighbour, Singapore, which found itself accused of encouraging the flight of capital from Malaysian to Singaporean banks. Then in September, Dr Mahathir announced the drastic step of imposing capital controls - in other words, of making it more difficult to take ringgits out. The people on whom this has the most effect are foreigners doing business in Malaysia. Foreign governments have expressed general unease.

As a consequence of the economic slowdown, Dr Mahathir faces a growing political opposition, crystallised in the person of Anwar Ibrahim, his former deputy and finance minister. Mr Anwar was planning to take advantage of his boss's economic distress to mount a political coup. Rather suspiciously, he finds himself not only sacked, but charged with sodomy and corruption.

As an expression of their disgust at his treatment, several Apec leaders, including the prime ministers of Canada and Australia cancelled their bilateral meetings with Dr Mahathir. Then, in an ill-judged speech delivered in his presence, the US vice-president, Al Gore, made an approving reference to the "brave" supporters of the reform movement which is campaigning for his host's removal. The reaction was a spasm of national fury in Malaysian newspapers.

Malaysia is small enough for its individual isolation to have only limited effects on the rest of the world, but as a result of the economic crisis the stakes have been raised in other, more explosive areas of diplomacy. Take the Spratly Islands, an obscure string of shoals and atolls in the South China Sea, partially or wholly claimed by several states, but principally China and the Philippines. The issue comes up at every Apec; every time, the participants make vague promises to be sensible and to keep talking. But the point about the Spratlys is their potential as oil fields. In times like these, over a prize so rich, there is less room than ever for compromise.

Japan's economic decline has also affected its political status. Despite the assurances of continuing loyalty made during his visit to Tokyo by President Clinton, Japanese are uncomfortably aware of the improvement in China's relations with America and its potential to eclipse their own. More urgent is the problem of North Korea and its suspected nuclear weapons pro- gramme. In 1994, it was put on hold after South Korea, Japan and the US agreed to provide fuel oil and new, safe nuclear reactors worth $4.5bn (pounds 2.7bn). Politically, sending cheques to a pariah regime like the one in Pyongyang has always been difficult for sponsors to justify. Now they are faced with the complaint that they cannot afford it either; already North Korea is threatening to restart its nuclear programme unless the money continues to roll in.

Adversity is supposed to bring people together, but clearly the same thing does not appear to apply to nation states, and one only has to look at the decade following the financial collapse of 1929 to find awful precedents for what happens when economic deprivation leaves nations with nothing to lose. Earlier this year, the Singaporean Senior Minister, Lee Kuan Yew, said there was still a sense of unity among Asian countries. But "it is the unity of Aids patients: there is nothing we can do to help one another."