Developing states worried

Emerging markets expert exports to the US to fall

The economic impact on developing countries of the attack on the World Trade Center was already being felt on Wednesday.

Government ministers moved to reassure citizens and investors but expressed fears about the outlook for their countries.

In the short term, there is a very big economic impact

Minister Takeo Hiranuma
Japanese Economy, Trade and Industry

Their economic programmes, often formulated with the IMF and World Bank and reliant on foreign investment, could be undermined.

Exports by these countries to the US, the world's biggest consuming nation, were already flagging before the attacks and could now fall further as consumer confidence is eroded.

Global financial and trade organisations have also been considering delaying or cancelling key meetings in Washington and Doha in the coming months.

But the threat posed by high oil prices lessened as OPEC promised to guaranteed supply and prices fell.

Economic impact

The strikes are expected to deal to blow to US consumer confidence which would delay Asia's recovery from the sharpest export slowdown in a decade.

Chinese and Japanese Economy Ministers express concern while in Vietnam

Japanese Economy, Trade and Industry Minister Takeo Hiranuma, speaking at the Asian and European Economic Ministers meeting in Vietnam, expressed alarm over the implications, but added he hoped they would not be lasting.

"In the short term, there is a very big economic impact," he said on Wednesday.

That position was echoed around Asia and the world.

China's junior trade minister Sun Zhenyu said the extent of the fallout was already clear.

"We know the stock markets have already been adversely affected. Exports to the US will go down to a certain degree," he said.

Blow to revival hopes

Taiwanese computer makers said the disruption to flights into the US came just as sales were picking up ahead of Christmas.

"Don't panic," said Russian Prime Minister Mikhail Kasyanov

Even if the airports reopen, tighter security could cause pile-ups and backlogs, they said.

South Korean Trade Minister Doo-Yun Hwang said the attacks would have a "negative impact" on trade, investment and the exchange rate but added he hoped it would be "short-lived."

"Do not panic," said Russian Prime Minister Mikhail Kasyanov on national television after Russians rushed to sell the US dollar, sending the rouble plunging.

Brazilian President Fernando Henrique Cardoso also warned there could be economic difficulties for Latin America's largest country.

"It is probable that considering the virulent nature of these acts there will be consequences in the whole world, mainly economic," he said.

"The whole world is in a turmoil," said Somkid Jatusripitak, finance minister in Thailand.

Quick recovery?

Some observers expect a negligible or short term impact.

"To the extent it may have a temporary impact on consumer and investor confidence, it could slow down the recovery in emerging economies," said Brahm Prakash, assistant chief economist with the Asian Development Bank in Manila.

"But one would not expect any systemic or long-term or even medium-term implications from this because the US system is very strong."

Indian Finance Minister Yaswant Sinha said: "The unfortunate terrorist attacks in the US will have no immediate direct impact on Indian economy and on the value of rupee".

"We have to keep faith in ourselves."

But Israel has already put the privatisation of state-run phone company Bezeq Israel Telecom on hold following the attacks, a spokeswoman for the country's Communications Ministry said on Wednesday.

"Everything is back up in the air following the attacks and we can not say with any certainty what will happen now," the spokeswoman.

World trade

China's junior trade minister, Sun Zhenyu, also expressed fears world diplomacy and policy-making would slow as the US focused on rebuilding national confidence.

"This event will make some delay to the important functions of international meetings, because US will need more time to deal with this domestic issue," he said.

He did not indicate whether Beijing anticipated a delay to the World Trade Organization (WTO) meeting in November where the communist giant is due to be admitted.

Trade officials said on Wednesday work was continuing to prepare the WTO's ministerial meeting in Qatar in November.

But a two-day discussion of US trade policy at the WTO has been postponed "to a later date", officials said.

It was not clear whether the World Bank and International Monetary Fund would postpone or cancel their annual meetings, scheduled for the end of this month.

Oil danger recedes

The danger for the world emerging economies from soaring crude oil prices has receded after the price of a barrel of Brent crude for October on Wednesday fell $0.66 after opening to $28.40.

Brent had spiked above $31 on Tuesday in reaction to the attacks amid concern that US retaliation could spark a wider conflict involving Gulf Arab producer nations.

Ali Rodriguez, secretary general of the Organisation of Petroleum Exporting Countries (OPEC), said Tuesday the cartel's 11 member states were "ready to use their surplus capacities if necessary [to ensure] a sufficient supply to the markets" and the stability of prices.