Asian nations vow action on oil

Even China's growth is jeopardised by high oil prices

Finance ministers of 21 Asia-Pacific states in the Apec grouping have expressed concern at the threat high oil costs pose to economic growth.

The ministers called for more investment in oil production to meet the challenge of soaring fuel prices.

They pledged to cut "demand-distorting" fuel subsidies to reduce consumption and protect government finances.

Their statement came at the end of a two-day meeting on the South Korean resort island of Jeju.

Despite the oil price surge, the ministers took an optimistic view of the prospects for growth in the Asia-Pacific region.

"We note that global economic growth has moderated over 2005, but is still likely to remain robust, despite high oil prices," the joint statement said.

"Though growth in Apec regions is expected to ease in 2005, we observe that member economies are experiencing faster growth than the global economy."

Oil prices, already rising because of increased demand, have been pushed to new levels by the impact of Hurricane Katrina on US oil rigs and refineries.

Indonesian woes

The Asia-Pacific Economic Co-operation Forum (Apec), set up in 1989 mainly to promote trade among Pacific Rim states, now accounts for more than half of global economic output and almost half of all international trade.

The finance ministers were meeting in Jeju as part of preparations for the organisation's annual summit in November.

Among the countries hardest hit by the oil crisis is Indonesia, which has seen a 10% fall in the value of its currency, the rupiah, this year because of high oil prices.

A fifth of the nation's budget goes on fuel subsidies and investors say they are concerned about the government's ability to finance the aid.

Plans to reduce the subsidies have met with a lukewarm response from analysts, who described them as vague and inadequate.

But Indonesian officials now say drastic cuts of up to 60% in the subsidies will be implemented in October or November.

In other discussions, Apec ministers welcomed recent moves by China and Malaysia towards greater exchange rate flexibility