APEC programs must see light

APEC programs must see light

By Jusuf Wanandi

VANCOUVER (JP): There is nothing that focuses the mind more
than a crisis. Seemingly this was what happened at the ninth
Ministerial Meeting and the fifth Leader's Meeting of APEC in
Vancouver from Nov. 21 to 25, 1997.

Due to the elections in midyear, Canada was late in preparing
something substantive to move the APEC process forward. In APEC
it has always been the Chair that has the critical role to take
new initiatives and to push the process forward. Thus,
expectations had been somewhat low about what could be achieved
in Vancouver this year.

Critics of APEC are already wondering whether this year's APEC
meeting will be the beginning of the end for the organization due
to the lack of leadership as well as the prolonged currency
crisis in East Asia.

It has been considered critical to the organization that
members continue to move ahead on trade and investment
liberalization and economic technical cooperation. The other
challenge for APEC this year was to be able to respond and
provide solutions to the currency crisis in the region.

During the deliberations at the Ministers Meeting, every
member economy was greatly aware of the challenges facing them
and the high expectations about the meeting's outcome. More
substantive debate had taken place than was usually the case,
not only on programs for trade and investment liberalization and
economic and technical cooperation which had been prepared by
their senior officials, but also on how to respond to this year's
challenges, including the currency crisis.

Among the many decisions taken, four stand out as the most
important ones. First is the APEC leaders' demonstration of real
partnership in the region by agreeing to endorse the idea of a
new regional framework for enhanced Asia-Pacific regional
cooperation to promote financial stability and to establish what
is known as the "APEC Fund". The idea has to be worked out by the
Finance Ministers in the next six months or so.

This idea was prepared in the Manila Meeting of Finance
Ministers and Central Bank Deputies from 14 APEC economies a few
weeks earlier, and is an improved and more acceptable version of
the earlier Japanese proposal for establishing an Asian fund,
first mooted at the IMF and World Bank Meeting in Hong Kong in
September.

This new version endorsed by the APEC leaders essentially
involves the creation of a regional early warning system on
financial instabilities coupled with a complementary role of a
supplementing fund from the Asia-Pacific as part of an IMF-led
financial bailout in future crises.

That this system has to be under IMF leadership is accepted
essentially because financial instabilities are a global problem.
In addition there is the problem of moral hazard that needs to be
prevented. This agreement by APEC leaders is vital and
demonstrates that APEC is concerned not only with trade issues
but also with macroeconomic policies, including in the financial
field.

Although APEC finance ministers have come together annually
since 1994, the effectiveness of their cooperation is starting to
be felt only now. Hopefully the crisis and the leaders' decision
on developing a new framework for enhanced stability in the
region will lead to urgently needed increased cooperation on
macroeconomic policies in the future.

Second is the progress made in the liberalization of trade
through a combination of improved offers in members' individual
action plans (IAPs), collective actions, and most significant of
all identification of a number of sectors for early voluntary
liberalization.

There have been improvements in the IAPs since the Manila
meeting in 1996. The IAPs continue to be the key vehicle to
reaching the Bogor goals. The review of the IAPs by the APEC
Business Advisory Council (ABAC) in addition to reviews by APEC
officials have become an important mechanism for peer pressure.
More such peer reviews, including from the Pacific Economic
Cooperation Council, would help ensure that the process of
liberalization continues to be on track and will be more attuned
to the needs of the business sector.

Most of all what is encouraging is the ability of the members
to produce a list of sectors for early voluntary sector
liberalization as instructed by the leaders in Subic a year
before. The final list includes nine sectors, namely:
environmental goods and services, fish and fish products, toys,
forest products, gems and jewelry, chemical products,
telecommunications mutual recognition arrangement or MRA, the
energy sector, and medical equipment and instruments.
Implementation of this initiative should be feasible in 1999.

The agreement on a broad range of liberalization and
facilitation efforts shows that APEC economies, even including
those that experience a currency crisis, are ready to quicken and
broaden the process of trade liberalization. They agree that by
doing this they can strengthen themselves to overcome new
challenges in the currency and financial fields.

Furthermore, this regional and sectoral liberalization program
should also become another peer pressure by example to the World
Trade Organization, as was the case with the agreement on
Information Technology Agreement in the 1996 Subic Meeting.

Third is the agreement to study the impact of the various
liberalization measures on domestic developments. The impact of
globalization on societies has been and continues to be profound.
In the first instance, namely in the economic field, even
developed nations have real difficulties in adjusting to
globalization.

Consider, for instance, the stagnation in the real income of
the middle class in the U.S. during the last decade or the high
rates of unemployment (12 percent to 20 percent) in Europe as a
result of globalization. The impact of globalization in
developing countries is even greater.

It will be felt not only in the economic field but also
politically (demands for greater participation), socially
(demands for social justice), as well as culturally (how to be
able to maintain one's basic cultural values).

In the economic field, the challenge is to be able to pursue a
more inclusive and sustainable development and growth. Rapid
growth alone, as amply shown in East Asia today, is far from
adequate.

The process of globalization tends to marginalize small and
traditional enterprises and people (such as unskilled labor).
That is why the participation in APEC of youth and women is
important to provide feedback, criticism, and possibly to bring
up to the surface the problems faced by the weaker segments in
societies.

It would be good if labor also has some participation in the
APEC process in the future.

However, these problems should be addressed within the broader
agenda of Economic and Technical Cooperation (Ecotech).
Therefore, the fourth important decision of the leaders is the
elevation of APEC's Ecotech agenda.

It is through Ecotech, which is APEC's third pillar besides
the other two of trade and investment liberalization and
facilitation, that developing economies in APEC can really
benefit from and catch up in participating in the two other
pillars.

But Ecotech should be important for every APEC member in
strengthening their capabilities to cope with globalization. In
this regard, two out of the six proposals stand out and hopefully
will be stressed and translated into more concrete programs next
year in Kuala Lumpur.

These are Human Resources Development (HRD) and the
participation of small and medium enterprises (SMEs) in the
economic growth and dynamism of the APEC region.

On HRD, an initiative for consideration is to establish an
APEC scholarship fund of a half billion U.S. dollars to help the
brightest students from within the region to go to the best
universities of the Asia-Pacific. Another concrete plan is to
establish apprenticeships for the younger generation in private
companies and to provide tax incentives for participating
companies.

Concrete programs need to be formulated to help SMEs increase
their involvement in and benefit from APEC cooperation. Programs
in the areas of HRD and SMEs are amongst Ecotech programs that
would be directly beneficial to small and traditional enterprises
and the weaker segments in the societies and should be given
priority in APEC's agenda in the next year.

Next year APEC will be a decade old. This provides a good
opportunity for the organization to undertake a real stocktaking
of the progress of its programs and to assess the direction for
consolidating the organization's work.

It is widely felt that APEC is engaging itself in a lot of
studies and programming but has not yet translated them into
reality.

This definitely needs to be changed. While it was easier
before for APEC to come to an agreement and to get the process
going because of the region's rapid economic growth and economic
dynamism, the meeting in Vancouver was a test for the
organization's long-term viability as it was being held in an
atmosphere influenced by the currency crisis and slower growth.

It has to be noted that the leaders and the ministers have
shown that they are able to turn the crisis into a catalyst not
only for further liberalization of trade and investment but also
in the financial field as a means to meet the challenge, today
and in the future.

The writer is chairman of the supervisory board of the Center
for Strategic and International Studies, Jakarta.