APEC's messages and implications for Indonesia

APEC's messages and implications for Indonesia

Mari Pangestu, Economist, Centre for Strategic and International Studies,
Shanghai

Another APEC year has passed. The meeting served up the usual
APEC fare of improving the processes and mechanisms to clarify
the road map to reach the Bogor goal of free trade and investment
by 2010/2020. The actions to be taken include an agreement to
broaden and update the Osaka Action Agenda in keeping with the
changing conditions, and the pathfinder approach which allows
economies ready to move ahead on APEC initiatives to do so ahead
of others.

There were also improved actions for strengthening
implementation mechanism, including strengthening the peer review
of individual action plans of members and strengthening capacity
building with the human capacity building initiative for the new
economy.

This focus on getting the APEC basics back on track is an
important achievement, and should be recognized as it has been
overshadowed by the larger picture of crafting an APEC response
to the Sept. 11 events.

Of course we will have to wait and see whether the
implementation of this traditional fare of the Asia Pacific
Economic Cooperation forum will be realized in the Mexican and
Thailand years of 2002-2003.

The significance of the Shanghai year will however, be
remembered because it was the first occasion where such a large
number of world leaders gathered after the Sept. 11 terrorist
attacks.

APEC is an economic cooperation forum and the first basic
question that arose in crafting an APEC response in such
difficult times is whether APEC should be responding to a
political and security issue.

There are at least two important precedents where the meeting
has played a significant role in regional security. First was
when the U.S. and Chinese leaders met in 1993 in Seattle for the
first time after the Tiananmen massacre, and second, when leaders
in New Zealand in 1999 discussed the United Nations deployment to
East Timor.

However, what the U.S. wanted this time was a strong call to
counter terrorism as an official APEC statement.

Of course it would have been remiss if a meeting of such
stature and with so many leaders from the world meeting did not
say anything.

Furthermore, the response to terrorism and its aftermath need
to be on all fronts: Economic, political, security and confidence
building, and that all these aspects are interrelated.

Therefore, APEC as a forum where leaders meet is a place to
make a statement and craft out the actions, which are in line
with the APEC process.

The outcome was as expected. Leaders, within their Leaders
Statement, condemned strongly the "murderous" acts, but also as
expected fell short of endorsing the U.S. military response, as
it is clear that a number of countries, including Indonesia, did
not condone such a response.

The statement also said that the United Nations should play a
major role in coordinating an international response. This
general statement coming out of the leaders' declaration is the
balanced approach that is in line with what China and Russia, as
well as the Islamic nations of Indonesia, Malaysia and Brunei,
wanted.

The specific APEC actions to counter terrorism was covered in
a separate annex and relate to actions that pertain to the
substance of APEC economic cooperation, and some of these actions
have already started in APEC working groups.

They include cooperation to collectively curb the flow of
funds to terrorists, improve and strengthen customs surveillance,
increase air and maritime security and increase protection of the
energy, transport and communications sectors.

APEC would be wise to stay true to its mission and essence of
economic cooperation and not stray into a security organization
which can counter terrorism, because that is not the original
intention of APEC and institutionally it would not be able to
deal with it.

There is in fact one other angle of the security issue, which
links to economic effects, which we feel is still missing. Post
Sept. 11, the issue of security standards of nations will be much
in question and has and will affect investment and business
decisions.

Economies who do not comply to acceptable level of security
standards and their enforcement thereof, run the risk of economic
isolation.

This is particularly relevant for Indonesia whose investment
climate and confidence levels have been very much affected in
recent weeks.

Given that the issue has profound economic implications, there
is a role for APEC to do what it is good at, which is setting
standards and best practices, and capacity building for their
implementation to prevent further widening of differences between
nations due to different security standards.

APEC also has a role to ensure that there are coordinated
actions to prevent a severe recession of the world economy, given
that two major economies the U.S. and Japan are its members; and
in boosting confidence by ensuring that the Doha WTO Ministerial
meeting in November yields a significant outcome to waylay fears
of the breakdown of the world trading environment. This would be
a further blow to an already fragile business and investment
climate.

Indonesia will benefit from positive outcomes of these two
approaches especially for its exports. However, the homework is
there for Indonesia to firstly evaluate how it stimulates the
domestic economy, given the budgetary constraints of a
stimulating fiscal policy, and limits of monetary policy stimulus
when one is combating inflation and still in the midst of
restructuring the banking sector and corporate debts.

Secondly we need to have an integrated vision of economic
development in Indonesia and what role trade is going to play.
This will be needed before we can be clear on what preparations
and anticipations are needed so that we can compete in the more
open market, and is also important to guide our negotiating
position in the WTO.