Almost 20 years ago, leaders of the Asia-Pacific region met in Bogor to “chart the future course of our economic cooperation, which will enhance the prospects of an accelerated, balanced and equitable economic growth not only in the Asia-Pacific region, but throughout the world”. In just a few months, Asia-Pacific Economic Cooperation (APEC) leaders will again meet in Indonesia, Southeast Asia’s largest economy. How far has the region come in achieving those goals and what more needs to be done?
The headline achievements are impressive. To note just one, incomes in the region have more than doubled since 1994 from an average of US$10,000 to more than $23,000.
The journey to where we are today has not been easy. The region has been buffeted by economic crises, first in 1997-1998 and then in 2008-2009. This crisis is not yet over, a number of APEC members recently enacted stimulus measures to kick start growth, such as QE3 in the US and Japan’s new attempt to reflate its economy. There is a possibility of a new stimulus in China in response to a deteriorating external environment.
These measures, while focused on domestic growth, have some unintended consequences. We are seeing rising capital flows into Asia that pose challenges, including the need to minimize the risks of asset bubbles and excessive credit expansion. There is already talk of “currency wars” and competitive devaluations. While the rhetoric makes for exciting reading, the world is far too complex for simplistic reasoning.
At the outset of the crisis, many had feared a descent into beggar-thy-neighbor polices, but thus far, through the actions of the G20 and APEC, we have avoided this. At this critical juncture, when nationalist sentiments are rising, we need more cooperation and understanding. APEC is the embodiment of bridging differences and must continue to play its role in bringing a diverse community together.
While APEC has done well in terms of freeing up trade and investment, the world that it occupies has changed. In 1994, bilateral trade deals were the exception, today they are the rule.
Even this is changing. The ASEAN Regional Comprehensive Economic Partnership Framework will consolidate the ASEAN+1 agreements into a single area and the Trans-Pacific Partnership agreement hopes to build on the Pacific 4 agreement. Outside our region, the US and the EU are talking about a trans-Atlantic trade agreement, which would create the single biggest market in the world.
These massive trade groups, while potentially building blocs to multilateralism, can make outsiders feel excluded. This is a dangerous path to go down and this region, through APEC, with its spirit of inclusiveness and openness, should ensure that no economy is left out.
However, strong headline growth has masked a dirty secret — income disparities have been growing both among and within regional economies. APEC leaders have long talked of the need for growth to be equitable — both in Bogor and in recent years such as in 2009 in Singapore — with a call to “foster inclusive growth” and in Yokohama where it was a key dimension of the APEC Growth Strategy.
The Millennium Development Goals (MDGs) set the objective of universal primary education by 2015. In this region, we should move ahead and aim to provide all our citizens with the skills to participate in this competitive global economy. While some economies have done particularly well in increasing tertiary education participation, for example in South Korea where the ratio has increased from 35 percent to almost universal enrollment since 1994, others lag behind.
However, enrollment rates are not a panacea. One need only look at high unemployment rates among recent graduates in parts of Europe to see this. Emphasis must be on flexibility and resilience. There is a need for educational institutions and businesses to work together to help to develop skills of our peoples to fulfill their potential. This requires a change in culture in both business and education providers.
Even if our people possess the skills to compete, they cannot do so if they are not connected to the market. We need our people and our businesses — large and small — to be able to connect to where opportunities exist. The Asian Development Bank (ADB) estimates that East Asia alone needs to invest some $8 trillion in infrastructure.
Much of this would be in transportation but a critical part of the creative economy is access to information. Access to the Internet varies tremendously in the region, from 2 to 84 in every 100 in Papua New Guinea and South Korea, respectively.
Another aspect of the integration process is how do our businesses reap the opportunities that lie ahead? It has been conventional wisdom that multinational corporations account for 70 percent of global trade, while at the same time small and medium enterprises (SMEs) account for 90 percent of all businesses.
The idea that products are made in one particular country has given way to the idea of being “made in the world”. The emergence of global value chains opens up opportunities for SMEs to participate, but SMEs face a distinct set of problems going global as trade rules and compliance costs disproportionately impact smaller businesses, and their access to finance and information about overseas markets is limited.
A focus on these three areas: education, infrastructure and barriers to SME participation, could help make a major difference to addressing APEC’s goals of equitable and inclusive growth in the years ahead. Calls for addressing inequality should not be misconstrued as calls for the redistribution of wealth — that has already been tried and failed. Making growth equitable and inclusive are essential to the region’s goal of community building — that is one in which we share a sense of common destiny and purpose.
These issues will be addressed during a conference organized by the Pacific Economic Cooperation Council (PECC), the Singapore National Committee for Pacific Economic Cooperation (SINCPEC) and the Indonesian National Committee for Pacific Economic Cooperation (INCPEC) on Feb. 22-23.
— Jusuf Wanandi is the co-chair of the Pacific Economic Cooperation Council and vice-chair of the Board of Trustees of the Centre for Strategic and International Studies (CSIS) in Jakarta.
— Tan Khee Giap is the chair of the SINCPEC and co-director of the Asian Competitiveness Institute (Singapore) at the Lee Kuan Yew School of Public Policy, NUS.