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APEC 2013 in Bali - a foretaste of APEC in Manila 2015

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Federico Macaranas
Professor, Asian Institute of Management, Manila, the Philippines

The BALI airport temporarily closed for commercial flights for security reasons, even as a new $300-million terminal has just been constructed (the cost of a one-day shutdown to the US government); dug up tarmac redesigned without chemicals, engineering works rushed from underpasses to a new $215-million oversea toll roads with dedicated motorcycle lanes crossing the main island across the waters to Nusa Dua; relocated monuments repainted, flag poles fitted with LED lights

alongside solar-powered streetlamps, cheap hotels sprouting side by side with the glitzy residences for the officials attending the Asia Pacific Economic Cooperation (APEC) 2013 meetings, including the $100-million Agung Pomodoro, site of the summit on Oct. 7 to 8, melding Balinese opulence and French luxury in 350 rooms and 17 villas - these are what initially strike travellers attending the various events around the annual gathering of economic leaders hosted by Indonesia which is spending $35 million for its second hosting in less than two decades.

The theme chosen for the Indonesia APEC meetings is connectivity and inclusive growth in the Asia-Pacific, far from the original Bogor goals of a free and open trade and investment zone set 19 years ago, but many hope will hasten that. More of the advanced member economies insist on trade and investment liberalization (TILF) agenda to be the focus. However, the concern of the Association of Southeast Asian Nations (ASEAN) members is that the emphasis on the TILF issues has resulted in greater income inequality in their region (40% in the Pacific Economic Cooperation Council [PECC] survey felt that way, vs. an average of 27% for all respondents from the entire Asia-Pacific).

ASEAN’S LOST CENTRALITY IN APEC
Having lost its centrality in an expanded membership (18 as of the 1996 Manila-Subic APEC meetings, vs. 21 today), the ASEAN concern for growing income inequality is fifth in the priorities in APEC. Ahead of this issue are (a) regional economic integration, including the Trans-Pacific Partnership or TPP, and Regional Comprehensive Economic Partnership or RCEP, among others; (b) the APEC growth strategy which considers an “inclusive growth” strategy, nonetheless with only 11.8% satisfaction among PECC survey respondents on actions taken in this regard by APEC; (c) corruption; and, (d) attaining the Bogor goals of free and open trade and investment.

Indonesia, the largest area-wise, the most populous, and among the most dynamic economies in ASEAN today, wisely thought of its theme by focusing on a trade and investment issue of “connectivity” (institutional, physical, and people-to-people) - it is rich in “behind the borders” reform concerns around land, sea, and air infrastructure policies - but at the same time also affecting the majority of the poorer communities in the region, the “inclusive growth” phrase in its theme.

Hence, the particular call for capacity-building in economic-technical cooperation (or Ecotech) agenda in APEC, becomes a priority. However, Indonesian Tourism and Creative Economy Minister Mari Pangestu is well aware that her call for capacity-building in the World Trade Organization may have caused her not getting the job as its head. Nonetheless, the Ecotech focus is likely to be picked up as a prime issue in the succeeding hosting of APEC meetings by China in 2014 and the Philippines in 2015. The PECC State of the Region 2013-2014 report in fact contains a full Chapter 3 dedicated to two Ecotech issues.

THE RETURN OF ECONOMIC-TECHNICAL COOPERATION
The first dwells on how regional organizations can be better appreciated by the wider public, so that they are not seen as NATO (no action, talk only). Many regional groupings are being perceived to be ineffectual in the face of expectations - generated by social media in part - for example among SMEs and poorer households, for faster delivery of outputs and outcomes resulting from their activities. Indeed, the Indonesian co-chair of PECC, Jusuf Wanandi, insists that APEC is missing on the priorities that will lead it to be less diffuse, “focus on a few things and get them done.” Thus, Indonesia is presenting a little over 20 deliverables for approval by member economies in the meetings of 2013. Hard infrastructure financing is one of the “connectivity” agenda - and even before the Leaders’ Meeting, China announced an Asian Infrastructure Investment Fund of $10 billion to be a vital symbolic drop in the bucket of the $8 trillion infrastructure funding gap in the region.

For the Philippines, capacity building in Ecotech activities must go beyond examining the cross-cutting programs and projects that mushroomed through the years of voluntary cooperation. More efficient organizations are being demanded by most everyone in APEC and ASEAN. Scarce resources are not being used wisely to address the value added of groupings.

A management framework of linking the dots in a value chain mapping exercise must be pushed by the Philippines; this can accommodate the dozens of Ecotech activities that can be woven in some coherent fashion to result in outputs desired by businesses and consumers - not merely researchers, intermediate suppliers, or throughput players in the “connectivity” game - though important they are in the intermediate steps for innovative economies. People are simply demanding “show us improved lives - through more and better jobs (gender-sensitive, regionally dispersed, answering future needs as well), secure incomes, quality education and health, etc..”

The second PECC Ecotech Chapter 3 theme targets the lessons from regional aid-for-trade programs. Development partners can pursue the optimal design, sequencing and good practices in microeconomic concerns such as infrastructure problems, energy shortages, and trade-facilitation constraints. They can be targeted to regional projects for exportable goods and services - an example of which is the production of food and pharmaceutical products from the abundant marine resources in the blue economy of the Coral Triangle, with the most biodiverse marine life in the planet, and elsewhere in Asia-Pacific. The advanced economies have to share their knowledge with a recently inaugurated World Health Organization program in ASEAN for a network on drugs, vaccines, diagnositcs and traditional medicine innovation - truly an example of the coordination required in international institutions.

MORE COMPLEX AND CHAOTIC REGION
The general economic conditions prevailing in the 21-member grouping is one of cautious recovery, with rising interest rates from tighter monetary policies to curb inflation providing a major risk to growth in jobs and incomes (APEC Policy Support Unit Report), and a harder than expected landing of the Chinese economy, also a major fear factor (PECC State of the Region 2013-2014).

China, as next year’s APEC host, is likely to reflect on the complex and chaotic interdependence of the 21 economies - as ASEAN receives more foreign direct investment from China rather than traditional ex-colonial partners including those from Europe, Abenomics restructures the Japanese economy with fiscal and monetary policies, and the American government shutdown faces complications of global financial market reactions.

Preparing the Philippines for its turn in hosting APEC in 2015 revives the question: what value does an organization have if what it can do, others can do better and faster? In a world of chaos, redundancy is not a problem but a solution. The next question is thus - at whose expense, collectively and singly?

(Federico M. Macaranas chaired the Senior Officials Meetings of APEC in 1996 that prepared for the Ministerial and Economic Leaders’ Meetings in Manila and Subic chaired by President Fidel V. Ramos. He is now full professor, Washington SyCip School of Graduate Business, Asian Institute of Management in Manila where he leads the school’s ASEAN 2015 Project. He contributed to the PECC State of the Region 2013-2014 Report presented in Bali on Oct. 3.)

Re-posted with permission from the Business World (This opinion piece appeared on October 7, 2013)

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