State of the Region


Message from the Co-Chairs of PECC

On behalf of the members of the Pacific Economic Cooperation Council (PECC), it is our honor to present our tenth annual report on the state of the region. The Report stresses that the while the state of the region is generally healthy, the Asia-Pacific has to overcome a number of challenges – especially improving both the pace and quality of growth in the region.

The focus of this year’s report is on structural reform and inclusive growth. As highlighted in Chapter 1, although the Asia-Pacific region continues to grow at a reasonable pace, it is some way off from the heady days that preceded the Global Economic Crisis and indeed long before that. As tariffs, quotas and other trade barriers have fallen with trade liberalization; the focus of efforts to generate growth has shifted to structural obstacles that create behind-theborders barriers to business. The goal of structural reform is to bolster the strength and efficiency of markets in order to enhance living standards.

Structural reforms have a variety of definitions. As defined in Chapter 1, they are ‘changes in government institutions, regulations and policies designed create a business environment that supports efficient markets.’ This covers full gamut of economic activities but we focused here in boosting labor productivity. Reforms in this area suggest that reforms could boost the long-term level of GDP per capita by 10 percent.

Chapter 2 includes the results of our annual survey of the Asia-Pacific policy community. The message from the survey results underscores the messages from Chapter 1 on the critical importance of education and labor market reforms to the future of growth in the region. For many years the region has benefitted from a growth model which leveraged the comparative advantage of different economies’ endowments of capital, labor, and natural resources in an increasingly open global market. As comparative advantage changes with higher incomes and lower population growth, the emphasis must now be on not only the quantum of factors of production but their quality as well. This points to the need for reforms in factor markets. The timing of these reforms is critical – the global recovery remains precarious, urgent reforms are needed but missteps and negative signals can send already jittery markets into rapid slides.

For several years, progress on regional economic integration – whether it is the Bogor Goals or the Free Trade Area of the Asia- Pacific (FTAAP) - has been the top issue for APEC Leaders to discuss at their annual meeting. This year was no exception; however, several developments in the region put a much greater urgency to this discussion. First, the successful conclusion of the negotiations for the Trans-Pacific Partnership (TPP) established a precedent for Asia-Pacific integration agreements. Secondly, the Regional Comprehensive Economic Partnership (RCEP) negotiations are due to be concluded by the end of the year. Thirdly, and perhaps most importantly, as trade growth has slowed in the post-Global Economic Crisis period, there is intense interest and debate on how global value chains are evolving. Chapter 3 is a regular update to PECC’s index of economic integration. This shows that the region continues on its path towards integration but also warns of a need to address income gaps.

Indeed, while we remain convinced that open markets are the best way for the region to continue on grow, this needs to be supplemented by behind-the-border policy reforms to empower individuals and companies to participate in regional and global markets. This will involve addressing gaps in both skills as well as the infrastructure to bring the benefits of integration to many of those parts of our communities who are currently left out of the economic growth of the region. As APEC Leaders said the last time they met in the Philippines, the “…vision of community requires that all sectors of society develop a stake in the success of APEC.” Through the initiatives taken over the course of the past few years, APEC’s work on trade integration has been supplemented by work on connectivity and this year’s focus on micro and small and medium enterprises (MSMEs) as well as structural reforms put APEC at the forefront of ensuring that more and more stakeholders can participate and benefit from the integration process.



Tang Guoqiang

Don Campbell



Don Campbell

Tang Guoqiang

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