ISLAND OF THE GODS

APEC Summit, BaliHosted by Indonesia

October 2013

INTRODUCING APEC: WHAT IT IS AND WHY IT MATTERS

Image: Embassy of Indonesia

ContentsWhat is APEC?

ABAC and Business

Official themes of the APEC Summit 2013

What does it all mean? Actual major themes…

ASEAN and APEC interplay, and the TPP

Insights from APEC

WHAT IS APEC?

44% global trade

21 countries

40% world’s population

55% world GDP

THE WORLD’S BIGGEST TRADE BLOC

APEC accounts for over half of the global economy; it is a talking shop, but one that

changes your world…Image: APEC

WHAT IS APEC?• The Asia-Pacific Economic Cooperation is one of the most important global

economic forums, with 21 “member economies”.• It is the leading Asia-Pacific forum for discussion of enhancing:

ECONOMIC TIES INVESTMENT

TRADE

• Its primary goal is to support sustainable economic growth and prosperity in the Asia-Pacific region.

APEC’S VISION & PURPOSE

• Since its founding in 1989, APEC has put a central focus on attempting to increase free trade and the free movement of goods and services amongst its members. Free and open trade is central to the APEC philosophy – Adam Smith would be a fan.

• APEC’s decisions are not legally enforceable – unlike ASEAN or the EU – APEC has much greater flexibility.

Image: The Telegraph

FROM BOGOR TO BALI

• Bogor is a leafy town in Indonesia, where in 1994 the last APEC Summit in Indonesia was held. The APEC meeting set out a pathway for the future of APEC. These ideas became known as the Bogor Goals.

• The Bogor Goals aim at: “free and open trade and investment in the Asia-Pacific by 2010

for industrialized economies, and 2020 for developing economies.”

• In order to meet the Bogor Goals, APEC attempts to work to reduce tariffs and other trade barriers across the Asia-Pacific region. Export and investment boosting policy measures are a key part of this.

MEMBER ECONOMIES OF APEC

Seven ASEAN nations*

Indonesia, Malaysia, Singapore, Thailand, Brunei Darussalam, Philippines, Vietnam

North America Canada, USA

Latin America Mexico, Chile, Peru

North East Asia

Japan, Republic of Korea

‘China’People's Republic of China, Hong Kong,

Chinese Taipei

Other nations…

Australia, New Zealand, Papua New Guinea, The Russian

Federation

* Myanmar, Cambodia and Laos, while members of ASEAN, are not APEC members

• Note that ‘China’ is technically represented three times, due to historical reasons, and also due to the fact that APEC is not attended by member countries as such, but “member economies” (PRC, Taiwan, Hong Kong).

• APEC is the “sharp end” geo-political pivot point where Chinese and US economic interests collide; stand-offs and mutual opposition can be expected

ABAC AND BUSINESS

APEC IS A BUSINESS FRIENDLY FORUM!

• The participation of business and the private sector is actively encouraged in APEC. Increasing business, trade, and investment is after all one of APEC’s major priorities.

• The APEC Business Advisory Council (ABAC), is a private sector council that provides feedback and advice to APEC leaders, through an annual dialogue, which provides advice on private sector priorities and issues.

ABAC CONTINUED…

• ABAC representatives also attend Senior Officials' Meetings, the Annual Ministerial Meeting and the sectoral Ministerial Meetings.

• ABAC comprises up to three senior business people from each APEC economy. The appointments are made by the Leader of the member economy concerned. The Chair of ABAC comes from the APEC host nation for that year.

ABAC PRIORITIES FOR APEC 2013

• Accelerate trade and investment liberalization• Promoting regulatory coherence• Initiate the new services agenda• Enhance supply chain connectivity

• Strengthen food security• Address energy security

• Encourage infrastructure investment and development• Foster the development of SMMEs

APEC CEO Summit

• On the side lines of APEC, leaders from the private sector will also gather to take part in a dialogue session with heads of state and policy makers.

• This forum allows for an exchange of ideas and views between the leaders of the private sector and leaders in the policy realm.

• Securing inclusive sustainable growth and achieving shared development will be the main focus of the forum.

OFFICIAL THEMES OF THE APEC SUMMIT 2013

OFFICIAL THEMES OF THE APEC SUMMIT 2013

• Under Indonesia’s leadership this year in Bali, APEC’s theme will be:

“Resilient Asia-Pacific, Engine of Global Growth”

• In the aftermath of a significant economic slowdown and market volatility in the last few months, APEC economies will be looking for resilience and certainty.

• The G20 Summit was regarded as a failure in terms of finding a global economic pathway; there are high expectations for APEC.

• This will also be the last major economic forum in 2013 before the most recent set of WTO “Doha” trade talks, scheduled for later this year in December, again hosted by Indonesia in Bali

OFFICIAL THEMES OF THE APEC SUMMIT 2013

The official APEC 2013 Priorities are:• Attaining the Bogor Goals (nearly 20 years on) • Achieving sustainable growth, but equitable• Promoting connectivity (note this is a big Indonesian priority; it also ties

in with the ASEAN AEC 2015)

WHAT WILL INDONESIA BE PUSHING FOR AS CHAIR?

• It is no secret that infrastructure development and promoting connectivity is a key priority area for Indonesia in this year’s APEC.

• Indonesian government ministers have frequently cited PPP development as a priority.

• Everyone “talks” about PPP, but Asia’s future economic growth really will depend on a hard PPP program; Asia has an $8 trillion infrastructure gap.

APEC PUBLIC-PRIVATE PARTNERSHIP (PPP) PILOT PROJECT

• During the APEC Leaders meeting, Indonesia will unveil a plan to create a Public-Private Partnership (PPP) Pilot Project.

• The idea behind the project is that a “best practice” PPP project mechanism would be created, in which other APEC countries could then follow in order to boost flagging infrastructure development in the region. Indonesia’s Finance Ministry will set up a unit that would specifically look at project design, in conjunction with various PPP experts from APEC who would sit on an APEC PPP Experts Advisory Panel.

Indonesia is scheduled to present the first design in another APEC meeting in Hong Kong in September 2014.

WHAT DOES IT ALL MEAN? ACTUAL MAJOR THEMES…

RISING INEQUALITY• Average incomes in APEC have more than doubled since its founding, but income

inequality has got worse – the gap between rich and poor is widening.

• The problem is especially acute in Asia. The Asian Development Bank (ADB) states that:

• “of the 28 countries that have comparative data between the 1990s and 2000s, 11—accounting for about 82% of developing Asia’s population—experienced rising inequality of per capita expenditure or income, as measured by the Gini coefficient”

• Within East Asia and the Pacific 250 million people still currently scrape by on $2 a day.

RISING INEQUALITY• APEC needs to work to ensure prosperity is shared; for example working to

increase access to financial products – such as credit and bank accounts. Vulnerable occupations – such as those working in agriculture and fishing – need to be able to access finance, so they can plan ahead and deal with short-term shocks. Agriculture for example, is still a major employer in APEC.

• Unchecked rising inequality can also lead to political instability. In Brazil this year mass protests took place at rising inequality, poor public services and corruption. The rich maybe getting richer, but the middle class in Brazil saw their incomes squeezed and the gap between rich and poor widening. Inequality also has detrimental effects on long term economic growth.

INFRASTRUCTURE

• APEC economies national state budgets will not be able to fund the huge investments needed, (predicted to be over $8 trillion in Asia alone), substantial private sector involvement is therefore critical

• Strengthening the Public-Private Partnership (PPP) mechanism is necessary, as APEC lacks project ready investments that the private sector can invest in – a continued private sector lament.

Image: The Jakarta Post

INFRASTRUCTURE

• Infrastructure development is being pushed in APEC by a number of mechanisms…

• Via the ABAC and Australia backed Asia-Pacific Infrastructure Partnership (APIP), which provides advice and investment checklists on PPPs.

• Via the APEC Public-Private Partnership (PPP) Pilot Project, backed by Indonesia.

Regional growth will require regional infrastructure

• Ports• Roads• Rail• Airports

All APEC members, including the US, need an infrastructure upgrade

ASEAN AND APEC INTERPLAY, AND THE TPP

Source: nextUp.Asia

Southeast Asia is a post World War II political concept as much as a geographic oneAn example of Jaw-jaw to prevent war-war – e.g. Indonesia/Malaysia conflict 1963-1966

ASEAN is Southeast Asia’s geo-political and economic grouping. It does not have the same economic scope or geo-graphical scope as APEC.

ASEAN AND APEC INTERPLAY

• ASEAN and APEC goals however do cross over…• Increasing regional integration, trade, investment

and interconnectivity are also goals that ASEAN works to further.

• For example, through the ASEAN Economic Community 2015.

ASEAN AND APEC INTERPLAY

ASEAN CONNECTIVITY: ASEAN ECONOMIC COMMUNITY 2015

ASEAN Economic Community 2015

ASEAN Connectivity is a three part initiative - Physical - Institutional - People

REACH OF FREE TRADE AGREEMENTS

RCEPTPP ACFTA

THE TRANS-PACIFIC PARTNERSHIP

• The TPP traces its origins from the 2005 Trans-Pacific Strategic Economic Partnership Agreement (TPSEP/P4) where the founding members were Brunei, Chile, New Zealand, and Singapore. In 2010, with the entrance of the US, the TPP was formed.

• The TPP is a huge free-trade agreement between 12 countries, which seeks to co-ordinate trade regulations. Although not yet agreed upon, APEC 2013 could well be the breakthrough point.

• The TPP covers a huge array of regulations and tariffs – from agricultural products to intellectual property to public tendering. The aim of which is to remove tariff barriers and streamline trade regulations across the group.

THE TRANS-PACIFIC PARTNERSHIP

two-fifths of global output

one-third of international

trade

Nations InvolvedAustralia

BruneiCanada

ChileJapan

MalaysiaMexico

New ZealandPeru

SingaporeUS

Vietnam

WHY IS THE TRANS-PACIFIC PARTNERSHIP CONTROVERSIAL?

• As well as frequently being the focus of anti-globalization protests, the sheer scale and scope of what the TPP covers has caused controversy…

• In many ways, the TPP is a work-around to the stalled WTO backed Doha Round free trade talks. The TPP gets round this by signing up just the willing members. This has angered China, who sees the TPP as a US backed geo-political grab, masked as a free-trade agreement.

• Intellectual property (IP) is also a key issue of contention, as the TPP would put strict enforcement rules on IP patents – such as drugs. This would outlaw the use of cheaper generic drugs, apart from in a few specific circumstances. This has been seen as denying the poor access to life-saving drugs and a win for western manufacturers.

INSIGHTS FROM APEC• Protectionist and nationalistic policies do not work in an economic

slowdown…

• And politicians know this…

• They may speak in a nationalistic tone to appease an audience, but sign up to free trade agreements nonetheless…

• Private sector engagement and the breakdown of barriers is critical to solve longstanding problems - $8 trillion infrastructure deficits cannot be filled by stretched state budgets…

SUPPLY CHAINS CAN NO LONGER BE CONFINED TO ONE NATION…

• In an increasingly interconnected regional economy - not to mention a global economy- protectionist one nation supply chains are increasingly inoperable…

• From cars to cattle, regional and global supply chains are increasingly the way forward…

FOOD SECURITY MOVES GLOBAL…

• Food security and supply chains are also moving to a more regional/global platform…

• Indonesia has recently proposed to buy control of up to 1.5 million hectares of northern Australian cattle land to help secure a sustainable beef supply.

• China is also buying huge swathes of land in Ukraine – around 3 million hectares – to grow crops for back home.

THE CLASH BETWEEN MULTILATERALISM AND BILATERALISM

• Binding forums, such as the WTO, are increasingly undermined by bilateral (or regional) free trade agreements signed between nations; such as the TPP…

• APEC will need to show that multilateral forums are still relevant by producing tangible outcomes…

• A successful APEC may tee up a successful WTO later this year…Indonesia hopes so: the ‘9th Doha Round’ WTO trade talks are hosted by Indonesia in December 3rd-6th

Stephen LockEdelman Indonesia

THANK YOU