Chapter 8 - Development cooperation: side track or central to APEC's future?
Introduction
8.1
In this chapter, the Committee examines the
third of APEC’s three pillars, development cooperation, by tracing the
evolution of APEC’s ‘second track’ agenda and reviewing its role in APEC.
8.2
Development cooperation is manifested in APEC
through a program of economic and technical cooperation, known as Ecotech.
Ecotech’s goals are to achieve sustainable growth and equitable
development, reduce economic disparities among APEC economies, improve the
economic and social well-being of the people, and to deepen the spirit of
community in the Asia-Pacific region. These goals complement APEC’s broader
trade liberalisation and facilitation objectives, including by recognising liberalisation
will not be effective unless developing economies have the systems and
understanding to meet these obligations. Technical assistance is thus an
important element of the Ecotech agenda. It also recognises there is a need to
create a climate in which markets can be progressively liberalised and
bottlenecks to continued economic growth removed. Infrastructure has been a
priority issue.[1]
8.3
The Ecotech program is carried out mainly
through ten Working Groups[2],
which were begun in 1990. They focus on six priority areas: developing human
resources, establishing stable capital markets, building economic
infrastructure, harnessing technologies of the future, promoting
environmentally-sound growth, and strengthening small and medium-sized
enterprises.[3]
Working Groups seek to address infrastructure
shortcomings in developing countries, support regional harmonisation of
standards, and promote information and technology exchange. Human development
programs assess labour and social security issues and provide training and
technical assistance for government officers, businesses and the financial
sector so as to ensure the market has an informed basis on which to develop.
Ecotech activities are thus structurally connected to the trade facilitation
agenda.[4]
Why Ecotech is not aid
8.4
Dr Elek emphasised that APEC is not a new ‘aid
bureaucracy’. Instead, its focus is on the exchange of knowledge and technical
expertise—through Ecotech.[5]
Dr Charles Morrison noted that there has always been confusion about how
economic technical cooperation relates to traditional ODA transfers under APEC.
This, in turn, has confused APEC’s role as ‘a process of information exchange
and policy dialogue’ with the ‘different role’ filled by aid implementing
agencies.[6]
8.5
In his paper, ‘Development Cooperation in the 21st
Century’, Dr Morrison demonstrated this fine distinction when he described how
the provision of ‘foreign aid’ fits into the APEC development cooperation
model. He acknowledged that, given the different stages of development of APEC
economies, some of the advanced APEC economies ‘will want to assist others in
meeting their goals through foreign assistance’. However, APEC’s model for the
application of foreign assistance is distinctive in two ways:
- APEC should not coordinate or have any hand in the provision of
these funds. Foreign assistance would be used as part of a sovereign
government’s domestic development schedule and so would be independent of
APEC’s oversight; and,
- Government derived aid assistance would be secondary in size and
importance to that generated through private sector activity.
Development cooperation: future
directions for APEC
8.6
Dr Andrew Elek told the Committee that
Australia’s great achievement in setting up APEC in 1989 was the forging of a
coherent framework, which took into account the divergent needs of all
potential APEC participants; a process which inevitably involved ‘distilling
fairly separate agendas’—trade liberalisation and development cooperation.[7] From the beginning, APEC
combined trade interests and development assistance as dual agendas in a
regional coalition of countries at very different stages of economic
development.
8.7
Despite the existence of this framework, many
people have commented on their perceived disparity between APEC’s declared
commitments to development cooperation and its achievement in this area. For
example, Professor Cliff Walsh, Director of the Centre for Economics in
Adelaide, told the Committee that development cooperation was a suppressed item
on APEC’s agenda. He was sceptical of APEC statements giving equal status to
development cooperation compared with trade and investment liberalisation and
facilitation. He thought this was not happening in practice.[8]
8.8
The Australian Council for Overseas Aid, while
advocating a more prominent role for development cooperation in APEC’s ‘two
track’ structure, observed:
We think that second track is very important because it is about
intensifying development cooperation in the region, trying to address some of
the social and economic inequities between countries and promoting sustainable
development. However, from what we can see, the main focus of APEC's work to
date has been on the first track: trade facilitation and liberalisation and
reducing impediments to trade and investment in the region.[9]
8.9
Although DFAT emphasised its commitment to
advancing trade liberalisation, it also recognised a clear role for APEC in
capacity building in the finance and related sectors. In this area, there would
be little overlap with other major international financial institutions.[10]
8.10
Most witnesses accepted the view that the ‘first
track’ trade and investment liberalisation and facilitation agenda would, in
the long term, generate wealth in APEC member economies and, through open
regionalism, in the economies of their other trading partners.[11] It was agreed that if all
member countries were to progress, markets must be open in order to generate
wealth.
8.11
Despite giving priority to the ‘first track’,
many considered that wealth would not be generated equitably across the region
unless mechanisms were in place to assist developing economies to build the
infrastructure needed to support market growth. The role of APEC’s ‘second
track’, development cooperation, was widely acknowledged as the means of
providing that assistance to economies in need of support. It was not, however,
until the effects of the Asian financial crisis became clear that APEC’s
Ecotech agenda received the attention it deserved.
Distilling the agendas:
development cooperation under APEC
8.12
In a paper on Ecotech, Mr Alan Oxley, Chairman
of the Australian APEC Study Centre, described how APEC is a creature of a new
era of cooperation, which evolved at the end of the Cold War and with the rise
of the Asian Tigers and Chile.[12]
During this period, prior notions about developed country obligations to
provide concessions to developing countries to assist growth were put aside.
Instead, for example, developed and developing economies worked jointly for the
Cairns Group coalition against any country, developed or otherwise, which
resisted reduction of trade barriers for agricultural produce. The Uruguay
Round further reinforced the view of equity among nations when it came to
economic reform. From this time on, the assumption that developing countries
should be allowed special exemptions from tariff reduction and other trade
agreements, as was allowed under the GATT, was generally unacceptable to the
international community.[13]
8.13
Mr Oxley stated that the free market had thus
emerged as ‘the orthodox instrument for economic development’, sweeping aside
former notions about balances and counter balances to ensure progression in
developing economies.[14]
He concluded that APEC is the premier regional organisation to adopt this
model, as:
There is no presumption that APEC is divided politically
according to the economic status of its members. The emphasis in language is on
collaboration in the common interest. APEC is the first regional organisation
for economic cooperation that is composed of developed and developing economies
that is not founded on the principle that collaboration must be based on the
premise that there are inherent differences between developed and developing
economies.[15]
8.14
Therefore, APEC is an organisation ‘not bound by
political preconceptions of the development process’. In its official statements, it refers to its
members as economic entities along a continuum of development, not as weaker
(developing) countries requiring assistance from the strong (developed) ones.
APEC thus focuses on ‘meet[ing] the economic development interests of its
members’ while disregarding the historical and political differences which have
led to their placement at diverse points on that development continuum.[16]
8.15
Dr Hadi Soesastro told the Committee that ‘both
APEC and the ARF [ASEAN Regional Forum] are the two pillars in the regional
architecture that we hope will help maintain peace, security, stability and
also increase prosperity in the region’. He said that:
Trade liberalisation, which has been an important focus of the
agenda of APEC, should be seen in the APEC context not simply as an exercise to
opening up markets. It certainly is an important agenda for APEC, but it should
always be seen as part of the larger context and broader objective of building
the community. I think by now we have come to an agreement, a recognition, that
APEC’s agenda needs this balance of trade liberalisation, trade and investment
facilitation as well as economic and technical cooperation.[17]
8.16
In 1995, Dr Soesastro wrote that there were two
views of APEC, a broad view and a narrow view. The broad view was based on an
understanding that APEC is about community building in the region—a view
suggesting that APEC is a process and that the process is what is important.
The narrow view focuses on outcomes, such as producing an investment code or
the negotiation of tariff cuts. He expressed concern that the narrow view would
create too much stress and tension inside APEC, which would be divisive.[18] He told the Committee:
Community building implies that one needs to be more willing to
engage in a give and take process, understanding each other’s problems and so
on. The narrow view in fact in APEC has been predominantly adopted in the past
by the Americans, who want to see results immediately. The political processes
in the United States do not tolerate people coming together without bringing
back visible results. Therefore they have always been talking about results and
outcomes, whereas community building needs a process of understanding. You have
to develop a habit of cooperation and these things. At the end I do feel that
again one needs to have some kind of a balance, because simply talking is also
not the purpose of the exercise.[19]
8.17
Dr Soesastro said that, in the process of trade
and investment liberalisation, there are both winners and losers and that
governments need to anticipate who will be the losers and either lessen or
eliminate their hardship in the process. He also said that some economies would
need support when they embarked on trade liberalisation.
While opening up, there is always this fear that developing
countries tend to lose out. There needs to be a sense of solidarity being shown
within the APEC process, and this should be especially reflected and manifested
in an attempt to really help these developing countries build and strengthen
their capacity, strengthen the institutions and strengthen the regulatory
environment. These are very important when these countries open up. There also
needs to be a greater sense of assurance that we will not lose out in the process.
That is the function of the economic and technical cooperation agenda of APEC.[20]
The evolution of Ecotech
8.18
The idea of equality in the market place is the
foundation stone on which APEC commits its members to ‘mutual respect and
mutual benefit’.[21]
But recognition of difference has been the substance of the coalition’s history
and its success.
8.19
The developing members of APEC, particularly the
ASEAN countries, were concerned about the weight of influence Japan and the
United States would have in driving the organisation’s agenda. Australia played
an important role in reassuring the ASEAN countries that the organisation would
be a balanced and inclusive one, in which ‘members would be there on an equal
footing’.[22]
8.20
Indeed, the framing of the phased agreement for
tariff reduction at Bogor in November 1994, seemed a bridge to future harmony.
AusAID stated in its submission that developing member acceptance of the
liberalisation agreement relied heavily on APEC’s acknowledgment of difference,
backed up by a stronger development cooperation emphasis:
The Bogor Declaration of 1994 stands out as the most significant
APEC development so far. A key factor in its acceptance by all APEC Leaders was
that it explicitly recognised the difference in capacities of developing APEC
members to effect free and open trade. Hence a further ten years was allowed
for APEC developing economies to achieve the goals outlined at Bogor. A further
factor influencing acceptance by all, was the Leaders’ call in Bogor to
intensify development cooperation. They stressed the importance of Economic and
Technical Cooperation (Ecotech) in APEC to attain sustainable growth, equitable
development, to reduce economic disparities in the region.[23]
8.21
Professor David Robertson noted that the
agreement uniquely brought together the Western and the Asian way ‘where
targets are agreed by consensus, where everybody’s words are believed to have
equal weight, and where targets are pursued not formally, but with best
intentions’.[24]
8.22
This consensus was, however, not achieved
easily. As Professor Ippei Yamazawa of the APEC Eminent Persons Group reported,
when President Soeharto introduced the term ‘development cooperation’ into the
Bogor Declaration, some members resisted it.[25]
Dr Andrew Elek attributed this to ‘uncertainty and ambiguity about what
development cooperation means’, with the term conjuring up uncomfortable
resonances of former donor/recipient obligations between APEC’s developed and
developing member economies.[26]
Nevertheless, APEC not only achieved consensus on phased tariff reductions but
also on a commitment to ‘intensifying Asia–Pacific development cooperation’.
8.23
On 19 November 1995, at Osaka in Japan, APEC’s
Economic Leaders set out to design operational guiding principles and a
strategy for implementing the Bogor commitments. They adopted the Osaka
Action Agenda a blue print for action on trade and investment
liberalisation and on economic and technical cooperation.[27] Emphasising their equal
commitment to the twin agendas, the Leaders, in their Osaka Declaration of
Common Resolve, stated:
The Osaka Action Agenda is the template for future APEC work
towards common goals. It represents the three pillars of trade and investment
liberalisation, their facilitation, and economic and technical cooperation.
Achieving sustained economic development throughout the region depends on
pursuing actions in each of these areas vigorously.[28]
8.24
Behind this rhetorical commitment to balanced
agendas, tensions between the United States and Japan, with their different
expectations of APEC, again surfaced.
8.25
According to Professor Yamazawa, the ‘lack of
consensus on economic cooperation among APEC members has impeded the
strengthening of cooperation efforts in APEC’.[29]
The term ‘development cooperation’, reluctantly accepted at Bogor, was again
rejected by Senior Officials in preparatory discussions for the Osaka Action
Agenda. He reported that the Leaders finally agreed upon the ‘modest term
“economic and technical cooperation” (Ecotech)’, with the result that: ‘Part
Two of the Osaka Action Agenda, although being one of the two major
pillars on the APEC agenda, turned out to be no more than a collection of
individual work programs and still lacked a strong thrust for visible
achievement’.[30]
8.26
Professor Yamazawa also recorded the
difficulties the Japanese Chair had in getting support for the Partners for
Progress (PFP) proposal at the APEC Senior Officials Meeting in February 1995. Japan initiated this proposal to break down
a perceived reluctance ‘to strengthen economic and technical cooperation beyond
studies and seminars’. The program was to incorporate a wide range of
cooperation activities that would be administered by an established agency
within APEC. The proposal was defeated because of concerns about funding and a
disinclination to increase APEC’s bureaucracy.[31]
8.27
The SOM did, however, embrace the PFP proposals
for technical cooperation programs focussing on three trade and investment
liberalisation, and facilitation (TILF) areas: standards and conformance;
intellectual property rights; and, competition policy. Professor Yamazawa
reported that the SOM recognised these as essential supports to the successful
progression of the first track agenda. Japan made its final commitment for
support to the TILF at the Leader’s dinner when Mr Murayama announced that 10
billion Yen would be provided over several years for TILF’s promotion.[32]
‘Designed to Deal with
Diversity’: APEC after Subic
8.28
At Subic in 1996, the need to redefine the terms
of APEC’s vision became increasingly urgent. It became clear that dragging the
chain on development cooperation would also retard the progress of the
liberalisation agenda. As Mr Oxley said, governments will not agree to economic
integration ‘unless they are satisfied that very basic strategic interests are
being advanced or protected.’ Until developing nations felt more comfortable on
that account, enhanced regional cooperation was unlikely.
8.29
The then United States Secretary of State told
the pre-Subic Bay Ministerial Meeting in Manila: ‘Now we must begin to take
specific concrete steps that will open up our economies and help lift the lives
and living standards of our peoples’.[33]
8.30
Dr Frederico Macaranas, Chair of the 1996 APEC
Senior Officials Meeting, noted that the development cooperation agenda had not
been developed to the extent of that for trade and investment liberalisation
and facilitation.[34] The desire to advance the free trade agenda
bolstered a new consciousness of the need to refine and focus the development
cooperation agenda, so as to garner public support for the total plan. Ealrier,
in its final report in 1995, the Eminent Persons’ Group had asserted that if
real progress was to made:
it was necessary to develop a clear conceptual framework which
allowed economic cooperation and development cooperation being promoted jointly
by APEC governments to be clearly distinguished from ‘old style’ foreign aid,
which carried overtones of patron-client relations, policy conditions and
leverage. A new model of development co-operation was needed, based firmly on
the guiding principles of mutual respect and mutual benefit which underlie the
APEC process.[35]
8.31
As a consequence, APEC made its first focussed
attempt to resolve internal disagreement about the role and direction of its
development cooperation agenda and to establish a workable framework for
‘community building’ among all member economies.
8.32
Prior to the Senior Officials Meeting in May
1996, issues papers were prepared on the potential nature and priorities of
economic and technical cooperation to be promoted through APEC.[36] The Foundation for Development
Cooperation convened an international dialogue group, which met three times, in
September 1995 in Tokyo and in February and May 1996 in Manila. The outcome was
the paper ‘An Asia-Pacific Model of Development Cooperation: Promoting Economic
and Technical Cooperation through APEC’, which was submitted to the Philippines
Chair at Subic.[37]
8.33
Issue papers were also prepared by the Economic
Committee and by the United States Government. The Philippines Government then
prepared a synthesis paper based on all three. Subsequent deliberations by APEC
Senior Officials led to the design and endorsement of The Declaration on an
Asia Pacific Economic Cooperation Framework for Strengthening Economic
Cooperation and Development at Subic Bay in the Philippines in November 1996.
8.34
At Subic in 1996, APEC Leaders committed
themselves to equitable development: ‘We recognise that our vision of community
can only be strengthened if our efforts benefit all citizens’.[38] They went on to say:
As an essential complement to our trade and liberalisation
agenda, economic and technical cooperation helps APEC members to participate
more fully in and benefit from an open global trading environment, thus
ensuring that liberalised trade contributes to sustainable growth and equitable
development and to a reduction in economic disparities.
8.35
In November 1996, APEC Economic Leaders issued
the Declaration on an Asia-Pacific Economic Cooperation Framework for
Strengthening Economic Cooperation and Development, which appeared as companion
document to the Manila Action Plan for APEC (MAPA).
8.36
In their Declaration, the APEC Economic Leaders
explained the context for directives made in these documents and ordered their
implementation. They targeted economic and technical cooperation, instructing
APEC Ministers to give ‘a human face to development’ by directing relevant fora
to give high priority to:
developing human capital; fostering safe, efficient capital
markets; strengthening economic infrastructure; harnessing technologies of the
future; promoting environmentally sustainable growth; encouraging the growth of
small and medium enterprises.
8.37
The Framework provided for increased private
sector involvement in Ecotech. The need for this partnership between government
and business was explained by the APEC Economic Leaders in their Subic
Declaration:
Lack of infrastructure severely contains sustained growth. Since
public finance cannot fully meet the enormous requirements of the region,
private sector investment must be mobilized. Providing the appropriate
financial, economic, commercial and regulatory environment is the key to
stimulating such investments. We direct the relevant ministers to work together
with private sector representatives and with national/international financial
institutions, including export credit agencies, and develop a framework for
this purpose.[39]
8.38
Government to government development aid was
included in the Framework, articulated as ‘aid between equals’ and designed:
To help build a growing sense of community and promote a spirit
of enterprise that leads our people to work with and learn from each other in a
cooperative spirit, economic and technical cooperation activities should draw
on voluntary contributions commensurate with member economies’ capabilities and
generate direct and broadly shared benefits among APEC member economies to
reduce economic disparities in the region.[40]
8.39
At Subic, APEC achieved a new level of consensus
on the relationship between trade liberalisation and facilitation, and its
development cooperation agendas; a relationship which had become increasingly
symbiotic.
Vancouver 1997
8.40
At Vancouver in November 1997, despite the onset
of the Asian financial crisis, APEC Economic Leaders remained optimistic, and
declared that ‘the fundamentals for long-term growth and prospects for economic
growth in the region are strong’.[41]
APEC’s course was to endorse the central role of the IMF, drawing on the
funding framework outlined at Subic to supplement IMF initiatives. ‘Capacity
building’ would complement the IMF packages, which linked aid to stringent
liberalisation programs. In this context, remedies to the crisis under
‘capacity building’, while incorporating human development elements, would
mainly focus on building financial infrastructure in struggling economies,
while the IMF would push the liberalisation process.[42]
8.41
In pursuing their commitment to ‘capacity
building’, the Economic Leaders elaborated the six priority areas established
in the Framework for Strengthening Economic Cooperation and Development. Four
of these focussed on economic, financial and technological development; the
remaining two on human resources and the environment.[43]
8.42
A new Ecotech Sub-Committee (ESC) was
established to coordinate the implementation of these initiatives. In the short
term, the ESC was intended to focus the direction of economic and technical
cooperation and to ensure that its activities received adequate attention from
APEC leaders. In the long term, it was to be a means of monitoring the
implementation and evaluating the effectiveness of Ecotech activities.[44]
8.43
ABAC gave support to the Manila Declaration
initiative for public/private collaboration in advancing the Ecotech agenda. It
recommended the formation of Partners for Equitable Growth (PEG), which was
designed to be a non-profit organisation with a board of senior business and
government leader directors to be run along private sector lines.[45] PEG would be engaged in:
- mobilising the resources and
resourcefulness of the business/private sector in support of APEC’s Ecotech
objectives; and
- a strategy of developing clear
complementarity between APEC Ecotech and the APEC trade and investment
liberalisation and facilitation (TILF) initiatives.[46]
APEC adopted the ABAC recommendation to form
PEG.
8.44
ABAC further clarified its vision of the
private/public partnership:
We do not see business/private sector initiatives in APEC’s
Ecotech diminishing or replacing government initiatives in the APEC Working
Groups and elsewhere. Rather we see business/private sector initiatives as complementing
government initiatives in the spirit of partnership envisaged in the Manila
Declaration.[47]
8.45
In the Vancouver Framework for Enhanced
Public/Private Partnerships in Infrastructure Development, the Leaders set up a
model to make infrastructure investment attractive to the private sector. APEC
had therefore moved closer to integration of the APEC agendas.
8.46
Canada, using its prerogative as host country,
opened up APEC’s development cooperation agenda by giving more prominence to
environmental issues. It also initiated programs designed to ensure that youth,
women and business participated more actively in APEC.[48] It also held the first-ever
FEEEP (Food, Environment, Energy, Economic growth and Population) symposium,
although this progression was overshadowed by APEC’s failure to commit itself
to this in a tangible way and other sustainable development issues.[49]
Kuala Lumpur 1998: a delicate
balance
8.47
Malaysia, as Chair of APEC in 1998, and other
Asian members, considered that APEC’s economic and technical cooperation agenda
had been overshadowed by the trade liberalisation agenda. Malaysia fully
supported the Vancouver initiatives on capacity building, particularly those
designed to develop the region’s human resources and harnessing technologies
for the future. Malaysia wanted APEC to build engagement with the Asian Pacific
business community.[50]
8.48
The worsening crisis during 1998 was to give
these and related issues more prominence. APEC considered the need to
strengthen global financial architecture and to strengthen APEC’s response to
the devastating social effects of the crisis through HRD work group activity.
8.49
In January 1998, a meeting of the APEC Human
Resources Development Group had convened in Bali to consider the human effects
of the crisis, particularly in relation to unemployment. A taskforce was set up
to evaluate the situation and to work out appropriate responses for APEC.[51]
8.50
On 22–23 April 1998, the APEC HRD Task Force on
the Human Resource and Social Impacts of the Financial Crisis held its first meeting
in Jakarta, Indonesia. A New Zealand academic, Associate Professor Nigel
Haworth, was commissioned to prepare papers and analyse case studies.[52]
8.51
Associate Professor Haworth reported that the
crisis had compelled APEC to encompass short-term programs to address immediate
problems. This was a change for Human Resource Development under APEC, which
usually worked towards broader medium and long-term capacity building goals
over a three to five year time frame.[53]
Priority areas included the need to strengthen or develop minimal social safety
nets in Asian countries and to assess and address the effects of the crisis on
particular sections of the labour market—women, migrants and middle-aged men.[54]
8.52
Laying important foundations for APEC to expand
its human resources development agenda, Professor Haworth asserted that
pressures on the labour market caused by the crisis meant that APEC should also
look at labour and management issues, an area not previously part of APEC’s
agenda.[55]
He argued that consideration of problems in this area was essential as support
for the export-led growth model APEC promoted for regional recovery because:
‘technology transfer and the focus on innovation and flexibility at the heart
of export-led models require continual improvement in managerial competence and
in employee skills levels’.[56]
8.53
As a result of the consideration of these
matters, the Economic Leaders included them in their Declaration: Strengthening
the Foundations for Growth and its attachment, the Kuala Lumpur Action Program
on Skills Development.
8.54
APEC Leaders also directed Ministers to act on a
range of initiatives aimed at ‘Strengthening the Financial Systems Individually
and Globally’—corporate governance measures—under the general aim of laying the
foundations for sustainable growth into the next century. These included the
formulation of approaches to strengthen the regional and global financial
system and to examine the scope for regulation of the international financial
system through an expanded G22 and to forecast and control financial
instability.
8.55
APEC’s support was also given to the formation
of the Asian Growth and Recovery Initiative. This was a package of $10 billion,
which would help address the particular problems of the nations in
crisis—without IMF conditions imposed, as mooted at Vancouver by Asian
members—and would also work to develop early warning systems. This initiative
would be funded by the United States and Japan and international institutions,
the World Bank and the Asian Development Bank, according to the aid model
defined by Leaders at Subic.[57]
8.56
On the social dimension, APEC Ministers were
directed to work together with these institutions to devise effective
strategies to ‘strengthen social safety nets’, and so ameliorate hardship in
Asia. The role of Ecotech was brought into the foreground, with Leaders noting
that economic and technical cooperation had ‘acquired added urgency’ with the
occurrence of the crisis.
8.57
The main thrust of the response on Ecotech and
labour market issues was carried by the Kuala Lumpur Action Program on Skill
Development. It stated:
In the face of the current economic crisis, APEC has agreed that
there is a need to address the social impact of the crisis. Retraining of
displaced workers can contribute towards alleviating the social impact on those
affected as well as strengthening community spirit in APEC.
8.58
The document named four specific areas for
development:
- upgrading the industrial skills base: creating greater
efficiency, enhanced technology flow;
- spawning new entrepreneurs: importance of a thriving SME sector;
- technology skills for the new millennium: new skills for rapid
transformation in the workplace; and
- strengthening institutional infrastructure to facilitate trade
and investment liberalisation: enhanced capacity to respond to market demands.
8.59
Under this program, private sector expansion and
upgrading of skills were intended to ameliorate the massive unemployment
resulting from the crisis. APEC intensified efforts under the Partners for
Progress model of private/public sector collaboration to stimulate the growth
of SMEs and encourage ‘smart partnerships’ between business and the private
sector to ensure that training matches demand.
8.60
These commitments for victims of the crisis were
in keeping with APEC’s market development model and its HRD commitments to
enhance education and training opportunities.[58]
The focus on ‘capacity building’ at Kuala Lumpur was mainly directed to big
business and strengthening financial markets, in keeping with APEC’s conviction
that ‘export-led growth’ would soon lead the unemployed in Asia back into jobs.
8.61
Despite these commitments, APEC’s performance
was not without criticism. Some commentators claimed that APEC had really done
very little that was new at Kuala Lumpur and that the formula for recovery had
not changed—demand led growth.[59]
Further, in focusing on international reform, others judged that APEC had
failed to avail itself of the opportunity provided by the crisis to consider
labour and management issues as a background to structural reform across the
region. As official APEC observer, PECC told APEC Finance Ministers at
Langkawi, Malaysia, in May the following year:
before we focus too much on the macro-economic, big picture
issues of regional and international architecture, we have to take a closer
look at promoting corporate and industrial reform and development.[60]
8.62
The PECC saw that the timing was right—with many
APEC economies already in the midst of making these changes—and APEC with ‘a
credible capacity to supply economic and technical co-operation’.
Unfortunately, despite the skills development commitments made in November in
Kuala Lumpur, PECC judged that APEC Trade and Industry Ministers and Foreign
Ministers had not succeeded in giving substance to Ecotech—‘things had not gone
very far’ over half a year later.[61]
New Zealand 1999
8.63
The Joint Ministerial Statement of the APEC
Sixth SME Ministerial Meeting held in Christchurch on 26–28 April 1999 drew
attention to the effects of the financial crisis on SMEs:
The recent regional economic crisis has and is continuing to
have profound effects on SMEs. SMEs have been particularly affected by the
credit crunch.
Returning SME’s to growth is vital to the region’s economic
recovery. The business environment, however, is also rapidly changing.
Corporations are divesting, leading to the creation of more SMEs. This
underscores the fact that SMEs will be the engine for growth in the future.[62]
8.64
The focus on SMEs would also further APEC’s
human development objectives for women and for indigenous peoples.
8.65
The second major meeting held in New Zealand
during its year as host was the Women in APEC meeting, entitled ‘Our
Contribution to Economic Prosperity’. The meeting examined the role of women as
entrepreneurs, in light of statistics showing women as premier initiators of
small and medium businesses. Their role in SMEs was highlighted as SMEs had an
important role to play in the region’s recovery from the financial crisis.[63]
8.66
Several new development cooperation initiatives
were begun during the year. These included Australia’s proposal that APEC
should work with the Asian Recovery Information Centre, being set up by the
Asian Development Bank. Australia focused on the effects of the crisis on
children. The United States reported on work on strengthening social safety
nets in APEC fora and through the virtual Task Force set up for this purpose.
8.67
In 1999, Human Resource Development (HRD)
Ministers took APEC’s broader development cooperation objectives closer to
centre stage. Their Joint Ministerial Statement, endorsed in Washington on
27–28 July 1999, advocated the:
- placing of human resources development and other employment
policies at the centre of economic policy and cooperation; and
- increased collaboration and information exchange with and among
other regional and international organisations and enhanced cooperation among
government, labour, business and civil society.[64]
8.68
The HRD Ministers also directed, for the first
time, that APEC members should consult the International Labour Organisation to
‘establish labour market frameworks and strong safety nets to enhance growth,
employment and social cohesion’.
8.69
These developments demonstrated that, under the
impetus of the financial crisis, APEC was prepared to assume a more
interventionist role than before. Prior to the 1997 meetings at Vancouver,
President Clinton had foreshadowed America’s support for such a move. The
President saw that, with the region in crisis and Japan in recession, there was
room to assist other countries to build good economic policies of their own. He
considered that the IMF should begin that process but if ‘that fails or is
insufficient, then those of us in the region will come in and support it’.[65]
8.70
APEC has, in effect, accepted the first
principle of sustainable development, which is acceptance of the
interrelationship between economic, social and the political factors. It should
now be more able to assist in bringing about ‘the effective management of a
country’s social and economic resources in a manner that is open, transparent,
accountable and equitable’—good governance, the essential platform for poverty
reduction.[66]
8.71
The APEC Leaders Declaration issued in New
Zealand on 13 September 1999 welcomed these initiatives and emphasised the need
for coordinated delivery of development programs to address the human and
economic dimensions of the crisis.[67]
A ban on new protectionist measures while WTO rounds proceed gained at least
verbal consensus.[68]
Building private/public sector
partnerships through Ecotech
8.72
Most development experts accept that APEC’s
ability to realise its development goals relies on its ability to cultivate a
productive relationship between the public and private sector.
8.73
In 1998, Australian representatives of APEC’s
Business Advisory Council said that Australian business’ understanding of
APEC’s goals was then in its ‘embryonic stages’.[69] They reported a largely
apathetic response to economic forums they had organised through DFAT to
explain APEC to the business community.[70]
8.74
Dr Christopher Findlay, Associate Professor of
Economics at the University of Adelaide, reported a similar response. In late
1997, at a function held in Melbourne by the Australian Pacific Economic
Cooperation Committee (AusPECC), business people were asked what they thought
APEC’s priorities ought to be. They suggested single sector development, such
as cars or beef, or focus on ‘free trade’ or trade facilitation. None saw any
potential in economic and technical cooperation activities.[71]
8.75
Dr Findlay explained that business participation
in Ecotech would produce mutual benefits: ‘it would force the participants to
make clearer their goals, and it would facilitate the execution of projects
because business would come to see the opportunities that were associated with
the programs’.[72]
At that time, however, he reported that only one third of Ecotech projects had
business input or participation.[73]
8.76
The Committee believes that APEC should continue
to seek business support for development cooperation programs. Although
business will benefit directly from many of the Ecotech projects run with its
support, it will also ultimately benefit from greater liberalisation, which
should result from APEC’s development cooperation program.
Ecotech and SMEs
8.77
SME development in the area of information
technology has been cited by APEC as the star of future growth across all APEC
economies.[74]
SMEs have been hard hit throughout the region by the financial crisis and their
revival and multiplication are seen as crucial to the region’s recovery. SME
growth is also regarded as essential for developing economies. The OECD’s
Development Assistance Council explained:
Microeconomic enterprises are a large, growing and very dynamic
element of the economies in developing countries. In many small countries these
very small, generally family-based enterprises or sole proprietorships comprise
an important part of the informal economy. A thriving microenterprise sector
generates output, employment and incomes and strengthens intersectoral linkages
leading to more integrated, resilient economies and balanced growth. It also
promotes more broad-based participation—particularly by the poor and by
women—in productive activities, leading to more equitable income distribution.[75]
8.78
Australian ABAC representative, Mr Michael
Crouch, explained the relative importance of SMEs in Australian and Asian
economies. He said that in Australia there are ‘some 2,500 large companies and
some 495,000 small and medium companies’, with a comparative ratio in Asia.[76] Meanwhile, 60 to 70 per cent
of trade within APEC is carried out by SMEs.[77]
8.79
Mr Crouch emphasised the importance of human
resource and infrastructure development to SMEs in Asian nations where weakness
in these areas meant loss of mutual benefits in terms of jobs and trade for
both Asia and Australia.[78]
Mr Crouch also described the important role Australia had played to date for
SME representation in ABAC by recommending that each of the three ABAC
committees have co-chairmen drawn from SMEs.[79]
8.80
Mr Malcolm Johns, Director of the Federation of
Automotive Products, saw that the failure to provide real channels of
communication for exchange of information and expertise under Ecotech,
particularly at a sectoral level, had had profound regional implications for
the auto sectors in Indonesia, Malaysia and Thailand.[80]
8.81
In relation to this, Dr Andrew Elek told the
Committee that APEC is always seeking ‘intelligent business inputs’ but these
are not easy to obtain. Commenting on the APEC Business Advisory Council’s
research capacity, he said:
It [ABAC] is proving quite effective, but you find that behind
the scenes they rush around and seek views from various other experts on what
they should say, because business does not tend naturally to think in these
international global strategic terms. [81]
8.82
The Committee believes that PECC and its national
constituent bodies are organisationally in the best position to assist ABAC
with its research needs. APEC should ensure that PECC and its national
constituent bodies are appropriately funded to provide such assistance to ABAC.
Australia’s foreign policy
approaches to development cooperation under APEC
8.83
The Australian Government has continued to
advocate that APEC pursue trade liberalisation goals while, at the same time,
supporting capacity building to provide a basis for continued growth in APEC
countries.[82]
8.84
DFAT’s idea of ‘capacity building’ was focused on the strengthening of market capacity, with the
assumption being that wealth thus accumulated would disperse in developing
communities equitably and automatically, without intervention from APEC. Mr
Peter Grey, then Australian Ambassador for APEC, told the Committee that APEC
is about:
facilitating economic growth. It is based on an assumption that
improved economic growth will filter down and lead to improved conditions for
individuals within an economy. But how that process is undertaken, and the
policies which individual governments choose to implement, is not something
which APEC is involved in.[83]
8.85
AusAID put DFAT’s view of growth as the prime
mover of equitable development into a broader development assistance context,
describing how growth is beneficial, but only for economies with standards of
good governance to ensure the benefits are shared around. Dr Robert Glasser,
then Acting Assistant Director-General, Mekong Branch, AusAID, said:
I think what the studies show...is that you can have tremendous
rapid economic growth and horrible inequality at the same time. So, if you do
not have the policies in place, the good governance, transparency, accountable
systems and a commitment by the government to distribute effectively and to
make sure that as many members as possible in society can share in the fruits
of growth, you can have growth and inequality at the same time.
Similarly, the studies show that without economic growth poverty
is not going to be eliminated or alleviated in a country; that you can have all
the goodwill that you want but, without the money and the support and foreign
direct investment and savings in a society and economic growth, you are not
going to be able to do anything about inequality in a society.
So the lessons for the aid program are that you need to
encourage growth, and in this case APEC's agenda is doing that through free and
open trade, but that is not enough and it is important at the same time—with
the aid program funds, for example—to fund activities in those countries that
promote good governance, that promote public accountability. If you get the
governance right, you will have the combination of good growth and you will
address also the income in inequalities within a country.[84]
8.86
AusAID’s current operational stance has, in
part, been modelled on One Clear Objective: Poverty Reduction through
Sustainable Development, the Simons Committee of Review Report 1997. The
report defined the concept of good governance as ‘the effective management of a
country’s social and economic resources in a manner that is open, transparent,
accountable and equitable’.[85]
8.87
The objectives to be realised through good
governance are identical to those that APEC’s development cooperation agenda aims
to achieve. Even so, as AusAID explained in its submission, Australian support
for its promotion in APEC developing member economies comes substantially out
of AusAID’s bilateral budget:
The primary focus of AusAID’s aid program is on poverty
reduction and sustainable development in the Asia Pacific region. With limited
resources, Australia focuses its aid effort on developing countries in the
region. Over 80 percent of Australia’s total aid budget is delivered in the
region. Many of our development cooperation partner countries are also members
of APEC. The bulk of Australia’s aid to APEC developing countries is actually
delivered through AusAID’s bilateral and other regional programs.[86]
8.88
AusAID submitted that, during 1997–98, Australia
had committed over $40 million to activities which ‘support trade capacity
building and economic governance, including in APEC developing countries’. This
represented support of a wide range of TILF and Ecotech activities in sectors
such as education, infrastructure, transport and energy, and natural resource
extraction.[87]
8.89
Dr Glasser said that AusAID’s major
organisational response to APEC had been the establishment of the APEC Support
Program which, as a feature, had brought about an increased degree of
engagement between departments carrying out activities under the Program.[88] In early 1998, over $5 million
had been committed to implement Support Program activities with ‘priority given
to proposals, which provide direct assistance to these economies in maximising
the benefits offered by a free trade environment’.[89]
8.90
In its aid budget summary for 1999–2000, AusAID
reported that Australia would provide $1.5 billion as official ODA over the
period, an increase of $22 million over the 1998–99 budget figure. The Asia
Crisis Fund was doubled to $12 million and country assistance for Indonesia was
increased by $6 million (total flows at $121 million). Other developments
included broader focused funding for a new three-year micro finance initiative
(for extending credit to very poor entrepreneurs) to the value of $3 million
dollars, and a 30 per cent increase in funding to the Human Rights Fund, to $1
million.[90]
AusAID would also provide funding for technical assistance to set up the Asia
Development Bank’s Asia Recovery Database in Manila.[91] In 2000–01, the Asia Crisis
Fund was replaced by the Asia Recovery and Reform Fund, which was allocated $6
million. The purpose of the Fund is to assist countries in the region to
undertake economic restructuring in the immediate post-crisis period, with a
view to achieving sustained recovery and stronger social protection systems.
This is intended to reduce the risk of future crises and help ensure long-term
economic and social gains from future development.
8.91
Mr Ian Dunlop, Chief Executive of the Australian
Institute of Company Directors, and a leading advocate for corporate governance
reform, warned that the recent signs of recovery in the region, having occurred
faster than expected, might forestall necessary corporate governance and
government reforms initiated during the depth of the crisis. Without these,
lack of accountability and associated inequities of the past will not be
moderated and future market growth will be without integrity or predictability.
Mr Dunlop emphasised that governance also needs to encompass the integrity of
legislative, regulatory and political structures, not just corporate practice.[92]
Conclusion
8.92
From the outset, the role of development
cooperation in APEC has been to assist members to reduce disparities in
economic development among them so that all members can share the benefits of
liberalisation. In APEC rhetoric, development cooperation has been one of
APEC’s three pillars. It has been clear, however, from the evidence available
to this Committee, that APEC has focused much more of its attention on its TILF
agendas at the expense of development cooperation. It was not until the severe
adverse effects of the Asian financial crisis became apparent that development
cooperation assumed a greater role in amelioration of those effects. Even now,
not everyone is convinced that APEC is giving enough attention to its Ecotech
program.
8.93
Both APEC and the WTO experienced setbacks in
1998–99. In November 1998, APEC failed to agree on its early voluntary sectoral
liberalisation program, passing it instead to the WTO. In November/December
1999, the WTO meeting in Seattle failed to launch a comprehensive round of
world trade talks. At the time of publication, no round had been launched. In
both cases, the Federal Opposition was critical of the Government, arguing that
APEC could have been better used to help initiate a new WTO round, and that the
Australian Government had become a spectator, rather than a player, at the WTO.
8.94
As discussed elsewhere in this report, the
Committee believes that APEC should not back away from its pursuit of its Bogor
goals in respect of trade and investment liberalisation. Nevertheless, at this
time of lower activity on the liberalisation front, there is an opportunity to
give considerable more focus to development cooperation. This would not only
help members which are still recovering from the financial crisis but also
others which are not yet in a position to maximise the economic and other
benefits available from liberalisation. With such assistance, member economies,
which are currently hesitant to embrace further liberalisation measures, might
become less reluctant to pursue APEC’s liberalisation agenda.
Recommendation
The Committee recommends that the
Australian Government initiate and support moves in APEC to give greater
attention to development cooperation programs.
The Committee believes that APEC should
continue to seek business support for development cooperation programs.
Although business will benefit directly from many of the Ecotech projects run
with its support, it will also ultimately benefit from greater liberalisation
which should result from APEC’s development cooperation program.
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