Message from the Co-Chairs of PECC
On behalf of our 26 member committees, it is our pleasure to present the eighth annual report of the State of the Region. This report has a much longer history going back 25 years as the Pacific Economic Outlook report that was initiated during our Sixth General Meeting in Osaka.
The ambition we have is to capture in a short report, general trends and problems in the Asia-Pacific economy as well as to suggest some ways in which regional cooperation can address them. This report includes a survey of regional opinion-leaders, who are representatives from our member committees as well as those who live and breathe the business of Asia-Pacific cooperation. The report also contains an update to our index of regional integration. We now include a thematic chapter to address an issue that we think requires deeper thinking. We are very grateful to all of the contributors to this report – including the over 500 people who took the time to respond to our survey.
The regional and global economies are at a critical crossroads. The paths taken today are going to impact how individual economies deal with the integration and globalization in the years ahead. The turbulence affecting emerging economies is not yet a systemic problem but it could be, unless concerted actions are taken. The global economic crisis forced a consensus that concerted actions were required. As economies recovered at different speeds the consensus around cooperation has diminished. That consensus needs to be rediscovered and put to work.
The agreement made in Bogor almost 20 years ago to pursue ‘accelerated, balanced and equitable economic growth not only in the Asia-Pacific region, but throughout the world’ through free and open trade and investment was a bold move considering that, at that time, the Uruguay Round was at an impasse and the idea that open markets were the right path to development was hardly a widely accepted notion. In spite of two major economic crises, the region has witnessed unprecedented growth: incomes have more than doubled and more than 500 million citizens were lifted out of poverty. There is little doubt that the path selected was the right one. As shown in PECC’s 2013 survey, 74 percent of regional opinion-leaders agree that trade and investment liberalization and facilitation has had a positive effect on growth for their economies.
While growth has been impressive, income inequality has also been on the rise. The income share of the bottom 10 percent in many of our economies has gone down, as the share of the top 10 percent increased. These increasing levels of socio-economic disparity are a recipe for social unrest and instability. Moreover, they threaten the consensus in favor of integration that has been brought together over the years. That the Bogor leaders’ statement talked about equitable growth was commendable, but while setting specific goals for trade and investment liberalization, they did not do so in terms of development. It was only through the Millennium Development Goals adopted in 2000 that some specific targets were set to provide a minimum standard for the inclusion of the least well-off in our societies.
This is not to say that APEC has ignored the development dimension; indeed the Osaka Action Agenda and the Manila Action Plan for APEC both further threshed out how development cooperation should be pursued in the region. However, the lack of specific goals has meant that regional cooperation on development has been too diffuse and lacked an orientation towards outcomes. Regional opinion-leaders were very positive in their support for the need to set some aspirational targets to drive work on development cooperation. As former chair of the APEC Senior Officials, Dr. Federico Macaranas suggests in his chapter that setting targets is useful but in today’s rapidly evolving economy, the benefits of these processes need to be felt on the ground and quickly. Even interim results that indicate steps on a path are useful.
The survey results on the WTO Doha Development Agenda (DDA) are not surprising but they are an enormous disappointment; only 16 percent of respondents thought that the WTO DDA should be a priority issue for APEC leaders to discuss and close to 60 percent thought that the WTO was unlikely to reach a conclusion within the next 3 years. While the focus on Regional Trade Agreements (RTAs) is understandable, an outright failure of the negotiations has important systemic consequences, not to mention that many economies that are not part of any of the groupings will be left out of the global trading system.
A bold move like the Bogor Goals might be much to ask for at this time, but we are at a tipping point. As seen elsewhere in the world, if aspirations are unmet, they lead to instability. While development issues are inevitably couched in developmental terms, they are also an enormous opportunity for the business community who need to be engaged in the provision of services to ensure that the bottom 10 percent are not left behind. As indicated by our survey results, there is a sense in emerging economies that supply side constraints are magnifying and may even be causing income inequalities. The removal of those constraints involves making investments in infrastructure – transportation, water, electricity, sanitation and above all, education. There are big opportunities for businesses able to navigate the risks and make the long-term investments to provide these services.
There are many people we would like to thank for their contributions and efforts to this report. First, those who have written contributions: Federico Macaranas, Michael Plummer, Chen Bo, Fidel Duque and Esteban Restrepo, CNCPEC, and JANCPEC. We also thank the staff at the PECC International Secretariat: Eduardo Pedrosa, coordinator of the report, Jessica Yom, Betty Ip as well as Tim Choi, Yilin Jiang, Daniella Ball and Camilo Pérez for their contributions. We would also like to express our appreciation to our member committees as well as all those who take the time every year to share their views and perspectives on regional developments through the survey.
Jusuf Wanandi
Co-Chair
Donald Campbell
Co-Chair