In the context of a global economic slowdown, two timely reports from the Economic Committee of the Asia-Pacific Economic Cooperation (APEC) forum offer valuable insights into the regional issues confronting APEC's member economies.
The reports released in conjunction with the Ministerial and Leaders' Meetings being held in Shanghai, People's Republic of China, are:
"APEC Economic Outlook": An annual publication of the Economic Committee since 1995, the Outlook reviews recent economic developments in the region and the economic performance and prospects of APEC member economies.
"The New Economy and APEC": Resulting from the 2000 APEC Leaders' Declaration, this report addresses questions about the fundamental underpinnings of the New Economy, potential policy reform and structural adjustment, and the pace and feasibility of ongoing policy initiatives.
The 2001 APEC Economic Outlook is the seventh in this series. This year's report is prepared amidst a cyclical slowdown of the world economy. Prospects for the year remain weak, as the negative impact of the global cyclical downturn rippled through and dampened business and consumer confidence. There are lingering concerns about the on-going inventory adjustment in the IT sector, more difficult financing conditions in some emerging economies, weakening corporate profitability and accompanying downward adjustment in equity prices, slower than expected recovery in the US economy and continued slow growth in the euro area, and a possible slip back of the Japanese economy in the near future.
"Nevertheless, underlying inflationary pressures have been relatively subdued in the APEC region, giving room for more macroeconomic policies to counter the slowdown," observed Dr. Kyung Tae Lee, Chair of the Economic Committee. "Monetary easing and more expansionary fiscal policies in many APEC member economies should help revitalize demand in due course. Unfortunately the recent terrorist attack on the United States has overcast our near-term prospects, leading to added uncertainty about the timing and strength of the global economic recovery."
For its topical structural issue, this year's Outlook report takes a look into the nexus between financial development, financial efficiency and economic growth. The study is timely in face of the current global economic slowdown and envisaged volatility in the global market in the near term. A prominent task before us is how to strengthen our macroeconomic foundation, of which the financial infrastructure is an important constituent. The study affirms the significance of financial efficiency in ensuring stability and promoting long-run growth and prosperity. Empirical experience proves that size is not everything and efficiency matters. A key message from the study is that financial policies should aim at boosting financial efficiency through promoting competition, increasing private initiatives, reducing barriers to entry, relaxing restrictions on bank activities, improving risk management, enhancing transparency and tightening governance.
"The New Economy and APEC" report resulted from the 2000 APEC Leaders' Declaration, which laid out a vision to capture the full economic and social benefits of the emerging New Economy. With a view to achieving this goal, the Leaders instructed Ministers to expand and develop the agenda to create an environment for strengthening market structures; institutions and infrastructure investment; technology development; and building both human capacity and entrepreneurship development. In response to this instruction, the APEC Economic Committee agreed to put into the work program for 2001 the New Economy project at its February 2001 meeting.
The EC's work in New Economy project is focused on bringing the benefits of the New Economy to all members in a balanced way. Five member economies - Australia, Canada, Japan, Chinese Taipei and the U.S. are leading this project. As a first step to moving forward the project, the U.S. submitted the report titled "New Economy and APEC."
The Report addresses four questions:
What are the fundamental underpinnings of the "New Economy"?
What evidence is there, at the macro level on benefits to growth and at the micro level of the challenges of transformation, which can assist in the domestic political discussion about policy reform and structural adjustment?
What are the implications, particularly in terms of trade competitiveness and digital pides, of the different paces of policy reform in pursuit of the New Economy?
What conclusions, both for economies and for the institution of APEC, can be drawn from the foregoing discussion?
With respect to empirical research, the Report both reviews existing empirical research as well as develops new analysis. It reviews existing empirical analyses of the macroeconomic benefits of putting in place the prerequisites for achieving the productivity enhancing outcomes of the New Economy; these analyses focus on the gains to GDP of trade and investment liberalization. In addition, the Report undertakes new microeconomic and sector-level analysis of the implications of the New Economy for international trade competitiveness. Specifically the Report considers the relationships between the pace of transformation of an industry sector, the sector-level trade patterns of an economy, and its policy environment.
Finally, the Report distills common themes from 16 case studies from 12 members of APEC prepared for this Report. Nominally following a "template," these mini case studies come from both official APEC sources as well as independent researchers and address how businesses, civil society, and governments are being transformed by the technologies of the New Economy - or are being held back from that transformation by the state of the domestic and international policy environments.
Background: The APEC Economic Committee
The Economic Committee (EC) was established at the Sixth APEC Ministerial Meeting in Jakarta in November 1994, when the Ministers agreed to transform the Ad Hoc Group on Economic Trends and Issues into a formal policy committee. The Committee is responsible for research on economic trends and issues in the APEC region, and serves as a forum for member economies to exchange information and views. The Committee's work addresses central economic issues of priority concern for Leaders and Ministers, and provides the analytical basis useful for advancing TILF and ECOTECH agendas.
The Economic Committee is currently chaired by Dr. Kyung Tae Lee, President, Korea Institute for International Economic Policy in Seoul.