2005 Budget and Management Committee Meeting

1. I should like first of all to welcome you all to the APEC Secretariat for this important meeting of the Budget and Management Committee. I wish you all a productive meeting.

2. There is a packed agenda for this meeting over the next three days and some tough decisions to be made on the 2006 projects to be funded, the Administrative Account for 2006 and contribution levels. These are all interlinked, but to assist us we have the benefit of the draft recommendations of the Reform Friends of the Chair group which have just been issued.

4. APEC reform is one of the priorities of APEC 2005. The recommendations of the Reform FOTC have been made after two meetings of the group, in the margins of SOM II on 27 May 2005 and in Hanoi on 20 July 2005, and through intersessional consultation.

5. Reform FOTC presented three major issues relevant to the BMC in its recommendations: APEC financial reform; streamlining of project approval mechanism; and the strengthening of ESC to promote ECOTECH activities.

6. Under financial reform I have two points to report. The first recommendation reflects a recognition that, to achieve financial sustainability, reductions in expenditure and diminution of services are not enough and that there is a need to increase contributions. The recommendation to take effect from 2007 is to restore the total amount of Members' contributions to the 1998 level of US$3,864,000; individual Members' contributions would follow the current percentage. Whether there should be a change from 2009 onwards will be decided in 2007.

7. The second set of recommendations concerns a division of the budget into four components:

8. The Reform FOTC recommends a clear division of labour between the APEC Secretariat and the BMC in the project approval process; empowering the Secretariat to provide advice on projects, including value for money and relevance to APEC priorities; and thus allowing the BMC to take a policy overview on the projects to be approved.

9. There is a major reform advocated for ECOTECH to transform the ESC into the SOM Steering Committee on ECOTECH (SCE) with an enhanced mandate to undertake the coordinating function for ECOTECH and rank Working Group project proposals by priority: much as CTI ranks projects from its sub-fora. A corollary of the proposal will be that BMC 2 will need to be held after SCE3 at which the projects will be ranked. Thus BMC 2 will be held after SOM 3 and the APEC budget (including projects) will be sent to CSOM for approval by AMM. This later submission will also enable more accurate budgets for the Administrative Account to be prepared.

10. Reform is an ongoing process and the reform FOTC recommends that reform should remain as a priority item for 2006. I look forward to the results from the mid term Stock Taking exercise which will be completed at SOM III and provide a framework for APEC's agenda for 2006 and beyond.

11. Returning to the financing of projects for 2006, you have some tough decisions ahead, particularly for the Operational Account projects. The total value of projects seeking funding exceeds by around US$500,000 the amount available, taking into account the need to hold some funds back for urgent projects.

12. I am pleased to see the first set of projects requesting funding from the APEC Support Fund. This commenced operation in July 2005 after approval at SOM II, the signing of a Memorandum of Understanding with Australia in June and the receipt of its first donation of A$1,000,000 (US$779,000) from Australia.

13. I am pleased to report the receipt on 3 June 2005 of the annual TILF contribution from Japan, amounting to US$2,051,656. Once again I would echo the remarks of my predecessors in inviting you all to consider contributions to the TILF Special Account and for the first time to the APEC Support Fund. APEC attaches considerable importance to projects and these are tangible ways in which APEC can make a difference. Your contributions will be greatly valued by all members.

14. May I remind you that SOM is looking for projects which are relevant to APEC: i.e. ones which respond to APEC's priorities. The covering papers on the funding of projects include statements on the relevant agreed priorities and these should assist you in coming to decisions. The opinion of the Secretariat on the response to these priorities has been tabled in respect of the Operational and TILF Special Accounts; for the APEC Support Fund the recommendations of the APEC Secretariat on funding are attached to the paper. The new project evaluation system, the Quality Assessment Framework, was used to improve the projects and to assist in coming to these recommendations. We welcome once again to our meeting the Australian consultant, Mr. Lincoln Young.

15. On the Administrative Account we have prepared the 2006 budget in the tight manner recommended by the Reform FOTC.

16. In drawing up this net budget of US$2,100,00 we have taken into account the level of APEC Secretariat services to support the incoming host economy. There are increasing demands on the budget as SOM creates additional APEC fora to service and expectations for communications and IT rise. Salaries in the context of the Singapore labour market are also rising at around 5% a year. Another cost push factor is the maintenance of the APEC Secretariat building. We are continually striving to improve our efficiency with the limited resources we have available. We are monitoring carefully the service satisfaction index as part of our ISO accreditation.

17. In formulating the budget we are now in a transition from one based on expenditure commitments and predicted savings to one based on likely net expenditure with no contingency. One consequence of this will be that contributions from member economies will have to be paid promptly, early in the first quarter of the year, to ensure adequate cash flow As I reported at BMC I in April at that time seven economies (representing almost one half of APEC's annual income) had not paid their annual contributions. Now in August there are still two economies which have not paid. The situation will need to change in 2006 and beyond.

18. As part of the reform agenda, I set up an Ad Hoc Committee within the Secretariat to advise me on how to improve both the management of APEC's growing store of information and the efficiency of our communications between members. At BMC I, I also informed you that we had received the offer from Microsoft to participate in its Solution Sharing Network (SSN). However, we found that this solution was not suitable for our needs. The Secretariat IT team has developed our own APEC Collaboration and Meetings System (ACMS) which we are now trialing in some 20 APEC fora, including SOM and the BMC. This system is being used for the first time in this meeting and we would welcome your feedback.

19. At the same time I am actively pursuing the establishment of an integrated knowledge management system that would include a secure on-line collaboration module, a Less Paper Meeting System, a Meeting Documents' database and an enhanced Project Database. We have consulted with Microsoft on how to realize this project in a most cost-effective manner.

20. The APEC Secretariat continues to investigate other means to improve the efficiency and cost-effectiveness of its work. In 2005 we expect to return more than US$900,000 to APEC Central funds from the operation of the Administrative Account. A substantial proportion of this comes from the new travel rules put in place at the beginning of the year and about which I informed you at BMC I this year. We have also looked carefully at our staffing requirements and outsourced one post and deleted another. We have engaged a consultant from the National University of Singapore School of Business to look at our staffing practices in the context of the Singapore labour market. Her report is being finalized and I hope to send it to BMC and SOM before CSOM. The report may be considered at BMC1 next year. Please see paper 2005/BMC2/012. To assist all members we are preparing a consolidated Guidebook on APEC Procedures and Practices.

21. In line with ongoing efforts to improve the functioning of the Secretariat and, at the same time, reduce operating costs, Secretariat conducted a review of its manpower needs in May 2005 and decided that it no longer requires the services of an IT Business System Manager. The services of the holder of the post, Mr Austin Kuo, were thus terminated with effect from 31 July 2005. I would like to express the Secretariat's appreciation to Austin for the services that he had rendered.

22. At the same time, Secretariat decided to outsource the post of Receptionist. We are happy to be able to arrange for Ms Siti Mariah, who was under the Secretariat's employ, to be absorbed into the payroll of the employment agency appointed to provide this service. The new arrangement has worked smoothly and without interruption to the Secretariat's services and, more importantly, without disruption to the work of other support staff who would otherwise have to cover for the Receptionist when she was not available (on vacation, emergency or sick leave) under the previous arrangement.

23. Finally on Secretariat staffing I have been pleased to welcome Mr Eduardo Menez from the Philippines, Ms Carmen Mak from New Zealand and Mr PHAM Ngoc Huu from Viet Nam as Directors (Program). Among the support staff our temporary Clerical Officer, Ms Karen Chek, will leave us on 31 August. Her post will be upgraded to Accountant I soon after. Mr Matthew Forno leaves us on 2 September from his post as Communications and Outreach Manager to return to IP Australia. We welcome his successor Mr Michael Chapnick from the USA. The staff of the Secretariat continues to work loyally and effectively - they have my intense gratitude.

24. Once again may I wish you a successful and productive meeting.