APEC 2013 responds to global need for resilience and recovery

The success of our regional economy is in large part due to the improvement in the interaction, understanding, and commitment among APEC members.

Last year was not an easy one for the world economy. Many governments struggled with high unemployment, low growth and few signs of recovery. Yet amid this uncertainty, APEC progressed on further integrating its member economies through more liberalized trade and investment.

It also built on efforts to strengthen food security and improve supply chains. To address the challenges posed by climate change, members agreed to reduce tariffs to five percent or less on a list of environmental goods that contribute to sustainable development.

The landmark move was highlighted as evidence of APEC members’ commitment to free trade at a time when negative economic prospects tend to heighten protectionist sentiments.

This year Indonesia hosts APEC under the theme “Resilient Asia-Pacific, Engine of Global Growth.” Officials there say the theme reflects the region’s dynamism and its ability to drive global economic recovery.

“This is our response to the need for resilience in the face of challenges and opportunities before the region,” said Indonesian Foreign Minister Marty Natalagawa.

Indonesia takes the helm of APEC at a crucial time for its member economies, with Europe and the United States mired amid economic uncertainty.

During the APEC Informal Senior Officials Meeting in Jakarta in December Mr. Natalagawa outlined the challenges currently facing the region, including threats to food and energy security. Given those challenges, he said it was vital that APEC work together to enhance the region’s economic growth and development.

Indonesia’s main priorities as host will be moving toward sustainable development with equity, improving connectivity and increasing the pace of economic integration by and advancing the Bogor Goals, part of a declaration created in 1994 that aims for free and open trade among member economies by 2020. 

Those goals were first outlined when Indonesia last hosted APEC, and officials say that this year Indonesia hopes to make further progress on that vision.

“When looking at the Bogor Goals we have to think of APEC beyond 2020,” said Yuri Thamrin, Indonesia’s Senior Official to APEC. “We have to be very creative in terms of identifying long-term, useful initiatives.”

With regard to improving connectivity, for instance, Thamrin suggested finding ways to link APEC with other regional architecture through multilateral gatherings, such as an APEC-ASEAN infrastructure forum.

And when thinking long-term, “we have to think in terms of practical deliverables,” he continued.

In 2011 Indonesian President Susilo Bambang Yudhoyono announced a Master Plan for the Acceleration and Expansion of Economic Development (MP3EI), which will speed the development of energy and transportation projects, in part through public-private partnerships.

That will enhance trade both within Southeast Asia and APEC and create opportunities for more investment. In the coming years, Indonesia will offer billions of dollars’ worth of public-private partnerships in railways, coal-fired power plants and other major infrastructure projects.

Analysts say the scheme could serve as a model for APEC. So too could its support for small and medium enterprises (SMEs). Thanut Tritasavit, a research associate at the Institute of Southeast Asian Studies, suggested in a recent paper that encouraging tourism and private investment in environmentally friendly technologies would also be beneficial goals for Indonesia to pursue this year. 

Indonesia will need to deal with ongoing challenges, particularly in ensuring the relevance of APEC’s role in the face of growing protectionism.

“They can do that by setting concrete goals, and redefining or reinforcing the APEC vision and objective of inter-region cooperation,” wrote Mr. Tritasavit.

Despite concerns that progress has been slow, trade and trade efficiency within the region has improved, according to studies, indicating that members are benefiting from trade liberalization efforts.

At present, APEC economies account for 54 percent of global gross domestic product and 44 percent of global trade. Within the region, moreover, trade has grown nearly seven-fold, from US$1.7 trillion in 1989 to $11.3 trillion dollars in 2011.

Ensuring that the region continues to grow stronger and healthier means relying more on regional demand, which means getting rid of obstacles to free trade, the first priority on Indonesia’s agenda.

Already APEC economies have achieved tremendous progress toward achieving the Bogor Goals, said Rizal Lukman, a deputy to the Coordinating Ministry for International Affairs in Indonesia. During APEC’s informal senior officials’ meeting in December, he cited reductions in trade transaction costs and average tariff rates as examples.

But while APEC has reduced average tariffs from 16.9 percent in 1989 to 5.7 percent in 2011, restrictive non-tariff measures, lengthy customs procedures and poor transport infrastructure still pose challenges to free trade.

And as new technologies arise, exchanges will rely on more than just trade in goods, but also people-to-people interaction. That is why improving connectivity is another of this year’s priorities, say Indonesian leaders.

Key to enhanced connectivity will be promoting the blue economy, which means furthering maritime linkages.

“When we talk about the blue economy it’s about food security, the environment, fishery cooperation,” Mr. Thamrin explained. “So a blue economy is not a stand-alone priority.”

It will also be part of sustainable growth with equity, a priority given the different levels of economic development within the region. As member economies grow, leaders say the gains must be shared evenly.

“It’s not only about expanding the market, but also empowering the market,” said Mr. Thamrin, who explained that in the aftermath of the Asian Financial Crisis in 1998 Indonesia discovered that small and medium enterprises played an important role in its recovery.

“So sustainable growth with equity is about quality growth – how to make the impact really relevant to vulnerable sectors in the economy, like women and SMEs.”

In that vein, Indonesia will continue to enhance business opportunities for women, support green growth, innovative development and corporate social responsibility.

Mr. Thamrin said reducing economic disparities among member economies was particularly important to underline during challenging economic times, when the temptation to become protectionist was high.

APEC’s independent research arm – the Policy Support Unit – predicts that region-wide growth will reach 4.5% in 2013, up from 4.2% in 2012. That means APEC could serve as an engine for world economic recovery. But it also means building on past achievements.

“The success of our regional economy is in large part due to the improvement in the interaction, understanding, and commitment among APEC members,” said Mr. Lukman, who assured the groupings’ other senior members that those improvements would continue.