Attachment B - Second APEC Ease Of Doing Business Action Plan (2016-2018)

I. Introduction

In August 2014 at SOM 3, the APEC Economic Committee (EC) recognized the importance and value of APEC’s first Ease of Doing Business (EoDB) Action Plan (2010 – 2015), and decided to continue efforts aimed at improving the enabling environment for businesses in the Asia-Pacific region.  Through subsequent discussions, EC members agreed to develop a post-2015 Ease of Doing Business (EoDB) agenda, which 1) continues to focus on the existing five priority EoDB areas (i.e., Starting a Business, Dealing with Construction Permits, Trading across Borders, Getting Credit, and Enforcing Contracts),[1] 2) runs for a period of three years (2016-2018), and 3) sets an APEC-wide target of 10 percent improvement by 2018.[2] 

While the Second APEC EoDB Action Plan builds off of the strong foundation of capacity building and targeted technical assistance created under the first APEC EoDB Action Plan that identified needed reforms and associated challenges, members have agreed to place greater emphasis on the implementation of EoDB reforms in 2016-2018, inclusive of increasing the capacity of member economies to implement these reforms. 

This document provides both the background on the EoDB initiative in APEC and summarizes the parameters of the APEC EoDB agenda for the next three years. Annex 1 presents an initial draft of APEC EoDB Implementation Plan for 2016-2018, which will function as a living document to be adjusted as needed throughout the duration of this initiative.[3]

II. Background

As part of APEC’s efforts to promote sustainable economic growth and improved living standards in the region, APEC has promoted structural reforms to reduce “behind-the-border” barriers to trade and investment to enhance the business environment in the region and to complement the trade and investment liberalization and facilitation agenda. 

In 2009, APEC launched the Ease of Doing Business Action Plan and set an aspirational target of making it 25 percent cheaper, faster and easier to do business in the Asia-Pacific region in five priority areas by 2015, with an interim target of 5 percent by 2011. APEC Ministers instructed officials to develop multi-year capacity building work programmes for each EoDB priority area.  The work programmes were led by Champion Economies[4] and generally followed a two-phased approach of 1) introductory workshops, and 2) economy level capacity building/technical assistance.

In 2010, Champion Economies for each priority area organized general workshops (Phase 1) that introduced the indicator and its importance to economic development, set the context for APEC’s objectives, and provided an opportunity to share experiences of reform successes and challenges among APEC economies. These workshops were followed by capacity building activities led by Champion Economies and tailored to the needs of volunteer economies (Phase 2), in the form of diagnostic studies, workshops, and guided visits that provided customized, practical recommendations for reforms.  In addition, there were two stocktake workshops that assessed progress and shared experiences and best practices (see Annex 2 for a snapshot of activities undertaken during 2010-2015). 

APEC EoDB Progress 2010-2015

The APEC Policy Support Unit (PSU) conducted annual interim assessments which show that APEC economies have made continuous progress in the five areas from 2010 to 2014.The collective improvement registered (12.7 percent) as of early 2015 is lower than the pro-rata 2014 benchmark (i.e., 20 percent) of the 2015 goal. Moreover, improvements in some areas were more difficult than others, like enforcing contracts and getting credit, reflecting the challenges in pursuing and implementing complex structural reforms.

There is also an issue of potential under-reporting of progress as measured by World Bank EoDB rankings.  The World Bank’s Doing Business (DB) Report does not always accurately reflect changes in the enabling environment for each economy under analysis.  Hence, numerous reforms undertaken by APEC economies in the 2010-2014 period and that have been highlighted by economies during EC-related workshops and policy dialogues may not have been captured by DB.  Over time they eventually will translate into outcomes reported by the World Bank’s DB report.[5]  It should also be noted that the World Bank uses standardized assumptions about firms.  For example, it contemplates firms that do not engage in foreign transactions.[6]  Thus, some improvements that are inherently important for furthering the APEC objective of integrating small and medium-size enterprises (SMEs) and entrepreneurs into global value chains may not be adequately captured by the World Bank’s Doing Business indicators. 

Many of the easier improvements—like streamlining procedures and reducing costs--have in large part been accomplished.  More difficult issues involving institutional changes that will help sustain reform in the long run still need to be addressed.

III. Strengthening the Ease of Doing Business in APEC

By committing to making it faster, easier and cheaper to do business in the Asia-Pacific region, APEC has contributed to its own objective of fostering inclusive growth by promoting reforms that facilitate entrepreneurship and improve the competitiveness of SMEs, specifically through lower costs to doing business, better access to credit, added opportunities to engage in international trade, and more efficient regulatory institutions, among others. And as noted above, under the first APEC EoDB Action Plan, APEC economies shared experiences and implemented technical assistance that increased their capacity to design and implement meaningful reforms in these areas.

The 12.7 percent improvement during 2010-2014 may indicate that APEC may not be able to achieve the aspirational target of 25 percent by the end of 2015; however, it still constitutes significant progress towards producing tangible results while taking into account the challenging economic environment in which reforms were implemented. Moreover, the evaluation of the EoDB work programme has demonstrated that reforms have collateral or spillover benefits in addition to the direct improvements in the indicators.  These benefits include raising the level of governmental capability in key areas of regulation and providing means to tackle corruption (including through the reduction of the number of processes businesses must go through to comply with regulation).  Finally, various reforms undertaken to date by member economies have set strong foundations to continue with more complex regulatory reforms in the future.

As mentioned before, the interim assessments conducted by PSU show that progress under the first APEC EoDB Action Plan has been uneven across EoDB indicators due to the level of complexity of reforms, and that there is still room for further work. According to the DB 2015 Report “reforms aimed at cutting red tape and improving regulatory efficiency are generally easier to implement (…) By contrast, reforms aimed at improving legal institutions are typically complex. Most entail substantial changes to legal frameworks, are costly to implement and can take years to yield positive results.”[7]

In the current economic context, APEC economies recognize the importance of renewing the emphasis on structural reforms needed to boost productivity and to make growth stronger and more inclusive, and thus, have agreed to continue supporting the implementation of regulatory reforms to improve the business environment in the region through the Second APEC EoDB Action Plan (2016-2018).

APEC will build on the experience and information shared during 2010-2015 to intensify its efforts to implement reform, while also contributing to the advancement of several other APEC priorities and initiatives, such as the APEC Growth Strategy, APEC Structural Reform Agenda, and the SME Working Group Strategic Plan. 

Additionally, APEC can take advantage of the new developments and improvements introduced by the World Bank Doing Business Report and other resources, including information of regulatory challenges and reform experiences at the local level, to work towards increasing economic opportunities of SMEs, stimulating the creation of new businesses, facilitating access to credit, reducing unemployment and supporting innovative firms, that result in more inclusive and sustained economic growth in the APEC region.     

IV. Objectives of Second APEC Eodb action plan (2016-2018)

The goal of the Second APEC EoDB Action Plan is to further improve business environment in Asia-Pacific region, and sets an APEC-wide target of 10 percent improvement by 2018. This target will use the percentage of improvement achieved by APEC members at the end of 2015[8] as a baseline for 2016-2018 while taking into account the historical progress registered by APEC economies since 2010. In adopting the plan, APEC members recognize that EoDB metrics do not provide a comprehensive measurement of the underlying legal infrastructure required for a strong business environment, hence reforms should not be limited to those that are specifically measured in the EoDB indicators in order to achieve the progress desired.    

This 10 percent target aims to reaffirm APEC’s strong commitment to implement regulatory reforms to improve the business environment. It will build on the accomplishments achieved during 2010-2015 and will provide a realistic yet challenging objective for APEC economies.  

Additionally, the specific objectives of the Second APEC EoDB Action Plan (2016-2018) include:

• Build upon existing APEC EoDB efforts and support the “implementation” of EoDB reforms.

• Identify challenges in the implementation of EoDB reforms and address them by sharing best practices and experiences.

• Carry out additional tailored capacity building activities that strengthen the competencies of APEC member economies to implement EoDB reforms

• Identify possible areas of collaboration with other international organizations, including the World Bank, UNCITRAL, OECD, the International Competition Network, the World Economic Forum, and the Hague Conference, among others to implement capacity building activities.

V. Priority Areas – Indicators

APEC economies recognize that progress has been made in the five APEC EoDB priority areas 2010-2015; however there is still room for improvement.  APEC member economies agreed to maintain the same priority areas.  There was also a general consensus that reforms should not be solely driven by EoDB indicators as measured by the World Bank but that deeper, more thorough-going reforms, as suggested by instruments of international organizations, should be considered that would not only improve Doing Business scores, but also have an enduring impact on growth and the business environment.[9]  Both the 2014 Ministerial Statement and 2014 Leaders’ Declaration emphasized the role of internationally recognized private international law instruments such as the Hague Conference Conventions and UNCITRAL instruments in facilitating cross-border trade and investment, enhancing ease of doing business, and fostering effective enforcement of contracts and settlement of business disputes.[10]

The Second APEC EoDB Action Plan will concentrate efforts in the programming, design and implementation of EoDB-associated reforms, particularly reforms identified during the diagnostic phase, while also allowing flexibility for volunteer economies that have yet to participate to request diagnostic reports from champion economies.  

The following table contains the list of priority areas and their associated EoDB indicators:

VI. ChampION ECONOMIES

The Second APEC EoDB Action Plan proposes to maintain the use of one or more champion economies as coordinators and facilitators of the work program for each of the priority areas. Additionally, economies willing to lead or support the implementation of a specific activity under a work program, in coordination with respective champion economies, are invited to become co-sponsors.    

This approach may increase the engagement of APEC economies in creating capacity to improve the business environment in APEC; and therefore may result in a greater number or variety of capacity building activities. It will also allow for more opportunities to share experiences and best practices regarding implementation of EoDB reforms.

The following table identifies the champion economies for each of the priority areas under the Second APEC EoDB Action Plan (2016-2018):

VII. Capacity building and technical assistance

EoDB reforms remain a high policy priority in APEC economies, and capacity building and technical assistance can help economies overcome constraints and challenges in implementing such reforms.

The capacity building and technical assistance activities already implemented in APEC during 2010 - 2015 have proved to be successful in increasing understanding of the importance of regulatory reforms in the five EoDB priority areas to improve the business environment; sharing best practices and experiences; and identifying constraints and recommending areas for reforms. However, they may not be sufficient to address the more complex and difficult task of implementing actual reforms.

The Second EoDB Action Plan focuses on increasing the capabilities of APEC economies to effectively implement reforms through APEC-wide activities and capacity building activities tailored to the needs and context of participating economies.  The Plan will also consider sharing experiences and learning from case studies at the local level, especially to address regulations or procedures under the responsibility of local authorities (e.g. Starting a Business and Dealing with Construction Permits).  Given the diversity among APEC economies, references to successful experiences, best practices and case studies at the local level could provide valuable insights for the development of new policies and reforms for APEC members. APEC economies agreed to continue capacity buildings in two formats:

• APEC-wide activities, which include workshops, seminars or policy dialogues where economies share best practices and exchange lessons learnt from their experiences designing and implementing EoDB reforms.

• Capacity building activities tailored to the needs and context of participating economies, which may include additional tailored diagnostic studies for participating economies, technical assistance to implement the recommendations from previous diagnostic studies, or technical assistance for economies that have their own action plan for reforms.

Annex 1 presents a detailed APEC EoDB Implementation Plan (2016-2018) which identifies capacity building and technical assistance activities to be implemented under the Second EoDB Action Plan (2016-2018).

The aim of Annex 1: APEC EoDB Implementation Plan for 2016-2018 is to be a living document, developed through a consultative process with champion economies, and inclusive of relevant and doable inputs from economies.

VIII. Monitoring and evaluation

To assess APEC’s progress in achieving the target of the Second APEC EoDB Action Plan (2016-2018), the APEC Policy Support Unit will conduct annual progress assessments that will be presented to the Economic Committee.  The EC may wish to supplement these annual progress reports with qualitative updates from member economies.

Additionally, champion economies of each priority area will report the progress in implementing the Second APEC EoDB Action Plan (2016-2018) at EC meetings.

References:

• [1] Out of the 10 World Bank EoDB indicators (in 2009), these five indicators were identified by member economies as the highest priorities for reform efforts.
• [2] Member economy views were collected through a survey conducted in 2014 and then discussed at EC1-2015. At EC1-2015 the United States presented a paper summarizing the key findings from the Post-2015 questionnaire as well as of the discussions that took place at the EC, which economies endorsed as the basis for the development of the APEC Post-2015 Agenda.
• [3] It is envisioned that a needs assessment workshop will be organized on the margins of SOM 3 2015 to develop content to inform/populate the APEC EoDB Implementation Plan 2016-20
• [4] Capacity building and technical assistance activities for each of the five EoDB priority areas were managed by “champion economies” who volunteered to lead indicator specific work programs: Starting a Business (New Zealand and the United States); Getting Credit (Japan); Trading Across Borders (Singapore (and Hong Kong, China – Phase 1 only)); Enforcing Contracts (Korea); and Dealing with Permits (Singapore).
• [5] For example, reforms that may have been recommended in a 2013 economy-level diagnostic report and addressed in 2014-2015 timeframe may not show up in the World Bank’s Doing Business Report until 2016 or later.
• [6] With the exception of the Trading across Borders topic, EoDB solely examines domestic transactions and processes.
• [7] World Bank. 2014. Doing Business 2015: Going Beyond Efficiency. Washington, DC: World Bank.
• [8] The DB Report is usually released in late October/early November of each year.
• [9] The 2012 APEC Economic Policy Report reported that “APEC economies agreed to look beyond the Ease of Doing Business Indicators and investigate legal and institutional components that are relevant to the five EoDB categories but not necessarily directly measured by the World Bank.”
• [10] Economies have held a series of workshops to identify key instruments that are relevant to the EoDB priority areas.