While global uncertainty contributed to a slowdown in growth for many Asia Pacific economies in 2012, the region ended the year on a more encouraging note and is positioned to rebound further. The markets are currently seeing 2013 as the year when a wider range of economies return to more robust growth.
As the outlook improves for Thailand and other Apec member economies, their 2013 agenda is to bring greater, more resilient and widespread prosperity to a region that accounts for 45% of total world trade and 55% of GDP.
Creating prosperity involves building capacity to ensure that Apec economies continue to promote growth and foster an environment that supports businesses, creates more jobs and delivers higher wages.
At the beginning of the year I joined the Apec Secretariat as the second fixed-term executive director, following my tenure as the governor of the Reserve Bank of New Zealand. In 2013, our focus is on three priority areas, guided by a belief that economic resilience and sustainable growth are more readily achieved when the region works together.
1. Further enable free and open trade and investment
Robust trade and investment ties unite and uplift economies. This was the view of Apec leaders who agreed almost 20 years ago that members should achieve the goal for free and open trade and investment in the region by 2020.
In particular, they committed to reduce trade and investment barriers, and promote the free flow of goods, services and capital. This commitment was made in Indonesia, Apec’s 2013 host, and is known as “the Bogor Goals.”
Increasing integration, resistance to protectionism and joint work to liberalise and facilitate trade and investment have been paying off. Average tariffs in the region were reduced from about 17% when Apec was founded in 1989 to 5.7% in 2011. By comparison, the average in the rest of the world was 10.3% in 2011. The region’s non-tariff restrictions have also been widely reduced or eliminated.
This progress is delivering important tangible benefits for Thailand. A significant reduction in auto part tariffs, for example, has helped it develop into a regional production and export hub. The auto sector now accounts for more than 10% of Thai GDP, employs 300,000 people and has become the world’s 10th largest producer and sixth largest exporter of cars.
On a broader level, Apec economies’ total trade increased 6.4 times to US$19.7 trillion between 1989 and 2011. Trade for the rest of the world grew only 5.8 times over the same period. What’s more, members are three times more likely to export to, and two times more likely to import from, a fellow member than a non-member. As well, growth in FDI flows to and from Apec economies is on the rise. In 2011, they accounted for just over half of total world FDI flows.
Sustaining this momentum is critical to the region’s growth prospects and has prompted a commitment to reduce tariffs to 5% or less on a significant number of environmental goods by the end of 2015.
2.Promote sustainable growth with equity
Nonetheless, members recognise that “growth as usual” cannot continue and that the quality of growth must be improved. Apec leaders in Yokohama in 2010 launched the Apec Growth Strategy to help ensure that regional growth and economic integration are sustainable and widely shared by the people in a climate of equity and social justice.
In particular, members are advancing policies that help small and medium enterprises (SMEs) internationalise, support women’s entrepreneurship and promote research and scientific innovation in areas such as green technology that can be transformed into new business opportunities.
Improving creditworthiness and access to financial services and risk protection are part of the approach. These issues are critical to Thailand’s more than 2.5 million SMEs which accounted for almost 40% of GDP and more than 80% of employment in 2011.
At the same time, the daily needs of workers and their families must be guaranteed to maximise the region’s productivity. To safeguard food production and access, Apec economies are exploring ways to expand technical cooperation and investment in agriculture.
Thailand, the world’s leading rice exporter, is a major contributor to and beneficiary of this effort — its agricultural sector overall grew by 4% in 2012 after heavy flood damage in 2011 and is expected to grow at between 3.5% and 4.5% in 2013.
3. Improve regional connectivity
More active participation in the Apec region economy is essential to increasing sustainable growth but it requires infrastructure that brings markets, businesses and individuals together. For this reason, members are working to improve connectivity on several fronts.
First, Apec economies are seizing opportunities to strengthen physical connectivity, through a multi-year framework to promote infrastructure development and investment. This is crucial for developing economies in which growth centres in many cases are still inadequately linked to road, air and water-based transport networks, as well as for developed economies that need to upgrade ageing infrastructure. It also complements Thailand’s plan to invest 2.75 trillion baht to develop infrastructure such as high-speed train networks.
Other supply chain chokepoints such as regulatory impediments and customs inefficiencies are also commanding considerable attention. Looking forward, Apec economies have set a goal to realise a 10% improvement in supply chain performance by 2015, in terms of reducing the time, cost and uncertainty of moving goods and services through the region.
Second, members are enhancing institutional connectivity, particularly in higher education to strengthen innovation and business development. Emphasis is on identifying regulatory best practices, improving mobility of researchers, students and educators, and bolstering cross-border educational services and instructional delivery.
Third, Apec is enhancing people-to-people connectivity. Facilitating travel for emergency responders is an important focal point given that the Asia-Pacific is home to 70% of the world’s natural disasters. Specifically, Apec economies are sharing effective disaster relief procedures, improving customs and immigration data sharing and advancing an emergency responder travel facilitation action plan. The goal is to limit economic disruptions and loss of life in the event of disasters such as the 2011 Thai floods during which 815 were killed, 13.6 million people affected and 142 billion baht in estimated damages inflicted.
Without doubt, 2013 will present its fair share of challenges for the Apec region. But by pushing ahead with the Apec agenda, member economies will stand a much better chance of keeping on a sustainable growth path to bring greater stability to the global economy.
Dr Alan Bollard is the Executive Director of the Apec Secretariat
About the author
Writer: Dr Alan Bollard