By Raymond Lim
. It is my pleasure to join you for dinner. Let me first extend a warm welcome to all of you, especially to our overseas friends who have come to Singapore to attend this conference.
2 The global economic situation has eased since the financial crisis started about a year back. Leading indicators are looking up, and the IMF recently lifted its forecast for global GDP growth in 2010 to around 3%. But it is too early to take our eyes off the economy – it will be a bumpy ride, fraught with risks. At the same time, we should now start to look at how to retool our economies to position ourselves for new growth opportunities in the post-crisis landscape.
3 The issue of how to re-position the Asia-Pacific economies for new growth paradigms has been a preoccupation in the APEC meetings that Singapore has been chairing this year. It will occupy our Leaders’ minds when they gather in Singapore next month for the Summit. It cannot be “growth-as-usual” going forward.
4 We must start to gradually unwind the global macro imbalances, which were at the root of the crisis. We must spread the benefits of growth more broadly across all segments of society, so as to maintain the consensus for globalisation. We must start steering our growth paths onto a low-carbon trajectory, to mitigate the risks of climate change and leave a sustainable future for the next generation. At the same time, APEC economies must remain firmly committed to promoting free trade as the key engine of growth to uplift all segments of society.
5 Since its founding 20 years ago, APEC’s steadfast efforts to keeping pushing for open markets and free trade has made a tremendous contribution to boosting growth and prosperity in the region. For instance, through unilateral liberalisation by economies, average tariff rates in the Asia-Pacific fell by two-thirds during the first 15 years of APEC’s existence – from 17% in 1989 to 5.5% in 2004. Intra-APEC merchandise trade has grown five-fold – from US$1.7 trillion in 1989 to US$8.4 trillion in 2007.
6 The question before us is what to push for next, given the already low existing tariff rates. Indeed, because tariff rates in the Asia-Pacific are already relatively low, the marginal benefits of further reduction in such barriers are likely to diminish.
7 This is why APEC is focusing on the next wave of economic integration – dealing with the practical, behind-the-border obstacles faced by businesses so that they can draw fuller benefits from open markets.
8 There are three key thrusts along which APEC can make contributions toward this next wave of trade policy-related reforms.
First, making FTAs more business-friendly.
Second, making regional supply chains smoother and more efficient.
Third, improving the business and regulatory environment.
Let me elaborate.
9 First, on making FTAs more business-friendly. Since the late 1990s, the Asia-Pacific has been at the forefront of trade liberalisation, with a fast-growing network of bilateral and regional FTAs. In 2000, only three FTAs were in effect. In just nine years, the number has risen to 54. This has helped bring tariffs down and boosted trade.
10 However, the flipside of the spread of FTAs is that it has led to more diverse and complex rules of origin (ROOs). This has raised the cost of compliance for business that want to make use of the FTAs.
11 Indeed, in APEC’s consultations with businesses, both importers and exporters have drawn attention to the tedious processes related to the use of ROO-related documents. Many highlighted the tedious layers of information required for application and authentication of such documents, and in general, the huge workload involved. Obviously, if the costs associated with administering rules of origin are too high, then that undermines the benefits derived from the FTAs. Cumbersome ROOs would lead to the under-utilisation of FTAs. A recent ADB survey among 609 firms in the East Asian region [1] found that only 22% take advantage of FTAs.
12 APEC has therefore been focusing on simplifying the procedures and documentation related to ROOs. We want to help maximise the potential gains from these FTAs, so that more businesses and consumers in the Asia Pacific can enjoy the benefits of lower materials costs and more affordable products.
13 Second, making regional supply chains smoother and more efficient. The decentralisation of global production networks, more complex customer demands, and the shortening of product life cycles have made it increasingly important for businesses to be able to move goods in a predictable, timely, and cost-effective way.
14 Achieving smoother and more efficient regional supply chains can help businesses to better tap the growing opportunities in the Asia-Pacific, and for the region to more fully realise the opportunities from trade and investment liberalisation. The potential gains for the region from enhanced connectivity are significant. In a study conducted by the Australian Centre of International Economics (CIE), it was found that a 10 percent rise in efficiency in supply chain connectivity could lead to an increase of US$21 billion dollars per year in combined APEC GDP . In another study, it was found that each additional day of delay for a good prior to being shipped reduces trade by at least one per cent .
15 Hence, APEC embarked on a Supply Chain Connectivity initiative early this year to identify and address key chokepoints in the regional supply chain. This could include, for instance, improving and forging closer links for all forms of transport networks from land, air and sea so that shipments can move smoothly and quickly, to simplifying customs procedures so that exports do not incur costly delays. APEC has identified several of these chokepoints and we look forward to completing the exercise by year-end, along with proposed actions for economies to work together to address them in future.
16 Third, to improve the business environment in the region. We want to enhance the business environment by focusing on regulatory reform to make it easier, faster and cheaper to do business in the region. This means, for instance, shortening the time needed to get a licence or streamlining procedures to start a business. Reforms on areas that impact the daily operations of business could make the Asia-Pacific an even more attractive investment destination and encourage greater cross-border trade.
17 This year, Singapore is leading an APEC initiative to identify key regulatory areas for reform and five areas of interest to the business community have since been identified. They are: a) starting a business; b) getting credit; c) trading across borders; d) enforcing contracts; and e) getting permits.
18 The next step is to set APEC-wide targets for all the five areas so that we can measure progress. We are also working together to design reform programmes led by “champion economies” with strengths in each of the areas. APEC economies are well-positioned to collectively push for more improvement in the business environment. Nine of the APEC economies are among the top 20 in the World Bank’s Ease of Doing Business rankings in 2010. The approach is to leverage on one other’s strengths to help all the APEC economies move up. We look forward to announcing more details on the targets and reform programmes at the upcoming APEC ministerial meeting in November.
19 This next wave of reforms will not be easy to implement and will take time. Compared to cutting tariffs, they are also administratively and technically more complex, and require an economy to have the capacity, determination and will to implement the necessary changes.
20 APEC’s traditional strengths of building capacity through the sharing of experiences and best practices will be a plus in this next wave of trade reforms. Because APEC is voluntary and non-binding, its unique pathfinder approach enables smaller groups of like-minded economies ready and willing to undertake reforms to go ahead first, allowing others to join in later when they are ready.
21 With APEC’s strong commitment to regional economic integration and a flexible approach that facilitates reform, I am confident that APEC will continue to stay at the forefront of trade and investment liberalisation in the next 20 years.
22 In conclusion, I want to thank the organisers of this conference for arranging an excellent and comprehensive programme that aims to tackle the important issues that policy-makers need to think hard about regarding the post-crisis economic landscape. I wish you all fruitful conversations and a productive exchange of views. We also look forward to tapping your ideas to further advance APEC’s agenda for this new landscape.
23 Thank you.
Mr Raymond Lim, Minister for Transport and Second Minister for Foreign Affairs, Singapore.
This year marks the 20th anniversary of the Asia-Pacific Economic Cooperation (APEC). The end of the Cold War opened the way for the beginning of a new grouping in the Asia-Pacific dedicated to fostering growth and prosperity through the liberalisation of trade and investment.
Over the past two decades, APEC’s scope of regional economic cooperation has been broadened, and membership expanded. APEC has also made important contributions, including pushing for the conclusion of multilateral trade accords. During this time, the Asia-Pacific region has prospered. APEC economies have not just prospered individually. The region forms important supply chains and is part of the global pattern of merchandise flow. Taken together, these are impressive achievements.
New Global Economic Challenges
As APEC enters its third decade, the world is emerging slowly from the worst global recession since the Great Depression. The precipitous drop in global demand, coupled with the seizing up of trade-finance, has taken its toll on international trade, the life-blood of many APEC economies.
Even though the immediate crisis has waned, the key pre-occupation is how we can build, as the G20 Leaders declared in Pittsburgh, ‘strong, sustained and balanced’ global growth. We need to guard against complacency. The crisis came about because of excesses and imbalances. These still have to be put right. We need to persist with the often domestically difficult structural reforms that are necessary to re-balance the world economy.
As we press on, we should not let down our guard against the threat of protectionism. Left unmanaged, tit-for-tat retaliation will constrict the main arteries of trade and investment flows. This will leave us all worse off.
Supporting the Global Agenda
Singapore has assumed the APEC Chairmanship at a challenging time. Nevertheless, the crisis has provided an opportunity for APEC to define its role more sharply and to inject renewed impetus to its work.
The PECC Co-Chairs Charles Morrison and Jusuf Wanandi, and SINCPEC Chair Tan Khee Giap in a recent Op-Ed (Straits Times, 2 October 2009) put forward a clear view of how APEC can be “an important foundation for the building of a new global economic architecture”.
Our core agenda in APEC – promoting balanced, inclusive and sustainable growth while pursuing trade liberalisation – complements the G20 Pittsburgh Summit’s broad approach on addressing global macroeconomic imbalances and keeping markets open. These are areas where APEC has a strong track record, and can contribute and support the global agenda.
In your discussions over the next two days, we look forward to the PECC contributing concrete ideas on the specific areas in which APEC can make a positive contribution.
Evolving Regional Architecture
Looking forward, we can never be sure how events will unfold. A fundamental political and economic rebalancing of the world is taking place. Developments in the Asia-Pacific, especially the relationship between China and the US, are at the epicentre of these changes. The cumulative effects of momentous events can reverberate over time.
We will require structures to manage these changes. To do so, we will need to deliver new levels of cooperation and coordination, at both the global and regional levels.
The designation of the G-20 as the premier forum for international economic cooperation has been the most pronounced response at the global level to these new challenges.
In the Asia-Pacific, the challenge has always been to develop the right framework for regional cooperation. We all share some basic interests that are centred on enhancing the region’s economic growth.
- We want a region that is stable, open, and inter-connected through trade and investments, both among ourselves and with the rest of the world.
- We want a region where economies can deepen cooperation and linkages, and also compete peacefully in the economic realm; and
- We want a robust framework of cooperation within which economies can contain and manage disagreements.
To achieve these basic interests, we have multiple structures with different, sometimes overlapping membership and goals. Though messy, this engages all the players – big and small. This has proven to be resilient as it reflects a realistic appraisal of the disparate political, cultural and economic interests in the region. The strength of this framework is that it is representative in nature and gives everyone a stake in the region’s success. Ideas to modify the existing architecture to one that is less representative are unlikely to gain wide support.
APEC with its core mission of promoting regional economic integration remains a vital piece of the regional equation. Within East Asia, there are two complementary and mutually supporting groups to foster intra-regional cooperation and provide concrete steps towards an East Asian community. One is the ASEAN+3 group, comprising ASEAN plus China, Japan and South Korea. The other is the East Asia Summit (EAS), which adds India, Australia and New Zealand. Across the Pacific, there is NAFTA and Mercosur.
APEC brings together both sides of the Pacific and prevents it from being split down the middle. It is fundamental to our interest to include the US in the region, given that it plays such an important strategic and economic role here. The construction of APEC had this in mind from the beginning. With the evolution of the global architecture and Asian integration accelerating, APEC’s role has become even more vital.
Conclusion
Let me therefore end by returning to the beginning. The core objectives that the founding members of APEC set forth in 1989 are to:
- Strengthen the multilateral trading system;
- Increase the interdependence and prosperity of member economies;
- Promote sustainable economic growth.
APEC’s vision was further defined in 1994, when APEC Leaders committed to the ‘Bogor Goals’ of free and open trade in the region.
The region will undergo even more sweeping changes in the next twenty years. APEC 2009 will mark a critical milestone in how APEC positions itself for the future. Nevertheless, APEC’s guiding principles remain relevant. As long as we focus on them, APEC will remain the premier vehicle for regional cooperation and the centre-piece of the regional architecture.
*The speech is edited for length.
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Raymond Lim is the Minister for Transport and Second Minister for Foreign Affairs, Singapore.
This article is taken from the Speech given by Mr Lim at the Conference Dinner for the Pacific Economic Cooperation Council (PECC) Conference on “Economic Crisis and Recovery: Enhancing Resilience, Structural Reform, and Freer Trade in the Asia-Pacific Region”, on 9 October 2009
