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MICROECONOMIC POLICY REFORM
STRATEGY FOR REGIONAL COOPERATION
Hadi Soesastro
CSIS, Indonesia
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Economic Reform and Regional Cooperation
Looking Back
Economic Reform
- agenda: focus on removing border
barriers
- manfestation: open borders
- challenge: deal with the protection of
“sensitive sectors”
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Regional Cooperation
- agenda: focus on liberalization and
facilitation of trade and investment
towards regional economic integration
- manifestation: regional principles/norms
and action plans (individual and
collective)
- challenge: regional arrangements to
enforce members’ commitments
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In East Asia
they can be seen as Economic
Reforms and Regional Cooperation of the
First Generation
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The “Second Generation”
Towards A New EraEconomic Reforms
- agenda: focus on behind-the-border issues- manifestation: institutional and regulatory changes- challenge: more complex political
economy
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Regional Cooperation
- agenda: focus on improving capacity for
policy development and implementation
- manifestation: policy and capacity
building packages that are tailor-made to
needs of individual members
- challenge: existing regional
arrangements need restructuring
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Challenges for East Asia
Regional competitiveness not only influenced by openness to trade and competition but also by the region’s regulatory and structural architecture
Region needs to promote economic reforms of the “Second Generation”
Region needs to design cooperation structures that supports “Second Generation” economic reforms
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APECis the regional cooperation structure
involving East Asian economies that come closest to being able to meet the demand
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Economic Reform and APEC
Rationale for a New Agenda
- momentum for “first generation” reform
and cooperation in APEC region has run
out of steam
- a new “economic mission” to enhance
regional growth, dynamism, productivity
and competitiveness
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Options for APEC
(1) Transform V-APEC to B-APEC tostrengthen and bind memberscommitment (eg. FTAAP)
(2) Strengthen domestic capacity ofmembers to undertake necessaryeconomic reforms
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Opening for Second Option exists in APEC
2003: Leaders recognized economic reform is painful but “necessary and beneficial in the long-term”2004: Leaders adopted the Leaders’ Agenda To Implement Structural Reform (LAISR)
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2005: Leaders instructed Ministers to work on behind-the-border issues and welcomed the adoption of the APEC Work Plan (“roadmap”) on LAISR 2010 “as a policy-oriented approach to bring about needed structural reforms”2006: Leaders recognized the need to intensify work on structural reforms2007: ?
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On LAISR 2010
Priority Areas
- regulatory reform
- competition policy
- public sector management
- strengthening economic and legal
infrastructure
- corporate governance
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Modality
To discover good practice principles within
each priority area that may be applicable to
the more specific reforms that individual
economies may choose to voluntarily adopt.
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The Economic Committee
Is mandated to promote structural reform
within APEC, responsible for overseeing
LAISR, and undertaking coordination with
other relevant APEC fora (SELI, CPDG,
Finance Ministers’ Process)
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Work Plan
“From 2006 to 2010, 2 to 3 coordinating economies, ideally from developed and developing economies, will take the lead on a particular policy issue. The coordinating economies will undertake policy-oriented work in this area, which may include policy dialogue …, capacity-building projects and a recommendation or good practice paper. This work will be conducted within a one to two-year time frame. The key findings of this work will be submitted to Ministers and Leaders”
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Observations
This New APEC Agenda/Initiative:
(1) Introduced concept of Second
Generation economic reform but is short
of developing Second Generation-type of
regional cooperation to support it
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(2) Regional cooperation can help improve
national capacity for policy development
and policy implementation by developing
of mechanisms for:
(a) sharing policy experience
(b) drawing upon international expertise in
relevant policy areas
(c) developing a regional vehicle that can be
used for independent review and
evaluation of policy performance
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Proposed Steps
(1) Strengthen the capacity of the APEC
Economic Committee to undertake review of policies in some key
areas by establishing an on-going APEC
Productivity and Efficiency
Commission (APPEC).
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(2) APPEC should have the capacity to
respond to requests by APEC and
member economies for analysis of micro-
policy and regulatory issues
(3) This Commission could draw in capacities
and research networks from around the
region, and be associated with the APEC
Secretariat
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(4) A strengthened Economic Committee
should be coupled with provision for
Ministerial-level direction and
responsibility for follow-through
(5) Leaders might commission research and
analysis of costs and benefits of policy
regimes, and Ministerial Sub-Committees
charged with follow-up and formulating
responses to the implications of the work
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Three Essential Elements
(1) Arrangements to produce independent analysis with transparency in reporting and discussion of results
(2) Delivery mechanisms to assist in enhancing capacity of member economies for policy development and implementation
(3) Follow through mechanisms to ensure implementation by member economies