By Nan-Hie In

The APEC Business Advisory Council (ABAC), established 20 years ago by APEC, is a high-level advisory body where senior private sector representatives from each economy produces studies and policy recommendations for state leaders and ministers in the 21-nation bloc. These studies and recommendations are essentially opportunities for public and private sector dialogue and collaboration, particularly through the Working Group meetings.

Trade, Growth & Climate Change

From the US government, several concrete targets have been set for APEC this year. According to Robert Wang, a senior official of the US Department of State for APEC, high priority themes for the forum in the Philippines, including initiatives that were started years ago, will continue to be advanced or effectively rolled out this year. The overall goal is to implement many of these projects by 2015.

They include the Environmental Goods Agreement (EGA). Under the theme of sustainable growth in the region, this initiative began in 2012 to reduce tariffs to five percent or less on 54 environmental products. “With the help of the private sector, we are working on capacity building to make sure that by 2015 all 21 economies with these 54 environmental products have its tariffs go down,” Wang says.

Another key priority is to improve the regional supply chain connectivity, he adds. Since 2010, the target has been a 10-percent performance improvement through a 10-percent reduction in cost. “Given the fact that an estimated US$3 or 4 trillion worth of goods movement in the region [are generated] per year, that’s US$400 billion if we succeed in reducing costs in terms of time.”

When a cargo ship sits idle at a port for five days to a week, it incurs substantial costs, Wang cites in an example. “Last year around US$2 million have been allocated to advance this project, including capacity building on eight choke points that block the flow of goods to the region, as identified from a previous study.” It is hopeful that these efforts will help reach the goal of a 10-percent cost reduction by 2015.

In line with the theme of inclusiveness for APEC 2015, economic empowerment of women continues to be a top priority. “Last year we were quite successful in getting together a dashboard [to measure] women’s economic participation in the economy,” Wang notes, adding that around 75 indicators have been identified.

By May, the study will be completed across all 21 economies in an examination of where they stand on the issue, he adds. “We will use that data to begin a focus [on this issue in the region] and recommend ways of improving women’s participation in these economies.”

Climate change is also a key issue, says Wang. One strategy is to strengthen efforts in the promotion of renewable fuels in the region, despite a higher cost than traditional fuels. “We are trying to continue the process of getting economies to begin to eliminate subsidies for fossil fuels” as many nations such as Malaysia and Indonesia still provide subsidies for this non-renewable energy source.

“The plan is to do so by getting more economies to conduct fossil fuel subsidies peer reviews,” he explains. “The Philippines has agreed voluntarily to do fossil fuel subsidies peer reviews; Peru has already completed one, and New Zealand will conduct one this year, and now the US is striving to get Indonesia and Malaysia involved too.”

Wang foresees these efforts will result in policy recommendations on how economies can gradually reduce and remove inefficient and wasteful subsidies. He also notes the target for 2015 is to get more nations to do these reviews and to generate best practice studies for a change in regulations across APEC economies.

Charles Lawrence Greenwood, Robert Wang, Jeff Hardee and Steven Xavier Chan
Charles Lawrence Greenwood, Robert Wang, Jeff Hardee and Steven Xavier Chan

Private Sector Participation

According to Jeff Hardee, Caterpillar’s Director of Government and Corporate Affairs (Asia Pacific) and Singapore Country Manager, who also serves as an alternate ABAC member, there are five “Working Groups” for ABAC this year from US members.

The Connectivity Working Group will focus on accelerating infrastructure, maximizing human capital potential and advancing the APEC Connectivity blueprint for improved trade within the bloc. Ed Rapp, Group President of Caterpillar and Co-chair of the group, will drive these discussions.

The Sustainable Development Working Group will explore the productivity of the workforce, food security, sustainable energy, and green development among other themes. Bart Peterson, Senior Vice President of Corporate Affairs and Communications at Eli Lilly, will champion these issues.

The SMME (small, medium and micro-enterprises) and Entrepreneurship Working Group will focus on promoting resilient SMEs, innovation, women’s economic participation and more.

The Regional Economic Integration Working Group – a mainstay topic at the forum – will garner support for the WTO, anti-protectionism, free trade in the Asia Pacific region, trade and investment liberalization, and more. Peggy Johnson, Executive Vice President of Microsoft, will lead these discussions.

The Finance and Economics Working Group will focus on macroeconomic growth and development in the financial system, including capital market development and integration as well as other financial infrastructure.

There are also other initiatives that, for instance, Caterpillar has forwarded through ABAC for improvement, such as bringing integrity back to mining, Hardee points out. “We decided to do a study on mining to look at the contributions of mining to economies in APEC and to look at best practices for encouraging investment in mining because there are policies in some countries that makes it difficult to do business.”

He also highlights some policies, particularly in Southeast Asia, have made it arduous to develop mines. “There are a lot of bad practices involved, and, for example, permits that you need are often disregarded. So, mining has developed a bad reputation.”

After securing funding for the study and approval from ABAC, the study went ahead and was completed last year, and it identified what constitutes best practices in the mining industry, Hardee points out. “It is an area where we as a member came up with an initiative and pushed it through a working group. Now we have a mining study to use as a platform for discussion with stakeholders in the industry.”

Other Economic Priorities

There are currently two major items on the agenda in relations to the financial services sector for ABAC, according to Steven Xavier Chan, Vice President & Gead of Regulatory, Industry and Governmental Affairs for Asia Pacific at State Street Asia.

The first is to expand access to finance for SMEs, Chan says. “We are looking at how to create a credit information sharing system, strengthening the legal architecture, creating and training and supply chain finance.”

Another key initiative is to develop a stronger capital market within the region, plus measures to strengthen long-term investment in the bloc, he adds. “We are looking into areas such as the repo-market and creating a ‘funds passporting’ for the region so investors in the region can access each other’s capital markets in a streamlined process.”

Chan also praises APEC as a rare forum in the region where such ideas germinate and then translate to implementation throughout the 21 nations.

“APEC is a true forum for the region where a lot of the ideas are incubated and where many policymakers can come together to engage in dialogue,” he says.