APEC Strategy for Strengthening Quality Growth

APEC Strategy for Strengthening Quality Growth Final Assessment Report APEC Policy Support Unit November 2020 Prepared by: Emmanuel A. San Andres, Satvinderjit Kaur Singh, and Jason Carlo O. Carranceja APEC Policy Support Unit Tammy L. Hredzak Consultant Celine Tseng Yang-Lun Intern Asia-Pacific Economic Cooperation Policy Support Unit Asia-Pacific Economic Cooperation Secretariat 35 Heng Mui Keng Terrace, Singapore 119616 Tel: (65) 6891-9600 Fax: (65) 6891-9690 Email: [email protected] Website: www.apec.org Produced for: Asia-Pacific Economic Cooperation Senior Officials’ Meeting APEC#220-SE-01.18 This work is licensed under the Creative Commons Attribution-NonCommercial- ShareAlike 3.0 Singapore License. To view a copy of this license, visit http://creativecommons.org/licenses/by-nc-sa/3.0/sg/. The views expressed in this paper are those of the authors and do not necessarily represent those of APEC Member Economies. The terms such as “national,” “nation,” “country,” and “state” used in the text are for purposes of this report and do not imply the political status of any APEC Member Economy. Executive Summary i EXECUTIVE SUMMARY In 2015, APEC Leaders endorsed a forward-thinking initiative, called the APEC Strategy for Strengthening Quality Growth (ASSQG). It mandated action in areas that APEC has not extensively discussed as a forum: formal and informal institutions, trust and social cohesion, and addressing climate change. While APEC has grown comfortable in tackling exclusively economic issues such as trade or cross-border investment, the future-oriented APEC Leaders called on the forum to address the social and environmental issues that can contribute to — or diminish support for — regional economic integration. What the APEC Leaders meeting in Manila in 2015 could not have predicted was the arrival of COVID-19 five years in the future. While the Leaders pointed to rising inequality, lack of access to human development, and environmental damage among their reasons for initiating ASSQG, these same problems have exacerbated the human toll and economic cost of COVID- 19. Just as environmental damage and climate change increased the likelihood of animal-to- human transfer of pathogens, economic marginalisation and lack of social cohesion is making the impact of COVID-19 more severe and more difficult to manage. The ASSQG was built on the 2010 APEC Growth Strategy and introduced the three Key Accountability Areas (KAAs) of institution building, social cohesion, and environmental impact. Since 2015, both APEC members and APEC fora have made progress in a number of areas that are relevant to pursuing quality growth. Many APEC members have improved regulatory quality, increased economic participation of women as well as other vulnerable groups, and introduced mitigation measures to reduce carbon emissions. Meanwhile, APEC fora have also implemented actions to improve regulatory quality and trade facilitation around the region, promote greater innovative and digital entrepreneurship in order to improve upward mobility, and promote more environmentally sustainable practices in the international trading system. Nevertheless, there remains considerable scope for additional efforts from both APEC members and APEC fora. Although all members face shared obstacles in achieving quality growth, specific issues can also differ among the APEC economies. Common challenges include maintaining a flexible and responsive regulatory system, promoting upward mobility among marginalised or vulnerable groups, promoting trust, and reducing carbon emissions while maintaining economic growth. Given the cross-cutting nature of many of the issues confronting the region, APEC fora should endeavour to expand and strengthen regional cooperation and cross-fora collaboration in order to better address the regional challenges towards achieving growth that is balanced, inclusive, sustainable, innovative, and secure. Progress on the Growth Strategy APEC’s Growth Strategy comprises five attributes: balanced growth, inclusive growth, sustainable growth, innovative growth, and secure growth. Balanced growth seeks to promote sustainable levels of current account and fiscal account balance, focusing on the macroeconomic environment across and within economies. Inclusive growth aims to provide every member of the society equal access to participate, contribute, and benefit from economic opportunities. Sustainable growth strives to devise a green growth model and develop resource- efficient economies to address challenges brought forward by climate change. Innovative Executive Summary ii growth focuses on creating an enabling environment for innovations that will sustain an economy’s long-term productivity growth. Secure growth aims to protect citizens’ economic and physical well-being and provide a secure environment necessary for economic activity. APEC economies achieved mixed progress across the five growth attributes between 2015 and 2019. On balanced growth, most economies managed to adjust their current accounts to a more sustainable level, making the external macroeconomic environment more balanced as a whole. With regard to inclusive growth, overall poverty levels have gone down, stemming mostly from reductions in developing APEC economies; nonetheless, concerns regarding income inequality remain. Regarding inclusive employment, gender divergences narrowed in terms of labour force participation, unemployment rate, and vulnerable employment, although the differences remained large. On sustainable growth, improvements were made in environmental and resource productivity, along with steady investments in the development and adoption of green technologies; however, the rising level of carbon dioxide emissions signify that more efforts are required to achieve a greener economy. On innovative growth, economies have been ramping up their innovative capacity, legal institutions, and ICT infrastructures, with significant technological catching up by some economies. Lastly, secure growth has been reinforced with stronger food security and public health capacity, although the region was not prepared. Economies also broadly improved their governance in terms of political stability, government effectiveness, and control of corruption. Progress on Institution Building The progress made by the APEC region on institution building is somewhat mixed. There are many areas of institution building in which the region made substantial progress, including improvements in regulatory quality, enforcement of property rights, and investor protection. The depth of financial systems across the region have also generally improved. However, there are other aspects of institution building in which there was a general decline across the region since 2010. Most importantly, the integrity of many institutions is perceived to have worsened over the assessment period, with several APEC members exhibiting quite significant declines. In addition, judicial independence and the quality of legal frameworks are also perceived to have generally declined, especially since 2015. The perceived integrity of institutions is a fundamental aspect to developing and maintaining a high-quality and effective institutional framework. As reported in the self-assessment responses to the ASSQG survey, many APEC members implemented a number of measures over the ASSQG assessment period to improve their institutions. For example, progress has been made in improving the quality and efficiency of their overall regulatory environments, strengthening institutions in trade and investment facilitation, and developing the strength of financial sectors, and efficiency and transparency of tax systems. In addition, APEC fora implemented a number of initiatives that focus on improving economic institutions around the region, such as the development of the APEC Cross-Cutting Principles on Non-Tariff Measures and the APEC Non-Binding Principles for Domestic Regulation of the Services Sector; launching of the APEC Framework for Securing the Digital Economy, the Framework of Ethical Business Practices in Medical and Pharmaceutical Sectors, and the APEC Collaborative Framework on Online Dispute Resolution of Cross-Border Business to Business Disputes; an initiative to establish the Asia- Pacific Model E-Port Network; and reducing regulatory burden through the APEC Ease of Doing Business Action Plans. Executive Summary iii Progress on Social Cohesion While APEC economies and fora have implemented measures and initiatives to improve social cohesion within their specific areas, significantly more work needs to be done. Economic and social marginalisation in the region still persists, with inequality in access to economic opportunities, education, and healthcare dampening otherwise stellar progress in raising overall living standards. Income gaps between the rich and poor have widened, with more than half of income gains over the past years going to the richest quarter of the population. Overall levels of interpersonal and institutional trust are low, and are further being eroded by misinformation and fake news. During the assessment period, APEC economies have implemented measures to improve access to healthcare services, quality education and employment opportunities for the poor, women, youth, the elderly, and vulnerable groups such as people with disabilities, indigenous peoples, and those living in rural and remote; initiatives to accelerate the reduction of the population below the poverty line; and policies to advance cooperation

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