Asia-Pacific Social Science Review 14(1) 2014, pp. 1-20 Analysis of Issues Development in Asia-Pacific Economic Cooperation Maddaremmeng Panennungi*, Rahadjeng Pulungsari, Evi Fitriani, Lily Tjahjandari, Surjadi and Padang Wicaksono APEC Study Centre of Universitas Indonesia Depok, Jawa Barat, Indonesia [email protected]/[email protected] Abstract: This study aims to analyze the determinant factors that affect issues development within APEC, map out those issues during the period 1993-2010, and show the relation of those issues with the APEC Summit Agenda 2013 in Indonesia. The analysis is based on secondary data, literature review of APEC meeting documents, interviews, and focus group discussions. Some interesting findings suggest that, firstly, issues development in APEC has been shaped by responses of APEC to opportunities and challenges related to economic, social, political and security conditions within APEC and the world. It is not only government agencies that are involved in issues development but other agents as well, such as the Pacific Economic Cooperation Council, the Association Southeast Asian Nations, the World Trade Organization, APEC Business Advisory Council, and APEC Study Centers Consortium. In the past and at present, the Eminent Persons Group and the PacificBusiness Forum, which were set up for a specific time by APEC, continue to play vital and influential roles. Secondly, this study finds that there are four big groups involved in issues development in APEC. All issues are part of the development issues in APEC economies. Even though the issues are very broad, encompassing economic and non-economic matters, these are nonetheless focused on economic integration of APEC, with Bogor Goals being in the nucleus of issues. The development of the range of issues, which APEC has pursued to respond to challenges and opportunities in the APEC economies, is intended to support and secure economic integration. Thirdly, the Indonesian APEC Summit Agenda 2013 emphasized three specific agenda items: attaining the Bogor Goals, sustainable and inclusive growth, and connectivity. All these are inter-related issues of developments that have been discussed since the establishment of APEC. Keywords: APEC, issues development, Bogor Goals, non-economic issues, Indonesia Copyright © 2014 by De La Salle University Publishing House 2 ASIA-PACIFIC SOCIAL SCIENCE REVIEW VOL. 14 NO. 1 The APEC (Asia-Pacific Economic and the Uruguay Round was concluded (around Cooperation) idea was formally proposed by 75%), while the lowest were at the time of the the Prime Minister of Australia, Bob Hawke, Asian financial crisis in 1998 (around 66%) and in a speech in South Korea in January 1989. the global financial crisis in 2008 (around 68%). Later in the same year, APEC was officially From 1989 to 2010, the APEC Economic established in Canberra, Australia. APEC, a Leaders’ Meeting (AELM) were held 18 times. forum for dialogue among economies of the Asia- The meetings in 1989-1992 were informal, but, Pacific region, now has 21 member countries. beginning 1993, AELM has been conducted Initially, APEC had 12 founders: United States regularly each year. During the AELM, the of America (USA), Canada, Japan, South Korea, APEC leaders discussed various important Australia, New Zealand, Indonesia, Malaysia, issues related to Asia Pacific economies. Some Thailand, Singapore, the Philippines, and Brunei important meetings of APEC, reflective of the Darussalam. best years of the body, were in 1993 in Blake The attention on APEC had faded since the Island (USA), 1994 in Bogor (Indonesia), 1995 in Asian financial crisis in 1998. However, APEC Osaka (Japan), 1996 in Manila (the Philippines), has been at the centre of regional stage again and 1997 in Vancouver (Canada). Since the since 2008/2009, because of the high economic Asian financial crisis, attention to APEC seemed growth rates of several APEC economies amidst to be on a decline. When the global financial the world’s financial meltdown. In 2009, APEC crisis struck, however, APEC attracted a great economies reached 54.5% of the world’s GDP deal of attention again. In meetings in Peru (Gross Domestic Product). APEC has the three (2008), Singapore (2009) and Japan (2010), the largest economies in the world: US, Japan and attention was certainly resurging. APEC leaders China. In 2009 (authors’ calculation based on data expected their respective nations to play a bigger from APEC Secretariat, 2013h), the contributions role in the region’s economies and in maintaining of the three economies to world’s GDP were as the stability of the world’s economic growth. follows (in current prices): 24.5%, 8.7% and Moreover, they saw APEC as the vehicle to be 8.6%. Their contributions in APEC were 44.9%, employed in the face of global protectionism. 16% and 15.7%, respectively. Furthermore, the If we examine the issues in the AELM, these contributions of the Indonesian economy to the issues have ranged from trade and investment, world’s and APEC’s GDP were around 1% and economic structural reform, to the environment, 1.7%, respectively. During the global financial severe acute respiratory syndrome and terrorism. crisis in 2008/2009, APEC’s economic growth as a Knowledge of these issues development, including whole had decreased more dramatically compared their determinant factors, is sporadic. Thus, to that of the world. However, several economies whether there has been a continuity of these in the region had experienced high growth rates, issues, such as in the 2013 Indonesia APEC, such as China (9.2%), Vietnam (5.3%), and Summit is unclear. Indonesia (4.6%). Trade relations between and among APEC Economic Integration: An Overview economies are large. The share of average exports and imports within APEC economies is about The evolution of economic integration usually 70%. However, the intra-APEC exports have begins from an integration of trade in goods shown fluctuations. If we consider the share of and services. However, some participating exports within the APEC economies in 1993-2011 national economies improve their integration (authors’ calculation based on data from APEC by assimilating factors related to production, Secretariat, 2013h), the highest share occurred such as labor and capital; and in the highest in 1994 when the Bogor Goals were achieved level of economic integration, by integrating ANALYSIS OF ISSUES DEVELOPMENT PANENNUNGI, M.A., et. al 3 their economic policy. Economic integration is of transaction from non-member countries/ actuallybased on market forces, but governments economies, which are more efficient, to member could could pursue deeper economic integration countries/economies, which due to a significant through cooperation and policies. Conceptually, reduction in barriers, are less efficient. It means economic integration follows a sequence. First, a that the world will become less efficient because Free Trade Arrangement or Agreement (FTA) is of the changing transactions from the efficient signed, in which a member economy lowers its economies to the less efficient economies. This trade barriers to fellow members while keeping problem will not occur if economic integration barriers to non-members. Second, the Custom is multilateral, that is, a multilateral trade Union (CU) occurs once a member country lowers integration through the WTO (World Trade its barriers to other member economies and adopts Organization). This trade diversion could be one a common treatment barrier to other economies. of the reasons why APEC, since the beginning of Third, the Common Market (CM) is formed once its establishment, is not intended to be a closed there is a decrease in the barriers against the economic cooperation and will not follow the movement of goods and services among members, EU model (an Economic Union today). Take along with the lowering of barriers pertaining the AELM 2 in 1994 in Bogor, Indonesia, as an to production factors (e.g., capital and labor). example, where an APEC statement had made a Fourth, the most complex, or the most recent, is significant contribution to and had helped in the the Economic Union (EU). This phase involves conclusion of the Uruguay Round. As a form of reducing barriers to movement of goods/services support for a multilateral liberalization and to and factors of production, and the harmonization avoid the closed regional liberalization, APEC of policies (e.g., monetary and fiscal policy) and had emphasized the following position in AELM other economic policies. The highest integration 2, based on a document of APEC Secretariat is the integration of politics or political union, (2013b): which means having a single country (economic integration is not necessarily within one country We wish to emphasize our strong opposition to or a political union). the creation of an inward-looking trading bloc Until now, the European Union is the example that would divert from the pursuit of global free of the most sophisticated economic integration trade. We are determined to pursue an open in the world. It has not only reduced barriers and free trade and investment in Asia Pacific in a manner that will encourage and strengthen against the movement of goods, services, labor trade and investment liberalization in the world and capital, but has also provided an integration as a whole. (p.2) or a harmonization of monetary and fiscal policies (for further discussion see several resources, The APEC activities during 1993-2010, i.e., Lamberte (2005); Jovanovic (2006)). Only especially those based on AELM statement, political integration as one country could be could be divided into two big phases: 1993- higher than economic integration. In the case 1997 and 1998-2010. The first phase included of APEC, even though the main objective is APEC activities which began in 1989, continued economic integration, there are several indications until 1993, and peaked in 1997. There was to suggest that the APEC’s objective is beyond high optimism generated in this first phase, economic integration.