APEC Dr. June Soomer, Adviser,

APEC

Dr. June Soomer, Adviser, Strategic Policy and Planning Department, Eastern Caribbean Central Bank, defines regional integration as "the unification of nation states into a larger whole. On one hand, regional integration can be described as a dynamic process that entails a country's willingness to share or unify into a larger whole. The degree to which it shares and what it shares determines the level of integration. There are different degrees of integration depending on predefined criteria" (Soomer 2003).

The Asia-Pacific region is unique in terms of the speed of its economic development. In the space of one generation, it has achieved the highest rate of growth of any region, becoming an engine of world growth alongside the United States and the European Union. The region recovered rapidly from the 1997-1998 Asian financial crisis, and its annual GDP growth has averaged 5.1 per cent over the last five years (2000-2004) compared with 2.8 per cent for the world. The region is on the threshold of transforming its economic position in the world (Promoting Regional Integration 2005).

Its manufactured products and computer software, backed by a diverse skills base and expanding technical know-how, now dominate world markets. It has vast domestic markets buoyed by rapidly rising consumer demand. Balance-of payments surpluses in the region have enabled it to accumulate foreign exchange reserves that now total over $2 trillion, with seven economies holding reserves of over $100 billion (Promoting Regional Integration 2005).

What is the Asia-Pacific framework for regional cooperation? The European model of integration, whereby a group of countries formulate a free trade agreement that moves progressively towards deeper economic integration, culminating in economic and monetary coordination, is unlikely to serve as a model for Asia-Pacific integration. Rapid cross-border exchanges brought about by the active interventions of many sub-regional groupings require a different approach in the Asia-Pacific region, an approach that blends in with its heterogeneous and complex economic environment and is based on perceived needs and benefits. (Strengthening Regional Economic Integration 2008)

APEC has taken a wide range of actions aimed at strengthening work towards regional economic integration among the APEC economies. It builds on, and develops further, APEC's commitment to achieve economic growth and prosperity through collective and individual actions, supported by targeted capacity-building programs.

In 1994, at Bogor, Indonesia, APEC leaders demonstrated commitment by setting in place the Bogor Goals, a bold vision to achieve free and open trade and investment in the Asia Pacific region by 2010 for developed economies and 2020 for developing economies. The Osaka

Action Agenda, updated in 2002, remains the underlying plan for progress in APEC towards achieving the Bogor Goals (Strengthening Regional Economic Integration 2008).

In 1996, APEC agreed to use Individual Action Plans (IAPs) as tools to track progress towards achieving the Bogor Goals. This was supplemented with a program of peer reviews that began in 1997. The peer review process offers the opportunity to learn from other economies' reform experiences and generally encourages open markets and measures to reduce the cost of doing business (Strengthening Regional Economic Integration 2008).

In 2005, APEC Leaders endorsed in Busan, Korea, the Mid-term Stocktake of Progress Towards the Bogor Goals, which concluded that APEC had contributed significantly to the growth and prosperity in the Asia-Pacific region through promoting free and open trade and investment and reducing barriers to trade and investment -- a result that helped the region outperform the rest of the world in terms of economic growth, employment, reductions in poverty, and access to education.

More complex and efficient supply chains have emerged in response to lower trade barriers and regional economic integration. The services sector has become the largest component of many regional economies, and business is increasingly concerned about the efficiency, availability and security of economic infrastructure and supply chains (Strengthening Regional Economic Integration 2008).

Small and medium-sized enterprises (SMEs) have become key players in the new global business environment. They represent 90% of businesses in the APEC region. The effect of these developments on SMEs varies considerably. APEC therefore must be alert to the needs of SMEs to ensure they reach their full potential.

Strengthening regional economic integration will yield better results if it is accompanied by targeted capacity-building activities. A more focused and long-term approach in addressing the capacity-building needs of APEC members would contribute to more coordinated effort and outcome in enhancing regional economic integration.

The future for economic integration in the Asia-Pacific region is promising -- driven by open markets and rising living standards. While much of this process will be organic -- as businesses and consumers respond to factors such as emerging technologies and demographic trends -- our economies have a crucial role to play in shaping and nurturing economic integration. Poor policy choices are likely to result in slower growth and render the region as much less competitive globally.

Ramifications of APEC economic development for global business

APEC's achievements, judged against the events of recent years, indicate that the architecture remains sound. APEC is forward looking and the framework of openness, facilitation and capacity building remains a crucial agenda for progress. The challenges posed by the shifting landscape are essential to implementation and how to achieve progress on each of the three legs of APEC in a balanced manner (the First Decade Since Bogor: A Business Assessment of APEC's Progress 2005).

Region-wide cooperation should add materially to the effectiveness of responses by APEC member economies. However, this will require continued intensive capacity building programs in APEC to improve and deepen financial systems and to improve skills and procedures in institutions. This should be an essential aspect of APEC's ongoing work. APEC should also support reforms to the international financial architecture to improve global responses in dealing with failures in domestic financial systems -- to prevent them from turning into sources of contagion capable of impacting region-wide or globally.