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2005APEC Business Advisory CouncilReport to APEC Economic LeadersBusan, Korea

Networking Asia-Pacific:A Pathway to Common Prosperity

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Networking Asia-Pacific: A Pathway to Common Prosperity 3

His ExcellencyMr. Roh Moo-hyunPresident of the Republic of KoreaChair, Asia-Pacific Economic CooperationSeoul, Korea

Your Excellency:

I have the honor to convey to you the 2005 ‘Report and Recommendations to Leaders’,from the APEC Business Advisory Council (ABAC).

APEC has reached the midpoint of the deadline to the Bogor Goals and questions are beingraised whether APEC can achieve these goals.

ABAC has put forward recommendations, based on the results of its own mid-term stocktake,in what it believes are areas of priority concern to the region.

Key messages from our report include:

■ Nothing will do more to expand trade in the region than the successfulcompletion of the Doha Development Agenda Negotiations. This offers anopportunity for a major breakthrough in global trade liberalization and is the bestopportunity available to APEC member economies, to significantly advance progresstowards their achievement of the Bogor Goals. This opportunity must be taken.

The recent visit to Geneva, by a delegation of ABAC Members, leaves us concernedthat negotiations may not be sufficiently advanced to ensure a successful outcomefrom the WTO Ministerial Conference in Hong Kong, China in December. We believethat the negotiations require an injection from political leaders, of commitmentand determination to achieve a successful outcome. In this regard, we considerhelpful, the recent Declaration by G8 Leaders, that free trade is the best way toassist the world’s poorer nations.

We urge APEC Leaders to exert their collective will in ways that cannot be denied.APEC Leaders should consider adopting a concerted APEC position, and instruct theirnegotiators to speedily resolve outstanding issues to enable the delivery of fullmodalities by the WTO Ministerial Conference in Hong Kong and bring the Round toa successful conclusion next year. It is our strongly held belief that nothing is moreimportant than this.

■ We believe that APEC should strive to be WTO plus. The recent proliferation ofbilateral and sub-regional trade agreements in the region, demonstrates a desireby APEC member economies for further trade and investment liberalization, whichgoes beyond what might reasonably be expected to be achieved at this timewithin the WTO. While we welcome the liberalization arising from these agreements,as we pointed out to Leaders in our 2004 report, a proliferation of them can haveperverse effects of creating distortions and increasing the cost of doing business.

APEC Business Advisory Council

ABAC Report to APEC Economic Leaders • Busan, KOREA 20054

We see the need to broaden and deepen the liberalization resulting from bilateraland sub-regional agreements within the region, by rapidly consolidating it into APEC-wide liberalization. We suggest that a Free Trade Area of the Asia-Pacific may be auseful way of doing this and recommend that Leaders establish a high level taskforce to examine its feasibility.

Trade facilitation is of crucial importance to the development of trade within theregion . Our recommendation to implement a Trans-Pacific Business Agenda, a comprehensiveand structured trade facilitation initiative, should stimulate business activity, and assistAPEC to achieve its trade facilitation goals.

ABAC believes that APEC must reform the way it operates. In our consideration of theMid-Term Review, ABAC was not content to undertake a mere stocktake of progress. Ouranalysis went beyond that and identified a series of reforms which we believe will helpinvigorate APEC, its role within the region, and its relevance to business. Our specificrecommendations are appended to our report.

Investment continues to be central to growth. Continued liberalization of financial servicesmarkets and the strengthening of financial systems, require sound governance, improvedtransparency, and financial system capacity building, particularly in emerging economies.

Our report also contains:

■ Recommendations to address the impact on business of the more stringent securityenvironment now existing.

■ A series of initiatives to strengthen regional emergency preparedness.

Finally, I return to the subject of most immediate concern to ABAC. After several years ofwork and negotiation, the world has reached the time for decision on the Doha DevelopmentAgenda. A substantial Doha Agreement will bring huge benefits to global prosperity andwill significantly advance APEC economies toward the Bogor Goals of “Free and Open Tradeand Investment in the Asia-Pacific by 2010/2020”.

At Blake Island in November 1993, a bold decision by APEC Leaders created APEC, based uponthe principles of economic cooperation and trade liberalization. That bold leadership webelieve, contributed to the Uruguay Round Agreement being concluded one month later.


A Time for bold leadership by APEC. The timing of the 2005 Leaders’ Summit is againpropitious. ABAC believes that a similarly bold display of leadership by APEC could againbe the factor needed to break the impasse and persuade WTO Members to reach agreement.An agreement by APEC Economic Leaders to instruct their negotiators to work cohesively toreach agreement would be a powerful signal to WTO Members of APEC’s commitment to freetrade.

Finally, I acknowledge with appreciation, the high level of cooperation and communicationABAC has had with APEC Senior Officials. This has made a significant contribution to ourdeliberations.

ABAC trusts that our recommendations will be helpful to Leaders and will find a place inthe conclusions which emerge from your 2005 Summit. We look forward to receiving yourresponse to our recommendations. Leaders may be assured of our willingness to assist withtheir implementation.

Yours faithfully,

Mr. Jae-Hyun HyunABAC Chair 2005ChairmanTong Yang GroupKorea

Mr. Hernan Somerville Mr. Hoang Van DungABAC Co-Chair ABAC Co-ChairPresident First Vice Chairman and Executive ViceChilean Association of Banks and Financial President Institute Vietnam Chamber of Commerce and IndustryChile Vietnam


Ms. Andrina LeverChair, Capacity Building Working GroupPresidentLever EnterprisesCanada

Mr. Idris AbasCo-Chair, Capacity Building Working GroupFounder and PrincipalArkitek IdrisBrunei Darussalam

Mr. Benigno RicafortCo-Chair, Capacity Building Working GroupChairmanNaturecraft Industries CorporationPhilippines

Mr. Ng Ser MiangCo-Chair, Capacity Building Working GroupChairmanTIBS International Pte. Ltd.Singapore

Dr. Savaraj SachchamargaCo-Chair, Capacity Building Working GroupVice ChairmanThai Chamber of CommerceThailand

Working Group and CommitteeChairs and Co-Chairs

Mr. Roberto RomuloChair, Action Plan Monitoring CommitteeChair, Task Force on the Mid-Term ReviewChairmanPhilam Insurance, Inc.Philippines

Mr. Javier PrietoCo-Chair, Action Plan Monitoring CommitteeSenior Vice President, External AffairsCEMEX GroupMexico

Sir Dryden SpringCo-Chair, Action Plan Monitoring CommitteeChairmanWEL Energy Groups Ltd.New Zealand

Mr. Juan Francisco Raffo NovelliCo-Chair, Action Plan Monitoring CommitteeChairmanRaffo GroupPeru


Mr. Michael DuckerChair, Trade and Investment Liberalizationand Facilitation Working GroupExecutive Vice PresidentInternational and Express Freight ServiceFedEx ExpressUSA

Mr. Michael CrouchCo-Chair, Trade and Investment Liberalizationand Facilitation Working GroupExecutive ChairmanZip Industries (Aust) Pty. Ltd.Australia

Mr. Gordon ChuCo-Chair, Trade and Investment Liberalizationand Facilitation Working GroupSenior Policy Advisor, AsiaVancouver International AirportCanada

Mr. Juan VillarzuCo-Chair, Trade and Investment Liberalizationand Facilitation Working GroupPresident and Chief Executive OfficerChilean Copper CorporationChile

Mr. Yoshio IshizakaCo-Chair, Trade and Investment Liberalizationand Facilitation Working GroupSenior AdvisorToyota Motor CorporationJapan

Mr. Mark JohnsonChair, Finance Working GroupDeputy ChairmanMacquarie Bank Ltd.Australia

Mr. Yasuo KanzakiCo-Chair, Finance Working GroupSpecial AdvisorNikko Group Ltd.Japan

Tan Sri Dato’ Azman HashimCo-Chair, Finance Working GroupChairmanAmBank GroupMalaysia

Dr. Jeffrey KooCo-Chair, Finance Working GroupChairman and Chief Executive OfficerChinatrust Financial Holding Company Ltd.Chinese Taipei

Dr. Twatchai YongkittikulCo-Chair, Finance Working GroupSecretary-GeneralThai Bankers’ AssociationThailand

Mr. Gary BenanavCo-Chair, Finance Working GroupChairmanNew York Life InternationalUSA



Ms. Wendy PyeChair, Technology Working GroupManaging DirectorWendy Pye GroupNew Zealand

Mr. Peter CharltonCo-Chair, Technology Working GroupChairmanFirst Charlton CommunicationsAustralia

Mr. Zhang LijunCo-Chair, Technology Working GroupChairmanSino-Sky Telekom Industry Group Co., Ltd.China

Mr. Noriyuki YonemuraCo-Chair, Technology Working GroupCounselorFuji Xerox Co., Ltd.Japan

Mr. Robert PrietoCo-Chair, Technology Working GroupSenior Vice PresidentFluor CorporationUSA



Hj Salleh Bostaman BH Zainal-AbidinAsset ManagerBrunei Shell PetroleumBrunei Darussalam

Mohd Roselan Mohd DaudManaging DirectorThe Islamic Bank of Brunei BerhadBrunei Darussalam

Mr. Andronico LuksicVice ChairmanBanco de ChileChile

Ms. Wang LiliExecutive Vice President and Board MemberIndustrial and Commercial Bank of ChinaChina

Dr. Raymond Chi’en Kuo-fungExecutive ChairmanChinadotcom CorporationHong Kong, China

Mr. Anthony John Liddell NightingaleDirectorJardine Matheson Holdings Ltd.Hong Kong, China

Mr. Chee Chen TungChairman and Chief Executive OfficerOrient Overseas (International) Ltd.Hong Kong, China

Mr. Rudjito MochtarPresidentBank Rakyat IndonesiaIndonesia

Mr. John PrasetioVice PresidentIndonesian Chamber of Commerce & IndustryIndonesia

Mr. Arwin RasyidPresident Director and Chief Executive OfficerPT Telekomunikasi Indonesia,Tbk.Indonesia

ABAC Members


ABAC Members

Mr. Younghoon David KimChairman and Chief Executive OfficerDaesung GroupKorea

Mr. Jay-Joon YoonPresident and Chief Executive OfficerSundosoft, Inc.Korea

Dato’ Dr. Tan Tat WaiGroup Managing DirectorSouthern Steel BerhadMalaysia

Mr. Julio MillanChairman and Chief Executive OfficerCoraza Corporación Azteca, S.A. de C.V.Mexico

Mr. Carlos Slim D.PresidentTelmex TrajectoryMexico

Mr. Philip LewinChief Executive OfficerPositively Wellington BusinessNew Zealand

Mr. Wayne Kenneth GoldingChairmanManufacturers’ Council of Papua New GuineaPapua New Guinea

Mr. Matthew TjoengManaging DirectorShine Way Development Ltd.Papua New Guinea

Mr. Enrique GubbinsExecutive DirectorSudamericana de Fibras S.A.Peru

Mr. Eduardo HochschildExecutive Vice PresidentHochschild GroupPeru


Mr. Theodore HuangChairmanChinese National Association of Industry and CommerceChinese Taipei

Mr. Henry KaoVice ChairmanI-Mei Foods Co., Ltd.Chinese Taipei

Mr. Chavalit Nimla-orVice ChairmanFederation of Thai IndustriesThailand

Mr. Le Quoc AnChairmanVietnam Textile CorporationVietnam

Mr. Oleg DeripaskaChairman, Board of DirectorsJSC Bazoviy ElementRussian Federation

Mr. Andrey KostinChairman and Chief Executive OfficerBank of Foreign Trade (Vneshtorgbank)Russian Federation

Mr. Alexander MedvedevDeputy Chairman, Executive BoardJSC GazpromRussian Federation

Ms. Chong Siak ChingPresident and Chief Executive OfficerAscendas Pte. Ltd.Singapore

Mr. Teng Theng DarChief Executive OfficerIntraco Ltd.Singapore

ABAC Members

Dr. Vu Viet NgoanGeneral Director and Chief Executive OfficerBank of Foreign Trade of Vietnam (Vietcombank)Vietnam


Executive Summary


ABAC continues to believe in APEC as the regionalinstitution that:

■ can bring about the realization of thebusiness vision of an Asia-Pacific communitywhere goods, services, finance and peoplemove freely;

■ ensures that the prosperity resulting fromthis integration is enjoyed by all economiesand societies within those economies; and,

■ provides a sound framework for respondingto regional crisis.

However, having reached the midpoint of thedeadline to the Bogor Goals, questions are beingraised whether APEC can achieve these goals.This comes at a time when the multilateraltrading system is in danger of weakening andbeing supplanted by bilateral t radingarrangements.

At the same time, while the world economyenjoyed one of its strongest years of growth lastyear and robust growth is expected to continuethis year - albeit at a more moderate pace –there are risks to this outlook which include:

■ the increasingly unbalanced nature of theexpansion and rising imbalances betweenmajor economies;

■ a tightening of financial market conditionswhich are leading to a rise in interest rates;and

■ volatile and higher oil prices.

These risks and challenges notwithstanding,ABAC believes that the world economicconditions present APEC economies anopportunity to undertake reforms needed tobolster medium-term economic growthprospects. Against this backdrop, ABAC has putforward the following recommendations callingon APEC to:

1. Lead in the successful conclusion of theDoha Round. ABAC strongly believes thereis no issue more urgent or more deservingof greater attention in the APEC region andurge APEC Leaders to demonstrate leadershipwithin the WTO negotiations, and redoubletheir efforts in the following areas:

■ Agriculture – Major liberalization oftrade in agricultural products includinga major reduction in tariffs, asignificant increase in minimum marketaccess obligations and the eliminationof export subsidies within five years.

■ NAMA – Elimination or substantialreduction of barriers for non-agricultural products.

■ Trade Facilitation – Enhance trans-parency, simplicity, standardization andexpeditious movement of goods andWTO capacity building in this area.

■ Services – Improve the quality ofservices offers. (APEC negotiatorsshould be encouraged to use the ABACchecklists as benchmarks for theremoval of investment impediments andto assess and improve the quality ofoffers in financial sectors.)

2. Respond to the Santiago Initiative. ABAChas responded to the invitation of APECLeaders to provide its views on emergingtrade facilitation issues as well as thebenefits and challenges that arise forbusiness from the increasing number ofRTAs/FTAs in the region and ways that thesecan be addressed with the followingrecommendations:

■ Launch the Trans-Pacific BusinessAgenda as a more structured andconcerted approach to trade andinvestment facilitation within APEC inpriority areas such as customsprocessing, standards and conformance,professional qualifications, intellectualproperty and regulations;

■ Establish a high level task force toexamine the feasibility of a Free TradeArea of the Asia-Pacific; and

■ Develop a more comprehensive workplan focusing on developing modelmeasures to encourage free and opentrade and convergence across the regionin the design and content of regionaland bilateral free trade agreements.

Executive Summary


3. Keep APEC on Track to Achieve the BogorGoals . ABAC regards the mid-term stocktakeas a critical milestone to the Bogor Goalsand have recommended that APEC take thefollowing suite of bold actions if it is toachieve these goals:

■ Reaffirm their commitment to theBogor Goals;

■ Strive to be WTO plus by going beyondWTO commitments or coverageparticularly in trade and investmentfacilitation;

■ Establish more effective mechanismsfor planning and executing ECOTECHprograms to support the TILF agendawith the participation of the businesssector and international financialinstitutions;

■ Take concerted steps to strengthenfinancial systems and develop robustcapital markets which underpineconomic growth; and

■ Reform the way it operates:❑ It should review whether it would

make more effective progress bymoving towards more bindingcommitments including examiningthe feasibility of a “Free Trade Areaof the Asia-Pacific”.

❑ The IAP Review process should bemade more robust and should focuson what needs to be done by eacheconomy to achieve the BogorGoals.

❑ Accord the APEC Secretariat theauthority and commensurateresources to undertake policyreview, advocacy, and research andanalysis.

4. Adapt to the new security environment.The lack of sufficient financial and technicalresources to achieve higher levels of securityin the trading system may render theregion’s entire supply chain vulnerable. Itis for this reason that ABAC has undertakenan assessment of the impacts businessesface that are directly related to the newsecurity environment so that appropriateresponses may be developed. ABAC alsourges the adoption of an APEC Frameworkfor Security and Facilitation of Global Tradeby member economies.

5. Create an Environment Conducive forBusiness . Promoting good business ethicsand eliminating corruption in the regioncomplement the number of initiatives takentowards improving the businessenvironment.

To promote good business ethics, ABACrecommends that APEC:

■ Continue regulatory reform andenhance the clarity of laws andregulations to remove fundamentalsources of corruption;

■ Enforce laws and regulations objectivelyand fairly when dealing with corporatedisputes;

■ Support measures which encouragebusinesses to voluntarily practice ethicsin management; and

■ Implement incentives to ensurecompliance with laws, rules andregulations as they impact on business.

On corruption, ABAC urges Leaders to:

■ Expedite implementation of theircommitments to become signatories tothe United Nations Convention AgainstCorruption;

■ Deny safe haven to corrupt officials andindividuals; and

■ Develop innovative and effectivetraining programs and technicalassistance for those in the field.

ABAC hopes to work in partnership withgovernments to create and implement anti-corruption measures more widely in each ofthe APEC economies.

6. Strengthen Financial Systems.Recognizing the need to address financialsystem weakness in vulnerable economiesas well as region-wide concerns posed bycorporate governance failures, ABACcontinues to build on work developed inrecent years to strengthen and deepen theregion’s financial systems and developrobust capital markets. ABAC recommendsthat APEC:


■ Adopt measures to assist in makingeconomies more resilient to the impactof volatile capital flows;

■ Support joint public/private sectorcapacity building initiatives tostrengthen and deepen financialsystems and markets;

■ Enable expanded private sector activityin the regional bond markets;

■ Implement Basel 2;

■ Adopt international accountingstandards;

■ Promote good corporate governanceand business ethics;

■ Strengthen security in financial systemsand encourage remittance flowsthrough formal financial sectors;

■ Review policy frameworks relating toageing and strengthen budgets goingforward by promoting private pensionsand savings and provide for genera-tional equity in meeting obligations inpublic pensions; and

■ Mobilize private funding to meet thegrowing infrastructure financing needsof the region.

7. Develop Emergency Preparedness. Inrecent years, the APEC region hasexperienced a number of man-made andnatural crises and disasters includingterrorist attacks, the SARS outbreak, andmost recently, the Indian Ocean tsunami.ABAC calls upon APEC to create a RegionalDisaster Response Network to coordinate

emergency preparedness efforts on aregional basis – building capacity to resistand respond to future crises.

8. Cope with Volatile Energy Situation.Growing pressure on Energy sources andvolatile prices highlights the need for APECeconomies to give priority in long-termplanning to ways of increasing energysupply, diversifying their sources, exploitingalternative and renewable options, andencouraging conservation and responsibleenergy use.

9. Encourage Innovation. To encourageinnovation, ABAC recommends thatin 2005 APEC Leaders launch an initiativeon patent cooperation and harmonization;technology choice; and concrete measureson intellectual property rights enforce-ment, including endorsement of a set ofmodel principles to control online piracy.

In 2005, ABAC will also initiate steps toidentify the likely content and possible far-reaching implications for the region of a2010 Information Society StrategicVision which is an important step to realizethe potential benefits that more ubiquitousbased computing concepts could provide toAPEC economies.

10. Environmental and Life Sciences-relatedTechnologies. ABAC has under considerationa range of environmental and lifesciences-related technologies andinitiatives. ABAC confirmed its endorsementof the APEC Life Sciences InnovationStrategic Plan and IT-based collaborativework underway in areas such as bordercontrol and biosecurity, environmentalconservation and monitoring, foodtraceability and healthcare management.


Main Report


I. Introduction

II. Ensuring Successful Conclusion of the WTO Doha Development Agenda NegotiationsA. AgricultureB. Non-Agricultural Market AccessC. Trade in Services

• Financial ServicesD. Trade FacilitationE. RulesF. Other Issues

III. Keeping APEC on Track to Achieve the Bogor GoalsA. Response to the Santiago InitiativeB. Contributing to the Reform and Development of APECC. Investment Liberalization and Facilitation

1. Impediments to Foreign Direct Investment in the Financial Services Sector2. Improving the Broad Investment Environment3. Intellectual Property Rights

D. Implementing the APEC Transparency StandardsE. Implementing the APEC Privacy FrameworkF. APEC Food System

IV. Building a Harmonious Relationship Between the Private Sector and Government in theNew International Security EnvironmentA. The Impact of the New Security Environment on Trade Transaction Costs in the RegionB. Adoption of an APEC Framework for Security and Facilitation of Global Trade

V. Creating an Environment Conducive for BusinessA. Promoting Good Business EthicsB. Eliminating Corruption in the APEC Region

VI. Achieving Asia-Pacific Community Through Cooperation and Capacity BuildingA. Strengthening Financial SystemsB. Enhancing the Competitiveness of Services SMEs

• Executive Volunteers for SME Capacity BuildingC. Promoting the Community Through Capacity Building

1. Emergency Preparedness2. Logistics Infrastructure

D. Securing APEC’s Future in a Changing Energy EnvironmentE. APEC 2005 Innovation Agenda: Patent Harmonization, Technology Choice and Enhanced

IPR EnforcementF. Information Society Vision in 2010G. Implement the Life Sciences Innovation Strategic PlanH. Technology to Improve Health Care DeliveryI. Technology to Address Environmental Concerns

1. Environmental Monitoring and Food Traceability2. Border Control and Biosecurity

Outline of Recommendations


Annexes

A Checklist on Financial Services Liberalization: Goals and Best Practices

B ABAC Contribution to the Mid-Term Review of APEC’s Progress Towards the Bogor Goals

C Barriers and Impediments to Foreign Direct Investment (FDI): Checklist and RecommendedPolicy Response

D Emergency Preparedness

E The APEC Business Advisory Council


I. Introduction

The world economy enjoyed one of its strongestyears of growth last year. This robust growth isexpected to continue this year - albeit at a moremoderate and sustainable pace - underpinnedby accommodative macroeconomic policies,improving balance sheets, supportive financialmarket conditions and a gradual rise inemployment. There are, however, risks to thisoutlook which include: (1) the increasinglyunbalanced nature of the expansion; (2) asignificant tightening of financial marketconditions which are leading to a rise in interestrates; and (3) a further sharp increase in oilprices. Major imbalances are beginning to impacton market perceptions. Spreads on riskier lendingare increasing. ABAC senses that an underlyingcause is concern that a global cooperativeapproach to dealing with major imbalances islacking. The international economic frameworkis under-performing.

These risks and challenges notwithstanding,ABAC believes that current world economicconditions present APEC economies with anopportunity to undertake reforms needed tobolster medium-term economic growthprospects. In particular, ABAC believes that thesuccessful conclusion of the WTO DohaDevelopment Agenda (DDA), including improvedmarket access for developing economies, will becritical to global growth.

Against this background, ABAC adopted thetheme “Networking Asia-Pacific: A Pathway toCommon Prosperity” which addresses thefollowing key issues:

■ Ensuring successful conclusion of the WTODoha Development Agenda negotiations

■ Keeping APEC on track to achieve the BogorGoals

■ Building a harmonious relationship betweenthe private sector and government in thenew international security environment

■ Creating an environment conducive forbusiness

■ Achieving an Asia-Pacific communitythrough cooperation and capacity building

The ABAC Report to APEC Economic Leadersaddresses each of these issues and puts forwardrecommendations in priority areas of concern.

II. Ensuring Successful Conclusion of theWTO Doha Development AgendaNegotiations

ABAC strongly supports rule-based multilateraltrade liberalization under the auspices of the WTO.ABAC agrees with APEC Ministers Responsible forTrade that “an ambitious and balanced outcomeof the DDA is of major importance for theachievement of the Bogor Goals and will serve asa powerful engine for economic growth and as ameans to improve the welfare of millions of ourcitizens”. The WTO Doha Development Agendanegotiations have remained at the forefront ofABAC’s concerns for the past several years. Mostrecently, ABAC has submitted through the Meetingof APEC Ministers Responsible for Trade(MRT) in Jeju, Korea in June 2005, specificrecommendations on DDA issues, including achecklist on financial services liberalization andon investment impediments that could be usedas benchmarks or “best practice” standards toaim for in the WTO.

ABAC believes that the Sixth WTO MinisterialConference to be held in Hong Kong, China inDecember 2005 is crucial to establishing a solidbasis for the successful conclusion of the DDAnegotiations in 2006 and in building confidencein the multilateral trading system. ABAC likewisebelieves that APEC economies have anopportunity in the lead up to the Hong KongMinisterial to find ways to provide momentumfor the core negotiating areas and that APECLeaders must provide a final push to thenegotiations prior to Hong Kong.

ABAC asks Leaders to instruct Ministers andofficials to exercise flexibility and demonstratethe necessary political will to agree on allmodalities by the Hong Kong Ministerial, takinginto account the ABAC recommendationsoutlined below.

A. Agriculture

ABAC reaffirms its position that an ambitiousoutcome on agriculture must be a fundamentalpart of a successful Doha Round of negotiations.ABAC notes that since negotiations restarted inOctober 2004 following the “framework” accordreached in July last year, there has been muchconstructive dialogue and agreement on severalkey objectives such as:


■ The total elimination of all forms of exportsubsidies by a credible end date;

■ Economies having higher levels of domesticsupport will make greater reductions; and

■ All economies other than the least deve-loped will contribute to improved marketaccess.

ABAC applauds the advances made in the pastyear, but is concerned that there remains a hugevolume of technical work to be done inagriculture. Delay in moving forward onagricultural issues has serious potential to be adrag on progress on other DDA subjects; thiswould impact negatively on the outlook for theSixth WTO Ministerial Conference.

Recommendations

ABAC notes that agreement on the methodologyfor converting non-ad valorem tariffs to advalorem equivalents (AVEs) had already beenreached. ABAC recommends to APEC Leaders thata heightened sense of urgency is given tosubstantially liberalizing trade in agriculturalproducts and resolving outstanding differencesin the three agricultural ‘pillars’ as follows:

Market Access

■ A substantial reduction in all tariffs■ A maximum tariff cap of 50%■ Agreement on a harmonizing formula to

achieve a tiered approach to tariffreductions

■ The scope and treatment of ‘sensitive’ and‘special’ products

■ The formula for application of ‘special anddifferential treatment’ to developingeconomies, including the concepts of‘proportionality’, ‘special products’ and‘special safeguards’

■ A significant increase in minimum accessobligations

Domestic Support

■ Levels of reduction in all trade-distortingdomestic support

■ Coverage and levels of payment to apply tothe ‘blue’ and ‘amber’ boxes

■ The percentage level to apply to de minimissupport

Export Competition

■ Complete elimination of export subsidieswithin five years

■ Treatment of other forms of exportcompetition-export credits, food aid, StateTrading Enterprises (STEs)

B. Non-Agricultural Market Access

ABAC commends the valuable contributions madeby the APEC Ministers Responsible for Tradethrough their Statement on the DohaDevelopment Agenda Negotiations in Jeju, Koreain early June, which has had a positive andimmediate impact on the WTO negotiations,notably their endorsement of a Swiss formulafor non-agricultural market access (NAMA)negotiations.

Recommendations

ABAC urges member economies to developspecific modalities for the negotiationsconcerning market access for non-agriculturalproducts. ABAC also urges member economiesto agree to the following as soon as possible:

■ Apply an ambitious formula approach toeliminate or substantially reduce tariffs forall products with no a priori exclusions byspecified dates;

■ Utilize other supplemental approaches,including sectoral agreements in areas suchas environmental products, informationtechnology products, and chemicals, wherethey would contribute to furtherliberalization;

■ Eliminate tariffs on information technologyproducts and widen the coverage of the ITA;

■ Substantially reduce tariff peaks, hightariffs, and tariff escalation;

■ Eliminate or substantially reduce non-tariffbarriers; and,

■ Recognize special needs and interests ofdeveloping economies and apply the “lessthan full reciprocity” principle.

C. Trade in Services

ABAC is concerned over the slow progress of theservices negotiations. A weak services sectorhurts the competitiveness of other industries asa whole and the regional economy. Enhancingthe competitiveness of service industries throughprogressive liberalization is a key element ofdevelopment. Liberalization of key service


sectors, such as transportation, distribution,telecommunication, and computer services thatsupports manufacturing is indispensable foreconomic development. ABAC believes thatsignificant progress is achievable in thisimportant area of the negotiations. ABAChowever notes that, while the number of WTOMembers that have submitted initial and revisedoffers has increased, the quality of these offersgenerally remains very poor. ABAC urges all WTOMembers to provide meaningful newliberalization in their services offers.

ABAC encourages member economies to giveparticular attention to the benefits from servicesnegotiations for SMEs, which are activelyinvolved in services trade. ABAC notes thatadvances in information and communicationstechnology have enabled SMEs to play a moreactive role in services trade. ABAC requestsmember economies to take steps to enhance theenvironment for services SMEs through the GATSrequest-offer process.

Recommendations

ABAC urges APEC economies to commit to higherlevels of liberalization on the broadest possiblerange of sectors and across all modes of servicessupply. In particular, it urges APEC to:

■ Improve and expand “mode 1” commit-ments, and make permanent the currentmoratorium of not imposing customs dutieson electronic transmissions;

■ Improve and expand “mode 3” commitmentsby enhancing transparency and mitigatingthe risks involved in FDI in order to facilitatecross-border investment by SMEs;

■ Improve and expand “mode 4” commitmentsconcerning business visitors, contract servicesuppliers, and independent professionals;

■ Promote regulatory transparency withineconomy schedules, by clearly makingcommitments that reflect the currentregulatory situation, listing market accessand national treatment restrictions whereapplicable, as a first step; and,

■ Eliminate regulatory measures thatunnecessarily constrain the access of servicesector SMEs to international markets.

Financial Services

Much greater effort is needed to promote thecomprehensive liberalization of financial servicesin the Round. Liberalization underpins andfacilitates strong economic activity, investmentand employment growth, creates greater choicefor savers and investors and rewardsentrepreneurship. APEC economies should makehigh quality offers in the WTO Doha Round thatgo beyond binding current practice to providefor meaningful new financial servicesliberalization to promote economic growth.Attached are checklists reflecting businessaspirations and best practices which would helpensure effective and balanced financial servicesliberalization (Annex A). They are designed as atool for economies to use in evaluating theirown offers and those of others.

Where developing economies need to pursuestep-by-step liberalization, transitional policiesshould include improving and strengtheninginstitutional capacities in developing economiesand market opening and liberalization indeveloped economies. Transitional policiesshould be transparent, publicly available, andan integral to the process.

Recommendations

■ Agree to pursue robust financial servicesliberalization in the WTO Doha Round as ameans of stimulating and sustainingeconomic growth and performance;

■ Give priority to public/private sectorcapacity building initiatives aimed atstrengthening institutional capacities indeveloping economies; and

■ Adopt best practices in ABAC’s checklist forthe WTO Doha negotiations and use thechecklist as a central reference by APECeconomies in assessing the quality of offers.

D. Trade Facilitation

ABAC is pleased that trade facilitationnegotiations in the WTO have begun favorablyand that APEC has paved the way for greaterwork on this issue within the WTO. ABAC alsoapplauds the agreement by APEC MinistersResponsible for Trade to develop possible modelmeasures on trade facilitation for RegionalTrading Arrangements (RTAs) and Free TradeAgreements (FTAs) for endorsement by APECLeaders in November.


While this progress is encouraging, more workis needed. The negotiation of trade facilitationdisciplines in the Doha Development Agenda iscrucial for businesses. APEC economies mustensure that negotiations on trade facilitationin the WTO Doha Round develop concrete rulesto improve the efficiency of internationalcommercial transactions. Comprehensive ruleson trade facilitation will bring industry andbusiness added certainty and transparency, andbetter information on import and exportregulations, including customs procedures.

Despite the obvious benefits, prospects forachieving meaningful trade facilitation rules inthe Doha Round are uncertain. Failure to agreeon trade facilitation would be a setback forbusiness, as the inefficiencies permitted by currentrules would continue to hinder global trade.

Recommendations

■ Advance trade facilitation in multilateralnegotiations, in particular the Doha Roundof WTO negotiations where the tradefacilitation agenda has met resistance;

■ Develop the substance of trade facilitationrules that would reduce impediments tocross-border transactions; and

■ Create support for trade facilitation withina diverse range of economies through theirprivate industries, build on the existingefforts of other organizations dedicated totrade facilitation, and coordinate with theseorganizations.

E. Rules

ABAC supports the Doha Declaration’snegotiating mandate to clarify and improvedisciplines under the WTO Agreements on Anti-dumping and Subsidies and CountervailingMeasures, including fisheries, while preservingthe basic concepts, principles and effectivenessof the agreements and their instruments andobjectives.

Recommendations

ABAC urges APEC economies to push for progressin the negotiations on these areas. In particular,it urges APEC economies to support revisions toclarify and improve rules: (1) to prevent abusiveand excessive use of anti-dumping andcountervailing measures; (2) to avoid excessive

burdens on respondents; and (3) to enhance thetransparency, the predictability, and fairness ofthe system in the WTO Doha Round.

F. Other Issues

ABAC believes that investment, competition andgovernment procurement are inseparably linkedto trade, and that rules in these areas arenecessary for the WTO to keep pace withcommercial realities. Clearly, the DohaDevelopment Agenda remains a priority and, tothe extent possible, ABAC will work towards asuccessful conclusion of those negotiations.

Recommendations

■ Explore other ways to make progress in theso-called “Singapore Issues” in the WTOwork program; and

■ Review APEC’s contribution to progress onthese issues, which are critical to theregion’s business community.

III. Keeping APEC on Track to Achieve theBogor Goals

A. Response to the Santiago Initiative

In their 2004 Santiago Initiative for ExpandedTrade, APEC Leaders invited ABAC to provide itsviews on emerging trade facilitation issues aswell as the benefits and challenges that arisefor business from the increasing number of RTAs/FTAs in the region and ways that these can beaddressed.

This year, ABAC provided APEC with its views onan ambitious trade facilitation agenda for theregion, based on a set of specific commitmentsfor customs administrations and trade officials.This agenda featured provisions related totransparency, release of goods, automation, riskmanagement, confidentiality, express shipments,review and appeal, penalties and advance rulings.Based on this input, APEC Ministers Responsiblefor Trade agreed to develop possible modelprovisions on trade facilitation for RTAs and FTAsfor endorsement by APEC Leaders this year. Asa next step in the development of modelprovisions related to RTAs/FTAs, ABAC suggeststhat APEC seek to develop a common “bestpractice” approach to preferential rules of originin their bilateral preferential tradingarrangements (PTAs).


While welcoming the opening of marketsresulting from RTAs/FTAs, ABAC is concerned thatthe proliferation of many separate agreementswith different terms and rules could result intrade diversion and increased costs andcomplexity of doing business in the region. APECmember economies need to take early steps toconsolidate the opening of markets arising fromRTAs/FTAs – encouraging the formation ofprogressively larger preferential groupings –contributing to regional liberalization.

If the WTO fails to achieve a successfulconclusion to the DDA next year, the focus oftrade liberalization will turn in earnest to thenegotiation of RTAs/FTAs. This underscores theneed to ensure that these preferentialagreements are WTO-consistent and havesufficient common elements to permit theirpossible future expansion and amalgamation. Italso points to the necessity of APEC having a“Plan B” to ensure that trade and investmentliberalization continues on an APEC-wide basis.

Last year, ABAC presented Leaders with twoproposals related to reinvigorating APEC’s tradeand investment liberalization and facilitationagenda. First, ABAC called for the launch of aTrans-Pacific Business Agenda which seeks toprioritize APEC’s efforts in the area of trade andinvestment facilitation through a more structuredand concerted approach in these areas (see box

for further details). Second, ABAC called uponAPEC Leaders to undertake a feasibility studyon a Free Trade Area of the Asia-Pacific.

Recommendations

ABAC reiterates its recommendations to Leadersfrom last year:

■ Launch the Trans-Pacific Business Agendaas a more structured and concerted approachto trade and investment facilitation withinAPEC;

■ Establish a high level task force to examinethe feasibility of a Free Trade Area of theAsia-Pacific; and

■ Develop a more comprehensive work planon bilateral and regional free tradeagreements, focusing on developing modelmeasures for a wide range of FTA chaptersto encourage free and open trade andconvergence across the region in the designand content of these agreements.

B. Contributing to the Reform andDevelopment of APEC

As part of its contribution to the mid-termreview of APEC’s progress towards the BogorGoals, ABAC undertook an assessment of APEC’s

The Trans-Pacific Business Agenda (“TPBA”)

The TPBA is a proposed APEC umbrella program for accelerating trade and investment facilitationand “behind the border” reform in the region.

It would consist of an ambitious APEC agenda of high priority, trade and investment facilitationand “behind the border” initiatives, and a new APEC process for implementing them morequickly and with more certainty.

The agenda of initiatives would be chosen by APEC and updated from time to time. Theywould be priority initiatives in areas shaping the business operating environment, for example,customs processing, standards and conformance, IPR, recognition of professional qualifications,business mobility, investment, business regulation.

The new APEC process for achieving these goals would group diverse projects under a highprofile, single umbrella name, to create more momentum for reform. It is a more concertedaction program, with well-defined goals and timetables, stronger mechanisms to encourageeconomies to meet these requirements, adequate management resources and better funding.

The TPBA pursues ABAC’s vision of a business environment where goods, services, investments,business people and capital move freely, and firms operate anywhere in the region as if intheir home economy.

It aims to meet business expectations for faster reform, through sharper prioritization andmore concerted implementation. The TPBA would make aspirational goals in APEC moreachievable, by pursuing them with greater clarity of purpose.


achievements in the areas of trade andinvestment liberalization and facilitation andeconomic and technical cooperation. The reviewtook into account recent developments andchallenges which, ABAC believes, have eitherdrastically changed the environment in whichbusiness operates or threaten the stability ofthe region’s economy and therefore call for acoordinated response. These include: rapidglobal economic integration; the dominant roleof information technology; other emergingtechnologies; the increasing complexity ofmultilateral trade negotiations; theproliferation of bilateral free trade agreements;the rise in terrorism; and the challenges posedby the financial crisis, creeping protectionism,the sharp rises in oil prices, natural disasters,changing demographics, and new diseaseepidemics. Further progress toward liberalizingtrade and investment regimes and knockingdown barriers at the borders is increasinglyshifting attention to behind the bordermeasures including those to address regulatoryobstacles, transparency and corruption concernsand market conditions.

Despite these challenges, ABAC believes that theBogor Goals remain relevant and stronglyrecommends that Leaders reaffirm the BogorGoals of ‘free and open trade and investment by2010 for developed economies, and 2020 fordeveloping economies’. ABAC interprets this tomean ‘free and open trade and investment amongAPEC economies’. However ABAC has alreadyadvised in its Report to Leaders in 2004, that itdid not believe that developed economies wouldreach the target of ‘free and open trade andinvestment by 2010’, unless a number ofinitiatives are taken by APEC.

In presenting its contribution to the mid-termreview of APEC’s progress, ABAC focused on whatAPEC must do to deliver on its Vision of “Freeand Open Trade in the Asia Pacific”. A copy ofthe paper “ABAC Contribution to the Mid-TermReview of APEC’s Progress Towards the BogorGoals” is attached to this report (Annex B).

Recommendations

In order to achieve the Bogor Goals, ABACrecommends in its contribution to the Mid-TermReview that APEC economies:

■ Re-affirm their commitment to the BogorGoals by the target dates;

■ Strive to be WTO plus by going beyond WTOcommitments or coverage particularly tradeand investment l iberalization andfacilitation;

■ Establish mechanisms for planning andexecuting economic and technicalcooperation programs with the participationof the business sector and internationalfinancial institutions. For small and mediumenterprise development, these programsshould focus on business skills, productdevelopment, and technology uptake forsmall and medium enterprises;

■ Take concerted steps to strengthenfinancial systems and develop robustcapital markets, notably bond markets toensure financial stability and to broadenthe sources of financing for infrastructureand corporate expansion that underpinsustained economic growth. In so doing,APEC should:

❑ Establish mechanisms for developingand implementing financial sectorcapacity- building programs with theparticipation of the business sector andinternational financial institutions;

❑ Support measures in regional andinternational forums to strengthenregulatory supervisory capacity; and

❑ Implement an on-going review andupgrade of financial standards accordingto international best practices.

■ Reform the way it operates:

❑ It should review whether it would makemore effective progress by movingtowards more binding commitments;

❑ Strengthen and improve individualactions by making IAPs moretransparent and accessible to businessand the Peer Review processes a morerobust, forward looking and policyrelevant interaction that includes agreater focus on what APEC economiesare doing individually and collectivelyto implement specific APEC commit-ments and priorities and achieve theBogor Goals; and


1 Professor J. Kimball Dietrich: Benefits of Financial Market Liberalization

❑ Accord the APEC Secretariat theauthority and commensurate resourceswith regard to policy review, advocacy,and research and analysis.

C. Investment Liberalization andFacilitation

1. Impediments to Foreign DirectInvestment in the Financial Services Sector

There is now significant evidence provided bythe World Bank and others, including an ABACcommissioned report from 2004, the DietrichReport1 , that FDI in financial services sectorshelps improve competitiveness of the hosteconomy, has positive benefits for consumersand provides capital, technology, new productlines, managerial knowledge, enhanced skillsand the restructuring of inefficient enterprises.A checklist compiled by ABAC is attached(Annex C). This identifies major impedimentsto FDI, which, if removed, would substantiallybenefit the host economy and corporateinvestors, and provides suggested policyresponses that include significant institutionalcapacity building recommendations.

Recommendation

■ Remove impediments to FDI in the financialservices sectors and work with ABAC to buildinstitutional capacities to make theinvestment environment more attractive todomestic and foreign participants.

2. Improving the Broad InvestmentEnvironment

ABAC is concerned that APEC activitiesconcerning investment liberalization andfacilitation are not as effective as those on tradeliberalization and facilitation. Last year, ABACrequested that APEC amend or clarify thewordings of the APEC Non-Binding InvestmentPrinciples (NBIP) with a view to improving theenvironment for cross-border investment. ABACalso proposed measures to promote investmentfacilitation. ABAC will be working with theInvestment Experts Group (IEG) to strengthenAPEC’s commitments in these areas.

Recommendations

In the meantime, ABAC urges APEC to:

■ Reaffirm ABAC’s recommendations of lastyear and to include them in the InvestmentExperts’ Group’s agenda;

■ Outline the direction necessary foraddressing investment liberalization in itsroadmap to the Bogor Goals;

■ Take the following steps to achieve theinvestment liberalization and facilitationgoals of APEC:

❑ Review the role of APEC in achievinginvestment liberalization and facilitation;

❑ Review member economies’ implemen-tation of the APEC Non-BindingInvestment Principles and Menu ofOptions for Investment Liberalizationand Business Facilitation; and

❑ Establish a mechanism by whichmember economies report implemen-tation of investment transparencystandards.

3. Intellectual Property Rights

Last year, ABAC recommended that APECstrengthen the enforcement of intellectualproperty rights (IPRs) and take steps to furtherpromote cooperation among enforcementagencies in the region in order to facilitateinvestment.

ABAC welcomes the agreement of APEC Ministersin Santiago in November 2004 to reduce piracy,trade in counterfeit goods, and online piracy, andto increase cooperation and capacity building.In addition, ABAC applauds the APEC MinistersResponsible for Trade for their adoption of theAPEC Anti-Counterfeit and Piracy Initiative inJeju, Korea in June this year and for having startedthe development of guidelines for the Initiativeas concrete deliverables. ABAC also notes thatsome economies have already established IPRService Centers, which provide information for IPRholders so as to allow them to take effective legalaction against the infringement of their rights.ABAC urges APEC to take significant additional


steps this year and in the coming years tostrengthen the enforcement of IPRs.

Recommendations

ABAC recommends that APEC:

■ Take the following actions by the Leaders’Meeting in Busan:

❑ Develop effective guidelines to reducetrade in counterfeit and pirated goodsand the sale of counterfeit goods overthe internet. Senior officials areexpected to continue taking leadershipin the Initiative, and to encourage allmember economies to properlyimplement the agreed guidelines;

❑ Take steps to reduce on-line piracy andto promote cooperation among IPRenforcement agencies in the region; and

❑ Consider follow-up measures, includingthe reporting by all member economiesof their efforts in implementing theguidelines, strengthening cooperationand on capacity building.

■ Demonstrate tangible results in terms of IPR-related efforts achieved each year at theLeaders’ Meeting, starting from Busan; and

■ Establish IPR Service Centers and develop asystem to enhance interaction among theCenters.

D. Implementing the APEC TransparencyStandards

Transparent governments are key to the businesscommunity, and 2005 is a seminal year fortransparency in the Asia-Pacific region. APECLeaders agreed to implement all of the APECTransparency Standards into their domestic legalregimes by 2005. ABAC applauds the agreementAPEC Ministers and Leaders reached in Santiagolast year to reflect the Transparency Standards intothe APEC Individual Action Plans so that economiescan report beginning this year on how they haveimplemented the Transparency Standards.

Recommendations

ABAC urges all APEC economies to:

■ Meet Leaders’ deadline by incorporating andensuring that the commitments outlined in

the Transparency Standards are clearlyreflected in their laws and other legalinstruments no later than this year; and

■ Faithfully complete the report this year.

At the same time, ABAC will provide APEC withconcrete examples of areas in which economiescan improve the transparency of theirgovernmental, legal, regulatory and adminis-trative functions consistent with the APECTransparency Standards.

E. Implementing the APEC PrivacyFramework

The approval of the APEC Privacy Framework byAPEC Leaders at the November 2004 LeadersSummit in Santiago is an important milestonein encouraging the development of appropriateprotection for personal information in the APECregion. The privacy framework, consisting of nineprivacy principles and a roadmap for domesticimplementation, strikes the balance ofprotecting individual’s privacy while fosteringthe responsible flow of global data that is socritical to modern, networked economies.

In order for the APEC region to realize the fullbenefits of the framework agreement, APEC needsto complete follow-on work this year. This includesfocus mechanisms that will allow responsibletransfers of information across the APEC regionand with APEC partners around the globe, andaddress procedures to foster cross-bordercooperation to respond to consumer complaintsand to deal with privacy infringements.

Recommendations

ABAC urges APEC economies to:

■ Seize this unprecedented opportunity towork with the business community todevelop a mechanism that will encourageand recognize organization’s privacy codesor corporate global privacy rules; and

■ Participate in continuing work on theimplementation of the Privacy Framework.

F. APEC Food System

In the 1995 Leaders’ Statement, food scarcity wasmentioned as a possible future impediment toeconomic growth and promised APEC action. ABACresponded and proposed several explicit steps inits 1998 and 1999 reports designed to create an


APEC Food System that would keep food abundantand affordable. The Leaders adopted the ABACproposal in 1999 and called again in their2000 and 2001 Statements for vigorousimplementation. However, there has been littleaccomplished on the APEC Food System despitethe Leaders’ directions and ABAC’s appeal forspecific actions to invigorate it.

There are three reasons ABAC again callsattention to the APEC Food System. First, visibleaction by APEC on the sensitive issue of food,and demonstrating that it can be approachedcooperatively instead of contentiously, can verypositively influence the WTO negotiations.Second, as concerns about possible tight energysupplies arise APEC should be reminded that, asthe Leaders pointed out ten years ago, it needsto take early action to assure that it does notface food shortage pressures a few years hence.Growing populations with greater affluence willdramatically increase food demand; combinedwith environmental stresses and water shortagesthis could spell trouble, with an adverse reactionfor every business in the region, unless addressedcooperatively. Third, as APEC takes stock of itselfthis year it needs to look at how it organizes tocarry out assigned tasks.

Recommendation

■ Make a serious study of what went wrongon the APEC Food System before the 2005Busan meeting and decide what correctiveaction to take from the “lessons learned.”

IV. Building a Harmonious RelationshipBetween the Private Sector andGovernment in the New InternationalSecurity Environment

The new security environment has broughtadditional costs to businesses in the APEC regionassociated with the need to achieve higher levelsof security in the trading system. At the sametime, the adoption of new security-driventechnologies and procedures may result inefficiency gains that will expedite cargoclearance at customs and contribute to thereduction of transaction costs.

A. The Impact of the New SecurityEnvironment on Trade Transactions Costsin the Region

This year, ABAC undertook a study to assessthe impact of the new security environment

on trade transaction costs in the Asia-Pacificregion. The study focused on three security-related initiatives, namely the ContainerSecurity Initiative (CSI) and Customs-TradePartnership Against Terrorism (C-TPAT), bothintroduced by the US government, and theInternational Ship and Port Facility Security(ISPS) Code, implemented by the InternationalMaritime Organization. The ABAC studyundertook interviews with major ports, seacarriers and exporting manufacturers in theAPEC region to determine estimates of costs –as well as perceived benefits – associated withthese key initiatives in the new securityenvironment.

Based on the information collected from theseplayers, it appears that the costs associatedwith the implementation of these three securityinitiatives have been modest, thus representinga “light footprint” on the global supply chain.Instead, the most significant cost factoridentified by manufacturers was associated withthe 24-Hour Advance Manifest rule, which hasincreased inventory lead-time costs and costsof demurrage due to longer storage timeat ports.

While transaction costs associated with theseinitiatives were modest, so were the perceivedbenefits of these programs to business.Companies indicated that they had not achievedany efficiency gains attributable to theirinvolvement in these security initiatives, suchas reductions in border wait times, pilferage,insurance costs, and safety stock costs. It wouldappear that more needs to be done to translatethe requirements of the new securityenvironment into benefits on productivity andthe bottom-line.

Recommendations

■ APEC governments should examine ways inwhich they can more clearly demonstratemeasurable benefits to secure traders (e.g.reduced inspections, reduced customsclearance time) and communicate thesebenefits to the business community.

■ While ports and firms in developedeconomies are able to adapt more easilyto the requirements of the new securityenvironment, the implementation costs tofirms in developing economies and to SMEswill be substantially greater. APEC shouldseek to identify specific capacity buildingprograms, including training for customs


APEC Customs Handbook

In cooperation with the customs agencies of each of the 21 APEC economies, ABAC is developinga customs and trade facilitation handbook which will provide a concise one-stop depository ofcustoms- and trade facilitation-related information for all APEC economies. ABAC sees this as atangible joint public-private sector project this year, serving as a useful tool for both businessesand government officials. Thus far, ABAC has received substantive feedback from roughly halfof the 21 APEC economies and looks forward to receiving input from those economies that haveyet to provide their inputs. The handbook will consist of:

■ A compilation of contact information for the various APEC customs agencies;■ Contact information for requesting advance rulings on the applicable classification, duty

rate or country of origin of good to be imported into a specific APEC economy;■ Contact and procedural information on administrative reviews of a customs agency’s decision

if an importer and exporter wishes to protest the decision or interpretation of a customsagency; and

■ References to the relevant laws and regulations pertaining to advance rulings andadministrative reviews.

officials and port employees inimplementing and maintaining newsecurity systems.

■ Noting the significant added inventorycarrying costs associated with the 24-HourAdvance Manifest rule, ABAC encouragesCustoms Authorities in the United States andCanada to consider requiring this information24 hours prior to the arrival of the vessel (oranytime while the voyage is in transit) ratherthan 24 hours prior to the loading of thecontainer at the port of origin.

B. Adoption of an APEC Framework forSecurity and Facilitation of Global Trade

Securing global trade is vital to continuedprosperity in the APEC region and the world. Asevere disruption to the supply chain in one partof the world can negatively impact the entireglobal trading system in a far-reaching way.Consequently, APEC has remained committed tosecuring trade flows in a way that iscomplementary to APEC’s core business of tradeand investment liberalization and facilitation.

ABAC was pleased that the APEC Sub-Committeeon Customs Procedures agreed in principle toimplement an “APEC Framework based on theWCO Framework of Standards to Secure andFacilitate Global Trade” (“APEC Framework”) asa new Collective Action Plan in the hope ofcontributing to an expedited facilitation oflegitimate and low-risk cargo. ABAC notes thatby implementing an APEC Framework, there are

opportunities for the private sector andgovernments to realize benefits and reducedcosts in addition to the direct benefit ofimproved security. ABAC encourages all APECeconomies to work closely with industry tofurther develop and implement the APECFramework as proposed at SOM I in Seoul, Koreaand looks forward to providing APEC customsofficials with detailed input.

Recommendations

ABAC recommends the following to promoteparticipation in the Framework:

■ APEC Customs administrations shouldexpeditiously sign the WCO Letter ofIntent, if they are WCO members, or theAPEC Letter of Intent to declare theirintention to begin the process ofimplementing the Framework as directedby APEC Ministers Responsible for Trade intheir June statement.

■ The creation of a work plan with ambitioustimeframes for implementation of the APECFramework. APEC economies not requiringcapacity building assistance should takenecessary steps to implement the Frameworkby June 2006, with the remainder of theAPEC economies completing implementationby June 2007.

■ Implementation of the APEC Frameworkshould include development of:


❑ voluntary government-industrypartnership programs to improvesecurity and facilitate the movement oflegitimate trade, including supply chainsecurity best practices for AuthorizedEconomic Operators (AEO);

❑ a mechanism for APEC economies andthird parties to validate an AEO’sadherence to security best practicesand a means for mutual recognitionof such assurances among economiesand AEOs;

❑ standard requirements for providinginformation to customs authorities foruse in targeting higher risk shipments;and

❑ a system to provide measurable benefitsto secure traders (e.g., reducedinspections, reduced customs clearancetime) and a system for reporting onthese benefits to demonstrate theresults after implementation of theAPEC Framework related programs.

■ Assistance for APEC economies in developingstandards and requirements for inspectiontechnologies and customs automationthrough capacity building.

■ Hosting, by relevant APEC fora, of capacitybuilding seminars and pilot projectssupportive of implementing the elementsof the APEC Framework.

V. Creating an Environment Conducive forBusiness

A. Promoting Good Business Ethics

The economic environment is changing andimpacted by the removal of barriers againstinternational competition and by variousconventions related to improved business ethics.An important ingredient for long-termprofitability is the voluntary acceptance bybusiness of ethics management which ABACintends to promote with stakeholders. APECLeaders should support these objectives throughpublic policy initiatives which address issues oftransparency of government regulations and theenforcement procedure of laws.

Recommendations

ABAC recommends that APEC economies:

■ Continue regulatory reform and enhance theclarity of laws and regulations to removefundamental sources of corruption likediscretion on the part of public officials;

■ Enforce laws and regulations objectivelyand fairly when dealing with corporatedisputes like labor-management disputes,customer–related disputes, and classaction suits;

■ Support measures which encouragebusinesses to voluntarily practice ethics inmanagement; and

■ Implement incentives to ensure compliancewith laws, rules and regulations as theyimpact on business, including legalenforcement of contracts.

B. Eliminating Corruption in the APECRegion

Last November in Santiago, APEC Leaders tookdecisive action by adopting the “SantiagoCommitment to Fight Corruption and EnsureTransparency” and the “APEC Course of Actionon Fighting Corruption and EnsuringTransparency.” Recognizing that a compre-hensive approach is required, these boldinitiatives apply to public and private sectorsand to all manner of corrupt practices. InNovember 2004, ABAC also clearly demonstratedits commitment to fight corruption as every ABACmember signed the ABAC anti-corruptionstatement.

ABAC maintains its commitment to encouragebusiness and governmental institutions toconduct their affairs with the highest level ofintegrity and ethics. Expanding on last year’sinitiative, this year ABAC will begin to solicitall major companies in the 21 APEC economiesto sign the ABAC anti-corruption statement.ABAC notes that under the leadership of Korea,APEC will host an international symposium onanti-corruption in September in Gyeongju. ABACwill participate in this event as part of the jointeffort to build public-private partnerships tocombat corruption. ABAC also applauds the APECLeaders’ resolve to fight corruption at all levels.


Recommendations

ABAC urges Leaders to:

■ Implement quickly their previouscommitments to become signatories to theUnited Nations Convention AgainstCorruption;

■ Deny safe haven to officials and privatecitizens engaging in corrupt practices; and

■ Develop innovative and effective trainingprograms and technical assistance forgovernment, corporate and NGO personnelinvolved in combating corruption.

VI. Achieving Asia-Pacific Communitythrough Cooperation and CapacityBuilding

A. Strengthening Financial Systems

APEC economies should continue to give priorityto strengthening and deepening the region’sfinancial systems and capital markets, inparticular by promoting and implementing bestsupervisory standards and practices, bydeveloping the region’s bond markets and bycomprehensively liberalizing investment infinancial sectors.

ABAC is concerned that the monitoring of capitalflows by multilateral institutions has waned inthe wake of the recovery from the 1997 financialcrisis, while some economies remain vulnerableto volatile capital movements. ABAC hascommissioned a study on possible responsemechanisms to ameliorate the impact of volatilecapital flows and will report separately to Leaderson its recommendations.

Global convergence to an internationally agreedfinancial reporting standard is now occurring andthis reflects the closer integration of financialservices and of capital markets. APEC economiesshould move as a matter of priority to convergetheir standards to international standards if theyare to benefit from capital market integration.

The Advisory Group established by ABAC and PECCpromotes capacity building initiatives throughpublic and private partnerships, to strengthenthe institutional capacities of public and privatefinancial agencies. ABAC requests Leaders’endorsement of its capacity building measures

to promote safer and more secure financialsystems.

Many of the region’s economies face budgetaryand other challenges due to the demographicsof ageing. Economies ought to give priority tothis issue, both by developing private pensionsystems and health insurance and promotingsounder budgets. There is also a solid rela-tionship between the accumulation of funds inpensions systems and the growing and massiveinfrastructure financing needs of the region. Thisrelationship presents significant challenges,including importantly the development of privatepensions which, under prudentially soundinvestment guidelines, could become a sourceof financing for infrastructure. Private sectorfinancing in infrastructure must be reinvigorated,and bond markets developed to allow them toplay a critical role in linking pension funds andinvestment in infrastructure financing.

Recommendations

■ Deal with volatile capital flows and theactivities of hedge funds

❑ Strengthen domestic economicframeworks, require regional andinternational institutions to improvemonitoring and surveillance and notethat ABAC will provide views onmechanisms which economies mightconsider to ameliorate the impact ofadverse flows.

■ Strengthen and deepen the region’s financialsystems

❑ Give priority to promoting andimplementing international beststandards and practices in financialsectors including, importantly, Basel 2in banking, and converge tointernational accounting standards; and

❑ Pursue measures to enable expandeddomestic and cross-border privatesector investment and issuance in theregion’s bond markets through anaction plan process, and ensureconsistency among all regional bondmarket initiatives.

■ Promote capacity building initiatives tostrengthen the region’s financial systemsand capital markets


❑ Endorse the role of the Advisory Groupon APEC’s financial sector capacitybuilding and provide budget support forthe involvement of the region’sfinancial system regulators in capacitybuilding initiatives; and

❑ Endorse proposals to broadlydisseminate ways to promote goodgovernance in public and privatefinancial institutions, measures toencourage the flow of remittancesthrough formal financial systems, andABAC/APG initiatives to combat themovement of terrorist funds, moneylaundering and corruption.

■ Pursue initiatives to promote developmentsin pension arrangements, including privatepensions, in meeting the challenges ofageing populations

❑ Promote privately funded pensions asan integral aspect of retirement andhealth policies under sound regulations,adopt OECD general principles forgovernance and supervision of pensionarrangements, and measures to ensureequitable generational burden sharingof current and accruing pensionobligations in public sector pensions;and

❑ Endorse joint ABAC/APEC capacitybuilding initiatives to strengthensupervisory arrangements for pensionsystems.

■ Pursue initiatives to promote themobilization of private savings to financethe region’s infrastructure needs

❑ Give priority to measures to reinvigorateprivate participation in infrastructurefinancing needs by promoting soundand equitable public/private part-nerships which should encompassflexibility in responding to changingcircumstances over the period of a long-term project and provide reasonablereturns to private investors within atransparent and sound contractualenvironment, enforceable through apredictable and fair judicial system andwith clear bankruptcy rules andprocedures; and

❑ Join with ABAC in a capacity buildinginitiative aimed at improving aspectsof guidelines and modalities developedby UNCITRAL and other agencies toimprove evaluation of risks in publicprivate partnerships.

B. Enhancing the Competitiveness ofServices SMEs

Services SMEs comprise over 90% of all companiesin the APEC region. Yet despite the importanceof these companies, many governments in theAPEC region have overlooked their contribution– or have not adequately taken into account theneeds of small services companies whendeveloping their policies and programs. ABACbelieves that there is a need for greater awarenessin all APEC economies of the important role ofSMEs in services trade – and greater capacitybuilding efforts by governments and businessassociations alike to take steps to further enhancethe competitiveness of services SMEs.

Last year, ABAC undertook a survey of all APECeconomies to determine what governments andbusiness associations in the region are currentlydoing to support SMEs in the services sector.Based on these findings, ABAC presented anumber of key recommendations to APECMinisters Responsible for SMEs. Although wellreceived by the Ministers, APEC has not yet takenup ABAC’s recommendations with regard tosupporting services SMEs. Given the importanceof this sector, ABAC wishes to reintroduce anumber of its key recommendations from 2004,and looks forward to working closely with APECSME officials in their implementation.

Recommendations

■ Set targets for increasing services trade bySMEs, such as doubling the number of SMEservice exporters in each APEC economy by2007;

■ Provide technical assistance to APECdeveloping economies on services exporting,including analysis of services exportingcapacity and identification of priorityservices for export promotion, training ofSMEs in successful services exporting,training to business associations and tradepromotion agencies on how to assist SMEservice exporters, regional networking ofassociations in support of SME serviceexporters, and training of government


services trade negotiators to link exportcapacity in negotiating strategies;

■ Build regional best practice networks tosupport SME services trade by establishinga network of SME services exporting focalpoints/champions in each of the APECeconomies, with the responsibility ofreporting each year to the APEC SMEMinisterial; and

■ Give priority in both the WTO and APECto addressing barriers to SME servicesexporting.

Executive Volunteers for SME CapacityBuilding

There are pools of experts in developed APECeconomies that are available to provideprofessional, voluntary, short-term assistanceand advice to enterprises, particularly to SMEsin developing economies. The challenge is todevelop better linkages between executivevolunteer organizations in developed economiesand agencies coordinating business skills andtraining requirements in developing economies.

ABAC is currently seeking to identify and compilea list of executive volunteer service organizationsthroughout the region. It is hoped that this listwill eventually form the basis of a regionalnetwork of organizations that can coordinatethe supply and demand of executive volunteersin developing economies.

Recommendations

ABAC calls upon APEC Ministers Responsible forSMEs to:

■ Survey and coordinate the skills requiredby their own small business communitieswith a view to establishing a register ofSME skills development needs;

■ Establish a network of organization withinAPEC that offer executive volunteer servicesin order to better coordinate private sectorcapacity building initiatives on a region-wide basis; and

■ Look at options for funding this network –either through APEC or in partnership withinternational financial institutions – inorder to defray travel costs for foreignexperts.

C. Promoting the Community ThroughCapacity Building

1. Emergency Preparedness

In recent years, the APEC region has experienceda number of man-made and natural crises anddisasters including terrorist attacks, the SARSoutbreak, and most recently, the Indian Oceantsunami of 26 December 2004, which resultedin enormous loss of life and economic damage.These events bring into sharp focus the needfor robust early warning and response systemsfor future disasters of all kinds.

In responding to the tsunami disaster, ABAC hasfocused its attention on the challenge ofeffectively incorporating the region’s businesscommunity in capacity building efforts foremergency preparedness. In its discussions,ABAC has considered each of the three phasesassociated with any natural or man-made disasteror situation, namely:

■ Resist phase – measures aimed at defenseand preparation for future event of scale;

■ Response phase – relief efforts in the firsthours and days of a crisis that can overwhelmtraditional response mechanisms;

■ Recovery phase – measures taken in theintermediate to longer term following anevent of scale to rebuild including restoring“business as usual” as quickly as possible,restoring jobs and income to affectedcommunities.

Recommendations

Based on its assessment of the current status ofthe regional business communities’ involvementin Resist and Response phases, ABACrecommends that APEC create an ‘All HazardsAPEC Regional Response Network’.

Such a network would seek to coordinate APEC’semergency preparedness efforts for future eventsof scale through a number of specific measures,including:

Resist Phase activities:

■ Review of regional response capabilities■ Self assessments of individual economy

capabilities■ Development of a mechanism to capture and

disseminate ‘lessons learned’ (e.g. publiceducation for emergency preparedness, early


warning communication, etc.)■ Establishment of region-wide communi-

cation and notification protocols for eventsof scale, which would seek to include theprivate sector along with other relevantgovernment, multilateral, and NGO actors

To capture this information, ABAC recommendsthat the APEC Task Force on EmergencyPreparedness build upon the website frameworkthat currently exists, in order to create awebsite.

Response Phase activities:

■ Development of rapid response communi-cations networks for use in natural disastersor in the event of a terrorist strike onnational infrastructures that can be quicklydeployed and made operational.

■ Development of an Airport EmergencyTeam capability within the region. Such aTeam would be prepared to take over groundoperations at response airport locationsduring the critical first days of a disasterresponse, when relief operations cause asudden surge in incoming cargo.

ABAC encourages APEC member economies toallocate sufficient financial resources to theestablishment of the APEC Regional ResponseNetwork and the delivery of the initial projectsoutlined above. In the development of the AllHazards APEC Regional Response Network, ABACwould play a supporting role, working to mobilizethe regional resources of the private sector.

The urgency of creating the ‘All Hazards APECRegional Response Network’ is underscored bythe potential of an outbreak of avian influenza.If human-to-human transmission of ‘bird flu’takes place, this could easily result in a pandemicthat will be the next “event of scale” in theAPEC region. It is imperative that the RegionalResponse Network is in place to mobilize theresources of business in all phases of thispossible health pandemic, from initial resist andresponse efforts to eventual regional recovery.

A copy of the full recommendations on emergencypreparedness is attached as Annex D.

2. Logistics Infrastructure

The development of cross-border distributionssystems between assembly plants and parts-producing factories is indispensable to “just-in-time” assembly systems. While the developmentof seaport cargo infrastructure continues toimprove, bottlenecks related to land route cross-border distribution systems in many APEC regionsis lagging behind. Difficulties includeinconsistent customs procedures and applicationof tariffs at land route crossings, degradation ofroads and trucks, congestion and natural hazardssuch as flooding.

Recommendation

ABAC encourages APEC to cooperate with theprivate sector in identifying capacity buildingpriorities related to the improvement of cross-border land route logistics infrastructure in theAPEC region, including upgrading of infrastructure,

Standards

Uniformity of standards regulations is fundamental to simplification of the conduct of businessin the APEC region.

ABAC has undertaken a study aimed at identifying the institutional changes that must be madeto remove the standards-related barriers that hinder business. The study includes gatheringcomparative data on approaches to standardization in the EU and APEC regions. It makes significantrecommendations for future progress and regional collaboration in this area, including a rangeof capacity building proposals to strengthen infrastructure.

ABAC members are gathering feedback from their respective national standards bodies, and thefinal report will be provided to Leaders in the near future. The study and report will be aninvaluable tool for policy makers and standards bodies throughout the region, and to advancethe development of greater regional consistency and collaboration on standardization for thebenefit of all economies.


Recycling Based Economies

Increased efforts are needed in 3R (Reduce, Reuse, Recycle) for sustainable development in theAPEC region. In order to realize 3R goals, APEC economies need to move toward standardizedregimes for recycling in the region to ensure that all goods produced in one economy can beused and recycled in any other economy.

Based on the ABAC recommendation in 2003, which have the objectives of:

■ Identifying issues and challenges to implementing 3R in APEC member economies;■ Sharing best practices of 3R in selected industries;■ Designing, developing and conducting Capacity Building pilot projects;■ Disseminating the resulting best practices to all APEC economies; and■ Establishing an Experts Network to facilitate implementation of RBE in APEC.

The APEC HRD Capacity Building Network held seminars in Mexico, China and Thailand. This is asuccessful case of APEC and ABAC collaboration. A final report, including recommendations, willbe issued in November 2005.

simplification and standardization of land routecustoms clearance procedures, and strengtheningof freight terminal functions at land borders.

D. Securing APEC’s Future in a ChangingEnergy Environment

The global energy equation has changed.Dwindling “easy” supply combined with rapidlygrowing demand in the APEC region andthroughout the world has increased the costs ofenergy. Large inflows of capital are required tomeet infrastructure and power generation needsof the next twenty years.

All of APEC’s critical Bogor Goals require a safe,reliable, affordable, efficient and stable supplyof energy. The new energy environment requireseconomies to consider a variety of ways toincrease energy supply, diversify sources ofsupply, and encourage its responsible use.Adopting this three-pronged approach can helpAPEC create strategic policies to prepare for thefuture. The rise of oil prices in recent monthsunderscores the need for action.

APEC economies need to increase energysupplies through creating forward movement oninternational investment disciplines in tradeagreements, encouraging international fundingof sustainable energy development, enhancingtransparency of the business environment, andcreating legal regimes where contract terms andenforcement mechanisms instill confidence ininvestors. ABAC applauds the adoption of BestPractices for Financing Energy InfrastructureProjects by the Energy Ministers at their June

2004 meeting in Manila and the wide range ofbest practices identified in the APEC EnergyProcess over recent years. APEC’s EnergyMinisters and officials should focus onimplementation of all these best practices in atimely and measurable manner.

Energy sources need to be conserved anddiversified by capturing the potential ofenergy sources such as liquid natural gas,creating more regulatory certainty throughoutthe energy value chain, and leveling the playingfield between national and foreign companies.Many APEC economies such as Japan and NewZealand are already leaders in the area of utilizingdiverse and non-traditional energy sources.Further, responsible use of energy requiresclose management of commercial demandthrough conservation and improved efficiencies,reducing consumption with a variety ofmechanisms, and sharing best practices,technologies and standards.

Recommendations

ABAC recommends that the following beconsidered for the APEC Energy Ministers meetingin October 2005:

■ Policy and Regulatory Action focusing onconservation policy, preferential treatmentof energy efficient products, support forresearch and development for alternativesources of energy;

■ APEC Energy Planning on an APEC-wide basisand in the Individual Action Plans, including


investigation of new energy sources suchas biomass and ocean energy, theapplication of ICT, and alternatives andtransition strategies; and

■ Ongoing APEC Energy Work Program,including regularization of the EnergyMinisters’ process, dissemination andinformation sharing of energy-savingtechnologies, and continued outreachactivities on Best Practices.

E. APEC 2005 Innovation Agenda: PatentHarmonization, Technology Choice andEnhanced IPR Enforcement

In their 2004 Declaration, APEC Leadersrecognized that improved protection andenforcement of intellectual property rights (IPR)promote investment, innovation and economicgrowth, and in their 2003 Declaration Leadersagreed to advance pathfinder initiatives includingin relation to IPR and technology choice.

In 2005, under Korea’s leadership, APEC canachieve significant breakthroughs by: (a)launching an APEC Initiative on PatentCooperation and Harmonization; (b) developingtechnology choice principles that will maximizeflexibility for end users to use technologies thatbest meet their needs; and (c) successfullyimplementing the anti-counterfeiting and piracyinitiative endorsed by APEC MinistersResponsible for Trade at their June 2005 meetingin Jeju, Korea.

Recommendations

ABAC recommends the following:

Patent Cooperation and Harmonization

■ Expand cooperative work amongparticipating APEC member economy patentauthorities to make efficient use of searchand examination capacity; and

■ Build common understanding on four priorart related issues – definition of “prior art,”grace period, novelty and non-obviousness/inventive step.

Technology Choice

■ Develop a set of technology choiceprinciples to be incorporated into the APECPathfinder Digital Economy Statement,including the use of industry-led, voluntary,

consensus-based, international standardsthat respect IPR; merit and performancebased procurement policies, and freedomof technology choice for Services Providersand consumers.

IPR enforcement

■ Adoption of an APEC Member Economy SelfEvaluation against APEC’s Optical DiskEffective Practices;

■ Expeditious implementation of the anti-counterfeiting and piracy initiative endorsedby APEC Ministers Responsible for Trade atJeju, including through:

❑ The creation of an IPR Enforcement TaskForce to help institutionalize andregularize cross-border enforcementcooperation, sharing of best practices,and opportunities for public-privatepartnership in training;

❑ Endorsement of Model Principles toControl On-line Piracy (set forth below)in order to provide a blueprint as APECeconomies update legislation to addressIPR challenges of the digital age;

❑ Establishment of regularly scheduledcybercrime and IP enforcementworkshops;

❑ Continued establishment of IPR ServiceCenters and systems to enhanceinteraction among new and establishedcenters;

❑ Annual reporting of concrete results ofIPR related efforts achieved each yearat the Leaders’ Meeting, beginning inBusan; and

❑ Prior to the Leaders’ Meeting in Busan,develop a method for each economyto report on implementation of theguidelines developed for the APECAnti-Counterfeit ing and PiracyInitiative.

F. Information Society Vision in 2010

ABAC welcomes recognition by Tele-communications Ministers in the APEC TELMIN6 Lima Declaration and Program of Action ofimportant policy principles many of which havebeen highlighted by ABAC in previous reports


to Leaders, including the importance of thefollowing toward fostering an inclusive APECinformation economy:

■ Free and open trade and competition;■ Technology neutrality;■ Innovation and intellectual property;■ Broadband development and accelerating

Internet access for all;■ E-Government;■ Cybersecurity and the Convention on

Cybercrime;■ Mutual Recognition Agreements and

minimizing regulatory divergence;■ Efficient use of spectrum; and■ Technical cooperation and human capacity

building.

ABAC welcomes and applauds the role of APECin facilitating the sharing of best practices ineach of these areas.

ABAC would like to highlight, nevertheless, theneed for greater clarity in a number of areas. Inparticular, it urges APEC governments torecognize the importance of:

■ Voluntary, open, non-discriminatory,industry-led, consensus-based technologystandards that promote interoperability,respect intellectual property and that donot unnecessarily restrict trade;

■ Establishing an APEC target date fordeployment of broadband;

■ Ensuring transparent, clear, industry-ledprocesses in the development of NGNstandards;

■ Joining the Convention on Cybercrime andimplementing consistent domesticlegislation as soon as possible.

The “global information society”, sometimescalled the “ubiquitous society”, is broadly definedas a society in which people are connectedanytime, anywhere, and to anyone through aubiquitous computing environment where everyobject is equipped with artificial intelligence.

APEC economies are at differing stages in movesto enable their people to participate in the globalinformation environment, through ready accessto modern communication services.Technological advance is rapid in fields such asa broadband and multi-platform access.

Complementing that technical progress amongAPEC economies is research on ways to enablecommunication service users to more easilyidentify their particular needs and control theircommunications. The need for reliable personalidentification is driving work to allow access toa range of different services behind a singleidentifier. The internet based “ENUM” service isunder trial in Australia, China, Japan, Korea, NewZealand, Singapore and USA. New Zealand istrailing a match between ENUM and the conceptof a universal communications identifier (UCI)system. Personal user protection is paramount.

Inevitably there are many views on specifics ondefinitions, requirements, norms and standardswhich should underpin the global informationsociety. There are serious issues raised byexisting and expected technologies and theirinterface, and potential impact on commerce,personal privacy, legal frameworks and a hostof other issues that are not yet defined.

Capacity building is the core activity to reducethe digital divide and establish an advancedinformation society expanding to the ubiquitoussociety in the future.

ABAC is considering a study of the challengesAPEC economies face in creating an environmentwhere a ubiquitous society can flourish,including access to broadband convergencenetworks, legal, regulatory and self-regulatoryframeworks to address privacy concerns,intellectual property protections and on-linepiracy prevention.

With the benefit of the study, ABAC will beable to develop a list of topics for considerationat a possible symposium to further exploreviews on this technology, its integration intosociety, definitions, legal frameworks and otherrelated issues.

Recommendations

Based on the outcomes of the study, ABACrecommends that APEC economies establish a2010 information society strategic vision. Thisis one of the important steps to realize thepotential benefits that more ubiquitousbased computing concepts could provide toAPEC economies. To be most useful and tomaximize the potential benefits inherent inthese strategic plans, APEC economies shouldensure that:


■ The 2010 information society vision isgeared to attaining reachable targets basedon the current status of infrastructuredeployment, existing technical and humancapacity and resources available to each ofthe economies.

■ Information exchange related to such plansas well as the sharing sectoral or topicalexpertise through the implementation ofcapacity building efforts take advantage ofexisting human resources and infrastructure.

■ Economies’ strategic plans address the needfor a facilitating, predictable andtransparent regulatory framework coupledwith open and accessible markets.

G. Implement the Life Sciences InnovationStrategic Plan

ABAC welcomes the endorsement of the APECStrategic Plan for Life Sciences Innovation as an

Model Principles to Control Online Piracy

■ Ratify and fully implement both WIPO Internet Treaties (WCT and WPPT).

■ Ensure adequate and effective prohibitions on the circumvention of technologicalprotection measures that protect copyright through copy and access controls, includingtrafficking in circumvention tools.

■ Ensure that widespread, willful unauthorized distribution of copyrighted material is a criminaloffence even if not undertaken for profit.

■ With regard to material residing or stored on an ISP’s network or system, adopt a formalizednotice and takedown system, imposing the following obligations on ISPs as a condition forprotection from monetary liability:

❑ Require ISPs to remove or take down infringing material expeditiously uponreceiving notification from rights holders.

❑ Require ISPs to take action against known or obvious infringers even when nonotification has been received from a copyright holder (except that an ISP should notbe required to monitor its service or affirmatively seek out infringing activity).

❑ Require ISPs to notify alleged infringers of notification received from rightsholders.

■ Establish meaningful and effective administrative or judicial procedures enabling rightsholders to obtain from a service provider information in its possession identifying thealleged infringer.

■ Support consumer education campaigns to promote understanding of and respect for copyrightand discourage infringing behavior.

important tool to assist economies in developingan environment that attracts investment andsupports innovation in life sciences. Investmentin the life sciences industry by APEC Membereconomies will contribute to the longevity,wellness, and economic potential of the regionand help to address critical areas of concern,including early detection, prevention, andtreatment of disease.

Intellectual property protection is critical to thedevelopment of an innovative life sciencessector. In this context, ABAC welcomes theStrategic Plan’s approach to IPR protection andsupports its treatment of IPR as an area ofpriority focus for the region.

Recommendations

ABAC supports:

■ A robust implementation model thatidentifies one or two outcomes in each of


the four critical areas in the life sciencesvalue chain: research, development,manufacturing and marketing, and healthservices; and

■ Efforts to develop a medical biotechventure capital fund on a regional or sub-regional basis in order to provide criticalfinancing for innovation.

LSIF implementation is also important in thecontext of reaching the Bogor Goals of liberalizedtrade and investment in the APEC region.Different policy and regulatory environments area hindrance to trade and investment in the lifesciences sector - the Strategic Plan seeks tocounter these problems by providing bestpractices for harmonizing regulatory standards.Additionally, the clear link between health andeconomic development makes improved accessto innovating medicines and medical treatmentscritically important, as healthy people makehealthy economies.

H. Technology to Improve Health CareDelivery

Technological advances are being brought tobear to improve health and health care deliveryin the region. The development of information/communications technology (ICT) - supportedelectronic patient health systems improves theaccuracy and delivery of health information,and helps safeguard the privacy and securityof patient information. The ultimate aim is anElectronic Health Record (EHR) which containsGP, Specialist, Local Health Authority andPrescription records.

Trials of various IT technologies for hospitalsare proving potential improvements inefficiencies and the safety of hospital patients.For instance, wireless Bed Management systemsare a novel application for improving the criticaltask of hospital bed management.

ABAC also welcomes the launch of the PacificHealth Summit, a multi-year project that beganin June 2005 in Seattle with a first-of-its-kindgathering of scientists, policy makers, healthcare providers and industry. The annual PacificHealth Summit will continue to bring togetherthe most current scientific information andtechnology for decision-makers’ discussions.

The Summit marked the launch of a major APEC-wide biomarker research project that willprovide data critical to the early detection andprevention of diseases. Additionally, theSummit established a Health InformationTechnology Policy Group that will focusspecifically on IT-related issues in health care.ABAC will engage with this group throughinformation sharing and other cooperativeefforts to develop relevant recommendationsto APEC Leaders on this issue.

I. Technology to Address EnvironmentalConcerns

ABAC has considered a number of environmental-related technologies and initiatives including aproposal to adopt recycling-based economies,environmental monitoring, border control andbiosecurity, and food traceability with greaterapplication of Information and CommunicationTechnologies.

1. Environmental Monitoring and FoodTraceability

Research underway in several APEC economieshas shown that applying Information andCommunication Technologies (ICT) toenvironmental monitoring improves agriculturaland horticultural productivity and management,animal health and food traceability. Integratingon-farm information systems with remotedatabases allows users, including regulatoryauthorities, to better monitor production andanimal compliance activities. Advances of thistype can lower the likely economic impact ofanticipated environmental and traceabilitycompliance regulations, which for APEC food-exporting economies could amount to technicalbarriers to trade.

The use of remote monitoring devices forcontinuous surveillance of the rural environment(fertilizer, soil, water conditions) helps to ensureenvironmentally sustainable practices – reducingpollutants and improving yield. Monitoringweather contributes to agricultural efficiency andsecurity. Food traceability is becoming mandatoryfor compliance purposes, and will be an importantelement in facilitating agricultural trade and thuseconomic development in the APEC region asinformation technology becomes less expensive,more functional and energy efficient.


Recommendations

ABAC recommends that APEC Leaders considercarefully the relevance and potential benefits totheir own economies of the emerging technologiesoutlined above, and explore the scope for capacitybuilding measures in partnership with economiesin a position to assist.

2. Border Control and Biosecurity

The risk of incursions of animal, avian and humandisease, unwanted substances and contaminantsis a common concern to APEC economies.Significant trans-border issues need to beaddressed. Work is proceeding with ICT-supported diagnostics using image recognitiontechnology, to provide APEC agriculture andcustoms authorities with a rapid method ofsampling and detection. The ability to quicklyupload digital pictures of organisms and matchDNA samples to remotely stored databases ofinvasive species, will significantly improve imagerecognition and has potential to greatly improvebiosecurity and border protection.

Recommendation

ABAC believes that the research activitydescribed above has broad-based potential forAPEC economies, and that APEC Leaders shouldensure their relevant authorities are conversantwith that work.


Annexes


Annex A

CHECKLIST

FINANCIAL SERVICES LIBERALIZATION:GOALS AND BEST PRACTICES

For use by economies in assessing and evaluating the quality of financial services offers in the Doha negotiations.

BANKING

GOALS

The offer should create new market-opening and investment opportunities.To what degree does it satisfy the following goals?

1) Improves upon 1997 commitments (where applicable)2) Creates new business opportunities through the lifting of restrictions3) Creates conditions that will attract new capital4) Addresses market access, national treatment and transparency of domestic regulation

measures in a comprehensive manner (as elaborated in the best practices whichfollow).

BEST PRACTICES

A high-quality offer in the banking sector should contain the elements enumerated below.

ESTABLISHMENT1) Permits investor to choose the form of establishment – whether as a branch, joint

venture or wholly-owned subsidiary – that makes the most business sense.2) Contains no “economic needs tests” or other geographic or product-specific

restrictions.3) Grandfathers existing investments in operations and activities.

TEMPORARY ENTRY OF NATURAL PERSONSFacilitates the temporary entry of key financial services personnel required formanagerial, technological, system or risk management purposes (add other categoriesas may be required by applicable investments).

NATIONAL TREATMENT1) Provides assured national treatment for asset management activities provided by

financial services firms.2) Avoids discriminatory international markets as domestic companies.3) Should treat locally established affiliates of foreign banks on the same basis as

domestic companies for regulatory and other purposes. Where differences in suchtreatment exist, they should not create conditions of competition more favorable todomestic service or service suppliers than for like service or service suppliers of otherWTO Members.


EXAMPLES

ADDITIONAL COMMITMENTS

TRANSPARENCY

1) Commits to improved transparencyoverall.

2) Spells out procedures for providinginterested parties with notice ofproposed rulemaking andopportunities for comment onproposed new rules.

3) Gives interested parties areasonable amount of time tocomment on, understand and takesteps to comply before new orrevised regulations take effect.

4) Commits to current and proposedregulations being easily accessiblein writing and on the Internet.

5) Commits to a clear and accessiblelicensing process, includingcreation of a system for answeringinquiries about regulatoryrequirements, interpretation,exceptions that are easilyaccessible and responsive to thepublic.

6) Commits to providing justificationsfor denials of licenses orapplications based strictly onfactors explicitly identified in thepertinent regulations.

7) Commits to the making of promptlicensing decisions and provides atimely, nondiscriminatory appealsprocess available for applicantswhose applications are denied.

8) Commits to provide clear andreliable information about aneconomy’s financial services lawsand practices.

a) Publication in national gazette.b) Standard procedures for

submitting public comments.

Clearly defines a standard “reasonableamount of time”.

E-government procedures.

a) Creates an enquiry point forlicensing and application matters.

b) E-government procedures.c) Employees are evaluated on

accountability to the public.

Justifications are provided in writingand within a fixed timeframe, knownto all.

a) Spells out appeals process, sequence and timeframes.

b) E-government procedures.

a) E-government procedures.b) Regular interchanges between

regulatory and supervisory bodiesand private sector through publicforums or other mechanism.

Annex A


INSURANCE

GOALS


1) Improves upon 1997 commitments (where applicable)2) Creates new business opportunities through the lifting of restrictions3) Creates conditions that will attract new capital4) Addresses market access, national treatment and transparency of domestic regulation

measures in a comprehensive manner (as elaborated in the best practices which follow).

BEST PRACTICES

A high-quality offer in the insurance sector should contain the elements enumerated below.

MARKET ACCESS1) Contains no “economic needs tests” or other geographic or product-specific

restrictions.2) Grandfathers existing investments in operations and activities.

Reinsurance: marine and transportation insurance allowed cross border (Mode 1).

Reinsurance: Access to marine and transportation insurance and intermediation on crossborder basis (Mode 1 for each).

Life and non-life reinsurance:

a) Elimination of mandatory cessionsb) Elimination of restrictions for cessions to foreign reinsurance companiesc) Elimination of right-of-first refusal privilegesd) Elimination of discriminatory collateralization and localization of assetse) Abolition of reinsurance monopoliesf) Guarantee of freedom of form for reinsurance contracts

ESTABLISHMENT1) Permits investor to choose the form of establishment – whether as a branch, joint

venture or wholly-owned subsidiary – that makes the most business sense.2) Provides full regard for relationship between parent and subsidiary.3) Allows use of home company name in host economy.4) Does not permit denial of form of establishment on the basis of the legal entity in

the home market.5) Permits freedom to determine percentage of foreign equity shares in joint ventures.6) Provides for staged elimination of foreign equity limitations (if any) with minimum

51% ownership during staging period.

Compulsory lines: Fully bound by national treatment and market access, as defined by GATS

Monopolies: Best endeavors to eliminate insurance monopolies and exclusive servicesproviders

Annex A


TEMPORARY ENTRY OF NATURAL PERSONS1) Avoids nationality / residence requirements irrespective of nationality2) Provides freedom to foreign insurance company to select its own representatives in

host economy3) Provides for temporary visa or work permits for short periods of stay

NATIONAL TREATMENT1) Provides the ability to compete for insurance coverage otherwise provided by state-

owned or state affiliated enterprises.2) Provides full national treatment with respect to capital, solvency, subject to

prudential carve out (must explain reasons for less favorable treatment underprudential carve out)

3) Insurance mediation: monetary transfer obligations limited to what is necessary toassume legal responsibilities in host economies.

TRANSPARENCY1) Regulations to be made publicly available2) Prior comment on new and revised regulations3) Reasonable time interval prior to new regulations entering into force4) Written explanations provided for rejected or accepting proposals5) Written statement to insurance applicant outlining necessary documentation6) Ability to provide information to the public on creditworthiness of a company7) No restrictions on availability of financial services information to insurance suppliers8) Availability of rules and procedures with respect to identification of financially

troubled institutions9) New tax measures affecting insurance enter into force only after their

notification to the WTO on a semi-annual basis

SOLVENCY AND PRUDENTIAL FOCUS1) New products, rates and services for other than personal or compulsory lines not

subject to file and approval requirements2) Regulations aimed at allowing the market to determine which products and rates are

to be applied3) Written explanation required of products that require file and approval procedures4) “Deemer” method for use in file and approval procedures5) No limits on the number or frequency of new products by an insurance supplier6) No restriction on dividend payments, provided that solvency provisions are met7) Encouragement of use of international “best practices” standards in accounting and

auditing activities

INSURANCE MONOPOLIES1) Monopolies generally prohibited from offering products outside monopoly

designations, with provision that they not abuse monopoly position where authorized2) Insurance suppliers with monopoly rights will keep separate accounts regarding

monopoly and non-monopoly activities

INSURANCE REGULATORMust be an independent government entity.

PENSIONS1) When private pensions are allowed, provide immediate obligations for full market

access/national treatment to those providing private pensions in the market2) Private pension fund managers designated to manage public or private pensions in

host economy3) Freedom to select form of commercial presence4) Ability to offer range of product / investment options.

Annex A


ASSET MANAGEMENT

GOALS


1) Improves upon 1997 commitments (where applicable)2) Creates new business opportunities through the lifting of restrictions3) Creates conditions that will attract new capital4) Addresses market access, national treatment and transparency of domestic regula-

tion measures in a comprehensive manner (as elaborated in the best practiceswhich follow).

BEST PRACTICES

A high-quality offer in the banking sector should contain the elements enumeratedbelow.

ESTABLISHMENT1) Removes barriers to establishment by foreign investors in the financial sector and

allows wholly-owned subsidiaries.2) Allows establishment in the form of branches or other forms of presence.3) Commits to permitting locally established affiliates of foreign asset management

firms to use the services of affiliates outside the host economy to provide assetmanagement services to domestic clients in the host economy.

4) Commits to removing prohibitions on foreign firms from managing pension assets,including public assets, on the same basis as domestic firms.

5) Contains no “economic needs tests” or other geographic or product-specific restric-tions.

6) Commits to grandfather existing investments in operations and activities.7) Ensures market access for the full range of asset management services8) Permits the dissemination and processing of financial information necessary to

provide clients with necessary services.9) Commits to support the provision and transfer of financial information, financial

data processing, and the provision of advisory and software related services.

CROSS BORDER

1) Permits foreign asset management firms to provide services on a cross border (Mode1) basis

2) Commits to support financial services provided cross border without requirement oflocal establishment (Mode 3) and also permits by consumption abroad(Mode 2)

TEMPORARY ENTRY OF NATURAL PERSONS1) Facilitates the temporary entry of key financial services personnel required for

managerial, technological, system or risk management purposes (add other catego-ries as may be required by applicable investments).

2) Removes requirements for a minimum number of senior or key personnel to beresident or located in the economy.

Annex A


ADDITIONAL COMMITMENTS

TRANSPARENCY

1) Commits to improvedtransparency overall.

2) Spells out procedures forproviding interested parties withnotice of proposed rulemakingand opportunities for comment onproposed new rules.

3) Gives interested parties areasonable amount of time tocomment on, understand and takesteps to comply before new orrevised regulations take effect.

4) Commits to current and proposedregulations being easily accessiblein writing and on the Internet.

5) Commits to a clear and accessiblelicensing process, includingcreation of a system for answeringinquiries about regulatoryrequirements, interpretation,exceptions that are easilyaccessible and responsive to thepublic.

6) Commits to providingjustifications for denials oflicenses or applications basedstrictly on factors explicitlyidentified in the pertinentregulations.

7) Commits to the making of promptlicensing decisions and provides atimely, nondiscriminatory appealsprocess available for applicantswhose applications are denied.

8) Commits to provide clear andreliable information about aneconomy’s financial services lawsand practices.

NATIONAL TREATMENT1) Provides assured national treatment for the full range of asset management

activities provided by financial services firms.2) Locally established affiliates of foreign asset management firms should have the

same access to domestic and international markets as domestic companies.3) Locally established affiliates of foreign asset management firms should be treated

for regulatory and other purposes on the same basis as domestic companies.Where differences in such treatment exist, they should not create conditions ofcompetition more favorable to domestic service or service suppliers than for likeservice or service suppliers of other WTO Members.

EXAMPLES

a) Publication in national gazette.b) Standard procedures for submitting

public comments.

Clearly defines a standard “reasonableamount of time”.

E-government procedures.

a) Creates an enquiry point for licensingand application matters.

b) E-government procedures.c) Employees are evaluated on

accountability to the public.

Justifications are provided in writing andwithin a fixed timeframe, known to all.

a) Spells out appeals process, sequenceand timeframes.

b) E-government procedures.

a) E-government procedures.b) Regular interchanges between

regulatory and supervisory bodies andprivate sector through public forumsor other mechanism.

Annex A


Annex B

I. Introduction

In 2001, APEC Leaders called for a mid-termstocktake of APEC’s overall progress towards theBogor Goals of free and open trade andinvestment by 2010 for developed economiesand 2020 for developing economies. SOM wastasked with coordinating the stocktake exerciseand to submit a report for the consideration ofLeaders. As one of the APEC stakeholders, ABACwas asked to contribute to the task.

This report represents ABAC’s contribution to themid-term stocktake. It follows a previousevaluation by ABAC in 2003 in the report “TheFirst Decade Since Bogor: A Business Assessmentof APEC’s Progress”.

Like that report, this assessment is undertakenfrom the perspective of the business sector. Itis based on the premise that APEC can providethe framework to deliver the vision regionalbusiness has of an Asia-Pacific Community ofopen economies.

The report begins with a description of thebusiness vision. It then examines changes inthe economic environment since the Bogor Goalswere set. In ABAC’s view, those changes requirefundamental adjustments in the strategies andmodalities for achieving the vision. Finally andmost importantly, the report offersrecommendations to keep APEC on target towardsthe Bogor Goals including ways to strengthenthe APEC process.

II. Business Vision of an APEC Community

ABAC members are agreed that their vision ofan Asia-Pacific community where intra-regionalbusiness can flourish has the following features:

o absence of tariff and non-tariff barrierso transparent and predictable operating

environmento an efficient customs systemo adoption of international standardso ease of business mobility

ABAC Contribution to the Mid-Term Review of APEC’s ProgressTowards the Bogor Goals

o reduction of barriers and impediments toforeign direct investment

o liberalization of services tradeo mutual recognition of professional

accreditationo robust and effective intellectual property

regimeso a secure environment for trade and financial

flowso prudent, sound financial systems, and robust

capital markets, including efficient local andregional bond markets

o safe, reliable, affordable, efficient and stablesupply of energy

o effective legal and regulatory systemso enforceable contracts and property rightso good governance and transparency in public

and business affairso administrative requirements that are not

overly-burdensomeo a well-trained work forceo fair and transparent competition policieso effectively enforced anti-corruption

measureso exchange rate stability

Despite its shortcomings, ABAC continues tobelieve in APEC as the regional institution thatcan bring about the realization of the businessvision of an Asia-Pacific community where goods,services, finance and business people movefreely. ABAC also believes in the continuingrelevance of the Bogor Goals to the businesscommunity as a level of ambition that shouldguide APEC members’ economic policies.

The business community is strongly committedto the Bogor Goals of “free and open trade andinvestment in the Asia-Pacific by 2010 fordeveloped economies and 2020 for developingeconomies”. However, 2010 is fast approachingand based on present evidence business doesnot believe that the Bogor Goals of free andopen trade and investment will be met.

■ It is critical that APEC member economiesreaffirm their collective and individualcommitment to achieving those Goals.


■ Profound changes in the global economicenvironment since the founding of APECrequire that changes be made to the measuresand modalities for achieving the Bogor vision.

■ APEC must alter the way it conducts itsbusiness. The status quo is not good enough.

III. Changes in the World EconomicEnvironment since Bogor

Changes in the global economic environment posenew and significant challenges to regionaleconomic cooperation not foreseen 15 years ago.The days are well past when APEC members werein a position to “champion” the APEC architectureof “concerted unilateral liberalization” and “openregionalism”.

Key features of the new environment are:

■ Rapid global economic integration whichchallenges APEC economies to strengthenthe capacity of their existing mechanismsand institutions to cope.

■ The pervasiveness of information technologyin all aspects of human activity hasenhanced efficiency and created new jobsbut also presents formidable challenges interms of resource requirements andabsorption capacity.

■ The increased workload of the WTO broughtabout by the growth in the number anddiversity of members and the complexity ofissues that touch on domestic policy-makinghas made decision-making more difficult andslowed progress in improving themultilateral trading system.

■ The proliferation of preferential tradeagreements among APEC members hasdistracted members from putting more effortinto making the APEC approach to regionalcooperation more effective; has raisedgenuine concerns about the discriminatoryimpact of such agreements; and increasedthe costs of trade through multiple rules oforigin requirements.

■ The emergence of China as an economicpowerhouse has presented APEC economieswith new challenges and opportunities.

■ The experience with the Asian financial crisishas highlighted weaknesses in the financialsystems in a number of APEC economieswhich, compounded by serious malfeasance,failures in corporate governance and sharpfluctuations in capital flows, have resultedin a loss of business confidence.

■ The rise in terrorism worldwide has drasticallychanged the environment in which businessoperates, affecting the movement of goods,people and finance and creating newchallenges that affect the bottom-line.

■ The threats of regional crises, be they fromepidemics like SARS and bird flu or morerecently from natural disasters like theearthquakes and tsunami that hit a numberof economies in the Asian region, havehighlighted the need for economies todevelop regional responses to such crisesand to ensure that these challenges do notbecome obstacles and/or impediments tothe achievement of the Bogor Goals.

■ The emergence of creeping protectionismin the form of non-tariff measures whichare increasing in sophistication and in theirapplication as the level of tariff barriersdeclines.

■ The changing demographics in certain APECeconomies, which now require moreextensive infrastructure and funding forageing populations, on top of ongoingdemands for public investments forindustrial development and trade in goods.

■ The increase in the importance of trade inservices and intellectual property issues aseconomies mature which have raised policyissues, such as online piracy, that also applyto new ways of doing business fostered bythe growth of the Internet.

■ The growing importance of environmentalconcerns, which has highlighted the needto ensure sustainable development in theregion.

Annex B


■ The increased volatility of energy prices andsupply, which has had a disruptive effectin APEC economies as a whole.

These factors have not led to major reversals inreform and openness. But the pace at which someeconomies have been able to continue withdomestic reforms has been constrained.Developing effective responses to thesedevelopments will shape APEC’s agenda over theshort - and medium-term.

ABAC believes that the APEC’s three-pillaredapproach of trade and investment liberalization,trade and investment facilitation (TILF), andeconomic and technical cooperation (ECOTECH)- (capacity building) - still provides the mosteffective response to these challenges. However,the critical need for strengthening economic andfinancial structures should be recognized. APECshould affirm that trade liberalization,facilitation and economic/financial strengtheningare at the heart of APEC, and that the thirdcritical pillar, capacity building, is vital toachieving these goals. Among other actions, thisinvolves training of customs officers, regulatorsacross all sectors, small business counsellors andjudges. It includes the adoption of newtechnology to facilitate paperless trading,e-commerce, and expedited customs clearanceas well as updating of legislation to create clearand enforceable rules and to meet the challengesof the digital age. Capacity building also requiresmassive investment in the trade infrastructure,including urban and transport services and theHR framework.

APEC has increasingly developed a role in theresponse to issues of region-wide concern –terrorism, disease, financial crisis and naturaldisasters. This role underscores the importanceof keeping alive the concept of a “community”among economies, notwithstanding theirdiffering political systems and level of economicdevelopment.

IV. What and How Can APEC Deliver?

APEC has achieved progress in moving towardsthe Bogor Goals but much still needs to be done.Perceptions of APEC’s ability to deliver on theBogor promise will determine its credibility inthe short-term.

APEC’s value proposition to business is that itstrives to go beyond members’ commitments inthe WTO. This ‘WTO plus’ character of APEC mustbe enhanced if it is to attract stronger supportfrom the business constituency.

A. Trade and Investment Liberalization

(1) Trade in Goods

APEC economies have made significant progressin lowering tariffs. But tariffs on agriculturalproducts remain unacceptably high, in somecases exceeding 100%. Tariff peaks and tariffescalation exist in a number of sectors of greatinterest to developing members, includingtextiles and processed agricultural products. Astariffs have fallen, the use of non-tariff measuressuch as anti-dumping actions have increased.

Meaningful agricultural liberalization is of vitalimportance to APEC economies, particularlydeveloping economies. Yet agriculture hastraditionally been the hardest field to negotiate.

APEC economies need to see:

(a) Elimination of all forms of agriculturalexport subsidies within five years ofthe Doha Development Agenda (DDA)implementation;

(b) Major and significant improvementsacross the board on market access;

(c) Tariff peaks reduced to a maximum levelno higher than 50 per cent;

(d) Much tighter discipline on all forms oftrade distorting domestic support; and

(e) Elimination of non-tariff measures.

(2) Trade in Services

APEC has implemented initiatives to advanceliberalization of trade in services since theimplementation of the 1995 GATS Agreement.But restrictions remain relatively high infinancial services and there is an imbalance inthe degree of liberalization within financialservices sectors. Substantial reforms have beenmade in the telecommunications sector;however, reforms have not been formallycommitted to in the WTO and they could bereversed. The GATS process needs moredetermined leadership from APEC economies inimproving the quality of offers.

Annex B


(3) Investment Liberalization

A number of economies have liberalized theirinvestment policies, particularly during theperiod 1996-2000.Yet impediments to foreigndirect investments remain. They exist in the formof performance requirements, limitations onmarket access, lack of transparency of foreigndirect investment (FDI) regimes, and restrictionson the level of equity participation, work permitand taxation.

There is increasing global competition for FDI.A conducive investment climate requires thatthe overall policy framework and the regulatoryframework (including in actual implementation)of entry and establishing operations in aneconomy, be based at a minimum on the APECNon-Binding Investment Principles.

B. Trade and Investment Facilitation

ABAC is a member of the Geneva-based TradeFacilitation Alliance, a business sector alliancesupporting the WTO negotiations on TradeFacilitation. This reflects the central role whichABAC sees for facilitation in its own work, andwithin APEC.

A mid-term review of APEC’s progress on theimplementation of the APEC Trade FacilitationAction Plan suggests that APEC may be withinreach of the 5% target reduction in transactioncosts by 2006. Accurate measurement is difficult.More work is needed on methodologies tomeasure progress on trade facilitation andcapacity building required to ensure achievementof the target.

There has been little success in achievingconformity to international standards andbenchmarks in trade, notwithstanding the usefulprogress in a number of economies towardsimplementing global standards in financialsectors. Coverage of products aligned withinternational standards is modest. MutualRecognition Arrangements (MRAs) are also oflimited value because implementation has notbeen complete. Moreover, the market size ofproducts covered is smaller than expected.Significant capacity building and collaborationbetween jurisdictions is required to improvestandards and conformance across the region.

More work is needed to improve the protectionof intellectual property rights through sustainedand effective enforcement and strengthening oflegal frameworks.

APEC should also promote and expand the use ofand address operational and logistical problemsrelating to the APEC Business Travel Card. A trueregional business visa should be developed witha high level of embedded security protocols.

APEC introduced the Pathfinder Initiative as animplementation mechanism. Existing PathfinderInitiatives contribute to trade facilitation, buthave yet to deliver a serious impact in terms ofachieving the Bogor Goals.

The mandate for Trade and InvestmentFacilitation is strengthened with the “SantiagoInitiative for Expanded Trade in APEC”. APECshould work on this issue and come up withconstructive suggestions and concrete measuresin 2005.

C. Mitigating Negative Effects of RTAs/FTAs

A large number of bilateral preferential tradingarrangements (PTAs) have either beencompleted, are under negotiation or beingconsidered within the region. This is clearevidence of a strong desire by APEC membereconomies for more progress in opening marketsthan is being delivered multilaterally orregionally.

While welcoming the opening of marketsresulting from these PTAs, ABAC is concernedthat the proliferation of many separate tradeagreements with different terms and rules couldresult in trade diversion and increase the costand complexity of doing business. APEC needsto take early steps to consolidate the openingof markets arising from PTAs, into liberalizationAPEC-wide.

ABAC has strongly advocated to APEC that itplay a role in mitigating the potential negativeeffects of these agreements. This is a highpriority issue for APEC and one where it can playa very useful role. Leaders asked for ABAC inputon this issue at their Santiago meeting.

ABAC supports the initiative for the developmentof “best practice” guidelines for regional trading

Annex B


arrangements (RTAs)/free trade agreements(FTAs). Other possible approaches to this taskshould be considered as well. The issue willcontinue to be studied by ABAC.

D. Capacity Building

Capacity building is the other side of the cointo trade and investment liberalization, tradefacilitation and the strengthening of financialsystems. All serve to build the region’s economyand contribute to a prosperous Asia-Pacificcommunity. Support for the TILF agenda providesthe focus for APEC’s ECOTECH or capacity buildingactivities.

Overall, little progress has been made in theECOTECH area. Funding is one problem and lackof coordination is another. APEC’s delivery ofECOTECH has been largely ineffective – toodiffuse, mainly information sharing seminars forofficials, with very little evaluation and follow-up. There has been focus on best practices butnot enough emphasis on true capacity building.Part of the challenge is that ECOTECH is not a‘one size fits all’; it needs to be adapted to theparticular circumstances in individual APECeconomies.

To meet the capacity building challenges facingthe region, APEC needs to leverage its limitedresources with more cooperation withdevelopment banks (IFIs), multilateralorganizations, bilateral aid programs – and theprivate sector. The focus of this initiative includesetting priorities, project planning andfinancing, and the delivery of training andinfrastructure to support business capacitybuilding, especially those of the SMEs, in thedeveloping economies. One project would be thesetting up of a mechanism to provideprofessionals to businesses in the developingeconomies. This requires the establishment ofa register of retired experts from the developedeconomies, a register of needs by the developingeconomies and a fund to partially finance thecost of the experts on assignment in thedeveloping economies. The fund can besupported by some APEC economies andbusinesses and IFIs such as the World Bank andthe Asian Development Bank (ADB).

APEC’s contribution to supporting the growthand development of small and medium

enterprises (SMEs) and micro-enterprises (MEs)has been uneven. Information sharing initiativeshave been undertaken – including several SMEwebsites – but with little sense of who actuallyuses these sites and information has not beenkept current. There is no commitment tomaintain websites and no marketing of them tothe end user. Knowledge that these websiteseven exist is sparse.

Attempts at delivery of SME training havestruggled and been uneven. ABAC believes thatAPEC’s primary support for SMEs should be inthe transfer of knowledge and policycoordination between governments, aimed atproviding a conducive environment for SMEs togrow and develop. More capacity building shouldbe undertaken with officials to better understandthe environment that is required for SMEs tothrive and the means to create that environment.

The APEC Integrated Plan for Action for theDevelopment of SMEs (SPAN) provides a usefulstrategic policy framework for APEC governmentsto review and implement SME policies andprograms in the area of HRD, financing,technology, access to markets and access toinformation.

APEC economies need to do more on microenterprise development, including betterunderstanding of the ‘grey market’, how to growmicro enterprises, how to integrate into theoverall economy and the extension of microfinancing projects.

Finally, APEC should consider favorably therecommendation of the 2003 study “The FirstDecade Since Bogor” for the formation of a newAPEC Ministerial Committee on Regional andTechnical Cooperation, with the capacitybuilding objectives set out in the report.

E. Strengthening Financial Systems

The next decade and a half will see significantdevelopments in financial sector convergence,its supporting information and communicationstechnology, improved financial engineeringcapacities, increased competition and financialsystem liberalization. These developments havethe potential to provide immense gains for APECeconomies including enhanced stability,improved financial services, and an expanding

Annex B


range of financial products available to APEC’sbusinesses and individual savers and investors.

Finance industry structures and regulatoryarrangements will need to keep pace with suchchanges, to promote the smooth and efficientfunctioning of markets and the consequenteconomic growth and employment opportunities.This will require increased collaboration,regionally and globally, to ensure best standardsand practices in regulatory arrangements. ABACproposes that the following key matters beaddressed in order for the region to fully realizethe benefits that lie ahead:

■ Give priority to developing and negotiatingcomprehensive financial servicescommitments in the WTO Doha Round andbeyond. There must be an on-goingcommitment to liberalizing market accessand investment by all economies. As acontinuing requirement, all APEC economiesmust review and upgrade financial standardsand practices to minimize the risk of majorfinancial instability and increase the paceof economic integration. APEC economiesneed to become fully engaged in thedevelopment and implementation of world’sbest financial and regulatory standards andpractices to promote financial systemstability and economic growth andopportunity.

■ Increase vigilance, and deepen regionalcooperation and coordination among APECeconomies to secure stable financialsystems. There is a need to developcomprehensive capacity building initiativesin partnership with the private sector toaddress security threats.

■ Capital markets are moving to greaterintegration as evidenced by the rising levelof flow of FDI and portfolio investment. Toharness the benefits from financialintegration and reduce risks, APECeconomies will need to mobilize local andoverseas capital, promote sound regulatoryframeworks; and develop efficient bondmarkets to link long-term savings andinfrastructure financing needs. This can beachieved through:

❑ The development of robust long-termcapital markets;

❑ Providing high quality public andprivate bond issues to meet the needsof pensioners/retirees in properlyregulated savings products and markets;

❑ Risk assessed bond issuance practiceswith reliable credit rating assessments,market risk pricing and agreedmechanisms to implement work-outs incase of default; and

❑ Sound public-private partnershipsfor the development of reliableinfrastructure financing vehicles.

There are no clear-cut universal solutions towholly ameliorate the risks arising from forcesimpacting on financial structures over the nextdecade. These forces will include: increasingcapital market integration, fluctuations in cross-border capital flows, large external imbalances,energy price volatility and vulnerabilities arisingfrom major currency realignments. ABAC stronglyencourages APEC economies to:

■ Reduce risk by continuing to build soundmacroeconomic frameworks and improvedstability and flexibility in financial systems;

■ Implement reforms which would reduce oreliminate the causes of key structuralimbalances – particularly in majoreconomies;

■ Support measures in regional andinternational forums aimed at improving andimplementing regulatory standards and bestpractices in financial sectors andstrengthened supervision and monitoring toameliorate adverse impacts arising fromvolatile cross-border capital flows and hedgefund activities; and

■ Deepen domestic capital markets andpromote regional bond markets.

F. Coping with Emerging Challenges

APEC economies should take steps to preparefor emerging challenges arising from informationtechnology innovation, environment, recycling,and energy supply and usage. Within each APECeconomy, business should work with public and

Annex B


private research bodies, government agenciesand universities to identify new innovationopportunities and applications that provide the“platform technologies” for development. Thiscould involve the use of advanced informationtechnology in areas as diverse as border control,biosecurity, disaster recovery, environmental andhealth service monitoring, and food traceability.

ABAC has stressed the importance of a region-wide compatible recycling system. This wouldallow goods produced in one APEC economy tobe used and recycled in another within theregion. An appropriate regional mechanismwould enable goods and materials for recyclingand remanufacturing and their international flowto contribute to effective utilization of resourcesand to environmental conservation.

Achievement of the Bogor Goals depends onaccess to adequate, safe, reliable, affordable andstable energy supplies. Large inflows of capitalare required to meet infrastructure and powergeneration needs of the next few decades. Thisnew environment requires a strategic approach.APEC economies need to consider a variety ofways to increase energy supply, diversify sourcesof energy, and encourage responsible use.

V. Toward a Stronger and More EffectiveAPEC Process

There is general agreement within ABAC thatAPEC consensus in certain areas have maturedto the point where members willing to take onthese obligations could formally commit toimplement them within an agreed timetable. Thetime has come to consider the merits of APECdecisions moving from full and non-bindingconsensus towards flexible consensus andstrengthened “concerted action.” A more formaland binding process for achieving the BogorGoals should be considered.

A. Moving to Enhanced “Concerted Action”on Facilitation

To consolidate its accomplishments to date andto establish a more concerted reform processbeyond the core issue of trade liberalization,ABAC recommends that:

■ APEC move to make some of its keyaspirational goals more achievable (on aplurilateral basis) to pursue the vision setout in Section II above in a determined way;

■ These efforts be undertaken under a singleprogram umbrella which encompasses, in acomprehensive way, APEC’s businessfacilitation agenda, and provides greaterclarity of purpose, momentum and structure,along the lines of the “Trans-Pacific BusinessAgenda” (TPBA) proposal;

■ Set more tangible and ambitious goals foragreed high priority areas of reform; and

■ Establish time bound agreements forimplementation of reforms by participatingeconomies.

The proposal has its origin in the PathfinderInitiative introduced in Shanghai in 2001 as animplementation mechanism for APEC decisions.The TPBA builds on this concept by movingforward towards more definite commitmentsbeginning in those areas where consensus hasmatured enough to get majority agreement. Suchcommitments might be drawn from any of thefour areas that mirror the so-called “Singaporeissues”: APEC Non-Binding InvestmentPrinciples, APEC Principles to EnhanceCompetition and Regulatory Reform, Non-Binding Principles on Government Procurement,and the APEC Trade Facilitation Action Plan.

In addition, there are several commitments underthe Collective Action Plan relating to MRAs ofstandards, customs procedures and businesstravel that could be moved to this stage. Bygiving them brand identity, TPBA woulddistinguish these APEC products from the diverserange of other activities going on in various APECfora and become more easily understood byregional business. Setting clear priorities willbe essential to attract the resources needed tocreate the human and institutional capacity toimplement important APEC initiatives.

TPBA would provide the umbrella forconsolidating facilitation commitments into asingle high profile package of “concertedactions”. Incorporating such agreed actions inthe Doha Round could validate them as boundcommitments.

Annex B


B. Going Further to Binding Commitments

APEC’s founding principles – non-binding andvoluntary, no negotiation or enforcement ability,and no policy development process – remain inforce today. Questions have been raised whetherthese founding principles require change, inorder to increase momentum in APEC for region-wide trade and investment liberalization and toallow the formation of new structures.

ABAC is currently assessing whether APECeconomies would judge the very significant effortinvolved in modifying the founding principlesto be justified by the benefits attributed to abinding agreement (that would be superior toexisting and anticipated bilateral FTAs), whenmultilateral reforms through the WTO DohaRound are being negotiated. Any evolutiontowards APEC structures that require bindingcommitments will have to confront thisfundamental issue. There is as well the attendantprospect of creating mult iple levels ofcommitments and processes. In this regard, ABAChas commissioned and received a report fromPECC on “Bold Reforms to Reinvigorate the APECLiberalization and Facilitation Agenda”.

In the Santiago Declaration, Leaders sought“recommendations on how to further liberalizetrade and investment in the region”. ABACsuggests that a Free Trade Area of Asia-Pacificshould be examined. To that end, ABAC reiteratesits 2004 recommendation that APEC Leadersestablish a high-level task force to examine thefeasibility of an FTAAP. The aim would be to assesswhether an FTAAP could offer a viable frameworkfor more effectively liberalizing trade andinvestment within the region.

The proposal for a “Free Trade Area of Asia-Pacific”envisages that APEC economies could reach formalagreements at the plurilateral level. By bringingtogether the many bilateral and sub-regional freetrade arrangements, an FTAAP could be analternative trade strategy for member economies.As envisioned, an FTAAP could rebuild themomentum in APEC for trade and investmentliberalization while consolidating existing PTAsand providing a benchmark for future PTAs.

C. Strengthening APEC’s InstitutionalCapability

Consideration should be given to restructuringAPEC institutions to improve their effectivenessin implementing APEC’s agenda.

■ The IAP review process needs to be morerobust and forward looking and the IAPsmore transparent, accessible and specific.They should be capable of being used forbusiness planning purposes and relevant toindividual economies reform programs.

■ A businesslike approach ought to be appliedto the review process; rather than a selfcongratulatory presentation reviewing whatindividual economies have achieved, a‘negative list’ approach could be taken, i.e.,what economies have yet to do in order toreach the Bogor Goals. The review shouldthen focus on what is intended to rectifythe situation. This would be less resourceintensive, be more business friendly, andmost importantly would focus attention andscrutiny on what still needs to be done.

■ A mechanism must be set up for identifyingspecific capacity building needs, developingtailor-made capacity programs taking intoaccount the situation of each economy,assessing outcomes of the programs with thecooperation of the private sector, and fine-tuning programs to respond to changingneeds. Mechanisms to ensure successfulpublic-private partnerships particularly incapacity building should be established.

■ The APEC Secretariat should be providedwith the authority and resources toundertake policy studies from an objective,region wide perspective. PECC’s proposal forthe Secretariat to be transformed into anOECD-type secretariat should be givenserious consideration.

■ Communication between ABAC and APECfora to encourage private sector inputshould be enhanced, including through theestablishment of a formal feedback

Annex B


mechanism on ABAC recommendations andthrough cross-participation in the meetingsof both fora. For its part, the private sectorcan initiate actions, which contribute to theBogor Goals, such as ABAC’s undertaking fora code on transparency and anti-corruption.

■ Coherence in APEC positions in multilateralfora – particularly the WTO - is necessary tostrengthen its ability to influence progressand directions in these fora. The strengthe-ning of the APEC Geneva Caucus is a step inthe right direction. However, there is scopeto further increase the level of APECcoordination in WTO activities, in the keyareas of agricultural subsidies and barriers,market access for goods and servicesliberalization. ABAC intends to participateactively in these activities to add its regionalbusiness voice to the WTO proceedings.

D. Reform of APEC and Relationship withABAC

Strengthened coordination between ABAC andAPEC is fundamental to the reform of APEC asan institution capable of delivering the promiseof free and open trade and investment. ABACvalues the annual Dialogue with APEC Leaders.It welcomes the opportunity to interact regularlywith Ministers and officials so that theyaccurately grasp the needs and aspirations ofthe business community.

ABAC’s own outreach activity has increased, inpart through capacity-building efforts in areassuch as trade and security, strengthened financialsystems, small enterprise development, and digitaltechnology. To reinforce ABAC’s presence in eacheconomy, ABAC is considering an “ABAC MissionStatement” that would prescribe its role. Itintends to maintain close cooperation with thebusiness community of each economy to be trulyrepresentative of their views, and to consult withgovernment officials to ensure understanding oftheir respective viewpoints. The three ABACmembers from each economy should represent across-section of their business community.

Annex B


The World Bank and others, including privatesector groups, have provided advice on theoptimal investment environment. The followingguiding principles seem to be used by manymultinational corporations to evaluate directinvestment opportunities. These are divided intotwo main groups: (1) The basic requirements,meaning those that a potential investor will wantto see met before going any further; and (2)Specific requirements, those that inhibit thewillingness of an investor to seriously consideran investment or inhibit the ability of theinvestor to operate efficiently and effectivelyin a market. The over-arching message is thatgovernments must take steps towards greaterfinancial sector openness in conjunction withbroader structural reform policies in order forboth entities, the investor and the host economy,to fully realize the benefits of FDI.

1. Basic Requirements

■ Stable and sensible economic policies .Business needs confidence that the hosteconomy will be managed in a competentand predictable way and that the rules ofthe game will not change mid-way through.

■ Low political risk . Capital tends to flowtoward environments with low political risk.An investor’s ability to rely upon theintegrity of the host government, and itsability to maintain local law and order, areboth essential to any long-term investment.

■ A well educated labor force andavailability of necessary inputs to anoperation, including access to technology .While the investor brings capital, often newtechnologies and management to the table,the quality of the local work force and theavailability of in-country materials are alsoimportant for success. As financial servicesbecome increasingly IT-enabled, access tocommunications infrastructure and theInternet become critical.

■ The size, value and potential for growthof the host economy’s domestic market ,especially the purchasing power of itsconsumers. Companies will not invest inareas where there is little potential to make

Annex C

Barriers and Impediments to Foreign Direct Investment (FDI):Checklist and Recommended Policy Response

a profit. Note: some markets are small butattractive because they are high value.

■ Reliable infrastructure. The ability tocomplete transactions, get products andservices to market, resolve disputes, andenter into contracts depends upon thepresence of reliable telecommunicationsservices, transportation services, powergeneration, office support services, acompetent financial system, legal andjudicial services, and other basics.Investments cannot yield reliable returnswithout them.

■ A stable currency, especially protectionfrom currency devaluation ormanipulation . Investments are often madein a foreign currency, usually dollars or yen,but the local products are sold in the localcurrency. While businesses recognize theyneed to adopt good mechanisms andmanagement regimes to hedge againstcurrency fluctuations, businesses are waryof economies with a history of currencydevaluations and artificial currencymanipulations. For example, they will beunwilling to make an investment in dollarsif they suspect that local assets (valued inthe local currency) will be devalued, andthey will lose part (or possibly all) of theoriginal dollar-based investment.

■ Stable and well-functioning marketsystem. Private property and the freedomto make contracts are essential componentsas are financial disclosures based on sensibleaccounting practices. Investors andcreditors are rewarded for their gooddecisions and not shielded by governmentfrom the consequences of bad decisions.

■ Ongoing program of regulatory reform andefficiency. Increased regulatory uniformityamong economies should lower regulatorycosts for market participants and thegovernments.

2. Specific Requirements

■ Market access and non-discrimination .Investors will gauge the degree to whichforeign governments will interfere with the


company’s ability to enter the market andcompete fairly with domestic or otherforeign providers. In some cases jointventures are a condition of market entry.These can increase the risk to the investorif the regulatory framework is nottransparent, is discriminatory and the localpartner is not well established. The freerthe market, the more attractive it becomesas an investment opportunity.

■ Sensible capital requirements and theability to manage assets . Investors willlook favorably on economies that adhere tointernational best practices for paid upcapital and capital reserve requirements, andwhere foreign and local investors are treatedin the same way. They also look favorablyon markets where they have the ability tomanage assets on a global basis (forexample, in the ability to invest funds wherethe return is likely to be greatest, ratherthan being forced to invest all fundsdomestically).

■ Policies that encourage the developmentof strong and stable capital markets .Investors need to be able to borrow andinvest locally as they wish with competitivesources of capital.

■ Provision for the remittance of dividends,interest, and royalties . Investors arereluctant to place significant investmentsin economies that do not allow therepatriation of profits.

■ Property rights and the protection againstthe unfair seizure of or nationalizationof assets. Investors will not put theirresources into economies that confiscatethem. The importance of governmentprotection of property and asset rightscannot be overstated. Property, includes real

assets as well as intangible assets likepatents and copyrights.

■ A good corporate governance ethic,supported by the host economy to ensurethat the owners of a company and all itsstakeholders get their fair share.

■ Potential for the provision of servicesbeyond the geographic area ofestablishment. A business will notnecessarily locate in a particular economyor geographic region of a particular economysolely to operate there. Companies valuethe ability to source from an operating unitin one market to serve nearby externalmarkets, or geographic regions in aneconomy.

■ A transparent and open legal andregulatory regime and good regulatorysupervision. Companies seek markets withfair and consistently enforced business laws,sensible and well-designed regulatoryregimes, which do not impose undueburdens and impede the ability of thecompany to grow and create moreopportunities. At the same time, they wantto be sure that their investment is subjectto sensible and predictable regulatorysupervision consistent with internationalbest practices.

■ Favorable taxation and tax incentives .While tax incentives geared to attract initialinvestments are important, governmentshave to think long-term. The finalinvestment decision is usually based on howan economy’s taxation will affect the normaloperating environment.

■ Temporary entry of natural persons .Companies want to have the ability to movein professionals from other areas or regionson a temporary basis as needed.

Annex C


Checklist of Barriers and Impediments to FDI in the Financial Services Sector andRecommended Policy Response

Barrier/Impediment Issues/Concerns Recommended PolicyResponse

Restrictive conditions ofmarket entry and operation :

- inhibits the willingnessor ability of investors tobring in full range ofcapital, skills andtechnology and theefficiencies ofmanagement and newproduct lines

- increases risk to potentialinvestor

- benefits of new capital,skills, technology andproducts only available toa portion of the marketwhere establishment ortrade is restricted tocertain geographicregions

- SMEs in restricted regionsunable to profit fromcompetitive benefit ofnew services

- Incentive reduced forhost government toupgrade prudentialstandards tointernationally acceptedrequirements (foreigninvestors generallysubject to high standardsof prudential supervisionin their home economy)

- foreign equitycaps

- joint venturerequirementsincludingownership andcontrol issues

- limits on rangeof products

- limits on abilityto operate in anintegratednational market

- onerous capitalrequirements

- phase out foreignequity caps

- phase out jointventure requirementsas condition of marketaccess

- remove limits on rangeof products offered(subject toappropriatesupervisorymechanisms)

- permit comprehensivemarket access in allregions of an economy

- permit foreignmajority ownership

- establish a strongregulatory system(thereby makingestablishment andoperating restrictionsunnecessary)

Strengthen Local Industry- support and encourage

capacity building inregulatory supervision

- encourage localproviders toparticipate in Basel 2capacity buildingworkshops (capitaladequacy, riskassessment andmanagement,operational risk andfinancial disclosure);and other financialsector capacitybuilding programssuch as thosepromoted by the IAIS,World Bank, ADB, IMF,PECC and APEC.

Annex C


Lack of National Treatmentand MFN

- reduces competitivenessand discourages growthand efficiency of localproviders

- local providers lessresilient to shocks

- increase risk by over-reliance on a few foreignservice providers

Restrictions on AssetManagement

- inability to get bestreturn on investment

- increases risk- inability to match

liabilities with assets

Lack of transparency,predictability and openness inlegal and regulatory regimes

- increases risk to investorand consumer

- encourages discriminatorybusiness practices

- increases risk ofcorruption

- promotes marketinefficiencies

Weak regulatory and legalinfrastructure

- inhibits smoothfunctioning of the market

- encourages monopolisticand cartel practices

- inhibits ability to enterinto contracts

- increases risk and costs toinvestor and hosteconomy

- discriminationbetween localand foreignproviders,includingdiffering capitalrequirements

- differentialrequirements on3rd countryproviders

- discriminatorytax

- equal treatment forforeign and localproviders

- improve operationalrisk through capacitybuilding (e.g. Basel 2)

- removediscriminationbetween foreignservice providers interms of marketaccess andoperations

- restrictions onfinancial serviceproviders; banks,insurers, assetmanagers

- restrictions onassets forinvestment

- restrictions onpersonnel

- allow cross borderinvestment

- allow fundmanagement fromoverseas

- provide forcommercial presenceof overseas servicesuppliers

- procedures forright of redressand/or appeal

- licenseapplication andawardprocedures

- inconsistentanddiscriminatorytreatment ofbusinessentities

- clear, publishedprocesses for legaland regulatorydecisions and rightof appeal

- clear publishedprocess forregulatory policyformulation andstakeholderconsultation

- poor prudentialsupervision

- enforcement ofbinding contracts

- lack of expertise- inadequate

solvency andcreditor rights

- weak propertyprotectionrights andenforcement

- capacity building ininternationallyrecognized bestpractices forfinancial sectorregulation

- strengthenedeconomic and legalinfrastructure,including bankruptcylaws and regulations


Annex C


Capital controls- potential to increase cost

of capital to investor andconsumer

- inhibits ability of investorto source and placecapital appropriately andefficiently

- difficulty in hedging risk- inhibits willingness of

investor to participate inthe market

- future exchange ratevulnerabilities withoutclear exit strategy

Weak governance- increases threat of

corruption- reduces market efficiency- promotes monopolistic

practices- threat of market failures

Poor property rightsprotection

- inhibits ability of investorto offer innovativeproduct lines

- inhibits willingness tofully participate in themarkets

Restrictions on the Movementof Natural Persons

- reduced ability to shareexpertise, technology andskills

- increases operationalinefficiencies

- inhibits ability to offerand service innovativeproduct lines on time

- repatriation ofprofits,dividends,remittances

- inability tosource capitaland placeinvestments ona global basis

- phase out capitalcontrols

- strengthen capitalmarketsinfrastructure

- regulatory reform- phase in flexible

exchange ratearrangements

- corruption- lack of

accountability- unpredictable

marketsituation

- lack ofcompetition

- strong corporate andpublic sectorgovernance ethics

- capacity buildingmeasures to promoteunderstanding andawareness of goodgovernance

- competition policyand laws

- asset seizure,includingnationalization

- patent, copyright andtrademarkprotection

- adequate laws andrights of redress

- eliminate ability tonationalize assets

- enforcement ofproperty laws

- delays inprocessingtemporary visaapplications

- limitedadjudicationability

- lack of clearcriteria andprocedures

- facilitate businesstravel and intra-company transfers

- expedite visaprocessing forprofessionals


Annex C


Annex D

In recent years, the APEC region has experienceda number of man-made and natural crises anddisasters including terrorist attacks, the SARSoutbreak, and most recently, the Indian Oceantsunami of 26 December 2004, which resultedin enormous loss of life and economic damage.These events bring into sharp focus the needfor robust early warning and response systemsfor future disasters of all kinds.

In responding to the tsunami disaster, ABAC hasfocused its attention on the challenge ofeffectively incorporating the region’s businesscommunity in capacity building efforts foremergency preparedness. In its discussions,ABAC has considered each of the three phasesassociated with any natural or man-made disasteror situation, namely:

■ Resist phase – measures aimed at defenseand preparation for future event of scale;

■ Response phase – relief efforts in the firsthours and days of a crisis that can overwhelmtraditional response mechanisms;

■ Recovery phase – measures taken in theintermediate to longer-term following anevent of scale to rebuild.

Recommendations

Based on its assessment of the current status ofthe regional business communities’ involvementin Resist and Response phases, ABACrecommends that APEC create an ‘All HazardsAPEC Regional Response Network’.

Such a network would seek to coordinate APEC’semergency preparedness efforts for future eventsof scale through a number of specific measures,including:

Resist Phase activities:

■ Review of regional response capabilities

■ Self assessments of individual economycapabilities

■ A mechanism to capture and disseminate‘lessons learned’ (e.g. public education foremergency preparedness, early warningcommunication, etc.)

Emergency Preparedness

■ Establishment of region-wide communi-cation and notification protocols for eventsof scale, which would seek to include theprivate sector along with other relevantgovernment, multilateral, and NGO actors

To capture this information, ABAC recommendsthat the APEC Task Force on EmergencyPreparedness build upon the website frameworkthat currently exists, in order to create a websitewith the following six major sections:

■ Disaster response organizations in eacheconomy, including links to their websites;

■ Preparedness tools currently available fromeach economy (e.g. checklists, manuals,etc.);

■ Response phase organizations (government,NGOs and private sector), including websitelinks;

■ Checklists for immediate Response phaseneeds;

■ Lessons learned from previous events ofscale; and

■ Pages for specific events of scale containingup to date information, critical needs listand current status.

Many of the resources for such a website mayalready exist and require only coordination andsupplementation to achieve the desired outcome.

Response Phase activities:

■ Recent tragic experience has raised regionalinterest in the development of rapidresponse communications networks for usein natural disasters or in the event of aterrorist strike on national infrastructures.A number of APEC economies have trialsin hand of potential ly significantenhancements of current disaster recoverytechnologies. These include pre-packagednetwork infrastructure and remote accessgrid nodes that can be quickly deployed andmade operational.

■ As a first step in developing a regionalresponse mechanism in the case of future


natural disasters, ABAC recommends thatAPEC members work toward the developmentof an Airport Emergency Team capabilitywithin the region. Such a Team would beprepared to take over ground operations atresponse airport locations during the criticalfirst days of a disaster response, when reliefoperations cause a sudden surge in incomingcargo.

Structure of the APEC Regional ResponseNetwork:

■ ABAC would propose that the reactivatedAPEC Task Force on Emergency Preparednesscoordinate the Resist phase initiativesoutlined above and be prepared to provideday-to-day direction during a Responsephase.

■ An Executive Committee, made up ofofficials, private sector representatives andNGOs would provide oversight and guidanceto the APEC Regional Response Network.

ABAC encourages APEC member economies toallocate sufficient financial resources to theestablishment of the APEC Regional ResponseNetwork and the delivery of the initial projectsoutlined above.

In the development of the All Hazards APECRegional Response Network, ABAC would play asupporting role, working to mobilize the regionalresources of the private sector.

Recovery (reconstruction, rehabilitation)

Although focused on more intermediate andlonger-term goals, the objective of the Recoveryphase of any event of scale should be to restore“business as usual” as quickly as possible,restoring jobs and income to affectedcommunities. The business community has aneven larger part to play in this phase.

a. Financing Reconstruction

The region’s business communities play acritical role in reconstruction efforts followingany natural disaster or other event of scale.APEC economies should seek to expedite this

process by ensuring that the awarding ofreconstruction contracts through internationalfinancial institutions and bilateral governmentprograms is done quickly, efficiently and in atransparent manner.

The region’s financial services companiesneed to work closely with their governmentsin financing reconstruction following eventsof scale. Insurance providers should seekto settle claims quickly and develop newinsurance products to offer protectionagainst certain events of scale in moredangerous areas. The region’s banks, inpartnership with their governments, play acritical role in providing financial resourcesfor reconstruction and businessrehabilitation in the aftermath of acatastrophe.

To facilitate the awarding of public sectorcontracts associated with disasterreconstruction, the use of web-based e-sourcing platforms can make a criticalcontribution to improving the efficiency ofsourcing and procurement processes, as wellas promoting greater transparency andaccountability. Such online platforms canalso assist in making these public tendersavailable to SMEs, either individually or aspart of consortia. One example is theABECHA sourcing and procurement hub(www.abecha.com), supported by theSingapore Business Federation, which hasoffered its services free of charge to assistwith tsunami reconstruction efforts.

Recommendations

■ As part of the work of the APEC TaskForce on Emergency Preparedness, APECmember economies should undertake areview of best practices in providingpublic-private partnership financing forreconstruction.

■ ABAC encourages APEC economies toreview their procedures for the awardingof reconstruction contracts through IFIsand bilateral government programs andto develop protocols for fast-tracking theawarding of reconstruction contracts.

Annex D


■ ABAC calls upon APEC economies toundertake a review of insuranceavailability for business assets againstcertain risks and take steps to liberalizetheir financial services industries, wherenecessary, to ensure that business andhomeowners have access to the widestpossible range of insurance options toprotect their assets.

b. Support for MSMEs

Micro-, small- and medium-enterprises(MSMEs) form the backbone of the economyin all APEC economies, providing employmentand income to millions. The sooner thatlivelihoods are restored and businesses areup and running again following a disaster,the better for the villages, towns and citiesin which they operate.

With regard to financial support forrehabilitation, microcredit lending hasalready been used in certain APECeconomies hard hit by natural disasters.ABAC has in the past highlighted the needto strengthen the capacity of micro-financeinstitutions (MFIs), including upgrading thequality of management, improvingaccounting and administration andfacilitating links with public institutionsproviding aid funding.

In addition to financial support, MSMEs mayalso need access to retraining programswhere a disaster has devastated theirparticular industries, whether temporarilyor permanently. Working in partnership withgovernment programs, small businessadvisors can deliver educational and trainingsolutions to local entrepreneurs to promotethe successful development of new micro-enterprises in the wake natural or man-madedisasters.

Recommendations

■ ABAC encourages APEC Finance officialsto undertake a review of financing

options that can be made available toMSMEs in case of events of scale,including microcredit lending, loanguarantees, leasing arrangements,venture capital funds and otherinnovative lending and equity financingmechanisms.

■ Similarly, ABAC calls upon the APEC SMEofficials to undertake a review of theresources available in each APECeconomy for MSME retraining and howthese can be mobilized in the aftermathof an event of scale. ABAC encouragesAPEC SME officials to share bestpractices and ‘lessons learned’ in thedelivery of SME retraining programs.

c. Restoring Confidence

Following any disaster – whether natural orman-made – a critical factor in full economicrecovery is the challenge of restoringconfidence in the affected region in the eyesof the outside world. Providing positiveand accurate information on recovery effortsis critical to rebuilding investor and businessconfidence in an affected region. Restoringthe confidence of consumers is alsoimportant, particularly at it relates totourism. Here, the region’s marketing andcommunications industries can assist intargeted information and promotionalcampaigns, aimed at rebuilding confidenceand overcoming misperceptions of potentialtourists to the region.

Recommendation

ABAC encourages APEC Ministers to instructtheir relevant promotion agencies (i.e.tourism, investment, trade) to review theiremergency preparedness planning to ensurethat they have the necessary resources inplace to mount a campaign aimed atrestoring confidence following an event ofscale, working in close partnership with theprivate sector.

Annex D


Annex E

Founding and Structure

The APEC Business Advisory Council (ABAC) wascreated by the APEC Economic Leaders inNovember 1995 to provide advice on theimplementation of the Osaka Action Agenda andon other specific business sector priorities, andto respond when the various APEC fora requestinformation about business-related issues or toprovide the business perspective on specificareas of cooperation. It is the sole non-governmental entity that has an official role inthe APEC Economic Leaders’ Meeting through aformal dialogue.

ABAC comprises of up to three members of theprivate sector from each economy. ABACmembers are appointed by their respectiveLeaders, and represent a range of businesssectors, including small and medium enterprises.The economy determines the term of membershipof each appointee as well as its ownadministrative arrangements and staff support.

The ABAC Secretariat based in Manila, thePhilippines serves all members and all economiesand maintains a website. Funding is providedthrough a system of annual dues, which arestructured to reflect the size of each economy,following the APEC formula.

ABAC in 2005

In 2005, Korea assumed the chairmanship of theCouncil, with Chile and Vietnam serving as co-chairs, following the APEC order. Co-chairsrepresent immediate past and future chairs.

ABAC adopted the theme “Networking Asia-Pacific: A Pathway to Common Prosperity” whichaddressed the following issues:

■ Ensuring the successful conclusion of theWTO Doha Development Agenda (DDA)negotiations

■ Keeping APEC on track to achieve the BogorGoals

■ Building a harmonious relationship betweenthe private sector and government in thenew international security environment

The APEC Business Advisory Council

■ Creating an environment conducive forbusiness

■ Achieving an Asia-Pacific communitythrough cooperation and capacity building

Consistent with the priorities of the ABAC Chair,ABAC established four working groups and acommittee to carry forward its work during theyear, namely:

■ Capacity Building Working Group (CBWG)

■ Finance Working Group (FWG)

■ Trade and Investment Liberalization andFacilitation Working Group (TILFWG)

■ Technology Working Group (TWG)

■ Action Plan Monitoring Committee (APMC)

ABAC also established a Task Force on the Mid-Term Review (TFMTR) to assist the Council indeveloping its contributions to the mid-termstocktake of APEC’s progress towards the BogorGoals undertaken by APEC. In addition, itmaintained the Communications Core Group(CCG) established in 2003 to pursue itscommunications outreach activities.

ABAC convened four meetings in 2005: MexicoCity, Mexico (21-24 February); Beijing, China(10-13 May); Kuala Lumpur, Malaysia (31 July-3August); and Busan, Korea (14-16 November).Two meetings of the Advisory Group on APECFinancial System Capacity Building were alsoheld: Beijing, China (10 May); and Kuala Lumpur,Malaysia (3 August).

Recognizing the value of working closely withrelevant APEC fora, ABAC actively participatedin various APEC meetings and related events:SOM I and related meetings (Seoul, Korea: 22February - 4 March); SOM II and related meetings(Jeju, Korea: 21 May - 31 May); SOM III andrelated meetings (Gyeongju, Korea: 5-14September); Meeting of APEC MinistersResponsible for Trade (Jeju, Korea: 2-3 June);APEC Finance Ministers’ Meeting (Jeju, Korea:8-9 September); APEC SME Ministerial Meeting(Daegu, Korea: 1-2 September); APEC Task Forceon Emergency Preparedness (Bali, Indonesia: 2-3


May); The Second APEC Policy Dialogue: The Roleof the Private Sector in Shifting from Informal toFormal Remittance Systems (Bangkok, Thailand:26-27 May); Symposium on the Mid-termStocktake of the Bogor Goals (Jeju, Korea: 27May); APEC Technical Working Group Meeting(Gwangju, Korea: 16-18 June); the InternationalSymposium on the Preparation for APEC Vietnam2006 (Hanoi, Vietnam: 21-22 July); and APECSymposium on Anti-Corruption and Transparency(Seoul, Korea: 1-2 September). ABAC also tookpart in the IAP peer reviews of Brunei Darussalam,Indonesia, Malaysia, Papua New Guinea,Philippines, Russian Federation and Vietnam heldat the margins of SOM I. ABAC sent a high-leveldelegation to Geneva on 13-14 June to press forthe successful conclusion of the WTO DDAnegotiations.

Other events organized or participated in by ABACincluded: Business Session on “The ABACExperience for the Mexican CEO” (Mexico City,Mexico: 22 February); PECC Seminar on the Futureof Pacific Cooperation (Jakarta, Indonesia: 8April); ABAC Forum on Chinese Companies GoingGlobal in the Background of APEC RegionalEconomic Cooperation (Beijing, China: 11 May);Developing Bond Markets in APEC: Toward GreaterPublic-Private Sector Regional Partnership (Tokyo,Japan: 21-22 June); Public-Private SectorDialogue for the Asia-Pacific Region on “Cross-Border Implementation of Basel II and EmergingRegulatory Banking Supervisory Issues” (KualaLumpur, Malaysia: 4 August); PECC’s 16th GeneralMeeting (Seoul, Korea: 5-7 September); andSymposium on Corporate Governance andTransparency in Financial Institutions (Melbourne,Australia: 17-19 October).

In line with the precedent set during the pastthree years, ABAC developed and submitted anInterim Report to APEC Economic Leadersthrough the Meeting of APEC MinistersResponsible for Trade held in Jeju, Korea in June.The Interim Report elaborated on, and outlinedrecommendations on, trade and investment

issues covered under the 2005 work program.In addition, ABAC submitted separate reportsand recommendations to the APEC Finance andSME Ministerial Meetings held in Jeju and Daegu,Korea, respectively, in September. It submittedits contribution to APEC’s Mid-Term Stocktakeof the Bogor Goals setting forth recommen-dations on how to keep APEC on track to achievesuch goals.

Studies and Related Work

To support its work and deliberations, ABACundertook a number of research studies andinitiatives, to wit:

■ Feasibility Study on Bold Reforms toReinvigorate the APEC Trade Liberalizationand Facilitation Agenda

■ Measuring the Impact of the New SecurityEnvironment on Trade Transaction Costs

■ APEC Customs Handbook

■ ABAC Standards Research Project

■ Study on volatile capital flows and triggermechanisms

ABAC also continued to pursue an activecommunications outreach program aimed atincreasing the level of awareness andappreciation of ABAC issues and activities withinthe business community in the region.

Future Work

ABAC remains fully committed to providingadvice to APEC Leaders on business sectorpriorities and in pushing forward the APECagenda on trade and investment liberalizationand facilitation. Future work will focus oncapacity building, strengthening financialsystems, trade facilitation, the monitoring ofAPEC commitments and the implementation ofthe roadmap towards the Bogor Goals.

Annex E

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