Vol. XIV No. 2
March-April 1996
relative “inward investment orientation” of European investors on the one hand and the potential discriminatory environment against European trade and investments in the light of the fast developing economic cooperation arrangements in the Asia Pacific region, on the other.
What's Inside 2
ISSN 0115-9097
APEC Study Centers: An Initiative of the Leaders' Education Group
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Philippine APEC Study Centers Network:
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Pooling Resources
European investments and trade. The apparent “inward orientation” of European investments may be
Toward Greater Regional Cooperation
Deepening
A new concept of cooperation in APEC
the Asia-Europe
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his paper focuses on two themes, namely: furthering APEC and European economic liberalization, and redefining development cooperation. It also looks into the role of Japan in the new Asia-Europe partnership.
Partnership Ponciano S. Intal, Jr.
APEC, “Open Regionalism” and WTO The primary impetus for the Asia-Europe Summit is largely coincidental. Specifically, intra-EC exports rose the fast changing economic landscape in the Asia Pacific dramatically from a range of 50-53 percent of total EC region and the desire of the European countries to be an exports during 1970-1985 to about 62 percent by 1991. active participant in the developments in the region. The F Page 6 European Commission’s (EC) paper calling for a “new Asia strategy” highlights the unease in Europe that it has so far failed to forge an active participation in the dynamic Asian region, with the attendant possibility that European firms would eventually A new world trade era has emerged with the advent of the WTO and the APEC. In light of this fast changing world economic environment, the need to look into and eventually lose out to the Japanese, other Asian redefine the Asia-Europe partnership becomes even more imperative. In his paper, Dr. Intal, and American companies in the PIDS president, makes an incisive analysis on the current unease and on the ideal future of competition in world markets. Thus, the Asia-Europe partnership, offering some notes on how to deepen it. the European Union’s new Asia The series of APEC articles featured in the last several DRN issues continues, this strategy aims at strengthening Europe’s time featuring the APEC Study Centers. Holding their regional conference in Manila on economic presence as well as raising May 9-10, the articles on pages 2 and 3 will be very helpful as introductory information to Europe’s political profile in Asia. DRN readers. More will be featured in forthcoming DRN issues.
Editor's Notes
“Pooling resources” on page 4 complements this issue's main feature article.
At the heart of the European unease is a two-part concern, i.e., the
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he vast diversity in the economic conditions, cultural backgrounds and social practices among the Asia-Pacific Economic Cooperation (APEC) membereconomies has somewhat slowed down efforts to build a cohesive regional community committed to work for mutually beneficial cooperative activities. For example, different views have been expressed on human rights issues, labor standards and on the tradeoffs between economic growth and environmental protection since the beginning of APEC in 1993, particularly during the Leaders’ Meetings and Ministerial Meetings. Because of the diverse backgrounds of the membereconomies, these differences are expected to continue within APEC until some solution can be found. It is, of course, impossible to eliminate all differences. Yet, membereconomies can nonetheless enhance knowledge and improve understanding of each other's needs and problems. And perhaps one of the most efficient ways to do this is through cooperative efforts in higher education. During the APEC Leaders’ Meeting in Seattle in November 1993, an initiative for greater cooperation in higher education among the APEC member-economies was proposed. Subsequently, at the APEC Leaders’ Educational Initiative Meeting six months later, all participating members agreed to: p establish APEC study centers utilizing existing universities and research institutions to promote APEC related studies, and p promote APEC programs for greater exchange of scholars and students.
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APEC Study Centers: An Initiative of the Leaders' Education Group* existing universities and research institutions to take up APEC-related issues in their research agenda and education curricula. The Network also encourages these institutions to organize a consortium for effective cooperation in research and education. During the second conference of the APEC Leaders’ Education Initiative held in Tokyo on September 22, 1995, 15 members of APEC agreed on the following programs of the Network: Coordination of studies. APEC study centers play a vital role by mobilizing the resources of AsiaPacific’s higher education institutions for advanced research that is focused on issues geared to build a cooperative regional community. Such collaboration will in turn help study centers to develop their individual activities. If there are emerging issues common to many members, then a joint study can be efficiently organized. Exchange of scholars. This program component will help improve research quality and enhance mutual understanding of the economy, society, and public policies of membereconomies. Through it, scholars and students can be based in institutions that best fit their interests and amply
The Network at Work Thus, the APEC Study Centers Network was established. The Network recommends that individual membereconomies should encourage their own
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*Based on the paper "APEC Study Centers: Aims and Issues" by Dr. Ippei Yamazawa of the Hitotsubashi University, Japan.
provide for their research needs. It also helps develop effective education curriculum. International symposia and workshops. Symposia will continue to be important occasions for direct communication and exchange of views on APEC-related studies. Active participation should be encouraged since they allow members to disseminate research results, conduct collaborative work, and enhance their common stock of knowledge. Electronic networking. Special arrangements are being worked out for prompt dissemination of the results of APEC studies across membereconomies through electronic technology. The United States and Japan, which proposed this undertaking, offered to extend their services to other members through the WWW and FTP servers of the Internet.
Self-Sustaining Centers APEC study centers are established by member-economies on a voluntary basis and, thus, should be self-financed and self-sustaining. However, since developing membereconomies are constrained by shortage of funds, the Network encourages and supports international cooperation with existing exchange programs. Eventually, it is envisioned that a central fund will be established to support poorly funded study centers to undertake APEC studies. DRN
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s part of the Philippines’ commitment to implement the recommendation of the APEC Leaders’ Education Initiative Meeting held in Seattle in 1993, the government, through the Department of Foreign Affairs, enjoined the Philippine Institute for Development Studies (PIDS) to take the lead in convening and organizing a Philippine APEC Study Centers Network (PASCN).
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Dr. Ponciano S. Intal Jr., PIDS President, convened heads of various local universities and research institutions from all over the country in an organizational meeting on November 7, 1995 in response to this call.
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PASCN Organizational Structure PASCN Advisory Board
PASCN PASCN Steering Committee PASCN Secretariat
Working Group 1
Working Group 5
Working Group 3 Working Group 2
Working Group 4
Philippine APEC Study Centers Network: Toward Greater Regional Cooperation Objectives and Structure The PASCN or the Philippine Network has the following objectives: p promote opportunities for collaborative research on APEC-related issues, p establish data and information base on APEC economies, p encourage faculty and students of higher education to undertake studies, theses and dissertations on APEC issues, p facilitate the exchange of information on APEC issues between and among government, nongovernment organizations, academic and research institutions, business sector and the public in general,
p provide advisory services on APEC to the Department of Foreign Affairs and other concerned government agencies, p undertake capability building programs for government on matters related to APEC, and p establish linkage with other APEC study centers.
The PASCN is envisioned as a network with several working groups (see box on page 5) and guided by a policy advisory board and a steering committee (see Figure). Initially, it is composed of eight (8) universities and one (1) research institution.
Working Group 7 Working Group 6
Working Group 8
The advisory group is composed of the Commission on Higher Education, Department of Foreign Affairs, National Economic and Development Authority, Department of Trade and Industry, Philippine Institute for Development Studies and an appointed representative each from the Philippine Chamber of Commerce and Industry and the media. It is tasked to give advice to the steering committee in the formulation of the policy framework and research program. The steering committee is composed of the PIDS, Asian Institute of Management, and Xavier University. As the designated chairman and lead agency, PIDS will coordinate the implementation of programs and activities of the Philippine Network, and manage its funds. PIDS also serves as the Network’s secretariat.
Three Programs The PASCN focuses on three broad areas -- research, information
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ne of the guiding principles of the APEC process is the promotion of cooperation through mutual respect and mutual benefit . Thus, one-way flows of assistance from developed to developing economies or ‘old-style foreign aid’ should now be redefined. It has also become more appropriate to describe development cooperation as a pooling of resources rather than the transfer of resources.
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available. Thus, additional resources should be mobilized by encouraging the private sector to take a more active role in the direct financing for the development of infrastructure. Experience in the Asia-Pacific region has shown that given an appropriate policy environment, a significant proportion of the financing for such infrastructure could be derived from private sources.
Information Power in APEC Provision of Public Goods The growing interdependence of Asia-Pacific economies has created a situation wherein many public goods can be efficiently provided only
In view of falling computing and telecommunications costs, scarce government funds for development cooperation should be channeled to activities which would involve the
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expertise to all participants. These examples would be consistent with the principle of mutual benefit, wherein all participating economies are given an opportunity to contribute and benefit from the collective efforts of those involved. Since the private sector would also benefit from these activities, it should also attract private contributions for the creation and maintenance of databases, making relevant technology available, or to cover some of the costs of training courses. Likewise, APEC economies could enhance the prospects for the private
Pooling Resources A new concept of cooperation in APEC through the collective involvement of other governments. While education and health services can be provided by individual governments alone, the improvement of transportation and telecommunications infrastructure can be most effectively done through joint efforts of several countries.APEC members would then need to focus on public goods which entail cooperation among different economies and that would yield benefits to as many participants as possible. Development cooperation also seeks to promote the efficient allocation of resources. The need for investments in infrastructure (from harbours, airports, land transport, power generation and distribution, water and sanitation) in the next few decades would greatly exceed the public funds
sharing of information, technology and expertise. Focusing on such relatively low-cost information pooling would result in the drawing of experience from those involved which could then be utilized by all participants irrespective of the physical location of such facilities. Pooling of expertise, especially information, is already being promoted by several of APEC’s working groups. For example, a compendium of the investment policies of participants has already been assembled and the trade promotion task force is setting up a database of market opportunities throughout the Asia Pacific. Other activities would be the setting up of training programs in a member economy, using trainors from other countries who could share their
sector by creating an information pool that include forecasts of expected markets and conditions to alert them on new, potentially and commercially viable investment opportunities. Sharing experiences about policy options on ownership (including buildoperate-and-transfer options), financing instruments (e.g., the development of long-term bond markets), rational approaches to regulation and pricing of outputs such as power and telecommunications, as well as design and tendering procedures should also be encouraged.
Open and Voluntary The extent of development cooperation already existing among APEC participants should be
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PHILIPPINE APEC STUDY CENTER... E Page 3
help guide the government in its dealings and negotiations under APEC.
Not Exclusive an
dissemination and advisory services.
publication,
The PASCN is not to be viewed as exclusive group. Part of the
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Network's objective is to lessen the gap between the present members and nonmembers by sharing resources and transfer of technologies. Thus, institution building is a key objective of the Network. DRN
and
Research Program. The Philippine Network will focus on studies which will be utilizedin promoting a better understanding of APEC and of the member-economies. As such, it will guide the government in its thrust to strengthen the country’s position on specific concerns such as trade and investment liberalization and facilitation, and development cooperation. The studies will be interdisciplinary and policy-oriented.
Philippine APEC Study Centers Network Working Groups p
Small and medium enterprises
n n n n
p
Trade and investment
n n
Research grants and fellowships will be awarded to graduate students who will work on APEC-related issues for their theses and dissertations.
n
p
Human resources development
n n
An exchange program for students, faculty and researchers will be organized among members of the Philippine Network and with other APEC study centers.
n n
p
Natural resources and environment
n n
Information Dissemination and Publication Program. PASCN will make available the results of APEC-related studies and other information on APEC to government, NGOs, educational and research institutions, business community and the public at large through conferences, seminars, workshops, roundtable discussions and publications.
n
p
Science and technology
n n n n
p
Education
n n
An electronic network will be established to facilitate the exchange of information on a wider scale. This electronic network will also be linked with other APEC study centers in the region. Advisory Services Program. The Philippine Network will provide advice and recommendations which would
n
p
East Asia Growth Area
n n
p
Development cooperation (including infrastructure and energy)
n n
University of Asia and the Pacific (lead) Philippine Institute for Development Studies Asian Institute of Management Xavier University UP School of Economics (lead) Philippine Institute for Development Studies University of Asia and the Pacific Asian Institute of Management (lead) De La Salle University Commission on Higher Education Ateneo de Manila University University of San Carlos (lead) Mindanao State University Philippine Institute for Development Studies Ateneo de Manila University (lead) Mindanao State University University of San Carlos Philippine Institute for Development Studies Commission on Higher Education (lead) University of Asia and the Pacific De La Salle University Mindanao State University (lead) Xavier University De La Salle University (lead) Mindanao State University
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Similarly, there was a significant increase in intra-Europe investments during the latter 1980s as indicated by the rise in mergers and acquisitions in Europe complemented by sharp expansion of foreign investment flows into the EC from the United States and Japan (de Dios and Bongolan, 1994). The trade and investment changes during the latter 1980s reflect the private sector response to the deeper economic integration within the European Community envisioned under the EC-1992 initiatives. At the same time that there was a flurry of intra-European investments and expansion of intra-European trade, East Asia was undergoing major industrial restructuring itself. In part because of the fast rising labor cost at home and the appreciation of the Japanese yen, South Korean won and new Taiwan dollar, significant investment from Northeast Asia flowed into Southeast Asia and China during the latter 1980s and early 1990s, triggering an acceleration in the economic growth, exports and industrial restructuring of Thailand, Malaysia, China, Indonesia and to a much lesser extent and only most recently, the Philippines. This process of economic restructuring going on in East Asia is sometimes referred to as the “flying wild geese.” Like in Europe, the sharp rise in investments within East Asia resulted in increased trade within East Asia, thereby forg-
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ing deeper economic interactions within the region. However, in contrast to the European investments, the flow of investments into Southeast Asia and China was primarily oriented for exports initially, largely to third country markets especially the United States and even the European Union itself. It is apparent that the flows of European and Northeast Asian investments reflect the private sector response to the differing market opportunities in Europe and East Asia, respectively, during the latter 1980s and early 1990s. European investors responded to the perceived increased market opportunities as well as increased market competition in a more economically integrated Europe which, given the far less dissimilar factor costs and demand patterns, involved many firm mergers and acquisitions. On the other hand, the Northeast Asian investors responded to the demands and opportunities of cost minimization through outward relocation to the Southeast Asian countries and China which have substantially different factor conditions and costs. Thus, the unease with the “inward orientation” of European investors is likely to be a relatively less important
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concern. As the flurry of preemptive investments in the run up to 1992 is over and as the European economies proved to be less robust than the exploding East Asian economies, it is likely that the European investors, primarily the large European multinational corporations, would become more aggressive in their investment behavior in the East Asia region. To some extent this is already happening. For example, the value of European foreign direct investments (on approvals basis) is higher than the value of American investments into either Thailand, Philippines, Malaysia and Indonesia from 1991 until the first half of 1994 (Takeuchi 1995). Nevertheless, there appears to be more scope for greater European participation in Asia’s growth. For example, Balaoing (1995) notes that only 2 percent of Germany’s foreign direct investment and 5.6 percent of UK’s foreign direct investment went to Asia while about 35 percent of the total foreign investments of Germany, UK and the Netherlands has been directed towards the EU market itself. APEC and trade discrimination. Another source of unease in Europe appears to be the APEC and its evolving economic arrangements. At present,
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the ideology of APEC is summed up under the term “open regionalism.” As conceived by the eminent Japanese economist Prof. Ippei Yamazawa and Australian economist Prof. Peter Drysdale, the essence of “open regionalism” is in fact not discriminatory at all. Underpinning “open regionalism” is the view that trade liberalization is not a matter of concession (as is implied under the GATT/WTO negotiations) but is an important policy initiative that a country unilaterally undertakes because of the benefits that accrue to the country undergoing trade liberalization, irrespective of other countries. The contribution of “regionalism” lies in the additional benefits of more concerted unilateral trade liberalizations in the region as well as in more coordinated trade and investment facilitation measures and supporting technical and economic cooperation activities among the APEC member economies. The APEC members reiterated their view during the Osaka APEC Summit that the trade liberalization measures (e.g., tariff reductions) under APEC are on a most favored nation (MFN) basis rather than to be granted on a reciprocal basis to non-APEC member countries. Given this decision, Europe need not worry about APEC and can in principle just sit back and relax and be a contented “free rider,” because it can gain improved market access to APEC markets without giving any concessions away. Nevertheless, the specific action plans to implement the Bogor Declaration are yet to be spelled out in Manila/Subic in November 1996. Moreover, the potential exists for misunderstanding among APEC member economies with regard to the comparability of the trade and investment liberalization measures to be implemented. It is possible that, despite the voluntary nature of the unilateral liberalization measures, the attempt to meet free trade conditions
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by the year 2010 for the APEC developed country members and the year 2020 for the APEC developing countries as spelled out during the Bogor APEC Summit would result in vigorous arm twisting among the APEC member economies. Given this, there may be pressures in the future for a temporary or transitional (at least)
...the sharp rise in investments within East Asia resulted in increased trade within East Asia, thereby forging deeper economic interactions within the region. preferential treatment toward APEC member economies, rather than on an MFN basis as currently envisioned, in order to meet the goal of free trade within APEC by the target dates enunciated. The possibility of temporary preferential treatment can occur especially with the implementation of liberalization measures affecting sensitive industries of the APEC member economies. The difficulties that the APEC Senior Officials faced on the principle of “comprehensiveness” as part of the Osaka principles governing the trade and investment liberalization action plans of the APEC member economies and the unsuccessful efforts to include a reciprocity requirement in the extension of the APEC liberalization efforts to non-APEC countries indicate that the road to thoroughgoing liberalization on an MFN basis in the APEC region is likely to be bumpy. Precisely because the road to trade liberalization on an MFN basis while at the same time meeting the timetable for free trade as set forth in the Bogor Declaration is not easy, the granting of preferential treatment to APEC member economies on a transitional (or perhaps even on a permanent) basis
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becomes a distinct possibility in the future. Preferential treatment in APEC, however temporary, is effectively a discrimination against Europe, primarily. Thus, Europe’s concern about APEC. Resolving APEC and European dilemma. The resolution of the APEC and European dilemma calls for either (a) concurrent market opening efforts among APEC economies and the European Union members, or (b) multilateral liberalization efforts under the World Trade Organization in conjunction with the liberalization efforts under the APEC. Either option will eliminate the lingering concern in the APEC on the free rider problem and could encourage more forceful and faithful implementation of the APEC trade and investment liberalization agenda. At the same time, either one or both of the options will also help assure Europe that APEC will not turn out to be a discriminatory club aimed primarily against Europe. The first option calls for agreements between APEC economies and the European Union members on bilateral trade and investment liberalization and facilitation. Considering that Europe’s tariff rates are already relatively low, the challenge is in improving trade and investment facilitation which involve especially the reduction of nontariff barriers and refinements in competition policies especially on government subsidies. This process can presumably be undertaken under the aegis of the AsiaEurope Summit if this is to be institutionalized. However, this option puts the Asian members of APEC under a negotiating disadvantage because East Asia is not an organized group whereas the European Union is highly institutionalized. The first option of bilateral discussions is probably most useful in reducing potential or future trade and investment frictions between Europe and East Asia by, for example,
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encouraging greater understanding of trade and investment rules of each country, pinpointing major bottlenecks or barriers to smoother trade and investment relations, and encouraging collaborative work in simplifying procedures or harmonizing standards in order to reduce the cost of trading or investing among one another. The second option endeavors to multilateralize the liberalization efforts under APEC. In principle, multilateral liberalization is the ideal approach because it does not create distortions in the international economy which regional groupings like NAFTA and the European Union do. In view of the goals set in Bogor, this implies going beyond the commitments that countries made during the GATT Uruguay Round. In effect, a new round of negotiations would have to be instituted. The principal issue, however, is when should the new successor round under the WTO be launched. The launching of a new round of multilateral negotiations under the WTO during the WTO Ministerial Meeting in Singapore in 1996 is too early and highly unlikely. The Uruguay Round has just been concluded; the important concern at present is to ensure the implementation of the Uruguay Round commitments. Moreover, the WTO is still at its infancy. Finally, many developing countries, including most of the ASEAN countries, remain very wary of the apparently growing lobby to include “social clause” and “trade and environment” provisions in the WTO agreements because both can be used for industrial protection by developed countries.
the
Among the developed regions in world, Europe is the most
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vulnerable to internal pressures on the use of “social clause” and “environment clause” in WTO agreements for protectionist purposes, given the magnitude of internal restructuring that has to be undertaken in countries like France to reduce fiscal deficits and total labor costs through reforms in the social welfare system. Fiscal and social welfare reforms are an important means of regaining international competitiveness for high total labor cost countries (arising from large associated payments for labor through the country’s social security
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collective leadership in improving further the world trading environment. Toward this end, the bilateral understanding and agreements that may be forged under the aegis of the Asia Europe Meeting (ASEM) that facilitate and improve economic and trade relationships among the EU and East Asian countries as well as joint technical analyses of the challenges facing the world and regional economies will help pave the way toward the successful launching of the new round of negotiations under the WTO in the near future.
"In principle, multilateral liberalization is the ideal approach because it does not create distortions in the international economy which regional groupings like NAFTA and the European Union do."
provisions). With more appropriate factor pricing vis-a-vis competitor countries like the East Asian countries, European industries may be less prone to advocate the use of voluntary export restraints (VERs), antidumping, and other protectionist regulations. (The alternative is to follow the Japanese example where the low wage labor intensive industries were relocated to the lower wage countries, resulting in a synergistic interaction between the growing developing countries and the restructuring Japanese industries.) To some extent, the new WTO round would benefit from an earlier implementation of fiscal and social security reforms in the high wage high unemployment countries (e.g., France) in order that it would not be held hostage to the political economy of the reform process in the high wagehigh unemployment countries. While it may be premature to call for a new round of negotiations under the WTO at present, it is useful that Europe and East Asia strengthen relationships and help provide
Redefining Development Cooperation Deepening bilateral develop-ment cooperation between Europe and East Asia will bring the most significant benefits towards stronger EU-Asia relations at present. Deepening bilateral development cooperation, however, involves some reorientation of the practice of development cooperation, away from the traditional “donorrecipient" relationship toward the “pooling of resources” among partners (Elek 1995). EU’s development cooperation program in the ASEAN. Drawing from the ASEAN experience, the European Union has been expanding its development cooperation activities in Asia. The European Union member countries and the European Union itself are the second largest sources of official development assistance, after Japan, for ASEAN during the period 19771991. About 60 percent of the official development assistance from EU and the EU member countries to ASEAN
DEVELOPMENT RESEARCH NEWS
during the period went to Indonesia while Thailand and the Philippines took 18 percent and 15 percent shares respectively. With respect to the EU grants under the ASEAN-EU Cooperation programs, Thailand, Indonesia and the Philippines accounted for 35 percent, 31 percent and 30 percent respectively (Balaoing, 1995, p.27). ASEAN projects with EU are funded through EU grants while official development assistance (ODA) from the EU member countries tend to be strongly influenced by commercial considerations (and therefore may best be described as “development financing” rather than “development assistance”). Europe’s development cooperation program with ASEAN countries has been expanding in scope since the 1980 ASEAN-EC Cooperation Agreement. The hundreds of EU cooperation projects, either regional or country-to-country, run the gamut of trade and commercial cooperation, investment promotion, economic cooperation, cooperation in development areas such as poverty alleviation and environmental sustainability, regional development projects, etc. Increasingly the EU has been stressing economic cooperation in its cooperation programs with ASEAN primarily in the areas of industrial cooperation, technology transfer, investment promotion, and the environment. (See Balaoing, 1995.) However, the implementation of the EU-ASEAN development cooperation projects tend to follow the “donor-donee” pattern. For example, it appears that “... only European experts, consultants and services suppliers have been tapped in EUassisted (economic cooperation) projects”(Balaoing, 1995, p.30). Similarly, there has been meager financial support to EU-ASEAN cooperation projects aimed at improving the market access of ASEAN products to the European Union. There
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has been insufficient joint ASEAN-EU effort at investment promotion in Europe on ASEAN. There have also been few joint projects in the technical and scientific fields, although this may reflect the relative backwardness of the ASEAN countries in these fields compared to Europe (Balaoing, 1995).
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public “bads” like international waters.
pollution
in
The pooling of resources means that it is not only the European Union that provides resources but also the East Asian countries, including such recipient countries as the ASEAN countries and China. Moreover, in contrast to the current general practice of tying aid to the purchase of services and materials from the donor country, the pooling of resources concept allows for the sourcing of resources from wherever the best source is among the European and East Asian countries. Pooling of resources also implies that even the usual donor countries may need some resources or knowledge or expertise from the usual recipient countries which can be accessed accordingly. The implementation of the new development cooperation mechanism needs to rely more on market forces with greater participation of the private sector and
“Pooling of resources." Andrew Elek (1995) presents a new framework of development cooperation for the APEC. The principles and the main approach outlined in Elek’s paper are also relevant to the Asia-Europe bilateral development cooperation program. Elek’s proposal is to move away from the old style foreign aid, with its donor-client relationship and in many cases with policy conditionalities imposed on the recipient country. Drawing from Elek’s framework, development cooperation between Europe and East Asia should focus on partnership, joint projects and pooling of resources (including finance, information and expertise) among the member economies in pursuit of the shared "Deepening bilateral development cooperation, objective of maxihowever, involves some reorientation of the mizing the potential practice of development cooperation away from of each country for the traditional "donor-recipient relationship" sustainable growth in line with its own toward the "pooling of resources" among priorities. Consistent partners." with the emphasis of the EU on the “software” aspects of far less participation of the government development (e.g., information, bureaucracy (including the multilateral expertise) rather than on the “hardware” of development (e.g., infra- agencies) beyond the approval of the principles underpinning the new structure), the pooling of resources allows for a multilateral sharing of approach and the regular review of the program. The pooling of resources is technology, expertise, information, maximized if there are no policy human resource development, technical training, etc. as well as the joint conditionalities and little (or none at all) tied aid. undertaking of projects among the member economies. The pooled The benefits of the new approach resources can also be used for providing For example, it does regional public goods (e.g., data base are apparent. on barriers to trading and investing in away with the current practice that each of the countries concerned) as only Europe provides the experts, well as addressing problems of regional F Page 10
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cultural constraints to women participation in the labor force. With E Page 9 much more limited land and a more homogenous population, Japan cannot follow the US example of tapping consultants and services suppliers in foreign immigrants to a significant the EU- ASEAN projects. It encourages degree in order to raise its long term greater people to people interaction growth potentials. Thus, it is apparent and group work. It addresses key that Japan would need to accelerate problems of inadequate information the internal reforms and deregulation about other countries, lack of skills and of its economy in order to improve the technological capability especially in productivity of the nontradable sector the developing Asian countries, and and release much needed the need for institution labor into the tradable sector. building in the member Unfortunately, at present it countries. Most important of appears that Japanese ...development cooperation between Europe and all, it builds the ethos of reformers are still on an uphill East Asia should focus on partnership, joint partnership even among the battle domestically. A credible usual recipient countries. projects and pooling of resources... among the APEC that is long on promises member economies in pursuit of the shared and commitments can be an One possible outcome of important ally to the Japanese objective of maximizing the potential of each the Asia Europe Meeting would reform process. Thus, Japan country for sustainable growth... be a commitment by EU needs a credible APEC. member countries and East Asian countries to implement At the same time, APEC a programmed deemphasis of the old needs a reforming and more open strengthening of the world trading and approach in favor of a programmed Japan. Right now, while Japan is a economic system. Thus, a successful phase-in of the new approach to major source of foreign investments in APEC helps lead the way to development cooperation over a well East Asia, it ranks a very poor second improvements in the world system. defined period of years. to the US as an export market for the rest of East Asia. Clearly, as the US The APEC vision of free trade (on While this may be the centerpiece continues to mend its economy and an MFN basis) is fundamentally a of the new Asia-Europe partnership reduces its trade deficit with East Asia, radical vision that has significant ramiwith respect to development coopthe rate of growth of exports and the fications on the political-economic eration, there remain areas of concern whole economy of the rest of East Asia dynamics of government bureaucracies like poverty alleviation that are more may be constrained if Japan’s economy and economic sectors among the APEC bilateral (i.e., country-to-country or EUremains much less open. This would member countries during the process to-country) in nature. Unfortunately, create an environment of increased of instituting significant reforms to the current image of the European trade tension between Japan and the implement the APEC vision. Given Commission is that it is very rest of East Asia. Ideally, Japan opens the difficult process of policy reforms bureaucratic. In this case, the challenge up its economy further in order to as experienced by many countries, one is in reducing the transactions cost of reduce the cost of doing business in useful role of APEC to the countries in aid-giving by streamlining bureauJapan and thereby temper the loss of its the region is that it facilitates domestic cratic procedures and instituting international competitiveness. In the reforms because the costs of reforms greater flexibility in aid admiprocess, the trade imbalance between (and opposition to reforms) are reduced nistration. Japan and the rest of East Asia will by the concurrent and complementary decline which will ultimately reforms of trading partners. Role of Japan contribute to reduced economic and political tensions in the region. Japan needs a credible APEC just Primary role. 1 The role of Japan in the new Asia-Europe partnership is as APEC needs a reforming and open Development cooperation. The Japan is a fast maturing society defined first and foremost by the role Japan. other role of Japan in the new Asiaand economy; its long term growth Europe partnership is to play an active potential is now constrained by its greying population and its socio1
ASIA-EUROPE PARTNERSHIP...
This section is largely taken from Intal (1995).
of Japan as a prime mover of APEC, i.e., the demands of leadership. In order for APEC to be credible (i.e, long in promises, commitments and achievements), Japan needs to embrace the essentially reformist agenda of APEC. By making APEC credible, Europe will have to sit up and listen -- that is, follow suit in the reform process. In so doing, the environment is set for easier multilateral negotiations toward further reform and
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improved, without bias to open regionalism. Thus, APEC members should not be discouraged from strengthening alliance with non-APEC participants. The pooling of resources among APEC economies is also voluntary. The convergence towards such activities should be encouraged only through persuasion. Development cooperation should not be tied to making particular policy changes which would only serve the interests of certain governments and institutions. Interference of APEC leaders or officials such as seeking to ‘steer’ the economic and technical cooperation activities of individual governments (or other development cooperation agencies) to particular sectors such as education, health or transport is inappropriate. Meddling with market forces is also inadvisable, such that cooperation activities should neither seek to do what can be done through market forces, nor to distort prices to divert trade or investment. Broad options should rather be identified wherein development cooperation
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funding could be more effectively used. Economic and technical cooperation should also help individual economies implement their own policy objectives. New options and opportunities for cooperation should be highlighted without duplicating existing programs of development cooperation. APEC leaders should instead increase awareness of policies and issues regarding resource pooling with the goal of benefiting as many participants as possible. DRN
End Notes This article is based on the working document used during the second policy dialogue among economic experts in Asia-Pacific region, which was hosted by PIDS on February 13, 1996. These series of dialogues were initiated by the Foundation for Development Cooperation in association with the International Development Research Center of Japan and the Brandeis University APEC Study Center. The dialogues are funded by the Ford Foundation, the Center for Global Partnership of the Japan Foundation and the Myer Foundation of Australia. The studies are being coordinated by Dr. Andrew Elek of the Australian National University and Prof. Ippei Yamazawa of Hitotsubahi University, the inaugural Chair of the SOM in 1989 and the Japanese Representative on the APEC Eminent Persons Group in 1994 and 1995, respectively. "Pooling Resources..." and the subsequent discussions in the February 13 dialogue served as inputs to a new paper, "An Asia-Pacific Model of Development Cooperation" which will be presented in the Regional Conference of APEC Study Centers on May 9-10, 1996 in Manila.
Vol. XIV No. 2
March-April 1996
Editorial Board Dr. Ponciano S. Intal, Jr. President Dr. Mario B. Lamberte Vice-President Ms. Jennifer P.T. Liguton Director for Research Information Mr. Mario C. Feranil Director for Project Services and Development Ms. Andrea S. Agcaoili Director for Operations and Finance Atty. Roque A. Sorioso Legal Consultant
Staff Jennifer P.T. Liguton Editor-in-Chief Corazon P. Desuasido Issue Editor Ma. Lourdes M. Salcedo, Wilbert R. San Pedro, Genna E. Manaog and Francis M. Coronel Contributing Editors Valentina V. Tolentino and Rossana P. Cleofas Exchange Delia S.Romero, Galicano A. Godes, Necita Z. Aquino and Federico D. Ulzame Circulation and Subscription Jane C. Alcantara Lay-out and Design
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role in the pooling of resources. At present, Japan’s ODA is preponderantly focused on infrastructure investments in recipient countries. Apparently one reason for this strong bias for infrastructure oriented ODA is that the Japanese bureaucracy is very much short of Japanese who have the experience, understanding and academic background on developing countries. However, if the concept of pooling of resources becomes the overriding focus of development
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cooperation in the region and between Europe and East Asia, Japan would have to shift somewhat its ODA towards more “software” and less of the “hardware” requirements of growth. This calls for Japan to share more of its economic growth experience, institutional innovations, etc. with the other countries. It may also require more Japanese who are knowledgeable of other countries’ cultures, idiosyncracies, politics, institutions, etc. In effect, Japan can take a leadership role in people to people exchange and interaction as well as in joint activities under the pooling of resources concept. DRN
DEVELOPMENT RESEARCH NEWS is a bi-monthly publication of the PHILIPPINE INSTITUTE FOR DEVELOPMENT STUDIES (PIDS). It highlights the findings and recommendations of PIDS research projects and important policy issues discussed during PIDS seminars. PIDS is a nonstock, nonprofit government research institution engaged in long-term, policy-oriented research. This publication is part of the Institute's program to disseminate information to promote the use of research findings. The views and opinions expressed here are those of the authors and do not necessarily reflect those of the Institute. Inquiries regarding any of the studies contained in this publication, or any of the PIDS papers, as well as suggestions or comments are welcome. Please address all correspondence and inquiries to: Research Information Staff Philippine Institute for Development Studies Room 304, NEDA sa Makati Building, 106 Amorsolo Street Legaspi Village, 1229 Makati City, Philippines Telephone Numbers 892-4059 and 893-5705 Telefax Numbers (632) 893-9589 and 816-1091 E-mail Address: jliguton@pidsnet.pids.gov.ph Re-entered as second class mail at the Makati Central Post Office on April 27, 1987. Annual subscription rates are: P150.00 for local subscribers; and US$20.00 for foreign subscribers. All rates are inclusive of mailing and handling costs. Prices may change without prior notice.
References Balaoing, E.A. "Deepening the ASEAN-EURO Partnership." Draft report submitted to the Foreign Service Institute, Department of Foreign Affairs, Manila, August 28, 1995. de Dios, E. and G. Bongolan. "The Philippines and the European Community: Policy Issues and Directions." CIRSS Paper No.3. Manila: Foreign Service Institute, 1994. Elek, A. “Pooling Resources: Promoting development cooperation through APEC.” Paper in progress. Foundation for Development Cooperation (Australia) and International Development Center of Japan, 23 September 1995. Intal, P. “Comments on Hellman’s and Hirata, et al.’s Papers.” International Symposium on “APEC: Cooperation across Diversity.” Institute of Developing Economies, Tokyo, Japan, 20-21 September 1995. Takeuchi, J. “Trends and Prospect for Foreign Investment in ASEAN Countries in 1990s.” RIM: Pacific Business and Industries, Vol.1, No. 27 (1995).
FORTHCOMING SEMINARS FIRST NATIONAL SEMINAR PHILIPPINE APEC STUDY CENTERS NETWORK May 7, 1996 De La Salle University
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