20 July 2007
For Personal Use Only

• Source: Asia Pulse

CANBERRA - Put away your bucket and spade, and reach for the calculator, APEC (Asia-Pacific Economic Cooperation) finance ministers hit the Sunshine Coast from July 30.

Climate change, investment, government finances and capital markets will be key areas of discussion when finance ministers and their officials of the Asia Pacific Economic Cooperation countries meet for five days of talks.

This will be the last formal ministerial gathering of the many APEC committees that have met this year prior to the Leaders Meeting in Sydney on September 8-9.

Security will be extremely strict around the Hyatt Regency Coolum meeting, but being in a more isolated venue, there are unlikely to be the huge clashes between police and demonstrators that marred the G20 Finance Ministers meeting in Melbourne last November.

Treasurer Peter Costello will host the 21-country gathering.

But the meeting will unlikely have the same glamour as the September leaders gathering when Prime Minister John Howard will rub shoulders with his old ally US President George W Bush, Chinese President Hu Jintao and Russian President Vladimir Putin.

Indeed, the finance ministers’ part of the APEC agenda was once the poor orphan of the pack, with the group’s focus more on trade and security, and was literally just a talk-fest that the Leaders would only mention in passing.

That may sound odd given the APEC forum accounts for 50 per cent of global economic growth with a gross domestic product of US$19.25 trillion, and having attributed nearly 70 per cent of world growth in its first 10-years of existence.

However, over the past two years the finance side of APEC has started to become a key element, more so as the likes of climate change have become a major economic factor.

Vice president for Asia at the US Chamber of Commerce Myron Brilliant says APEC is an ideal forum to discuss climate change policy.

But Mr Brilliant says although climate change will be high on the APEC agenda it is unlikely a binding regional strategy will be met.

“I think the carbon credit system will be on the table … keep in mind that APEC is a voluntary organisation so … each government has it’s own right to best determine how to proceed.

“If we can share ideas about where to go from here, if we can get the developing countries to be at the table and offer constructive solutions … that will be a positive step forward and that’s what perhaps APEC can create.”

The meeting will be looking to strike a balance between the emitters of the undeveloped world, such as China, and the developed.

Not that the developed world is looking to stop the economic boom in China in its tracks by cutting emissions, far from it. But it will try encourage the country to at least slow the pace at which it emits at.

Like the G20 meeting last year, APEC will also be looking at energy security - such as making markets more transparent and accessible - to ensure countries can rely on future oil and gas supplies.

The meeting also will discuss ways to increase investment within the Asia region to encourage the funding for much needed infrastructure - such as deepening capital markets to attract private investors.

Even though the Asian countries hit by the Asian Financial Crisis in the late-1990s have undertaken some structural reforms in their economies, albeit at different speeds, investment in the region is still well below levels seen 10-years ago.

Reserve Bank of Australia Governor Glenn Stevens said this week that the Asian crisis was essentially a banking crisis, bought on by the banks and their customers taking on too much foreign currency risk.

He said while they also have improved banking supervision and macroeconomic policies, a number of countries were still having difficultly meeting international standards.

“Developing and maintaining a strong supervisory apparatus is a challenge in any country at any time, no less in the Asian region,” Mr Stevens said.

Government finances, and the wide ranging fiscal positions among the 21 members, will also be discussed by the finance ministers, and looking at whether such levels of budget debt are sustainable given future problems facing the region, such as an aging population.

Here it won’t be the developed world finger wagging at their undeveloped counterparts given that the global’s largest economy - the United States - is running a huge budget deficit of around US$280 billion excluding defence spending.

“The whole issue of sustainability, the issue for most economies, is still the inadequacy of savings for the baby boomers running into retirement,” Stephen Roberts, chief economist at Grange Securities said.

“That looks like being a big budget drain for most of those economies looking out over the next 10 to 20 years.”

That’s where Australia is looking relatively squeaky clean with a balanced budget, a fund already in place to deal with uncovered public servant superannuation liabilities, and a well documented outlook for intergenerational change.

So while APEC is voluntary and more about encouraging its members to take a certain path in reforms over the long term, a minister can pick-up an idea that might help his or her economy.

And if it proves unpopular at home, however beneficial it may be to the economy in the long term, they can always blame APEC.

APEC started as an informal gathering of 12 countries in 1989 in Canberra.

The 21 economies that now make up APEC - and account for a third of the world’s population - are Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, Philippines, Russia, Singapore, Taiwan, Thailand, United States and Vietnam.

Filed by Maria Robson under Macroeconomic Policy, Multilateral Trade, Investment and Competition Policy, Development, Climate Change