Manila takes over from Beijing, whose chairmanship of APEC in 2014 culminated in a landmark US-China climate deal, and the push for a trade deal for a region accounting for half of global business. How will the Philippine leadership and economic turnaround shape the 21-member trade bloc?
“I think the more innovative contribution the Philippines is making is two-fold: one on people and small business, and the other on resilience. We couldn’t have had a more focused attention-grabber than Typhoon Ruby. Organizers completely reorganized this big meeting, and it’s been flawless,” said APEC Secretariat Executive Director Alan Bollard.
Bollard was referring to the first event that the Philippines hosted from December 8 to 9, the Informal Senior Officials’ Meeting (ISOM). Initially set in Albay, the ISOM was moved to the capital Manila as the storm made its way to the disaster-prone province.
The former governor of the Reserve Bank of New Zealand, Bollard said the Philippines will carry over China’s initiatives on facilitating trade and testing new drivers of growth. Yet, he said a key challenge will be pursuing Manila’s priority of helping cottage industry-type SMEs access global finance and markets.
Rappler caught up with Bollard before he flew back to his Singapore office. The APEC Secretariat chief discussed the Philippines’ 4 priorities in 2015, the “noodle bowl” of trade agreements in the Pacific Rim, and the distinct Filipino style of hosting one of the world’s premier business meetings.
Watch our exclusive interview.
What are the lessons the Philippines can learn from China’s chairmanship this year?
The China year has been a very busy one. China’s big deliverable this year has been an agreement to do a study on something called FTAAP: Free Trade Area of the Asia-Pacific. We’re saying, “What would a really free trade area look like? How might we combine the various trade negotiations currently underway to get there? How do we stop one part of the Pacific room from going on one direction, and another part going off on another direction?”
That’s the subject of a big study that will be started this year: The Philippines will be putting in place all the mechanisms to get an agreement on what that should be and how it should proceed.
Secondly, connectivity: how we join up the region. There’s a lot going on about infrastructure in the region, ensuring we’ve got the same sort of systems in borders. We call it trade facilitation. So that if exporters in the Philippines are exporting to whether it’s China or the United States, we help them facilitate those goods going through customs, health and security checks, logistical arrangements, common data standards. We want to make sure that there’s not a single China system, a Japan system and a US system, but a single Pacific system.
Thirdly, as part of this connectivity blueprint is a way of helping people move across borders. We’ve been running for some years an APEC Business Travel Card, which means business people can get fast entry into different economies. We’d like to see whether there’s a way to extend that to other skill groups. We’re also looking at ways of improving student mobility across the region with APEC scholarships. We’re looking at ways of improving tourist mobility because tourist flows are just increasing so fast at the moment.
In addition, China was quite adventurous in terms of a number of projects to test out new drivers of growth. Because ever since the global financial crisis, trade growth has slowed down so we are looking at other growth drivers: how much can domestic demand drive growth? What happens as poor people join the middle classes? They’re looking at different things to spend their money on; that’s a different growth driver. How do governments see their incentives and requirements for providing social services? What about increased attention to the environment? It’s a big China focus at the minute. How much can “green growth” be a driver? What about oceans and what we call the blue economy, how much can that be a driver?
The Philippines will be the one that keeps all that moving. Those things don’t just happen. They require intense meetings and projects, and work programs for the 40 to 50 working groups we’ve got in APEC. Many of those will be meeting in the Philippines this year.
The Philippines’ focus for 2015 is inclusive growth. You said this involves a new model where we look at areas previously underrepresented in APEC. Can you tell us more about that?
The focus that APEC has had is growth. A few years ago, APEC leaders said, “Let’s remember there are different dimensions to growth.” One is a real Philippine focus this year: inclusive growth. Who’s benefitting from it? Are the returns to fast growth going down the economy? Actually, we know that while economies have been getting richer, inequality is growing as well.
So what the Philippines wants to do is to go into areas of the economy that traditionally have been hard to get engagement in. We’re seeing economies grow as they get internationalized, and they get access to global demand, global developments, and trade more. The part of the economy that finds it more difficult to do that is small business.
The Philippines identified 4 priorities: SMEs, regional integration, human capacity development, resilient economies. Which do you think should be the top priority?
I think the more innovative contribution the Philippines is making is two-fold: one on people and small business, and the other on resilience. On resilience, we couldn’t have had a more focused attention-grabber than Typhoon Ruby (international name: Hagupit).
As Typhoon Ruby grew in strength, this very hard decision had to be made that we wouldn’t go to Legazpi, Albay. We would come here (Manila) instead. We’re sorry we weren’t able to go out there. We should say to the people there: we appreciate all the work that had gone on. We hope there will be some APEC meetings there later in the year. But the right decision was made. Actually in the space of two or 3 days, the organizers completely reorganized this big meeting with several hundred people, and it’s been flawless. That’s an example of how to plan things that could disrupt APEC. Who knows there will be more of that during the coming year?
That put the focus on resilient growth. That means planning for disasters and unexpected events. It says having business continuity plans, processes in place. One of the things the Philippines will be focused on this year will be ensuring that when disasters happen, people can send teams across borders to help disaster recovery very quickly without getting caught up in red tape. We saw that happening last year. There are improvements we can make. The Philippines will lead that.
Trade Secretary Gregory Domingo made a distinction between two types of SMEs. There are those already connected to the global value chain but he said there are also cottage industries, microenterprises with no access to finance, markets. How can APEC address the needs of both?
Yeah, he made an interesting distinction. The globalized ones we see taking a bigger role already. Actually, East Asia leads the world in global value chains. So until 10 years ago, you had to be a multinational or a very big government enterprise if you want to trade in a major way. It’s changed. We see it when we look at things like iPhones and other modern devices. They’re not just built in one country. They’re built in a whole bunch of different economies and components and services. That’s well underway. There’s a bunch of projects that APEC is doing to help build those, and those will continue this year.
The harder stuff from an APEC point of view, because we’re all about globalization and integration, is the cottage industries. They’re not globalized. They are local. They often don’t have the money, human capabilities, sometimes the technical capabilities to scale up. So we know the Philippines is going to propose a number of projects to help them improve, and to make use of the Filipino experience on that. We are going to be in Clark in late January, early February talking about some of those very specific things, and what other economies can offer as well.
Have there been more interventions in climate change mitigation, disaster risk resilience, which the Philippines is also pushing for?
There’s a lot going on. We’ve all seen climate change effects in super typhoons, flooding, landslides. There’s also long-term impacts changing agricultural competitiveness and implications for food security as well. We talked a lot about that: what it might mean for coastal communities, the blue economy, building up stocks. We haven’t got full answers to that yet. We are also looking at energy efficiency, how to stop polluting. Of course, a lot comes from coal-fired generation and some of the big industrial operations, transport, and all those areas. We’ve got ongoing projects to try and lead to emission reductions.
One of the things that came out of Beijing that we were surprised but very pleased about was the bilateral agreement between China and the United States on emission reductions. That was probably the first major agreement between a developed and developing economy, which we hope might be a model going forward. That’s been a big holding point in the unsuccessful climate change conventions happening over the last decade. That isn’t formally on the agenda in the Philippines but you can be sure there will be side meetings going on bilaterally to try and move that forward.
On the region’s trade landscape: you’ve said the challenge is to define the FTAAP vision. How do you see that happening in the coming years, especially in relation to other trade negotiations: the US-led Trans-Pacific Partnership (TPP) and ASEAN’s Regional Comprehensive Economic Partnership (RCEP)?
It’s an untidy Pacific Ocean with a lot of trade agreements negotiated and underway. Some of those are bilateral ones, regional ones. Some of them are what we call mega-regional ones like TPP, and the one the Philippines is in, RCEP. Then there are other things we call are plurilateral ones on the sidelines of WTO (World Trade Organization). There’s a lot of stuff there and it’s not going to get any tidier.
But if we look at that sort of noodle bowl analogy, and say, “What is going to be the big menu in the kitchen over the next 10 years?” China said, “Let’s try and sort out these cooking menus, and try and ensure they are moving in the same direction. We don’t want a US-led TPP going off on that direction, and an RCEP with China and India going on off on that direction. We want them all converging.” To be realistic, it’s a long way to go and we’ve got to see how TPP and RCEP actually eventuate.
TPP has been going on for 4, 5 years and hasn’t yet got a resolution. There’s another, we hope a final meeting scheduled for early next year because people are seeing a political window of possible opportunity in the US early next year. TPP will try and hit that window but there’s no guarantee. However, once it does, then we’ll start to see the text and what that all looks like. How much that would be a model for FTAAP? How much would FTAAP be a TPP+ type of arrangement or would it still have a way to go? Then we want to know about RCEP.
So we’re looking at stepping stones. It’s complicated at the minute but there’s a lot of energy and focus on it. I think everybody in the region sees what trade has delivered and sees that as a way for growth. We’re interested in this because it’s helping people improve their livelihoods and become better off.
There will be a lot happening during the Philippines’ year. We’ll keep hearing about it, and working at how we can move things forward. But having said that, APEC won’t be doing the negotiations. It’s on the sidelines of APEC. We reach things by agreement. It’s all consensus.
There’s a lot of concern about ASEAN integration next year. What are the things APEC economies should look forward to?
ASEAN has got some very big goals. I think most commentators think they will not all be met, 80-20 achievements, something like that. But we are already seeing quite a bit happening as economies get ready for the end of next year. You can see it in services, in regulation of different professions. We’re watching that quite closely because APEC wants to pick up and use whatever we can out of that.
We expect the Philippines as host to help with the transfer of technology and information about what’s working in the ASEAN Economic Community, and what’s not working as well so we can entrench that in the working groups for the Philippine year. But it’s not just ASEAN. We also draw on Northeast Asia, the North Americas. The other quite interesting development for us is the Pacific Alliance, which is Mexico, Peru, Chile, and Colombia.
What are the main takeaways from ISOM in Manila?
A couple, I’d say. One is a real-life listen about resilience that the Philippines has provided for us.
Secondly, the meetings have taken place in a different sort of style. Look, I’ve put on a tie for you for the first time since I’ve been here. The meetings themselves are much more casual. We’re sitting around on open chairs. That’s the Filipino way of trying to get more agreement around the room. It’s got a particular style of doing that and getting things on the table.
The other thing is this focus on small business: people, skills, the cottages of small businesses and inclusive economy. I don’t want anybody to think that’s going to be easy. It’s not. It’s harder stuff than we’ve done in the past. It’s not easy to see how craft businesses, cottage industries can just take the benefits of globalization. That’s going to be quite a long, hard road but the Philippines started us off on that. – Rappler.com
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