ASIAN AFFAIRS INTERVIEW WITH DATO' NOOR ADLAN

Executive Director APEC (1997-1998)

APEC VERSUS ASEAN

Serge Berthier.- To some, the Asia-Pacific Economic Co-operation forum or APEC (1) seems to be some sort of an enlarged ASEAN, designed primarily so as to drown the voice of ASEAN on the world stage. What would you say?

Dato' Noor Adlan.- Well, I think this is wrong. Before leveling criticism at APEC, one has to look in terms of the forces at work when it came into being in 1989. It had little to do with ASEAN. Since the early 1980s, there had been on-going discussions and commissions on the need to establish a forum going across the Pacific, between Asia and the Pacific States. Remember that in those days, the GATT Uruguay round talks were flagging. At the same time, economic growth and development were taking off across the Asia-Pacific region. There was a growing realization that such growth had been made possible by what we call today globalization, and by the openness of the economic policies that the countries had pursued. So there was the feeling that some instrument was needed to consolidate what was happening further. It was a case where people felt that it would be good to do something that would keep up the momentum that had been building-up on its own, that would entrench the commitment to open multilateral trading system a little more.

S.B.- Was then APEC supposed to be some sort of a trading organisation in disguise, its purpose being to inject new blood and organize things a little bit better than the flagging GATT was able to do in this part of the world?

D.N.A.- It might be going too far in saying that APEC was or is going to organize things. APEC, very much like ASEAN, is not a policy-maker instrument.

S.B.- Were the ASEAN countries very supportive?

D.N.A.- There was of course some trepidation or apprehension on the part of some of the ASEAN countries towards the formation of this larger grouping because some ASEAN members felt that ASEAN could have been detracted from its way on full economic co-operation faced against a larger body. And there was also the challenge of the membership in this larger body because we were going to have countries at very different stages of development. The common ground was that everyone was committed towards an open economy and a free trading system. When ASEAN was formed in 1969, its objective was just for co-operation which is not on the agenda of APEC.

S.B.- If APEC is not a policy-maker instrument and co-operation between members is not really on its agenda, one might be tempted to describe it as nothing more than a fancy club.

D.N.A.- One must see it within its own context. You have there a number of countries that, by being members, adhere to a commitment. They are committed in doing things a certain way, that is to say, to be at some stage implementing the necessary tools for a liberal economy and free trading system to work. Now, you might object that, from the outlook, you see very little relevance between say, the United States and Vietnam, because they are at the opposite end of the stage of economic development. The important thing is that by working together within APEC, it will give the necessary knowledge and further the impetus towards that goal within the context of the nations. Being members of APEC, countries less liberal at this stage of their economic development become more aware of the need of the moment.

S.B.- It sounds to me like taking a leaf out of the book of the World Trade Organisation (WTO).

D.N.A.- You may say that, but you have few similarities between the two bodies. The first thing to keep in mind is that the WTO works within a legal framework, with binding commitments which are negotiated and agreed upon. Within APEC we work on the basis of flexibility. We do things voluntarily at the pace one is comfortable with. Having said that, there is nevertheless a good common ground between them for, by sharing this common ground on free trade, APEC supplements the effort of WTO.

S.B.- You mean then that APEC is in a way a lobbyist pushing the agenda for free trade arrangements at regional level, which is not the case of ASEAN.

D.N.A.- It is may be going a little bit far. Let say that we sometimes prepare the ground work. A good example of this is the agreement on technology. It came into being as a result of the strong endorsement of it by APEC at Subic (Philippines). That’s why the agreement was sealed in Singapore by WTO. It was the same process that speeded up the telecommunications and financial agreements that the WTO sealed in the second part of 1997. The APEC leaders had committed themselves to ensure that such agreements would be completed by the target date of WTO. Such commitments at regional level help to focus the efforts of the members and of the others.

S.B.- The World Trade Organisation is basically to trade and economic arrangement what the United Nations are to political and sovereignty issues. What I want to say is that it is a global organisation. Listening to you, and knowing that there are other regional trade groupings such as NAFTA (2) or Mercosur (3) in South America, not to mention the EU, is APEC evolving then into a sort of pressure group within the World Trade Organisation? Are we slowly lurching towards a World Trade Organisation dealing with three or more non-governmental agencies, each with its own priorities?

D.N.A.- I don’t thing you can consider APEC as a bloc or a non-governmental body. Strictly speaking, you can hardly qualify a member of APEC of being non-governmental organization. Mostly members are strictly speaking sovereign nations so the connotation is not right.

S.B.- I agree but what I mean is that APEC looks to me, coming back to the example of co-operation with WTO you gave, that it works a little bit like a pressure group at regional level. It helps build consensus or common position at a lower level.

D.N.A.- To a point, maybe what you say is right since within APEC, we work on what we perceive as being good for us, being the right thing to do. Then, yes, it might evolve into a kind of pressure. But this is a natural thing. If within APEC you reach the point of having a critical mass to push things a certain way, then you have this natural tendency to expand the critical mass within and then outside APEC. If you see it within that context, then yes it is true that we end up as a pressure group. Yet I don’t like the connotation.

S.B.- APEC has been expanding quite rapidly. At the last annual meeting of the leaders (4), three more economies were admitted: Vietnam, Peru and Russia. Is APEC still manageable with such a diversity of countries?

D.N.A.- First, let me say that we are not going to expand for another ten years. But this is a critical issue. On the one hand, APEC members believe that their commitment to open regionalism implies that the group should be inclusive of whoever has the same commitment in the region. Otherwise it would not make any sense of being a closed-ended organisation promoting open regionalism. On the other hand, the feeling is that the members have to decide what is a manageable organisation. The view that was expressed in Vancouver by the leaders is that 21 members is still manageable in terms of maintaining the working practice of the organisation and the cozy relation which the leaders have. The dilemma is not new. The last member to be admitted was Chile. We were then 18 members and had a three years moratorium on membership in order to assess the manageability of a 18 member organisation (5).

S.B.- Adding Russia to APEC while more than a dozen Pacific nations are knocking at the door has been seen as a surprise. Russia itself was said to be surprised at the speed at which it was admitted. Why such a choice?

D.N.A.- When leaders meet, purely objective criteria may not be the deciding factor. It could also mean a political decision must be made. Some may perceive that the depth of interaction between Pacific countries and Russia is not so great as to deserve a particular treatment. Of course the capital of Russia is not in the Pacific, but the view was that the larger mass-land of Russia is in the Pacific hemisphere. Furthermore, the potential for growth is very great and such growth will happen hopefully within the next ten years.

S.B.- Coming back to what you call manageability of APEC, since it is not a policy-maker and each member has its own Individual Action Plan to keep the trade liberalization movement moving, what is then manageability?

D.N.A.- APEC, very much like ASEAN, works on an informal format. Therefore manageability should be seen within that context of informality. The question is a little bit like, "Are you going to have enough time to know each other more and to see everyone?" At the leaders' meeting, they have head to head discussions. When they meet, there are no other persons in the room. But you need time to do so. If you can't do it anymore, maybe it will alter the spirit of such meetings. That is what we mean by manageability.

S.B.- So, it is not an administrative problem like, say, in the UN, where administrative problems have slowly eroded the effectiveness of the system?

D.N.A.- No. It is not a worry. Firstly, the secretariat is not a policy-making body. So, it does not require the same kind of expertise or staffing. Secondly, we are a very light organisation. We have only 21 professional staffs at the secretariat.

S.B.- One per member, I assume…

D.N.A.- Yes. Actually we are still only 18 because the three new members have not yet sent anyone. Then we have 17 locally employed supporting staff (6). The unique thing about it is that the professional staff are not paid by APEC. Each remains on the payroll of its respective countries. so the total budget of APEC is not important.

S.B.- What is the budget of such an organisation?

D.N.A.- Not much since it covers only the office expenditures and so on. Each member contributes a percentage. We have an upper limit of 18% which is Japan and the United States, then we have a decreasing scale. The floor is only 2,5%. So in monetary terms, it will come to less than US$700,000 for the highest contribution and the minimum will be US$70,000 and we have people in between. The members have very much a hand-on approach. The secretariat merely services the meetings that are held and we are the institutional memory for the members. We have a wide range of meetings, and therefore someone has to co-ordinate and keep track and of course we do a lot of public affairs functions. But, as you mentioned, the secretariat does not have a policy function at all, so it saves costs.

S.B.- Nevertheless, each member has to prepare its own Individual Action Plan, then the leaders turned to a sectorial approach, and you have what you call "Collective Action Plans". All this requires some co-ordination and some ground work, I presume?

D.N.A.- Yes. Where ground work is required, it is done by individual members or through think-tanks such as the Pacific Economic Co-operation Council (7).

S.B.- If you had to compare ASEAN to APEC, what would you say?

D.N.A.- First, our focus is on the Pacific region, not just Southeast Asia. APEC is at a larger level. One difference is what we call open regionalism. Unlike other regional co-operation bodies, such as ASEAN or say, the European Union, APEC does not discriminate. Whatever conclusions we struck with each other, they are open to non-members of APEC as well. They have a built-in global dimension (8).

S.B.- So there is no real similarities?

D.N.A.- There is one and it is important. Their work is done on the same principle -i.e.- by consensus. Such working pattern was an established principle in ASEAN when APEC came into being later on. And there was a strong will to maintain this unique way of consensus. Having said that, there are basic differences between ASEAN and APEC. At least in ASEAN we have an equal partnership in the sense that the ASEAN leaders are on same level of economies. Of course some are bigger than others, but basically ASEAN economies are in the same league. It is easy to talk of a level playing field, but it is meaningless if you don't pay attention to the players on the field. In APEC, we are in a more difficult situation. You have to be more cautious because of the level of the economy development of some members. Therefore you cannot narrow down your options as you can in ASEAN. The range is too wide. You can't slot people into a system that will not work for them.

S.B.- Has the financial crisis in Southeast Asia affected the mood in APEC?

D.N.A.- Yes and no. At the Vancouver meeting, in November 1997, we were in an unprecedented situation. For the first time, the meeting was held in the frame-work of a crisis situation as result of the problem of stock markets and currencies falling down. The focus was on the economic turbulence. Basically, what was said was that things needed to be ironed out at three levels, the national level, the regional level and the global level. Those levels interface themselves of course. The leaders decided to mandate President Clinton and Prime Minister Hashimoto to speak to the Europeans for we already then had the feeling that the meltdown was not just a regional or national problem but that it would have a global dimension.

S.B.- To mandate the two leaders of the largest economies to sort out the mess was not really a breakthrough, was it?

D.N.A- Maybe. But the fact is that you first need a human face to focus other people. The immediate thing was to bring about for the Europeans to recognize that the turmoil was global. Then when I say, no it didn't alter the mood in APEC, it is because everyone agreed that the best way out is to open the economies of the members further. At the same time it was recognized that things had gone wrong in the process. Some of the wrongs were at the national economy level. The nations will have to rectify it. But it was also acknowledged that it is necessary to do things at regional and global level although it is not very well perceived at large. All these elements must come together in order to overcome the problem.

Winter 1998.

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Notes:

1.- Twenty one economies are members of the Asia-Pacific Economic Cooperation forum. They are: Australia, Brunei, Canada, Chile, China, Hong Kong, China, Indonesia, Japan, Korea (South), Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore, Chinese Taipei, Thailand, the United States, and Vietnam.

2.- NAFTA (North American Free Trade Agreement) is a trade bloc consisting of Canada, the United States and Mexico.

3.- Mercado Comun del Sur (MERCOSUR), i.e. "Common Market of the South" was established by the Treaty of Asuncion signed in 1991 by Argentina, Brazil, Paraguay, Uruguay and Argentina. The objective was to establish a Common Market by December 1994. A transition period was set up in order to apply in it the major instruments for such a market (harmonization of the legislation, coordination of macroeconomic and sectorial policies and so on). In August 1994, the countries agreed on the need to extend the transition period to January 2000. Chile and Bolivia have since then signed agreements to achieve, in each country, a Free Trade Zone with MERCOSUR. The external trade of MERCOSUR was only US$17 billion at the end of 1996 compared to US$635 billion for the ASEAN countries.

4.- in Vancouver (Canada) in November 1997.

5.- As many as 15 countries were waiting for the three-year moratorium on membership to expire. The other reason for such a moratorium was for the members to have the time to establish some rules for the applicants. There are loose rules calling for a successful applicant to produce an Individual Action Plan and to join Collective Action Plans "from the time of its joining APEC".

6.- The secretariat of APEC is based in Singapore.

7.- The Pacific Economic Cooperation Council (PECC) is a non-government organisation established in 1980 at the proposal of the Prime Ministers of Japan and Australia. It was not a formal body. but the framework of a partnership of business, government and research representatives from 22 Asia-Pacific economies (Australia, Brunei, Canada, Chile, China, Colombia, Hong Kong, Indonesia, Japan, Korea, Malaysia, Mexico, New Zealand, Peru, the Philippines, the South Pacific Forum Island Nations, Russia, Singapore, Chinese Taipei, Thailand, the United States and Vietnam).

"We are not talking about countries", Isaac Tcachman, the current Director of its secretariat, points out, "but economies. Each economy is represented by someone and each economy has its local organisation organized as the local people wish. Each local one is non-governmental organisation although they might be supported by government. Let’s take Perupec, from Peru, as an example. The chair is an ambassador and the coordinator is an employee of the Ministry of Foreign Affairs in Peru, but the members of Perupec are businessmen and academics. So it does not mean that Perupec expresses the view of the Peruvian government but the view of the group where in the majority the members have nothing to do with government organizations. What is important is that we have what we call a tripod organisation. In a way, we are basically a sub-contractor of APEC and the only non-government body to be given the status of observer at APEC meetings".

PECC does not enact or draft policies but study and propose long-term options. Its strength, according to Isaac Tcachman, is that organisation does not only employ full-time people but draws on experts on each of the sectorial field it wants to tackle.

"Our strength is that in APEC you have a high turn-over of staff within the structure because it is institutionalized that way, whereas we have staff on longer assignments. There is a sense of continuity which is maybe lacking, or say, undermined in APEC by its very nature. There is of course political consideration in that, but since we do not have any political consideration to take into account in our set-up, we do not have this hurdle. As a result, with time on our side, our role of observer has been slightly enhanced to a little bit more active status because most of the time APEC relies on us to look back to what has happened in the past. We tend to become the back-up of the system at the technical level.

The other thing in our relations with APEC is that being more low-key, we can be more productive on sensitive issues and act as a sort of clearing house for policy and business research."

8.- APEC deals mainly with trade matters. Its agenda is to liberalize nine sectors for the time being. The target date is 1999 but the implementation is left to each member in its "Individual Action Plan".. The nine are: environmental goods and services; fish and fish products; forest products; medical equipment and instruments; telecommunications; mutual recognition arrangements; energy; toys; gems and jewelry; and chemicals.

Six other sectors have been added to the agenda in November 1997. They are: oil seed and oil seed products; food; natural and synthetic rubber; fertilizers; automotive parts and civil aircraft.

Winter 1998

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