Toward the Development of APEC

— More Efficient, Concentrated Activities
and Positive Participation by the Private Sector —

Keidanren (Japan Federation of Economic Organizations)
September 16, 1997

« Introduction »

Keidanren formulated and issued proposals titled "Basic Thinking on Intraregional Cooperation in the Asia-Pacific Region" in 1994 and a proposal titled "Japan's Role in Asia-Pacific Economic Cooperation," directed toward the Osaka Meeting of the Asia-Pacific Economic Cooperation (APEC) forum, in the following 1995. At the stage of making the APEC vision and its liberalization plans, these opinion papers, among other things, called for taking into consideration of the diversity among APEC members and for the Japanese government to take the initiative by carrying out its own liberalization.
At the APEC meeting in the Philippines last year, the Manila Action Plan (MAPA) was adopted, and APEC moved from the stage of vision to the stage of concrete action. This signifies both that APEC has come to exert a direct influence on corporate activity and that APEC has entered an era in which it requires the practical business experience and information of the private sector. Indeed, last year's Subic Declaration emphasized private-sector participation in the APEC process and expressed great expectations of private business circles.
For this reason, Committee on Asia & Oceania of Keidanren in February of this year conducted a survey of 500 Keidanren member countries on the desirable roles of APEC and the Asia-Europe Meeting (ASEM). This questionnaire enabled the committee to hear the views of private business people. Then, taking into account the discussions of the APEC Study Group, the committee formulated its opinions on the desirable activities and management of APEC and the specific issues that APEC should take up with priority from now on.

« Problems of APEC and Policies to be taken »

Keidanren positively evaluates the achievements of APEC so far and has expectancy of its activities from now on. It is a fact, however, that various problems have emerged as APEC has become more active year by year, such as the enlarged scope of APEC's activities and the growing complexity of its organization , the balance between the promotion of intra-regional liberalization and the coordination of national interests among APEC economies, and the mode of private-sector participation.
We believe that APEC should tackle these problems in a positive manner, and we make the following proposals with the aim of making APEC's activities more effective.

  1. APEC Organization and Activities
  2. Until now, whenever there have been new proposals for creating conferences, fora, or organizations, APEC has tended to move onto the implementation track without enough overall coordination. As a result, APEC's organization and activities have steadily grown bigger and more complex, so that now it is difficult to see the full picture.
    From now on, APEC should make efforts to arrange and simplify its organization and activities from an overall perspective, undertake activities in a more strategic and concentrated manner, and conduct simple and efficient management.

  3. Promotion of Liberalization
  4. APEC adopts a non-binding principle, which emphasizes the voluntariness of member economies. Although there is some concern that the process of liberalization would be delayed if completely left to the autonomy of members, from the point of view of the diversity of constituent members in terms of stage of economic development, culture, and other factors, we believe that this method should be continued.
    However, the autonomy of members should not be respected to such an extent that we lose sight of the direction of liberalization. In the Bogor Declaration, APEC members committed themselves to the realization of liberalization in trade and investment by 2010 or 2020, and yet the efficiency of the individual action plans of each country is not necessarily adequate.
    In order to implement liberalization without fail, each member is called upon to (1) observe the standstill principle, so that there shall be no reverse from the present situation, and (2) indicate a concrete road map to the final goal of liberalization in their individual action plans.
    Meanwhile, if a country adopts an industrial policy that emphasizes the nurturing of domestic industry, that country must ensure transparency in the policy and indicate the background and a deadline of the policy. For the settlement of related disputes, APEC members should utilize the World Trade Organization (WTO) and at the same time pursue settlements through governmental or private-sector discussions that do not rely on legal means.

  5. Private-Sector Participation in APEC
  6. So far the opinions of private-sector business circles have been reflected in APEC through the Pacific Business Forum (PBF), the APEC Business Advisory Council (ABAC), ad-hoc meetings with private-sector participation sponsored by the APEC chair country, and numerous committees and working groups. However, partly because the arrangements on the private-sector side have not necessarily been adequate, the opinions of the private sector have been only expressed issue-specific-wise, when sought by government and inter-governmental bodies, and occasionally been reflected.
    On the basis of the strong belief that it is precisely private-sector economic activities that constitute the source of economic development in the Asia-Pacific region, APEC should reflect the opinions of private-sector business circles as much as possible. And in order to coordinate these private views in a voluntary, continuous, and effective manner, it is necessary for APEC to re-structure its various meetings and give clearer terms of reference as to their roles in APEC. We hope that a forum for private-sector participation can be realized that has continuity in terms of content and greater effect.
    For this purpose, APEC should utilize the national private economic organizations of member economies and should consider the establishment of an organization, as a supplement to the ABAC, comprising the private economic organizations of member economies, like the Business and Industry Advisory Committee (BIAC*) to the OECD, for example. Then, within this framework, it is necessary to promote the strengthening of bonds and the exchange of information among these business organizations, put together the opinions of private-sector business circles, and submit proposals to APEC, the governments of member economies, and the ABAC.

  7. Active Transmission of Information About APEC Activities
  8. Despite the fact that APEC is deliberating problems that exert a direct impact on private-sector business activities, the actual working mechanism and precise substance of APEC activities is not much generally known. Since private-sector activities are an important factor in supporting the activities of APEC, APEC should actively and frequently transmit information about its activities to the private-sector business circles of member economies, using a variety of means of communication.
    On its Internet home page, APEC should introduce related activities in an even more easy-to-understand manner and should endeavor to promptly update and improve data.

« Priority Issues That APEC Should Tackle in a Concentrated Manner »

In order to achieve the continuous economic development of the Asia-Pacific region, private-sector direct investment should be further utilized. Therefore, it is necessary to promote the improvement of the investment environment. Many issues should be tackled for this purpose, including the construction of infrastructure, the training of human resources, facilitating the path of exchange for people and commodities, the protection of intellectual property rights, and the promotion of information exchange.
Infrastructure construction is among the most important challenge for the economic development of the region. Since this involves huge amounts of money and broad range of technology, however, the use of private-sector resources will be important, in addition to by public sector efforts. Furthermore, in order to promote technological development and to further expand trade and investment among APEC members, it is important to give adequate protection to intellectual property rights and to take measures which prevent the holders of there rights from suffering any large damage. Therefore, we propose that APEC should take up two themes - the construction of infrastructure using private-sector resources and vitality and the protection of intellectual property rights - as priority issues in its activities in the immediate future.

  1. Promotion of Infrastructure Construction Using Private-Sector Resources and Vitality
  2. Last year the ABAC proposed the holding of the Joint Public Private Sector Infrastructure Roundtables, and the first such meeting was held in the Philippines in November 1996. Such meetings are held frequently not only by APEC but also by the ASEM and other organizations, but they do not go much further than the stage of general discussion. From now on, it will be important to bring together the results of these meetings and start discussions on more specific issues.
    Furthermore, as an experiment in raising the effectiveness of the non-binding principle, the ABAC proposed the APEC Voluntary Investment Project (AVIP). In view of the importance of infrastructure construction, it is hoped that this AVIP will be actively utilized in the field of infrastructure development.
    In the promotion of infrastructure construction using private-sector resources and vitality, we urge efforts in particular toward the realization of the following three points:

    1. The appropriate sharing and reduction of risks through strengthened cooperation between international organizations and member governments
    2. Since infrastructure construction projects using private-sector resources and vitality take place within the public framework of the recipient country--that is to say, the policies and regulations of the government, etc., an important key to a project's success lies in the commitment and support of the public sector in the recipient country. Accurately understanding this point, APEC members should endeavor to reduce the risks by establishing links with the official development assistance of the developed countries and gaining the cooperation of international organizations such as the World Bank, and should make the following efforts toward preparing the environment of the infrastructure construction:

      1. APEC member economies should promote transparent and consistent investment inducement policies and investment-related legislation. For this purpose, the governments of developed countries and international organizations should expand their arrangements for providing advice and technical cooperation.
      2. APEC should formulate guidelines for model contracts, which are the basis of individual agreements, and for role sharing between the public and private sectors.
      3. Member governments and international organizations should strengthen their support for the construction of peripheral and related facilities of infrastructure projects.

    3. The building of a new framework for fund procurement
    4. In the area of fund procurement, it is necessary for APEC to urge the building of the following kinds of framework with the cooperation of international organizations and member governments:

      1. It should be made possible to utilize the official scheme of public-policy financing of the investing country in projects that are guaranteed by local governments, even if not by the central government of the recipient country, and projects that extend over more than one country.
      2. Efforts should be made to build a framework to encourage reflux of funds from national organizations and investors to infrastructure construction using private-sector resources and vitality by, for example, consideration of the establishment of an Infrastructure Building Fund, the expansion of supplementary guarantee for bonds issued by the entities involved in infrastructure projects, and the expansion of trade insurance (eg., extending the period of foreign investment insurance, etc.).

    5. The establishment and fostering of local financial and capital markets
    6. Since most of the income that businesses earn from an infrastructure project (typically, of BOT format) is in the local currency, fund procurement also should be conducted essentially in the local currency. In countries where local financial and capital markets are not well developed, however, fund procurement will have to rely on foreign currency, which causes exchange risk for the borrower in addition to country risk for the lender.
      For this reason, as a medium- and long-term issue, member economies, with the cooperation of the governments of developed nations and international organizations, should make efforts to establish and foster local financial and capital markets.

  3. Protection of Intellectual Property Rights
  4. Last year, the ABAC called for the introduction of a mechanism and procedures for the adequate protection of intellectual property rights. And it proposed (1) the establishment of an APEC Central Registry for Trademarks and Patents, (2) the establishment of a program of comprehensive cooperation on intellectual property rights, and (3) the implementation of the WTO/TRIPs* agreement - or equivalent obligations in the case of non-WTO signatories - in the shortest possible time.
    We believe that existing organizations should be positively utilized, and, therefore, are not ready to endorse the establishment of another new organization. However, we hope that governments of APEC member economies continue their efforts toward the establishment of a program of comprehensive cooperation on intellectual property rights and the early implementation of the TRIPS agreement.
    Furthermore, we urge efforts toward the realization of the following three points:

    1. The realization of common global intellectual property rights
    2. It is necessary to make efforts toward the international harmonization of systems and implementation relating to intellectual property rights. For this purpose, it is hoped that APEC will take the initiative toward the establishment of a simple, speedy, multilateral system of procedures for acquiring rights so that the examination results of different economies are honored and mutual certification is possible.
      In this case, rather than building a new system, efforts should be made to utilize existing systems. We urge countries to join international agreements related to intellectual property rights as soon as possible and to realize a unified and integrated system. (Please refer to the note at the end)
      Also, efforts should be made at the same time to promote the establishment of an English-language database, which include information on the status of applications, announcements, registration, well-known trademarks, and examples of disputes (success and failure); the introduction of the System of Laying-Open of (an unexamined) Application*; and a shift from the first-to-invent principle* to the first-to-file principle*.

    3. The thorough enforcement of rights
    4. We highly evaluate the fact that intellectual property rights legislation is taking shape in many APEC members. Because this legislation is not forcefully implemented, however, violations of intellectual property rights do occur. This is a large barrier to the external trade and investment of private companies. Therefore, through the cooperation of APEC members, we strongly urge the promotion of the following three points:

      1. Strengthening court system
        We call upon APEC members to make efforts to speed up the court process and also to properly utilize and expand the discovery system*. It is also important to fix appropriate amounts of compensation.
      2. Establishment of related legislation
        In addition to intellectual property rights laws (patent laws, trademark laws, etc.), members should make efforts toward additional legislation in such related legal fields as the prevention of unfair competition, civil codes, and commercial codes.
      3. Promotion of information flow among organizations related to intellectual property rights
        Efforts should be made to promote closer cooperation and the smoothen flow of information, such as information concerning the violation of intellectual property rights, in and among patent offices, customs, police, and other authorities in economies in the region.

    5. The promotion of educational and enlightenment activities concerning intellectual property rights
    6. The protection of intellectual property rights is an essential key not only for the maintenance of order in the market but also for consumers. In parallel with the establishment and strengthened management of legislation, it is important to promote the fostering of human resources and educational and enlightenment activities.
      As well as efforts to raise the understanding of intellectual property rights at both the public and private levels through the holding of seminars, the dispatch of human experts, the establishment of a training system, and so on, efforts should also be made to promote the development of human resources, such as examiners and protection officials, and for this purpose to strengthen the cooperative linkages among APEC member economies.

« Conclusion »

At last year's APEC meeting in the Philippines, it was confirmed that APEC would tackle such medium- and long-term issues as the environment, energy, food, and population. We strongly endorse its and, among all, APEC should give particular emphasis to the environmental problem. Also, human resource development will continue to be important for the achievement of continuous economic development by developing countries in the region. These two items should be priority issues from now on.
Regarding the environmental problem, solutions are going to require a long time, so specific countermeasures should start as early as possible. Efforts should be made as soon as possible to promote the transfer of environmental technology, energy and resource conservation technology, know-how, and so on.
Regarding human resource development, APEC and other international organizations and government organizations already have planned and are implementing related measures. It is hoped that public and private efforts will be coordinated so as to avoid duplication and increase efficiency.
We would like to take up the problems of environmental preservation and human resource development as most important issues and state our opinions later more specifically.

* See attached explanation of terminology.
Specifically, it is hoped that many countries as soon as possible will join the Patent Cooperation Treaty* for patents and the Madrid Protocol* for trademarks. Also, regarding design, there is the Hague Agreement as an existing mechanism . However, since the content of this agreement is unacceptable for countries which adopts the examination system*, such as Japan and the United States, at present work is going ahead on the drafting of a new Hague Act* with the objective of promoting the affiliation of these countries. It is hoped that this work will be completed speedily and as many countries as possible will quickly join the agreement.

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