> The Newsletter of The Australian APEC Study Centre

Playing Host

The APEC Study Centre consortium met in Ho Chi Minh City recently for its annual conference. The theme for this year’s event was “Strengthening Economic Partnership for Sustainable and Equitable Development in the Asia-Pacific”. Delegates made presentations spanning the APEC agenda including implementing the Busan Roadmap, harmonizing ECOTECH and TILF and responses to emerging security issues.

Opening the first session, Dr Robert Scollay from the APEC Study Centre in New Zealand raised five key challenges to implementing the Busan Roadmap (BRM) in his presentation. The first of these concerned Volunteerism versus Negotiated Reciprocity.  The presenter posited that for the BRM to be able to deliver region wide trade and investment liberalization, Negotiated Reciprocity provides the best option to move forward. This is because, owing to the very nature of reciprocity, what member economies have to give up on one hand will be compensated for by what is gained in the other.

The third issue concerned the contribution and promotion of quality FTA’s and RTA’s. As the proliferation of these agreements threatens market fragmentation, Dr Scollay highlighted the need for APEC work programmes to encourage further integration. The difficulties concern inherent conflicts in the pursuit of FTA and RTA objectives that are unachievable with the WTO. The question was raised whether member economies, particularly the more developed ones, would be prepared to make compromises on their respective FTA models so that each reflects the differing objectives.

In concluding, Dr Scollay noted the formidable nature of implementing the BRM and set up the challenge for developed member economies to fulfill their side of an “implicit bargain” with APEC developing economic members as contained in the Bogor Declaration.

Dr Kui Wai Li from the City University of Hong Kong in the fourth session presented an overview of results from an in-depth analysis that looked into the impacts of openness and indigenous factors on economic growth and globalization amongst world economies. The premise is that whilst globalization has tended to focus on the implications and consequences of external factors such as trade and foreign direct investment, it is in fact indigenous factors and openness that derive advantages for economies from the globalization process and that bear a direct correlation to GDP growth.

Compiling data from 62 economies the report examines the relationship and performance of a number of openness and indigenous factors, and makes a significant contribution to the debate on the relevance of domestic issues towards the process of globalization and resulting economic growth through integration.

Capping off the two day conference Dr Hadi Soesastro from the Centre of Strategic and International Studies in Indonesia in the seventh and final session highlighted the need for “agenda-driven” reform of APEC. The need to re-invigorate the APEC agenda and achieve the Bogor Goals have directed efforts to deliver a pledge and maintain the economic grouping’s relevance to stakeholders. Dr Soesastro noted that APEC’s pledge to achieve free and open trade and investment remain ill-defined and that only by changing the mechanism and procedures used to forge the agenda can true reform be implemented.

Many reform efforts have already been undertaken in APEC premised upon institutional strengthening, including improving operational efficiency and linkages. Alternative proposals have been pursued including the Mid-term Stocktake, ABAC and some compelling issues such as those raised in the Lowy Institute paper “Saving APEC”.

Dr Saesastro then questioned the architecture of APEC by posing the following: why do East Asian members have an urge to organise themselves into an East Asian regional structure, will this structure compete with APEC and can there be a division of labour between the two? If the East Asia Summit (EAS) engages the US, APEC could lose its appeal to both East Asia and the US, and a new regional architecture would emerge.

An analysis of the existing APEC structures and functions leads Dr Saesastro to conceptualize APEC into three main parts, or a set menu metaphorically speaking, starting off with Liberalization, proceeding to the main course of Facilitation and finishing off with ECOTECH.

Dr Hoang Anh Tuan officially closed what was a well-organised and insightful event, and passed the duty of organising the next Study Centre Consortium Conference in 2007 across to the Australian APEC Study Centre. We are all looking forward to then.

To view papers and presentations from the conference click here.

The Group of 8 Summit to be held in St. Petersburg, Russia in July is expected to focus on energy security, encompassing nuclear energy, oil and gas production and energy infrastructure. International energy security is of special significance to Russia, which is one of the world’s largest fuel and resource powers. It is also probable that Russia will downplay the “bullying” accusations levelled by Dick Cheney and instead focus on the promising development of the East Siberia Oil Pipeline (ESOP) to the Pacific coast.    

Work finally began in April on a four thousand kilometre oil pipeline designed to carry one billion barrels of oil per day from Eastern Siberia to the Pacific Ocean. The pipeline, expected to be finished in 2008 was originally intended to take oil directly into China, but it will now terminate at the Russian coastal and border town of Nakhodka. By terminating on the Pacific Rim, the pipeline gives Russia the unique opportunity to open markets that have previously relied heavily on Middle Eastern oil.

Direct access to Asia, particularly Chinese, Japanese and South Korean markets and the West coast of the United States holds enormous promise. But Russia is likely to use the G8 summit to gloss over the potential costs of the pipeline. According to the Russian Government the initial cost will be approximately 11.5 billion dollars. Independent and unofficial experts Vladimir Milov and Ivan Selivakhin in their book Problemi Energicheskoe Politiki (Problems in Energy Politics), put the initial cost at 15 billion dollars. How this initial cost is to be covered, has been absent from the debate. It is presumed that national pipeline monopoly company Transneft, will cover costs subsidized by the Russian Government.

Legal concerns are also an issue. A nomad clan of indigenous Nemets are considering claiming a share in the profits. But more tellingly, investors will be apprehensive of joining the venture; particularly when the Putin government in suspicious circumstances dismantled YUKOS, which in turned owned the largest producer of Eastern Siberian oil, Tomskneft. When “rules of the game” remain unclear, initial investment may need to be covered by the Russian taxpayer until the pipeline proves profitable.

It seems that the Russian taxpayer will be paying for the pipeline for quite a bit longer. Peculiar Russian problems such as slow progress because of the weather (in Siberia and the Taiga work can only be undertaken in autumn, as winter is too cold, summer too hot, and spring too wet) and pervasive corruption will force costs to increase.

Additionally, the pipeline and port are precariously close to a tectonic plate, which in turn creates environmental concerns. President Vladimir Putin has already once yielded to environmental lobbyists and ordered the route to be changed. Originally the pipeline was to pass within 800 meters of Lake Baikal, the world’s largest fresh water lake and a UNESCO World Heritage Site. Opinions differ on the cost benefit analysis of re-routing around Lake Baikal. Transneft’s vice-president Sergei Grigorev commented “any extension of the route would make it unprofitable”.
 
It would appear that the potential risks associated with the ESOP may make Siberian oil too expensive to be profitable, $6.40 per barrel (Transneft estimate) and $9.80 (Milov and Selivakhin). In the long term however, when oil resources are scarcer and Russia intensifies its position as a resource giant the pipeline may turn out to be a dark horse.

The pipeline is being built to supply the ever-growing demand for oil in China and the rest of the Asia-Pacific region. Transneft estimates that oil demand in China alone will grow by 50% between 2002 and 2010, and continue to grow parallel with the world’s fastest growing economy. For Russia, the ESOP represents an opportunity to kick start exploration and development of extensive oil deposits in Eastern Siberia, and stimulate economic activity in a severely depressed region.  

Until now China and Japan have been dependent on shipments of oil from the Middle East and Africa. In circumstances where safe production and transportation cannot be assured Asia must seek new sources of oil. Asia stands to benefit from a more stable source of oil. This will enhance the region’s energy security and ensure the region has a platform on which to support development and growth of the economy.

The Australian APEC Study Centre has been working this year with the Government of the Socialist Republic of Viet Nam in its capacity as host of APEC 2006.  The “Viet Nam – Australia Cooperation in Preparing for APEC 2006” project is sponsored by AusAID and has been developed by the Centre to enhance the capacity of Vietnamese government officials to host APEC 2006 events, deal with key APEC issues, and to set agendas for 2006 and beyond.

The Government of Viet Nam has made its APEC year a priority. In initial preparations for the year-long agenda of meetings capped off by the Leaders’ Summit, an urgent need to enhance the capacity of government officials to host the relevant events was recognised. This capacity has two main parts: skills and expertise relating to the organisation and management of events, logistics, protocol, procedures for conducting meetings and conference secretariat tasks; and familiarity with, and well thought-out opinions on, substantive issues and priorities on APEC agendas.

Members of ministries including the Ministry of Foreign Affairs (MOFA), benefit directly from the project, as well as those pursuing policy development and initiatives to shape the APEC year, particularly in the Trade Facilitation area. In addition, the Project is assisting staff in other central ministries and in the provinces which will host APEC 2006 events.

The project is comprised of three major components. Component 1 seeks to enhance the capacity of MOFA to host APEC 2006 events and to deal with APEC issues. The second component focuses on Trade Facilitation Agenda assistance to enhance the capacity of the Ministry of Trade to set agendas and lead international discussions on trade and investment liberalisation and facilitation (TILF). The third and final component, Emerging Needs assistance, responds to ongoing requirements of high priority and common interest to both the Governments of Viet Nam and Australia and includes activities with the Ministry of Planning and Investment and the Ministry of Finance.

Cooperation in these areas is of considerable significance to both Viet Nam and Australia. With Viet Nam hosting APEC in 2006 and Australia to host in 2007, assistance enhances continuity and builds constructive outcomes for both countries in their respective hosting years.

All project Stakeholders continue to work to enhance Viet Nam’s contribution to the APEC process as a means to greater prosperity for all member economies.

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Source: APEC Secretariat