LAEBA Conference on Accelerating Regional Integration in the Asia-Pacific Region

The conference on "Accelerating Regional Integration in the Asia-Pacific Region”, part of the annual Latin America/Caribbean and Asia/Pacific Economics and Business Association (LAEBA) series, was held on 15 July 2009 in Singapore. The conference, jointly organized by the Asian Development Bank Institute and the Inter-American Development Bank (IDB) and supported by the Institute of Southeast Asian Studies (ISEAS), brought together high-level officials attending the Asia-Pacific Economic Cooperation (APEC) meetings, multilateral agencies, think-tanks, and academics across the Asia-Pacific region.

The keynote speech^* by Ambassador Michael Tay underscored APEC's achievements in bringing together both sides of the Pacific. In a span of two decades, average tariff rates in the region have been reduced to a third of pre-APEC levels, and merchandise trade increased five-fold between 1989 and 2007. Yet issues still abound, and Mr. Tay enjoined participants to consider what APEC can do in terms of concrete programs and initiatives, to provide a regional ecosystem that would allow businesses and economies to continue to thrive and prosper.

The conference was divided into four sessions that explored modalities for accelerating regional integration and the associated issues of the integration process in the Asia-Pacific region, such as limited market access, high transportation costs, and weak small- and medium-scale enterprises (SMEs).

Two papers were presented in session one. The first paper highlighted the importance of a favorable political context and a government's commitment to create an environment conducive for economic growth and development, as well as geographic proximity in cooperation initiatives. The paper suggested that existing interregional forums could be used as platforms to advance cooperation, particularly on financing issues to improve infrastructure, logistics, and movement of people between Latin America and the Pacific. The second paper shared the results of its empirical assessment on the state of market integration in the Americas and provided short-term measures toward convergence of regional trade agreements, such as harmonization of verification process, digital origin certificates, most-favored nation tariff, and selective most-favored nation liberalization.

The second session discussed issues regarding the process of trade and investment liberalization in the Asia-Pacific region. Given the increasing intra-regional trade for production networks in Asia, the first paper stressed the importance of sequencing and complementarity of cross-border trade facilitation efforts. Physical infrastructure should be supported by information and communication technology infrastructure at the border, the latter of which may be more beneficial for trade than further investments in physical infrastructure. The second presentation proposed broad measures such as the standardization of rules of origin solutions that would balance the rights and obligations of producers and importers.

The third session addressed the issues of improving business climate for further integration, particularly on the internationalization of SMEs in regional and global value chains. The first paper argued that the key to successful SMEs is the adoption by governments of a consistent and comprehensive long-term policy that develops “best business practices”, as well as joint efforts of governments, trade associations, and training institutions to reduce human resource development costs. The paper proposed the establishment of national corporate credit information databases and credit guarantee systems to deal with the financial challenges of SMEs. The case study of the Peruvian value-chain in the second paper employed an econometric model to map out the distribution channels and to help evaluate operational performance of SMEs. The framework was suggested to serve as a guide to governments in crafting policies that would address problems in the value chain.

The final session dealt with the issues on enhancing connectivity between countries and the aforementioned regions, focusing on trade logistics which traditionally have been among the costliest in global supply chains, using Asian and the Latin American/Caribbean case studies. In the case of Asia, supply chain management remains an operational challenge as logistic providers seek ways to integrate strategies to provide the greatest value to consumers. The first paper illustrated that not only market-driven factors, but also product characteristics and labor quality must be considered in determining the optimum supply chain strategies and design. In the case of Latin America/Caribbean, trade logistics showed a poor performance when compared with other regions. Among the reasons mentioned were geographical limitations, complex nature of projects, heterogeneity within and across countries, and financial restrictions. To bridge this performance gap between the regions, the Initiative for the Integration of Regional Infrastructure in South America aims at facilitating harmonization of crossborder regulation and management, and the IDB on its part continues to provide financial and technical support to facilitate physical integration in the region.

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