PACIFIC BASIN ECONOMIC COUNCIL
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APEC and PBEC: It Even Sounds Right The turmoil at the WTO Ministerial graphically illustrated the need for the international business community to become more proactive in articulating the benefits of globalization and free trade. By John Barry Kotch American Chamber of Commerce in Korea Journal Vol. 49, No. 3, May/June 2000 March was a red letter month for both APEC and PBEC with the former holding a Forum on Shared Prosperity and Harmony hosted by the Korean government in Seoul and the latter its annual International General Meeting in Honolulu. They even took place at the same hotel, although the settings differed considerably and seasonally; springtime at the Seoul Hilton and the Hilton Hawaiian Village. Korea's robust economic recovery attracted a parade of dignitaries from President Kim Dae Jung and numerous cabinet ministers to the host of this year's APEC in Brunei Darussalam, Minister of Industry P.A. Rahman. Also in attendance were leading academic experts and luminaries such as Alan Toffler and Nobel Laureate Robert Mundell. Although it lasted only a day and a half, the APEC Forum was tightly organized and finely focused in three discrete segments, each highlighting an aspect of the recovery process. The forum rightly pursued a "lessons learned approach," the idea being to ferret out what worked and what didn't, in order for APEC economies to avoid and minimize future crises while, at the same time, promoting policies conducive to growth. These included structural reform, trade and investment liberalization, devising cooperative measures to avoid recurrence and exploring specific plans for regional cooperation with the goal of reducing social and economic disparities and sharing prosperity more equitably. The results will be forwarded to the Senior Official for inclusion on the agenda of the leaders' meeting in Brunei Darussalam in November. Overall, the participants took note of APEC's positive impact on trade and investment liberalization and facilitation, market opening and foreign direct investment, all powerful factors in Asia's rapid economic recovery. In this regard, they emphasized the necessity of harnessing APEC to help break the WTO impasse. In this connection, it was noted that the contagious nature of the crisis had a positive side effect in eliciting international cooperation and assistance from its inception, thereby making it easier to deal with and shortening its duration. Debate ranged over various foreign exchange regimes, appropriate monetary and fiscal policies and the role of the IMF and other international financial organizations in the process of devising a new financial architecture. The ever-increasing volatility both of foreign exchange and stock markets was especially noted as a cause for concern as the generator of large-scale, shortterm capital and currency movements. This was underscored in Nobel Economic laureate Robert Mundell's welcoming speech in which he called for better coordination of the world's three major currency blocs - the dollar, the euro and the yen - so as to minimize currency fluctuations. Better forecasting techniques, such as a Foreign Exchange Crisis Forecast Model proposed by President Kim in his welcoming speech, were also discussed along with the desirability of currency controls, particularly with respect to hedge funds and short-term capital flows and the need for monitoring them. Addressing the problem requires domestic adjustment mechanisms and market discipline to cushion the shock, sound monetary and fiscal policies, genuine financial sector reform and regulation, prudential lending. transparency and good corporate and national governance. The need for better IMF rescue packages including provisions for moral hazard and greater attention to safety nets for the "have-not" segment of the target population were also mentioned. Some of the new ideas to emerge from the two days of discussions included proposals on a more flexible workforce through "workfare" in conjunction with productive welfare and cyber education as a way of crashing through the digital divide. The first session on Surmounting the Economic Crisis through Liberalization and Reform and presided over by Harvard Professor Robert Barre, focused on the need for structural reform and the second part on effective ways of implementing trade and investment liberalization. Participants included WTO Director designate Supachai Panitichpakdi and Korean Minister of Finance Hun-Jai Lee. The second two-part session was presided over by Harvard Professor Jeffrey Sachs and Bank of International Settlements General Manager Andrew Crockett. The overall theme was A New Financial Architecture for Preventing the Recurrence of Economic Crisis and included Berkeley Professor Barry Eichengreen and NY Federal Reserve Director William McDonough in the first sub session dealing with Finance and Foreign Exchange policies and in the second on short term capitals flows and hedge funds, the Chief Morgan Stanley, Dean Witter Economist Stephen Roach. The third session on Saturday morning looked at the issue of Regional Cohesion as for the Alleviation of Social and Economic Disparities. The first part, the search for a new social welfare paradigm, featured a presentation cum lecture by Berkeley Professor Irma Adelman comparing the Western and Korean concepts of a social contract, followed by a tour de force presentation on the need for adapting education to the new knowledge-based economy by Future Shock author Alan Toffler. The second part on reducing the knowledge gap through regional cooperation was highlighted by World Bank Korea Representative Sri Ram Ayer and featured a video presentation by President Jim Wolfensohn highlighting Korea's transition to a knowledge-based economy. In this new environment, productivity and competitiveness will take precedence over the kind of factor accumulation that drove Korea's earlier economic growth. He predicted that high levels of human skills in the form of an educated work force and technical know how, combined with a growing information and communication network, will place Korea at the forefront of growth and innovation in the 21st century Before there was APEC, there was PBEC, making the latter the oldest economic cooperation organization in the Asia Pacific region. While the latter did not give birth to the former, it did provide the basis - the private sector initiative which today remains the driving force behind the APEC idea. One of the most interesting and productive special sessions was a PBEC-APEC Joint Workshop on Corporate Governance which brought together high level presenters form both organizations demonstrating more than anything that the two are in synch. Korean economic issues were a high point on the agenda of the 33rd Annual International General Meeting in Honolulu just prior to the APEC Forum. The overall conference theme was the "Economic and Political Implications of the Changing Global Landscape" and included sessions on Rethinking Multinational Corporations in a Global Economy, Corporate Responsibility in the Face of Global Economic Integration, Getting the WTO Back on Track, The Link Between Military Security and Economic Development in the Pacific. The Meeting also showcased Korea's economic recovery under the rubric of "New Business Opportunities in Korea: Investment for the Future." Keynote speaker and Trade Minister Han Duck Soo was effusive in his praise of Korea's economic recovery, as was Sang Kong 11 Chairman of the Institute of Global Economics. Chairman Sang foresaw a brighter future in a qualitatively different economy in which small and medium enterprises, along with the chaebol, would all play their part, reinforcing each other through the synergistic effects of high tech. Milton Kim, President of Good Morning Securities, called attention to the change in Korea's new, foreign-friendly cultural and investment climate with the emphasis on new ideas not old connections - and the fact that Korean Americans, in particular, are returning to their homeland and embarking along with fellow Korean entrepreneurs on E-Commerce start ups and joint ventures. The APEC-PBEC workshop was fortunate in having several outstanding presentations. The first by Robert Clarke, Chairman and CEO of Hawaii Electric Industries, on the role of the Board of Directors and its relationship to management stressed the importance of an independent, active and involved outside Board of Directors whose first duty is to the shareholders, not management. The second day, Stuart Deming spoke on Corporate Governance from an Accounting Perspective, shedding much light on what effective regulation should look like and how to detect patterns of illegal conduct. They were accompanied by a highly informative Kroll Associates presentation on implementing effective anti-corruption practices within the organization. Finally, Ambassador L. Craig Johnstone, Senior Vice President for Economic and National Security Affairs of the U.S. Chamber of Commerce discussed how corporations need to augment their awareness of economic and security issues increasingly central to corporate decision-making. One of the high points of the PBEC Meeting was a highly successful Korea Night featuring dancing, music, singing and costumes concluding to the refrain of Arirang. Korean culture and cuisine had the last word in an afternoon and evening of Koreana, a feast for mind and body alike. John Barrr Kotch (Ph.D., Columbia University) is adjunct Professor Political Science at Hanyang University Graduate School of Asia-Pacific Studies. He has written for the New York Times, The South China Morning Post, Foreign Policy and other publications.