Anti-Corruption and FTAs/RTAs amongst Key Issues Discussed by Leaders
The 1997 Asian Financial Crisis was yet another reminder - if the world needed one - that corruption and poor transparency inhibit the development of fair and efficient markets. That message hasn't been lost on APEC. In November in Santiago, Chile, Leaders of APEC's 21 Member Economies pledged US$10 million to capacity building initiatives to fight public corruption. Earlier, APEC Ministers approved for endorsement by Leaders a package of actions under the Anticorruption and Transparency (ACT) capacity-building program that will allow the forum's members to better investigate and prosecute corrupt officials and other individuals, as well as recover stolen assets. Sometimes those assets can represent vast fortunes - a significant percentage of an economy's GDP.
APEC Leaders believe that corrupt officials, the people who help them, and their assets, should be denied safe haven. In Santiago they agreed to promote regional cooperation on extradition matters, legal assistance and the recovery and return of proceeds of corruption. APEC Leaders want to intensify actions to cooperate with multilateral and regional intergovernmental institutions; exchange information on domestic anti-corruption commitments; and develop innovative training and technical assistance to fight corruption.
A high-level APEC anticorruption symposium will be held in Korea next year. And practical workshops and training programs will be developed as part of the program to deal with investigatory and prosecutorial techniques, judicial reform, money laundering, asset forfeiture and recovery, as well as APEC Transparency standards.
The APEC Course of Action on Fighting Corruption and Ensuring Transparency is a landmark initiative for APEC. Corruption diverts public investment away from areas such as public sector modernization and social development - including education and health care - and into projects where bribes and kickbacks are more readily available. One of the gravest dangers of corruption is the loss of confidence in institutions and the de-legitimization of government. Corruption has become one of the primary 'taxes' on business and an enormous burden on social and economic development throughout the region. The World Bank estimates that the direct cost of bribery alone to national economies exceeds US$1 trillion annually.
"Corruption is among the biggest obstacles to development throughout the APEC region and has a significant impact on the lives of all peoples in APEC economies," notes Robert Prieto, a member of the APEC Business Advisory Council (ABAC) and Senior Vice President of Fluor Corporation. "It represents a huge "hidden tax" on business and potentially causes decisions to be made not on what is best for business or the region."
APEC believes that ensuring transparency and fighting corruption are twin pillars in developing fair and efficient markets and are relevant to broader APEC efforts to promote economic development and prosperity. "Corruption is a scourge that imposes heavy costs to all economies and undermines business confidence," says Ignacio Walker, Minister of Foreign Affairs and Trade of the Republic of Chile and Chair of the Ministers' Meeting in Santiago.
One of the first steps is to implement punitive anti-corruption policies consistent with the U.N. Convention Against Corruption. The UN Convention offers all countries a comprehensive set of standards, measures and rules that they can apply to strengthen their legal and regulatory regimes to prevent and control corruption. The Convention includes measures on public procurement and the management of public finances, and asks States to put in place measures to prevent corruption involving the private sector and enhance accounting and auditing standards in the private sector.
"APEC's initiative on anti-corruption and transparency will open a new era of business and commerce if it is implemented uniformly by APEC governments," noted Jae Hyun Hyun, 2005 chair of the ABAC. Among other things, he notes, "it promotes business activities through securing fair competition."
Prime Minister John Howard of Australia noted that corruption can act as a powerful disincentive for foreign investors, adding that under APEC's anti-corruption initiative, members will receive training and technical assistance to investigate and prosecute corruption cases, increase judicial integrity and combat money laundering and terrorist financing.
Each APEC economy must also take steps to assure openness for merit, equity, efficiency for the recruitment of civil servants; enhance the transparency of public administration in key areas such as organization, function and decision-making; and put in place appropriate public financial disclosure mechanisms or codes of conduct for senior officials in the public sector. They should improve accounting, inspecting and auditing standards in both the public and private sectors in accordance with provisions of the UNCAC. As a group, APEC members should promote cooperation among financial intelligence units and explore joint partnerships, seminars and workshops with the UN, ADB, OAS, the World Bank and the Global Forum on Fighting Corruption and Safeguarding Integrity, and other intergovernmental organizations.
But corruption wasn't the only big item on the agenda at the recent APEC meetings in Santiago. On the terrorism front, leaders agreed to take steps to cut off terrorists' access to the international financial system, including implementing standards and agreements on combating terrorist financing and money laundering. Ministers applauded APEC's work this year in financial contributions to the Asian Development Bank's Regional Trade and Financial Security Initiative; progress in advancing business mobility initiatives such as the Advance Passenger Information systems, the development of a Regional Movement Alert List System and cooperation on the issuance of machine readable travel documents by 2008. APEC has also worked on supervising exported and imported food in a bid to prevent hidden hazardous or toxic materials.
In the field of healthcare, APEC leaders pledged political commitment to fighting AIDS and endorsed the initiative on Fighting against AIDS. They also supported efforts to increase access to health care and safe and affordable drugs for all people with AIDS. In addition, they supported renewed efforts next year to address the threat of infectious diseases like SARS, avian flu, pandemic influenza, tuberculosis, malaria and polio.
Another important step forward for APEC economies was agreement on a set of best practice principles for regional trade agreements and free trade agreements (RTAs/FTAs). While the best practice principles are non-binding, their strength lies in the moral force they have from the backing of economies accounting for 60% of world trade. In effect they are a reference for APEC members when undertaking new RTAs/FTAs.
Among the characteristics of the best practice RTAs/FTAs are comprehensiveness, going beyond WTO commitments, transparency, simple rules of origin and openness to accession by third parties. To improve transparency, ministers also agreed on the need for information to be freely available to assist business in understanding the provisions of RTAs/FTAs and to encourage the adoption of common approaches and best practice. APEC is developing a website that will include details of all RTAs/FTAs concluded so far by APEC Member Economies.
The APEC Best Practices for RTAs and FTAs "is a timely policy response to better understanding the growing number of RTAs/FTAs in the region," noted Ricardo A. Lagos, chair of all APEC Senior Officials Meetings in 2004. "The additional capacity building support is intended to ensure that all APEC Member Economies are able to undertake the analytical and negotiating tasks involved in conducting RTA and FTA negotiations."
APEC economies are providing assistance to train trade negotiators. An International Workshop on Identifying and Addressing Possible Impacts of FTAs/RTAs Development on APEC Developing Member Economies will be hosted by Viet Nam in the first half of 2005. The workshop will share experiences and best practices to help developing economies within APEC to negotiate and join RTAs/FTAs. Japan, meanwhile, will also hold a workshop and two symposia next year on Capacity Building for the New International Architecture in Trade and Investment. The project will offer an understanding of the identification, negotiation and completion of RTAs for the business community and others involved in trade negotiations.
In other fields, Leaders gathered in Chile welcomed the APEC Comprehensive Strategy on Intellectual Property Rights and encouraged further progress in 2005. Members also agreed to launch the Santiago Initiative for Expanded Trade in APEC to complement the achievement of free and open trade in the region. An overarching dimension of the Initiative is capacity building so that all economies can implement and benefit from their work on trade liberalization and facilitation. The Santiago Initiative has two components:
Recommendations will be made next year on how to further liberalize trade and investment in the region and work will continue to reduce business transaction costs by cutting red tape, embracing automation, harmonizing standards and eliminating unnecessary trade barriers.