Integrating Greater APEC Economies with Regional Institutionalism 1 Asia Study Center Consortium (ASCC) Paper Topic: "Integrating Greater APEC Economies with Regional Institutionalism" Tony Sowang Kuo Jeremy Firster Shih Chien University, Taipei Shih Chien University, Taipei ABSTRACT The more successful APEC has become and as progress is reached towards moving the region to greater economic liberalization and cooperation, the more dilemmas it seems to face. As a significant economic community with 40.5% of world population, 54% of GDP and 43.7% of world trade, APEC members and the world trade could be beneficial from economic liberalization. However, over twenty years since its establishment, the economic issues in the region seem more and more complicated. Rising commodity prices continue to contribute inflationary pressures in emerging and developing economies in 2011. To build an efficient institution to promote policy alignment and economic and technical cooperation among the members is the goal of this research. In East Asia, regional integration has become very complex with several overlapping institutions and structure forms. To improve the ease of doing business for APEC nations, three factors in East Asia are discussed: trade implementation by public and private means, cultural differences and the impact on the business environment, and transparency of economic integration. APEC can improve the economic integration of its member economies through a balance of social values and efficiency. Key words: APEC, transparency, policy alignment, regional institutions, East Asia, 1. CULTURE AND INSTITUTIONAL BUILDING: GREATER APEC ECONOMIES APEC was created to promote and develop the economic growth of markets in the Asia Pacific region1. Membership has grown from 12 economies to 21 and from representing 24 percent of world GDP to 54 2 . Currently, a large number of APEC members are in East and Southeast Asia. The main purpose of this research is to determine how Asian APEC members are organized within the region and to determine ways in which further integration and trade can occur between the APEC and Greater APEC economies. Greater APEC economies are defined as economies outside of the APEC framework which play a role in maintaining economic stability and sustainability within a regional framework. 1 Lorraine Cardenas and Arparporn Buranakanits, “The Role of APEC in the Achievement of Regional Cooperation in Southeast Asia,” Annual Survey of International & Comparative Law, 2010 ed. 2 “About APEC,” 12 May 2011 <http://www.apec.org/en/About-Us/About-APEC.aspx>
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Integrating Greater APEC Economies with Regional Institutionalism 1
Asia Study Center Consortium (ASCC)
Paper Topic: "Integrating Greater APEC Economies with Regional Institutionalism"
The more successful APEC has become and as progress is reached towards moving the region
to greater economic liberalization and cooperation, the more dilemmas it seems to face. As a significant
economic community with 40.5% of world population, 54% of GDP and 43.7% of world trade, APEC
members and the world trade could be beneficial from economic liberalization. However, over twenty
years since its establishment, the economic issues in the region seem more and more complicated.
Rising commodity prices continue to contribute inflationary pressures in emerging and developing
economies in 2011. To build an efficient institution to promote policy alignment and economic and
technical cooperation among the members is the goal of this research. In East Asia, regional
integration has become very complex with several overlapping institutions and structure forms. To
improve the ease of doing business for APEC nations, three factors in East Asia are discussed: trade
implementation by public and private means, cultural differences and the impact on the business
environment, and transparency of economic integration. APEC can improve the economic integration
of its member economies through a balance of social values and efficiency.
Key words: APEC, transparency, policy alignment, regional institutions, East Asia,
1. CULTURE AND INSTITUTIONAL BUILDING: GREATER APEC ECONOMIES
APEC was created to promote and develop the economic growth of markets in the Asia Pacific
region1. Membership has grown from 12 economies to 21 and from representing 24 percent of world
GDP to 542. Currently, a large number of APEC members are in East and Southeast Asia. The main
purpose of this research is to determine how Asian APEC members are organized within the region and
to determine ways in which further integration and trade can occur between the APEC and Greater
APEC economies. Greater APEC economies are defined as economies outside of the APEC framework
which play a role in maintaining economic stability and sustainability within a regional framework.
1 Lorraine Cardenas and Arparporn Buranakanits, “The Role of APEC in the Achievement of Regional Cooperation in
Southeast Asia,” Annual Survey of International & Comparative Law, 2010 ed. 2 “About APEC,” 12 May 2011 <http://www.apec.org/en/About-Us/About-APEC.aspx>
Integrating Greater APEC Economies with Regional Institutionalism 2
The limitations of this paper is to located in and immediately around East and Southeast Asia.
A general theme to remember is that market access is not equivalent to growth.3 Culture and economic
prosperity are strongly linked and cultural responses affect the outcome of economic growth.4 Different
parts of the World have different institutional forms to better meet their needs and preferences.5
National cultures create a system of shared meanings and understanding patterns of cause and effect
relationships of a given concept, behavior, or attitude.6 An economic culture is defined as the beliefs,
attitudes, and values that form the economic activities of individuals, organizations, and other
institutions7
and these traits are learned and shared through generations8. Gaining an understanding of
a states culture is essential for securing successful business.
There are three levels of contextual culture in each society9 that states that our behavior is easy
to see and understand but are based on the invisible basic assumptions and meanings. Many economies
in East and Southeast Asia are considered to be a high-context culture10
. Interpretations of high-context
cultures depend largely on the relationship, place of communication, etc – there is less emphasis on
what is written and more emphasis on the actions that occur. Many economies in the Asian region are
considered to have the Clan11
organization model which forms organically and is focused on internal
maintenance of the group. In this arrangement, there are strong elements of participation and teamwork
with a strategic emphasis on commitments. Hierarchy's and authority are valued and often goals cannot
be achieved by other means. This differs greatly from the US model which is considered to be a Market
organization valuing stability and order through a mechanical process and focusing on external
positioning. Attributes to the Market form includes goal achievement and competitiveness with a
strategic emphasis on competitive advantages and superiority. Through these organizational cultures
forms the patterns of organizational functioning and the institutions they operate under.
East Asia and Southeast Asia are defined as two geographic realms that share similar physical
3 Barbara A.Weightman, Dragons and Tigers: A Geography of South, East, and Southeast Asia , 2010
4 David Landes “Culture Makes Almost All the Difference” 2-13
5 Dani Rodrik, :The Globalisation Trilemma”
6 “Managing Globally: Cross Cultural Management p.109
7 Michael Porter, “Attitudes, Values, Beliefs, and the Microeconomics of Prosperity 14-27
8 Orlando Patterson, “Taking Culture Seriously, p. 208-212 Discusses the effects of our environmental and historical
affects on culture 9 “Managing Globally” Introduced by Andre Laurent in 1986 p.287 Behavior; Values, Beliefs, and Preferences; and Basic
Assumptions and Meaning 10
Global Cultural Environment p.122 11
Global Cultural Environment p/ 133-135
Integrating Greater APEC Economies with Regional Institutionalism 3
and cultural characteristics.12 These realms represent similar functional interactions between people
and the natural environment, transportation networks, cityscapes, environmental damage, and focus on
major population clusters. East Asia is defined13
as People’s Republic of China (China), Hong Kong,
China (Hong Kong) Mongolia, North Korea and the Republic of Korea (South Korea), Chinese Taipei
(Taiwan), and Japan. Southeast Asia is defined as Myanmar, Thailand, Laos, Cambodia, Viet Nam,
Malaysia, Singapore, Brunei Darrusalam, Indonesia, Timor-Leste, and The Republic of the Philippines
(The Philippines).
An example of an organizational culture can be seen in East Asian countries and is derived from
the teachings of Confucius to form the guidelines known as “Confucian Humanism.”14
The cultural
impact this has on economic activity is the belief is that government leadership in a market economy is
needed, human connections are needed to ensure a person behaves properly (the law can not stand on
its own), and that dynamic interplay between the private and public sector provides resources for
societal advancement. The “Confucian Humanism” ideal set is a large motivator behind China's Beijing
Consensus,15
as many of it's principles are very similar to these. In terms of globalization, this is an
example of geopolitical civilizations which groups countries together based on shared cultural traits
including values, beliefs, and institutional and social structure. APEC has membership within four
different civilizations16
For example, In Chinese societies, the rule of law was completely replaced with close personal
relationships between family and to others as well. These close relationships would add security to
business because the family would be responsible for the actions of one of its members. If bad business
deals occurred, they would be banned from their family and lose the security network they had. In this
case the perceived scenario of corruption was more so the culture of their business interactions than
being corrupt. It is not to be determined that there isn't corruption in the region, however the methods
of doing business has historically been without the use of law.
12
Barbara A.Weightman, Dragons and Tigers: A Geography of South, East, and Southeast Asia , 2010 13
“About APEC,” Describing the countries with official titles. Parentheses show the terms of members for the
purpose of this paper. North American region by APEC: Canada, The United States of America, Mexico; South America:
Chile and Peru; Oceania: Australia, Papua New Guinea; The Russian Federation (Russia) 14
Wei-Ming Tu, “Multiple Modernities: A Preliminary Inquiry in the Implications of East Asian Modernity, p. 259-263 15
Kjeld Eik Brosgard, “Redefining Beijing Consensus: Ten general principles.” 16
Ch. 11 Cross-cultural management, table of culture economies. p.296 APEC has members in Far Eastern, Latin
American, Anglo, and Japan shown as an independent nation
Integrating Greater APEC Economies with Regional Institutionalism 4
2. THE IMPORTANCE OF THE ASIAN REGION
2.1 Strong Vertical Network
East Asia has experienced a very large amount of growth17 since the 1950s. As table 1 shows
below, several countries have experienced high levels of growth at different times. Industries in East
Asia have developed over the past fifty years in terms of production networks, processes, and
capabilities18. Stemming from Japan, vertical networks have become very extensive in East Asia, as
most countries are now specializing in creating a certain part of a product, and shipping it to another
country to be added to or finished. This has allowed for certain countries to cultivate a specialization in
an area. Malaysia, the Philippines, and Thailand are well inept at assembled of finished machinery.
These skills were passed down from Taiwan and South Korea which now perform more technical
construction. As Malaysia and the Philippines grow, as well as Taiwan and South Korea, certain
assembly and manufacturing jobs have flowed to lower wage countries such as China and Viet Nam.
17
Sujin Chan, “Beyond Special and Differential Treatment,” Regional Integration As a Means to Growth in East Asia, p.
57 18
Chan, “Beyond Special and Differential Treatment,” p.100-101
Integrating Greater APEC Economies with Regional Institutionalism 5
2.2 Natural Resources
East and Southeast Asia are two regions which have several of the world’s highest mountains,
longest rivers, plains, and tropical forests19
providing the region with a large level of natural resources
(Table 2 for country list). The Mekong river is home to the most diverse fishery second to the Amazon
river in Brazil20. 80 Percent21
of the people in the Mekong River Basin livelihood relies on this river.
The South China Sea is another resource base,22
having said to be a rich source of oil and natural gas.
Currently, the South China Sea region has proven to have 7.5 billion barrels of oil reserves with
speculation of 213 billion barrels of oil.
2.3 Strong Exports
This region of the world produces several global exports including the types of cars and
electronic gadgets used, several types of clothes, shoes, and other products, entertainment and media - a
plethora of goods are coming from this region (see Table 3)23. Exports represent a large percentage of
growth for the East and Southeast Asian nations. Exports in Taiwan generate 70 percent of Taiwan's
growth, with the leading exports being electronics and machinery. In Thailand, exports counted for over
half of the countries GDP growth, stemming mainly from machinery, electronic parts, agricultural
commodities, and jewelry. Papua New Guinea is working on a project to export natural gas that is
19
Weightman, p.1 20
“International Rivers: People, Water, Life,” Lancang (Mekong) River, 20 June 2011
< h t t p : / / w w w. i n t e r n a t i o n a l r i v e r s . o r g / c h i n a / l a n c a n g - m e k o n g - r i v e r > 21
Derek J. Mitchell and Brian Harding, “China and Southeast Asia” 22
Ernest Bower, “The Quintessential Test of ASEAN Centrality: Changing the Paradigm in the South China Sea” p. 1-4 23
Weightman p.1
Table 2
East and Southeast Asia: Natural Resources
Mekong River China Thailand
Myanmar Laos
Cambodia Viet Nam
South China Sea China Viet Nam
Malaysia Indonesia
Philippines Thailand
Sources : Internationa l Rivers : People, Water, Li fe, accessed June 20, 2011, Ernest Bower, “The Quintissentia l Test of ASEAN Centra l i ty: Changing the Paradigm in the South China Sea,” Accessed July 13 2011
Integrating Greater APEC Economies with Regional Institutionalism 6
projected to double the countries GDP.24
2.5 Global Marketplace
Although once the supplier and maker of goods for the world, East Asia is transforming itself
from “Factory Asia” to be the new world’s marketplace. Currently there are half a billion people in Asia
considered to be in the global middle class,25
with 2.5 billion more to be added in the next twenty years.
The effects of this can be seen with China as people there are consuming more and more and increasing
exports from outside countries. Growth in trade between China and Southeast Asia has seen large
growth rates since the early 1990s.26
From 1993 to 2001, growth in trade was an averaged 75 percent
annual growth rate. The current trend shows China becoming the largest trading power with all the
Southeast Asian nations in the near future. The dominant form of trade with the Southeast Asian
nations is done through Chinese Southeast Asians.
24
John D. Conroy, “Papua New Guinea; The informal economy and resource boom” 25
Peter Drysdale, “Asia's middle class on the rise” East Asia Forum 26
Derek Mitchell and Brian Harding, “China and Southeast Asia” p. 77-90
Table 3
Top Exporting Countries in East and Southeast Asia – 2010
China #1 in World for export va lue
electrica l and other machinery
Japan Transport equipment, motor vehicles
semiconductors , electrica l machinery, chemicals
South Korea Semiconductors , wireless telecommunications equipment
Motor vehicles , computers
Hong Kong electronic machinery and appl iance
texti les , appeara l
Singapore Machinery and equipment, consumer goods
pharmaceutica ls
Taiwan Electronics , machinery, crude petroleum,
Chemicals : Optica l , photographic, measuring
Malaysia Electronic equipment
Petroleum, l iqui fied natura l gas
Thailand texti les , footwear, fi shery, rice
rubber, jewelry, computers
Indonesia oi l and gas , electrica l appl iances , plywood
Vietnam Clothes , shoes , marine products , crude oi l , electronics ,
wooden products machinery
Source: East and Southeast As ia , The World Factbook, Accessed Jun 25 2010
Integrating Greater APEC Economies with Regional Institutionalism 7
3. ASIA'S INSTITUTIONS
3.1 Comparison of Regional Institutions
Of the three types of regional institutions, ASEAN, NAFTA, and the EU, ASEAN is said to be
the least integrated.27 The European Union is the most integrated having a ‘one market’ principle by
removing trade barriers on all goods, services, labor, and financial capital. In this organization
structure, however, there are members which have rules for acceptance and are expressing similar
levels of economic development. NAFTA, the North American Free Trade Agreement, had the most
comprehensive agreement for goods and services through it’s diverse membership of Canada, the
United States, and Mexico. NAFTA allows temporary movements of labor for business purposes. The
interesting point of NAFTA is that it is a successful example of a regional economic institution with
members of different sizes, income levels, legal traditions, regulatory regimes, and cultural
backgrounds. ASEAN development isn’t quite so clear. Often referred to as the ‘noodle bowl,’ ASEAN
infrastructure is a complex web of regional agreements and preferential trade agreements for bilateral
and triangular purposes. In total, there are forty different trade agreements in place that are both
connecting the members of East Asia together and with members outside of the region.28
3.2 Development of East and Southeast Institutions
The institutional structure in East Asia has seemed to develop out of reactionary terms instead
of planned terms. Beginning in the late 1960s,29
ASEAN' original six members (Indonesia, Malaysia,
Thailand, Singapore, the Philippines, and Brunei) grouped together to protect each others national
sovereignty during the Cold War era and to solve disputes peacefully30
. National sovereignty would
remain a pillar of institutional frameworks in the region still to come. After the Financial Crisis of
1997, East Asia was treated as a whole due to economic contagion31
and from this point East and
Southeast Asia began to cooperate as an economic entity32
with the formation of ASEAN+3.
27
(Chan) p.124 28
“Institutions for Regional Integration” p. 114-120 29
“About ASEAN” <http://www.asean.org/about_ASEAN.html> Accessed March 8, 2011 30
Sheldon Simon, “ASEAN and multilateralism: the long, bumpy road to community.” 01 Aug 2008 31
Chakraborti, “India and the Asia-Pacific Region” 32
Simon Sheldon, “ASEAN and multilateralism, the long and bumpy road” The CBS Interactive Business Network:
Institute of Southeast Asian Stuides
Integrating Greater APEC Economies with Regional Institutionalism 8
In terms of ASEAN infrastructure and regional institutions that are formed from it with geopolitical
concerns distort trade patterns and send false messages about economic prosperity33
ASEAN also
distributes a principle of non-interference34
with the domestic concerns of it's members, which greatly
weakens it's strength as a regional institute. A great agent of change in the region is the evolving form
of the international economic system. To reflect transparency, the system is becoming more based on
the rule of law than informal arrangements.35
Although adjustments are being made to the regional
institutions in East and Southeast Asia, more can be done to improve transparency as well as increasing
understanding between the cultural differences between APEC members.
3.3 Differences Between Trade Deals Regionally and Bilaterally
To increase economic stability, ASEAN has been noted to support the process of open
regionalism,36
which is defined as “external liberalization of trade blocs.” The first and most
understandable meaning of open regionalism came from the 1980s during Asia Pacific discussions for
deeper integration of regional trade expansion. It is argued that all successful countries have liberalized
in gradual stages with stages of removing protectionist barriers to trade37
. Through the ASEAN FTA
process38
, 95 percent of tariffs have been reduced to less than five percent, as trade accounts for nearly
100 percent of aggregate GDP, the efforts to remove trade barriers has greatly improved economic
sustainability in the region.
Within this realm comes many special differential trade agreements being made in order to
pursue multilateral trade agreements. An example of this is the special trade agreement between China
and Taiwan known as ECFA; Economic Cooperation Framework Agreement.39
ECFA is to promote
economic integration through staged trade liberation where certain protected sectors often remain
untouched through the process. This example cites how some cultural traits in the region are changing
to foster economic growth and stability.
3.4 Hub-and-Spoke System
East Asian institutions had developed out of geopolitical terms rather than a sense of equal and
33
Porter p.25 34
Sheldon Simon, “ASEAN and multilateralism: The long, bunpy road to community” 35
Porter p. 25 36
Chan p. 52-54 37
Chan p. 28 38
Ernest Z. Bower, “ASEAN's Opportunity to Become the Core of Asian Regionalism” accessed 13 Jun 2011,
< h t t p : / / c s i s . o r g / p u b l i c a t i o n / a s e a n s - o p p o r t u n i t y - b e c o m e - c o r e - a s i a n - r e g i o n a l i s m > . 39
Mignonne Man-jung Chan, “The Cross Strait Relations: an Update”
Integrating Greater APEC Economies with Regional Institutionalism 9
common purpose40
and send false messages about economic prosperity.41
This has led to a region in
which members are of very different sizes in many criteria including market size, development,
openness and economic structure. The regional institution structure in East Asia and Southeast Asia is
referred to as a 'Hub-and-Spoke' 42
system. This system creates regional instability as the smaller spoke
economies are politically and economically marginalized as they integrate themselves with the larger
hub economies43
. The European Union is known as a central hub, for the membership have equal
benefits. In East Asia, China and Japan are the natural Hub nations while the remaining East and
Southeast nations represents the spoke nations.
The idea of the hub and spoke framework is an application of the world system theory.44
In this
'world system,' developed and large economies try to draw in resources from small developing
countries. In the context of East Asia, Several East and Southeast nations are favoring industry towards
China, which causes stability problems45
in the region. In regards to institution building, the hub-and-
spoke system allows for the growth of preferential trade agreements to continue, feeding into the
unplanned regional structure of East and Southeast Asia as well as weakening regional institutions.
Trade diversion46
from more efficient trading partners is enhanced which further reduces sustainability.
Even as culture can explain how an economy runs, it can also explain how economic cultures turn
unproductive. Sometimes a society maintains traditional beliefs, values, and social institutions that are
inefficient.47
3.5 Problems Caused by Hub-and-Spoke Framework
3.5.1 Natural Resources
Although the region is abundant in natural resources, the management of these assets is largely
mismanaged in that there are strong inefficiencies which are not only affecting the countries within the
region, but the world as well.48
The growth of Asia is dependent on the proper use of natural resources
for both living and energy. There is a growing threat to energy security in East Asia as the demand from
countries within and outside of the region continue to grow. The importance of the proper use of these
40
(Chakraborti) p. 1 41
Porter p.25 42
Chan (p. 45-51), 43
Richard Baldwin, :The Spoke Trap” p. 2-3 44
Weightman p. 21, summary of Immanuel Wallerstein's model of the World's System Theory 45
Baldwin, p. 3-7 46
Baldwin p. 28 47
Robert B. Edgerton, :Traditional Beliefs and Practices” p.131 48
Ernest Bower, “The Quintessential Test of ASEAN Centrality: Changing the Paradigm in the South China Sea,” p. 1-2
Integrating Greater APEC Economies with Regional Institutionalism 10
natural resources is to sustain the economic development. Although the growth in the region has been
significant, energy is needed to sustain this growth. Energy supply shocks can wreck an International
economy.49
The issues of improper resource management can be viewed through shared resources by
rivers such as the Mekong and the South China Sea.
On the Mekong river, there is an uncoordinated and environmentally unsustainable rush to
obtain the natural resources in the river.50
China has made fifteen dams in the Yunnan Province and has
granted development of eleven dams on the lower half of the Mekong river to Chinese and other
foreign companies. The benefits of hydroelectric power is absorbed by China, while the costs are felt
by the affected Southeast Asian nations. Instead of sending scientists and businesses to uncover the true
level of assets in the South China Sea,51
countries in the region have been sending their navies as
territorial disputes are made. The shared interdependence of resources is facing strong nationalistic
views of development on the resources, creating an inefficient use of these key assets. The sovereignty
issues facing East Asia integration is causing a dilemma in the efficiency of using natural resources to
support the economic growth evenly in the region.
3.4.2 Uneven Growth
As East Asia is growing, growth is not even in the region. This is expressed in terms of poverty
and GDP per capita (see table 4 below). Although many countries have experienced incredible growth
within the region, there still remains high levels of poverty in many of the countries. From the countries
selected in the study, regional poverty as of 2010 stands at an average of 17.78 percent52
with poverty
reaching higher than 25 percent in many Southeast Asian countries including Laos, the Philippines, and
Papua New Guinea. Given that some countries are densely populated, economic growth rates need to
be high in order to provide jobs for new workforce entrants, Indonesia needs to maintain an annual
growth rates of seven percent.53
49
Peter Drysdale, "Threat to Asia's energy security," East Asia Forum, accessed 20 Jun 2011
50 Richard Cronin and Timothy Hamlin, “Mekong Tipping Point”
51 Bower, p. 1
52 “East & Southeast Asia,” The World Factbook, data could not be found for Singapore, Brunei, and Hong Kong
53 Bower, “ASEANs Opportuntiy to Become the Core of Asian Regionalism
Integrating Greater APEC Economies with Regional Institutionalism 11
4. SOLUTION TO PROBLEMS
4.1 Different Institutions in East and Southeast Asia
Although East and Southeast Asia are facing several constraints to continue stable, sustainable
economic growth, there are several things which can be done to improve the current situation. As the
growth in Asia is changing the structure of the global economy, the global economy should change the
structure of Asia. This region of the world is said to be a promoter of open regionalism where countries
are building towards multilateral trade agreements to enhance this process. Global welfare is improved
once regional agreements are expanded as foreign investments help to ensure development.54
However
many elements are needed to ensure access turns into growth, as the hub and spoke paradox had
explained. The multilateral agreement of ASEAN+3 was formed to accomplish three broad tasks;
leverage bargaining power by weaker countries on multilateral stage, win domestic battles, and use
external partners to break regional inefficiencies.55
However this regional integration needs to be
expanded to more partners including trans-regional partners. As these APEC economies are strongly
54
Chan p.53 55
Chan p. 98
Table 4
East Asia Poverty % of Population 2010 East Asia GDP (Per Capita PPP) 2010 Taiwan 1.16% Singapore $62,100
China 2.80% Brunei $51,600
Malaysia 3.60% Hong Kong $45,900
Thailand 9.60% Taiwan $35,700
Vietnam 10.60% Japan $34,000
Indonesia 13% South Korea $30,000
South Korea 15% Malaysia $14,700
Japan 15.70% Thailand $8,700
Laos 26% China $7,600
Cambodia 31% Indonesia $4,200
Mayanmar 32.70% Philippines $3,500
Philippines 33% Viet Nam $3,100
Papua new Guinea 37% Laos $2,500
Singapore - Papua New Guinea $2,500
Brunei NA% Cambodia $2,100
Hong Kong NA% Myanmar $1,400 Source: “East and Southeast As ia ,” The World Factbook Accessed Jun 25 2011
Integrating Greater APEC Economies with Regional Institutionalism 12
linked with the other APEC members and the international community, the increased integration to
include influences from outside the region can only provide benefits. An example of this is Singapore56
which requires technology transfers, trade, and foreign direct investment which it's geographic region is
not able to provide.
4.2 Balancing the Hub-and-Spoke Framework
APEC can serve a role to break the inefficiencies caused through the hub-and-spoke framework
by the inclusion of Greater APEC Economies. APEC can introduce new regional trading partners into
the region to create a higher level of stability by offsetting the hub nation dominance, and interact with
smaller nations to build economic ties in order to reduce instability. Including India as a member of the
Greater APEC Economies has several benefits including a regional member to balance the rise of
China, offer further sustainable growth to the East Asian region, and to build on existing economic ties
within the region57
. Much has changed in a decade for India, which makes it a very attractive country
for inclusion in APEC operations. In 2010, India was ranked the fifth largest economy in the world
having annual growth rates averaging 7 percent since 1997.58
Inclusion of India as a greater APEC
economy can not only benefit the East Asian region by maintaining stability, but it can also help to
propel other nations forward, such as Indonesia. Indonesia and India are close not only geographically,
yet by cultural and civilization traits as well. Including North Korea as a Greater APEC Economy can
add a large level of economic stability to the region. Leaving issues of politics and security aside, an
economic secure North Korea59
could relieve tensions of economic instability by increasing confidence
of peace with its neighbors.
5. CONCLUSION
Enhanced inter regional structures can benefit East and Southeast Asia by first expanding trade
creation. International institutions currently have rules and guidelines over how to use resources
responsibly and can help expand gains in welfare. Gains in welfare are accomplished by reducing
higher trade barriers, diversifying trade partners, and stabilizing commodity and resource prices by
further integration to reflect world prices60
. A role for the international economy is needed due to the
56
Chan p. 95 57
Chakraborti, p. 7-11 58
“South Asia: India,” The World Factbook 59
Danielle Chubb, "North Korea Watching: 2011" East Asia Forum, Accessed 15 Jul 2011