Apec aims for inclusive growth
MANILA, Philippines–The 21 member-economies of the Asia-Pacific Economic Cooperation (Apec) aim to put in place within the next two years measures to make economic growth more inclusive through greater access to finance and improved infrastructure under the proposed Cebu Action Plan.
The Philippines, which hosts this year’s Apec meetings, has its own share of initiatives that target to make public-private partnership (PPP) in infrastructure more appealing to investors, such as expanding insurance coverage to projects being rolled out by local government units (LGUs), Philippine officials said on the sidelines of last week’s Apec Finance and Central Bank Deputies’ Meeting.
Finance Undersecretary Gil S. Beltran noted that while the Apec jurisdiction is expected to post growth of 3.5 percent this year and a slightly higher 3.7 percent next year, there has been a “slowdown” in investments across the region.
“There’s a need for member-economies to do some more structural reforms, and improve on their policies so that their economies will strengthen and investor confidence will be restored,” Beltran said.
“The main issue that concerns [Apec members] is how to make their economies grow as fast as before the global financial crisis” amid global economic volatility, he added.
Hence, reforms that will integrate the region by granting easier access to financing among low-income households as well as micro, small and medium enterprises (MSMEs) should be high on members’ agenda, according to Beltran.
“The best antidote to [financial] volatility is structural reforms—adopting measures that will make your economy grow faster, enhancing efficiency in the markets and production processes, reaching some sectors which are not able to get financing so that they will be able to finance their businesses. These are the things that will make investors think twice before leaving a country. If your economy is growing, your private sector is showing some resiliency and good growth, then the funds will stay,” he pointed out.
For the part of the Philippines, it is spearheading initiatives to promote fiscal transparency via an open data initiative, the finance official said.
“This transparency measure is intended to make sure that taxes are collected, put into the right projects, and that the agencies that implement these projects attain the objectives for which they are mandated,” he said.
Another initiative is institutionalizing credit information bureaus across Apec members in order to better connect borrowers to potential lenders, Beltran said. “Under the Cebu Action Plan, we want all the [Apec] economies to have credit information bureaus,” he said.
Microinsurance for farmers, households and MSMEs, especially in light of the natural disasters that almost on a regular basis hit the region, will also be promoted, the finance official said.
Beltran said, “The losses from disasters in the Apec region is about $200 billion each year, and only less than half of those are insured, so there’s a big market out there that needs protection.”
In terms of infrastructure development, PPP should be pushed by tapping the “huge savings” of Apec member-economies, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo said.
“There are tremendous PPP opportunities in Apec, but the issue is financing, which is a very important component. We have excess savings and yet financing continues to be problematic,” Guinigundo noted.
But the BSP official noted that the real problem was the fact that Apec members “don’t have sufficient, bankable and credible infrastructure projects.”
“If we are able to provide the member-economies sufficient and bankable projects immediately, I think we could have good use of excess savings which end up in the banks and government securities. What we need to do is to translate those financial assets into tangible infrastructure projects,” he said.
“Many of our countries have a high savings rate; there’s a lot of savings that can be used to revive growth, [which] could be done if we can use these investable funds for infrastructure,” Beltran added.
The Asian Development Bank has estimated the infrastructure requirement across Apec until 2030 to cost $8 trillion.
To facilitate better financing for infrastructure projects via PPP, Apec would introduce initiatives for leveraging of private funds while continuing the disposition of public funds, Guinigundo said.
Apec will also put up a regional PPP knowledge portal that will connect potential investors to proponents of projects in member-economies’ respective pipelines, the BSP official said.
Another proposal being looked at is standardizing PPP contracts across the region, Guinigundo said.
In the case of the Philippines, Beltran said National Treasurer Roberto B. Tan and the Insurance Commission were in talks with insurance industry players to urge the latter to introduce products that will also cover LGUs’ infrastructure projects.
At present, only projects being rolled out by the national government get insurance coverage.
Thus far, there has been “broad” support for the Cebu Action Plan, Beltran said, adding that multilateral lenders have also expressed interest to finance Apec’s growth initiatives.
The Cebu Action Plan, which will be up for approval by the group’s finance ministers during their September meeting in Cebu, targets to make the region more financially integrated, transparent and resilient alongside infrastructure development.
