A Cost-Benefit Analysis of PNG APEC 2018

By Francis Hualupmomi, New Zealand
Oct 27, 201671

This is a Cost-Benefit analysis of the Asia-Pacific Economic Cooperation (APEC) Meeting to be hosted in Papua New Guinea (PNG) in 2018 at a cost of about K3b.
What is APEC?
APEC is a regional economic forum in Asia-Pacific region. The forum initially started as an informal dialogue of economic leaders in 1989 in Canberra, Australia. It was formally established in 1993 with 12 members. Currently, APEC has 21 member economies. APEC Vision as reflected on ‘Bogor Goals’is to achieve free and open trade and investment in the Asia-Pacific by 2010 for industrialised economies and 2020 for developing economies. The current theme centers on economic integration, sustainable and inclusive growth. PNG joined APEC as a full member in 1993. However, it has not been a very active member until APEC approved Somare government’s proposal to host the meeting in 2018.

apec-haus

Is the APEC Worth It?
It is also important that we understand the advantages and disadvantages of being a member of APEC.

Advantages
APEC is often referred to as the most dynamic engine growth of the world’s global economy driven by its trade and investment value and contribution. This holds true for its population of about 2.8 billion people which represents approximately 57% of the world’s GDP and about 49% of the world trade (as of 2013). This suggests that developing countries stand to gain increasing benefits. First, APEC’s informal approach of dialogue and collaboration encourages more participation compared to other rules-based economic forums/organisations. Secondly, not only will they benefit from the development of procedures, policy frameworks and systems to deal with contemporary issues ranging from transparency and governance to financial sector reform and customs procedures but the opportunity to learn new skills and best practices from other economies. Third, they are able to set agendas and have much say, just like any other bigger players in the forum.
Moreover, it is becoming clear that the exponential growth in the region will continue to reduce poverty across the region with deepening trade and investment. For instance, over the last two decades, we have observed that there has been a reduction in poverty and growing middle class as real GDP doubled from USD 16 trillion in 1989 to USD 31 trillion in 2013.
Finally, developing countries will benefit from APEC’s effort in integrating the region’s economies and promoting trade while addressing sustainability and social equity. Some of these initiatives are: Promoting Regional Economic Integration and Trade; Making it Easier to Trade Across Borders; Making it Easier to do Business Faster Customs Procedures; Structural Reform; Connecting the Region; APEC Business Travel Card; APEC Supply Chain Connectivity; A Sustainable Future for the Asia-Pacific; Environmental Goods List; Increasing Energy Efficiency and Renewables; Inclusive Growth: Ensuring Everyone is On Board (Nurturing Small Businesses, Enhancing Social Equity in the Region).
Disadvantages
While the advantages seem highly beneficial there are also some disadvantages of developing countries being part of APEC. Firstly, it seems advanced countries will continue to benefit more than developing countries due to the advanced technology and technical know-how that enhances their competitive and comparative advantage power. Small economies such as PNG will continue struggling to find their niche in the regional value chain. In addition, it appears that some of the Bogor Goals of APEC have not been achieved to date. This suggests that there is no guarantee that developing countries’ agendas expressed through high-level policy goals will be achieved. This is largely attributed to the complexity of geopolitics and interaction of other forces influencing the value chain. Lastly, the rule of corporate giants will continue to influence the value chain in the long run as it seems. Giant corporations’ interests will be politically driven at the institutional level; they will be the ‘winners’ at the expense of developing countries.
Is Hosting of APEC Worth It?
The question of whether APEC is worth hosting it by the PNG government in 2018 is necessary at this time when the country is facing an economic problem. Experiences from other member countries such as the recent host, Philippines suggest that the benefits will outweigh the cost initially invested. For instance, Philippines as a host of two APEC meetings (1995 and 2015) is currently experiencing a growth rate of 8% as a result of heavy investment in between those years. But what are the likely benefits of hosting APEC in PNG despite the current economic situation?
First, is that benefits outweigh the cost in the long run. This implies that there is an opportunity cost; in the immediate term the cost will seem exorbitant but over time benefit will accrue. Second, there are immediate returns through increased economic activities during the time of the event. For instance, there will be increased investment from tourists and businessmen so as the creation of jobs. Third, not only will it bring returns in the immediate term but also restore the credibility of the state in hosting future high-level meetings. At the same time, investment in the meeting will boost our socio-economic infrastructures such as modern university facilities and improve our security and defence capability and capacity.
As far as the long term benefits are concerned, this meeting will increase and deepen PNG’s trade and investments in the region. This will further be boosted by labour and skilled mobility, technology and knowledge transfer and financial transfer. SMEs are expected to benefit in this multi-relations. Socially, it will help increase collaboration and cooperation in combating governance and transparency and climate change issues. Another important point is that not only will PNG showcase its unique culture and tradition in the region but as an emerging Pacific leader it will fulfil the Pacific dreams of connecting the small island countries to the bigger APEC community through Pacific Islands Forum and Melanesian Spearhead Group. If that is well executed, there is a high possibility for PNG securing its full membership in ASEAN.
Conclusion
The analysis suggests that the opportunity cost of hosting 2018 APEC Meeting would accrue moderate returns in the immediate term and higher returns in the long term despite high cost in the short term. The hosting of APEC is a strategic decision of the government based on calculated risks. Since it takes time for investments to maximise returns, vibrant leadership and effective good governance system is highly necessary. Political disturbance at this time would not only embarrass PNG’s international credibility but also jeopardise the opportunity to host future high-level meetings and access to other regional and global forums/organisations.
The author is a Political Scientist and PhD Candidate in Public Policy at the School of Government, Victoria University of Wellington, New Zealand. He holds a BA in Political Science and Public Policy and Management (UPNG), BA Honours in Political Science and International Relations (UPNG), Master of International Politics (Jilin University, P.R China) and Post Graduate Certificate in Higher Education Policy Management (Melbourne University). The views expressed here are his own. francishualupmomi270@gmail.com

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