Permit me to firstly express my appreciation to Dr Rikki Kersten, Director of the Research Institute for Asia and the Pacific (RIAP) for affording me the opportunity to be with you today. It is my particular pleasure to have accepted the invitation and be here for the annual Sir Hermann Black Lecture. This great Australian was the driving force behind RIAP which he launched in 1987. That APEC is the topic for this year seems most appropriate.

The focus of RIAP which is to commit Australia to the other economies of the Asia-Pacific region through business facilitation and outreach to the private sector/business accord with much of the aims and activities of APEC at the global level. At the same time, in recent months when some of the member economies of APEC have been so ravaged by the regional economic turmoil, questions and anxieties on APEC and its relevance have surfaced. And this has come perhaps at the best or ill of times when APEC is heading towards this year, to mark a decade of work on regional economic cooperation.

When the 12 founding Ministers from Australia, Brunei Darussalam, Canada, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, Republic of the Philippines, Singapore, Thailand and the United States of America gathered in Canberra on 6 to 7 November 1989 to mid-wife the delivery of APEC, this was the culmination of efforts of more than 2 decades of discussions and consensus building between academic, business and official circles on the desirability of the notion of Asia-Pacific Cooperation. It was not just that APEC was born in Australia but that Australians had taken a leadership and crucial role to that birth. She continues to take a proactive interest and contribute actively in guiding and shaping the affairs of APEC.

The Australian Government's White Paper on Australia's Foreign and Trade Policy published last August states "APEC is the most significant forum in which Australia participates and will remain a key element in Australia's regional strategies over the next 15 years". In the light of the economic turmoil some discussions have been generated in this country. Some bringing into question APEC's credibility, asking whether this is not the beginning of the process of degeneration yet others if APEC has withered or not even dead.

Given the topic of my address what I will do is to provide the big picture of APEC - of its development, examining some of the issues facing APEC and look at the challenges and opportunities presenting APEC as it stands on the threshold of the new millennium. Only by having the whole picture can we have a better indication into the health of APEC.

APEC has come a long way since 1989, while still remaining true to the basic elements and ethos that the Canberra meeting generated and forged. It has been proceeding to build on the efforts of the past and to look forward to a further positive process of evolution.

The initial years of APEC were focused largely to exchanges of views and projects based initiative. The concerns were simply to advance the process of Asia-Pacific Economic Cooperation and to promote a positive conclusion to the then Uruguay Round of GATT negotiation. Today, APEC is more. It has evolved with the needs of the member economies into a forum of greater substance and higher purpose: to build the Asia-Pacific community through achieving economic growth and equitable development through trade and economic cooperation.

At Blake Island near Seattle in November 1993, when the Informal Economic Leaders met for the first time and which was subsequently annually instituted, they envisioned a community of Asia-Pacific economies based on the spirit of openness and partnership, of cooperative efforts to solve the challenges of change, of free exchange of goods, services and investment, of broadly based economic growth and higher living and educational standards and of sustainable growth that respects the natural environment.

Vision only gets so far. In subsequent meetings, APEC Ministers and Leaders further refined the vision and launched mechanisms to translate it into action. In 1994 in Bogor, Indonesia they translated the vision of an open trading system into the very ambitious goal of free and open trade and investment in the Asia-Pacific by 2010 for developed member economies and 2020 for developing ones. The next year in Japan, Leaders put more flesh on these bones with the Osaka Action Agenda.

The agreements firmly established the three pillars of APEC activities - trade and investment liberalization, business facilitation and economic-technical cooperation. Indeed they constitute the core of its activities to which the 1989 Canberra meeting generated and engendered through subsequent emplacement of structural arrangements which directly leads to the organization's highest formal body - the annual Ministerial Meeting, composed normally of the Ministers of Foreign Affairs and Trade. Any evaluation and judgement of APEC must necessarily begin from here.

At the same time, APEC also covers a broad range of activities. Transportation, Telecommunications, Science and Technology, Human Resources Development, Tourism, Energy, Marine Resource Conservation, Trade Promotion, Trade and Investment Data Review, Small and Medium Enterprises, Agricultural Technical Cooperation and Fisheries. These grew from the initial projects based initiative and some even spawned Ministerial level meetings and a few other sectoral Ministerial meetings come to be emplaced as well. They augment the three pillars of APEC activities, and basically contribute to the Ecotech activity.

APEC has grown to now encompass the other Ministerial meetings for Ministers of Education, Energy, Environment and Sustainable Development, Finance, Human Resources Development, Industrial Science and Technology Cooperation, Small and Medium Enterprises, Telecommunications and Information Industry, Trade and Transportation. Unlike the annual Ministerial Meetings, these sectoral Ministers Meeting with the exception of the Ministers of Finance, do not necessarily meet annually. Indeed, they meet on the basis of offer to host by a member economy. Irrespective of whether a Ministerial meeting is being held or not for the year, officials work through out the year in their respective working or policy groups. Progress have been achieved by the sectoral Ministerial Meetings in forwarding the APEC agenda. In practical terms the initiatives cover areas such as information exchange, training, seminar, best practices, research, institutional support, etc.

APEC's trade and investment work opens markets, facilitates the movement of goods, services, investment and people across borders, and thus help all members share in the benefits of global trade. Economic and technical cooperation builds the confidence and capacity of members by putting in place the building blocks for growth and development. These activities are mutually reinforcing and make equally important contributions to achieving APEC's goals.

By building on domestic liberalization and deregulation exercises and encouraging further action, APEC is contributing to more liberalized and open trading environment. This cooperation as agreed in Subic, the Philippines in 1996 proceeds on two tracks: Individual Action Plan or IAP and Collective Action Plan or CAP.

The IAPs are unilateral measures that are taken domestically by each member according to its own timetable. They are dynamic and rolling plans which are subject to revisions and improvement. Each member IAP covers 15 different categories of agreed action including traditional market access issues such as the reduction and removal of tariffs and the elimination of WTO inconsistent non-tariff measures and greater transparency in investment regimes. IAPs also include other measures of benefit to investors and traders such as ensuring effective protection of intellectual property rights, increasing awareness of dispute mediation, services, encouraging wider competition and opening government procurement markets.

APEC's trade agenda encompasses much more than lowering tariffs. Economic experts have observed that it is by facilitating trade that APEC is making its most immediate contribution to the regional economy. International trade can be an expensive business. The costs involved in adapting products to new standards, clearing customs, or finding accurate information on regulations, can be especially prohibitive for smaller companies trying to expand into new markets. APEC's Collective Action Plans, which are jointly pursued by all members according to the same timetable, deal with precisely these types of obstacles.

APEC's facilitation work covers a wide range of trade issues, from customs and standards to government procurement and intellectual property rights, to business mobility and access to information.

A 1997 study undertaken by APEC's Economic Committee suggests that once implemented, the commitments contained in the 1996 Individual and Collective Action Plans will increase the gross domestic product (GDP) of the APEC region by about 0.4 percent in real terms, for a value of US$69 billion based on APEC's combined 1995 GDP.

The rest of the world will benefit as well. By 2010, APEC liberalization and facilitation commitments made in 1996 alone are expected to increase global GDP (1995 prices) by approximately 0.2 percent, representing about US$71 billion - a figure that is roughly equal to the total amount of official development assistance in 1995. In other words, those commitments in 1996 will have an impact roughly 25 percent of that attributed to the conclusion of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT). APEC has lived to its avowed principle of open regionalism. In other words, the product of APEC economic cooperation has not only been without detriment to the rest of the world but benefitted it.

Freer trade and investment in the region will mean increased growth well into the future. While individual members will experience gains in different areas of their economy, the analysis indicates that every member will be better off.

A fundamental principle of APEC's liberalization efforts has been its commitment to strengthening the multilateral trading system, in particular by determining concrete ways to contribute to the work programs of the World Trade Organization (WTO). It has played a role in bringing the Uruguay Round to a successful conclusion and taking the leadership at the WTO to the conclusion of the Agreements on Information Technology and Basic Telecommunications.

In 1997, APEC Leaders and Ministers when meeting in Vancouver met under an unprecedented situation. They have to face the regional currency turmoil of its East Asian members. Whilst the current problems have caused short term difficulties, they did not veer from the resolve that economic liberalization and facilitation remained the keys to ensuring both the future economic health of the APEC economies and the restoration of business confidence in the region.

They delivered improved Individual Action Plans, promised to update these annually according to agreed guidelines, and reaffirmed their status as APEC's primary vehicle for trade and investment liberalization and facilitation. In addition, they opened an important second channel for trade liberalization by agreeing to seek tariff cuts ahead of the Bogor timetable in specific sectors. In all, Leaders and Ministers chose fifteen sectors for early voluntary sectoral liberalization, nine of which were identified for immediate action. The goal is for APEC economies to work out the terms of these sectors by the time of the APEC Trade Ministers" meeting in June of this year and begin implementation in 1999.

In tandem with the broad focus on TILF, APEC economies pursue ECOTECH activities. This aspect of activity is important to reduce economic disparities among member economies and social well being and to attain sustainable growth and equitable development. The emphasis has shifted from modes of cooperation which avoid transfer of resources by one economy to another to modes which rely on the sharing of information, knowledge, experience and expertise. The aim is more towards the basis of forging a mutually beneficial partnership than on the donor-donee relationship. Thus a paradigm shift is involved here. APEC has also institutionalized private sector participation in economic and technical cooperation. Progress has been made in the ECOTECH area.

At Subic Bay, the Leaders instructed that high priority be given in six areas:

? developing human capital,

? fostering safe and efficient capital markets,

? strengthening economic infrastructure,

? harnessing technologies of the future,

? promoting environmentally sustainable growth, and

? encouraging the growth of small and medium scale enterprises

The Vancouver meetings have provided a number of challenges that APEC is focusing on this year. Fortunately, these broadly accord with the emphasis Malaysia is bringing to its year of chairing the APEC process.

Early voluntary sectoral liberalization is set to be a major thrust for APEC this year. As complicated as choosing the sectors to work on was, this is still the easy part. The hard part - hammering out agreeable terms of measures including tariff reduction and getting credible numbers of economies to sign on to this completely voluntary exercise - has just started, and the deadline is tight. So work will by all means continue this year on APEC's trade and investment liberalization and facilitation agenda. At the same time, Malaysia and some other economies believe that this part of APEC's agenda has in recent years somewhat overshadowed work on economic technical cooperation. ECOTECH activities will be given their due weight to ensure the proper balance and integration among the three pillars. Towards this end, a SOM Sub-Committee was emplaced this year.

Within ECOTECH, Leaders in Vancouver called for special emphasis on developing the region's human resources and harnessing technologies of the future. The purpose of capacity building in these two key areas is "to enable all members of the APEC community to benefit more fully from trade liberalization". Malaysia fully supports this focus on human resources and technology and will do her best to ensure that APEC achieves productive outcomes in these areas this year.

Another Vancouver challenge and which Malaysia feels strongly about, is the need for APEC to expand its engagement with the Asia Pacific business community. Business has served to be the engine to the explosive growth in the Asia-Pacific region. The continuing globalization of business means that the APEC economies must develop region wide practices and policies to ease the free flow of goods, services, investment and capital within the region.

Business is clearly one of APEC's most important constituencies. APEC already receives valuable advice from the APEC Business Advisory Council and has made some progress in building business views into its policies and programs. But we need an even closer engagement with business so that it feels like a full partner in the APEC process. Outreach to a broader segment of the business community is also being called.

APEC has to stay current if not ahead of the times. Electronic commerce is the coming issue. This is an example of a work program that must have business input. The goal is to promote a predictable and consistent legal and regulatory environment that enables all APEC economies to reap the benefits of electronic commerce. There is also an APEC agenda for Science and Technology industry cooperation into the 21st century. Science and technology is about innovation, empowerment and capacity building in the drive towards economic growth and its close linkages to trade and investment. It has been the determining factor in the development progress and social well being of economies and peoples. This should further push the APEC agenda.

These are by no means all of the initiatives underway in the far-flung APEC process, but rather a few of the highlights coming out of the Vancouver meetings that will keep us busy en route to this year's finale in Kuala Lumpur. I hope I have convinced you that we will not be lacking for employment this year. Indeed, managing this APEC process, with such a broad range of activities, numerous committees and working groups, and coordinating among eighteen - soon to be twenty one - member economies, presents major challenges. Partly because the Secretariat that I head is very small compared to those of other international organizations.

The APEC Secretariat was not emplaced till some two years after the establishment of APEC. It is a service organization and has no policy function. It has two major responsibilities: to carry out certain corporate functions and to provide support for the APEC fora. The Secretariat does have some albeit limited research and analysis capacity but even then, most of this is carried out under the guidance of individual APEC forum. All of its professional staffs are seconded by the member economies and meet with their upkeep. Unlike some other international bodies, APEC is driven directly by politicians and officials from the capital of members. In other words, a hands approach on APEC is being maintained by them.

APEC does so much business by fax and e-mail, that it has been called the virtual organization. Sometimes I think it is virtually impossible to manage. Seriously, though, it is important for APEC periodically to examine whether it is structured appropriately to accomplish its evolving tasks and whether streamlining is possible. Therefore, as one additional job for this year, Malaysia together with New Zealand and Brunei, the incoming Chairs of 1999 and 2000 respectively, will lead such an examination.

This, then, is a brief overview and development and APEC's plans for 1998. But what of APEC's achievements? Is the organization succeeding in reaching its goals?

Obviously, the jury would not render a final verdict until 2010 and 2020. But I believe that in numerous ways, some large and some small, APEC is succeeding. A measure of this can be drawn as an illustration from APEC's key achievements in 1997 whereby Canada, the APEC Chair for the year puts as follows, which also give an indication of the range of issues being tackled by APEC:-

? On January 1, APEC members began implementing their liberalization commitments, as set out in Individual Action Plans (IAP) tables in Manila in November 1996.

? APEC members improved upon and extended 1996 commitments, on a voluntary basis, and have agreed to release revised IAPs annually, along with progress reports on implementation and improvements.

? APEC accelerated the timetable for identifying sectors for early liberalization by two years.

? APEC adopted a blueprint for customs modernization by the year 2000 - the most ambitious and detailed customs program in the world.

? APEC adopted principles for dispute mediation, stating that APEC dispute mediation should foster greater confidence in the WTO and should not prejudice rights and obligations under the WTO and other international agreements.

? APEC developed tools for exporters, including an internet database of applied tariffs for all APEC members, which will be expanded this year to include non-tariff measures - most comprehensive and easily accessible tariff database in existence.

? APEC succeeded in bringing a new focus to work on six priority areas for economic development in the region.

? APEC agreed on a framework for co-operation on infrastructure, including private-public partnerships for investing in infrastructure, and initiatives for future work in telecommunications, energy, transportation and basic urban infrastructure.

? APEC agreed to examine ways to reduce the risk and better respond to the possibility of future financial crises in reaction to the currency and stock market developments in the APEC region.

? APEC completed an interim analysis of sustainability in the region, which focussed on a assessment of the impact of rapid economic development and population growth on food, energy and the environment which in APEC parlance is commonly referred to as FEEEP. A point worthy of note here is that the FEEEP issue is taken as a whole and the 5 variables taken jointly "in a long term, inter-related manner". The FEEEP issue has global impact and APEC is now attempting to tackle this global issue.

? APEC established plans to make cities more sustainable, to promote cleaner production processes and cleaner and environmentally sound technology; to protect the marine environment in the region; and to improve aviation safety.

? APEC increased its outreach efforts and continued the exchange of ideas, views and priorities with business, from the working level to Ministers and Leaders.

? APEC developed a framework for incorporating the concerns and priorities of small and medium-sized enterprises (SMEs) throughout its work.

? APEC became a more transparent forum by making all final APEC documents public from 1997 onwards, and by welcoming several non-members into Working Group activities.

? APEC launched an initiative to study the impact of trade and investment liberalization.

? APEC engaged young people as never before, and agreed to hold a Ministerial Meeting on women in 1998.

That APEC has been able to achieve such a success in so short a time, is a consequence of the unique way it conducts its activities. The basis of the APEC process is its non-binding nature, flexibility, openness, voluntarism, equality and evolution. What this entailed is consensus and confidence building. Cooperation is forged by encouraging each economy to make voluntary, unilateral decisions in a concerted way to prompt and promote shared objectives. Some is skeptical about this approach and sees this as the basic flaw in the APEC process. In fact, this is an inherent strength if not imperative if the APEC process is to succeed. Given the economic diversity and level of development of its membership, it is necessary to move more informally by consensus at a speed all its members can accept.

Now let me touch on the Asian financial crisis. I do not intend to comment on the causes of the crisis. Instead, let us look at two questions: What impact is the crisis having on APEC's agenda? And how is APEC reacting to the crisis?

There is obvious concern that the financial turmoil could set back APEC's trade and investment liberalization agenda. Clearly, when economies are growing rapidly, it should be easier to make the domestic adjustment required by opening to greater international competition, and political support for continued liberalization is likely to be stronger. That's the theory. Happily, however, we just do not have much evidence yet that the crisis and the expected slower growth rates are putting the brakes on APEC's liberalization plans. We are already five months into the crisis when Leaders met in Vancouver and launched the major new initiative on early sectoral liberalization that I had mentioned and prodded the WTO to conclude the agreement on financial services. To repeat, some adverse impact on the APEC agenda would not be surprising given the very difficult conditions facing several APEC members but we have not seen any significant impact yet.

It is almost as if the crisis, by reinforcing our regional interdependence, contains built-in forces to forestall a protectionist backlash. In addition, the existence of APEC itself is a positive force. One of the principles leaders enunciated as part of the Osaka Action Agenda calls for a standstill on new protectionist measures. If any economy responded to the crisis with significant new protection, its fellow APEC members would want to discuss it.

Leaders in Vancouver devoted overwhelming attention to the financial crisis and "resolved to work together to address these shared challenges". They called for rapid implementation of the Manila Framework for enhanced regional cooperation to promote financial stability. This came out of a meeting earlier in November of Finance and Central Bank Deputies from 14 APEC economies. The salient points of the Framework included:

? enhanced regional surveillance;

? intensified economic and technical cooperation to improve domestic financial systems and regulatory capacities;

? adoption of new IMF mechanisms to support strong adjustment programs,

? and a cooperative financing arrangement to supplement, when necessary, IMF resources

Leaders also asked two among them, President Clinton and Prime Minister Hashimoto, to work on the global aspects of the financial instability by drawing in non APEC members including restoring confidence to the market. This was held recently in Washington in what was known as the G22 Meeting.

Finally, Leaders also instructed APEC Finance Ministers to accelerate their work on collaborative initiatives to promote development of financial and capital markets. They asked Finance Ministers for a report on progress on these initiatives and for "concrete outcomes at their next meeting," scheduled for the latter part of this month in Canada which would also address various policy issues related to the financial crises.

Though APEC may be poorly suited institutionally as it has no central institution wide point of technical expertise such as the IMF has and obviously no funding mechanism and scale of resources to deal with the immediate crisis, this sort of economic and technical cooperation under the APEC Finance Ministers process can make an effective contribution in addressing the medium and longer-term issues that lie behind some of the market turmoil. Key elements of this process include:

? training in financial market regulation and supervision techniques;

? sharing experiences on strengthening clearing and settlement infrastructure;

? supporting development of rating agencies and strengthening information disclosure standards; and

? regional forums on pension fund reform and asset-backed securitization

At the SOM I in mid February, it directed the relevant APEC fora to incorporate initiatives and measures that would help alleviate effects on economies arising from the current financial situation. Work is being undertaken by the Economic Committee, particularly its annual Economic Outlook and its Infrastructure Workshop, the HRD Working Group, SME PLG, investment related fora and the Roundtable on Infrastructure.

ABAC had also been working on the issue based on 4 proposals:-

? a measure for quick amelioration of the Asia financial crises. This would include the establishment of a mechanism to guarantee repayment of government bonds, denominated in hard currencies issued in the economies affected by the financial crisis;

? regional financial forum;

? Establishing a multilateral currency swap mechanism to solve the problem of short-term currency fluctuations; and

? Recommendations in respect of the IMF.

What the financial crises had done is to show not that APEC has not acted, for surely it has done so, but the extent and nature of the response. Even the Leaders at Vancouver recognised this and to quote the relevant excerpt of the Declaration, "The global dimensions of these problems suggest the need for a global response, with regional initiatives to compliment and support these efforts?.On a global level the role of the IMF remains central". In as much as the affected economies have to undertake the necessary reforms within, the recovery was also dependent on changes in the global business environment, especially in overcoming the deficiencies in global flows of trade and capital. The buzz is now about the creation of a "new international financial architecture" following the Asian financial problem. Here too, APEC is serving the Asia-Pacific community by contributing, in the ways it is institutionally best suited, to efforts to manage a terrible regional crisis and prevent its future recurrence.

Conclusion

APEC uniqueness is clear - in its way of doing and carrying out its business. The key for APEC has been to concentrate on practical "value added" input, building on rather than duplicating the work of the many multilateral institutions. In its relatively short period of existence, it is already emerging to have an impact on the region and beyond, particularly in terms of its constructive interplay to developments in other multi-lateral settings like the WTO. We have seen not only sustained regional growth but also an unprecedented process of policy convergence among 18 very different economies. This will be increasingly felt as it moves to provide the nuts and bolts to the edifice laid: for APEC is moving from the vision and planning phase to that of implementation. As it moves to realise a more free and open trade and investment regime and foster closer economic cooperation, this is not an end in itself. They are merely means of involving, expanding and nurturing every opportunity to co-operative endeavours towards bringing about a sense of Asia/Pacific community.

As the world continues to undergo rapid change, it has become more apparent that all members of the community need to work together to increase prosperity and well being. This require that all members of the Asia-Pacific be connected. Governments alone cannot solve the challenges of the day. They need to work with citizens on a domestic level to consolidate partnerships and to obtain counsel and ensure support for policy directions. APEC is built on partnerships and its long term success will depend on continued creativity and innovation that are part of a sustained dialogue with interested stakeholders.

The Pacific Economic Cooperation Council (PECC) has observer status. From time to time, it has been charged to undertake certain specific tasks for APEC like economic analysis. The APEC Study Centres have been established in almost every APEC economies to be bridge to the Universities and Institutions of advanced research, albeit with relatively little formal link-up to the APEC process. So far, the greatest area and formal outreach has been towards the private/business sector.

The APEC economies have been and will continue to be a major contributor to global prosperity and stability. They have enjoyed dynamic growth in the past decade. Despite the regional economic turmoil which is fazing the performance of some of its members in Asia and some growing concern that the so called Asian miracle may come to an end, their economic fundamentals remained sound. These economies have high savings, productive capacities, flowing from heavy investment in education, a hard working and disciplined people and a sound industrial manufacturing base. The economies having come to terms with the real causes of their problems would seize the moment to take the appropriate action. They would not be likely to repeat their mistakes. These economies are expected to come out the stronger having undergone this pain.

With the imminent membership of Peru, Russia and Vietnam, APEC will include the regions main economies. The potential of a 21 member APEC can be seen in that in 1997, it had a combined GDP of 14 trillion dollars which was around 58% of world income and 47% of world trade and what with its population expected to continue to expand into the 21st Century. With the latter new consumers are being created. The Asia-Pacific region is expected to bring in new consumers faster than anywhere else in the world. In the years leading up to 2025, of the 400 million of them, some 55% will live in this region. It is not just that birth rates is high, there is some other region that is higher, but that the demographic picture of what I had earlier alluded education, skills, infrastructure and savings is what makes the difference. As East Asia augments its population, it adds new markets and industries.

Much specific meaningful activities of cooperation have been sowed and harvested. In broad terms, APEC has made important contribution to a sense of interdependence, the need of cooperation, coordination, openness and connecting the community. There are areas where APEC is making real contributions and showing even greater promise for the future. The challenge to APEC in its way forward must necessarily be not just to reinforce the political will in cooperating even more closely together but working towards a balanced agenda taking into account the diversity and levels of development of the members' economies. Not only has it to remain relevant but seen to be relevant.

Thank you.