NEWS ANALYSIS

Leaders' minds focused on inclusive growth

AS THE annual meetings of the Asia-Pacific Economic Cooperation (Apec) grouping got under way at the weekend, the talk here isn't about who's putting what sort of stumbling blocks to a regional trade pact like the Trans-Pacific Partnership (TPP).

No one has really given the usual sales pitch for globalisation, producing fancy charts and econometric models showing the tangible benefits that a boost in exports or foreign direct investment have brought.

Instead, people are asking about the basic principles and conditions that need to be in place before - not after - their economies embark on more economic cooperation with regional neighbours.

Some, like Peruvian President Ollanta Humala, are even calling into question the value of the additional growth that cooperation brings - and saying that it cannot simply be an end in itself.

"For me, what's more important than economic growth is what we do with that growth. Is there a chance to redistribute it and correct inequality?" Mr Humala told the Apec CEO Summit preceding the Leaders' Meeting.

"This is the responsibility of any government - that's what we were elected for."

This echoed Indonesian President Susilo Bambang Yudhoyono's remarks as he opened the summit.

"We cannot achieve Apec's goals without ensuring the principles of inclusion in our economic growth and development," he said. "Therefore, maintaining the growth path that is sustainable and inclusive is of great importance."

From politicians to policy wonks, strong declarative statements like these have altered the tenor of the conversation so far at this year's Apec - and for good reason. In the last two decades, globalisation has brought significant benefits to the 21-member economic grouping. Its member economies have grown at four times the global average expansion rate.

Yet income disparities in the many economies also have widened significantly, putting pressure on governments to justify any move to open up markets.

"If there's prosperity generated, does it come to me or does it go to some other group, maybe a minority... that is becoming a serious problem," noted Singapore Prime Minister Lee Hsien Loong in a panel discussion.

"Unless countries are able to develop policies which enable more of their people to benefit from globalisation and give people more assurance, stability and buffer against the uncertainties that globalisation brings, I think these questions will continue," he warned.

That is why issues like education and infrastructure seem to top the Apec agenda this year.

Leaders are also talking about getting more women into the workforce, investing in health care and promoting financial services like micro-finance in rural regions.

All this is to ensure that more of a country's population - as well as its small home-grown enterprises - can tap into the benefits from the growth that globalisation can potentially bring.

But there is another reason why Apec countries should work on all these initiatives.

Businesses looking to expand or invest in the region on the back of lowered trade and investment barriers will often need the right workers, suppliers and local capital. And currently, these "supply- side bottlenecks" to growth are not being adequately addressed, the Pacific Economic Cooperation Council, which had polled CEOs about the region's prospects, said in a report presented to Apec leaders last week.

In other words, spreading growth around better begets even more growth.

In fact, it may even be a prerequisite to the region moving as a bloc to a more advanced stage of higher-value economic cooperation.

Cynics may say that the current rhetoric surrounding more "inclusive" growth is purely a result of political realities today.

From Latin America to South- east Asia (and even here in Singapore), governments are all facing increasing pressure from their electorates to fix the widening rich-poor gap that is one of the side effects of globalisation.

But whatever the intention, the shift in tone is nonetheless an important one.

As the Peruvian President noted, the private sector often takes the lead from governments and will gradually learn also to incorporate social inclusion policies into their corporate strategies.

More fundamentally, it eventually creates the kind of peace and social stability that allow governments to think long-term and implement reforms.

And that is perhaps the ultimate cornerstone for continued growth in the Apec region.

ignatius@sph.com.sg