Finance and central bank officials from across the Asia Pacific Economic Cooperation (APEC) member countries have agreed to push forward an agenda of financial resiliency and infrastructure development to shield the region from risk to its growth prospects.
“The recognition of the need for financial resiliency and infrastructure development has put these on the APEC agenda. Boosting financial resiliency and infrastructure development poses the benefit of ensuring that economic gains of the region can be sustained,” Department of Finance (DOF) Undersecretary Gil Beltran said at the conclusion of a two-day APEC Finance and Central Bank Deputies’ Meeting in Tagaytay City on Friday.
“Also, it gives a better fighting chance for member-economies to enhance the inclusivity of growth moving forward,” he said on the final day of the March 5-6 event.
The Asia-Pacific has some of the fastest growing economies in the world, but threats to the sustainability of growth and the goal of accelerating poverty reduction in the region still linger. The list included external shocks, such as weak global demand and the impact of monetary policies in advanced economies, and natural disasters.
Delegates agreed the region is not immune from economic shocks. Its geographic location makes it highly vulnerable to the damaging impact of natural disasters. It has been estimated that 70 percent of the natural disasters that occurred globally between 2003 and 2013 have hit the region, resulting in about $68 billion in annual economic losses.
Deepen financial markets
Financial resiliency and infrastructure development are the third and fourth pillars, respectively, of the Cebu Action Plan (CAP), which is a medium- to long-term development road map proposed by the Philippines for Asia-Pacific economies.
The two other pillars of the Cebu Action Plan are financial integration and fiscal transparency and policy reform. These were discussed on the first day of the APEC deputies’ meeting.
The third pillar calls for measures that will deepen financial markets in the region to strengthen the ability of economies to absorb shocks. With higher volume of funds and availability of more financial instruments in capital markets, sources of financing for development initiatives widen.
In addition, the third pillar requires governments to have sufficient fiscal buffers that economies may draw from in times of stress.
In the case of the Philippines, for instance, efforts to trim the government’s budget deficit and bring down the debt burden over the past decade have given the economy ample fiscal space to respond to shocks. Expenses required for reconstruction and recovery of areas hit by natural disasters, for example, were partly accommodated by the national budget without causing fiscal woes, Beltran said.
The fourth pillar calls for measures that will help increase sources of and ease accessibility to funds for infrastructure projects.
Beltran explained that the Philippines has strengthened its Public-Private Partnership (PPP) program to allow the private sector to invest in more public infrastructure projects. Also, the government has been consistently raising the allocation in the budget for infrastructure.
Despite existing efforts in the Philippines and other economies toward financial resiliency and infrastructure development, delegates still recognized the need to implement more measures. This is in recognition of the unpredictable nature and magnitude of external shocks.
In its hosting of the meeting, the Philippines shared its own efforts in line with the four pillars. Besides strengthening its fiscal position through tax and administrative reforms and increasing infrastructure investments from current 2.5 percent to 5 percent of GDP by 2016, the Philippines also has made public vital fiscal data and has implemented reforms in the budget process.
Moreover, delegates were told, the country has also implemented measures to liberalize the financial sector, a move that serves as a prerequisite for financial integration in the APEC region. All these reforms and investments contribute to the virtuous cycle the Philippines is enjoying, with robust fiscal space to support even more growth.
Outcomes of the discussions held during the meeting will be added to the agenda for the APEC Finance Ministers’ Meeting, which will be held in Cebu City in September.
Finance Secretary Cesar V. Purisima in a statement welcomed these developments.
“As we know very well here in the Philippines, shocks like natural disasters and volatility in the global economy seriously threaten our shared goals to make growth sustainable and translate these gains into reducing inequality and poverty,” Purisima said.
“Building structures and buffers through the Cebu Action Plan to buttress against these threats makes for a less vulnerable and more resilient Asia-Pacific region. Infrastructure development, on the other hand, is our region’s investment towards future growth. Enhanced connectivity and mobility to support our growing populations will allow economies in the Asia-Pacific region to capitalize on their demographic dividends,” he added.