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Structural Reform a Precursor to Regional Growth

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Structural Reform a Precursor to Regional Growth
« on: November 22, 2020, 09:00:00 PM »

Addressing costs and red tape and encouraging business across the region is key to economic growth said presenters to the APEC Senior Officials Policy Dialogue on Structural Reform.

According to the World Bank, 10 APEC economies are among the top 30 countries in which doing business is considered "easy." At the same time, behind-the-border issues such as high transaction costs and non-conducive policies, remain a challenge to regional economic growth.

Jane Drake-Brockman, a business-woman and Chair of Australia's Service Industry body, told the meeting that "Business often feels confronted by 'a regulatory fog' swirling over the whole Asia-Pacific region. With opaque rules and red tape, entrepreneurs often cannot see a clear pathway to setting up a new business, getting a license, innovating or partnering with another regional firm."

Similarly, ABAC Peru Representative Enrique Gubbins described government micro-management and over-regulation of business as being "presumed guilty until proven innocent." A system of overly interventionist checks, rules and licenses effectively paralyses potential entrepreneurs & innovators.

Consensus among Senior Officials was that governments should continually examine both existing and new regulations to ensure a balance is struck between legitimate regulation and the costs imposed by unnecessary regulation, in the form of additional compliance costs on business or anti-competitive effects of regulation.

Drawing from his own experience in the New Zealand structural reform process, former Minister for Finance, the Hon. David Caygill described the inevitability of vested interests, resistance to change, and opposition to regulatory reform. In the immediate term, he said, "Everyone made sacrifices. But it was necessary, in order to raise the standard of living in New Zealand, which had been slipping since the 1950s."

Policy packages were in some cases borne of necessity, he said. "Sometimes the economy being in a crisis (or at least a mess, as NZ was after the oil shocks and fiscal crises in the mid-1980s) can be the best impetus for wholesale regulatory reform."

But a lesson from the Dialogue for Senior Officials has been that governments should not have to wait for a crisis to address reforms which will benefit domestic, regional and global markets.

Economies that pursue structural reform to address domestic or behind the border impediments to growth will be more resilient to economic shocks, achieve greater macroeconomic stability, and experience increased productivity and higher living standards.

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