The Treasurer, Mr Peter Costello, chaired the 2007 APEC Finance Ministers’ meeting on 2‑3 August 2007.
“The APEC Finance Ministers’ meeting is Australia’s foremost forum for practical economic cooperation in the Asia-Pacific region.
“We held a very successful meeting with productive discussion on substantive issues for Australia and the region,” said Mr Costello.
Australia introduced important issues on to the agenda, such as climate change and energy security, to generate dialogue on solutions to the most significant emerging pressures facing APEC economies. Other key issues discussed by APEC finance ministers included sustainable government finances, investment in our region, and strengthening private capital markets.
These discussions included engagement with the APEC business community and were held in the APEC spirit of cooperation and consensus that recognises the different needs of each economy. The discussions will directly inform APEC Economic Leaders’ consideration of these issues in September.
Climate change
Climate change is one of the major international challenges.
“The region is growing strongly and the task we face is to maintain high growth, which will require the expansion of energy sources, security of energy supplies, whilst at the same time minimising and reducing carbon emissions” said Mr Costello.
Finance ministers have a significant role to play in bringing a broad economic perspective to this issue, and developing and linking market-based economic policy responses. Ministers agreed that APEC economies need to expand the use and transfer of new, more efficient technology that favours lower emissions, and to share experience and analysis on the various approaches that government and business take to achieve clean development.
Ministers agreed on the need to address climate change and to cooperate in the region to that objective. Various measures adopted by different countries were discussed, including taxes, emissions trading, subsidies and regulation. Cooperation is important to ensure that emissions trading systems are designed in a way that would allow harmonising them on a broader regional basis.
Energy security
The global demand for energy is increasing, and is particularly strong in the APEC region. There are ample stocks of energy available to meet demand but trade and investment are needed to increase the supply of energy. Medium-term macroeconomic frameworks have been successful in maintaining growth when energy prices have been rising, but ministers noted the need for ongoing vigilance in setting macroeconomic policy and for greater flexibility in energy markets.
New clean technology initiatives and greater efficiency and diversity in energy supply improve energy security and underpin a sustainable response to the challenges of climate change. It is important that firms, both private and state-owned enterprises, operate as efficiently as possible.
Fiscal sustainability and transparency
Economies in the region continue to look for better ways to manage public expenditure and ensure that government finances are sustainable, transparent and accountable. The services and infrastructure needs of economies are changing as the population ages and becomes more prosperous. The challenge is to meet the needs of current and future generations while being fiscally responsible.
Australia is at the forefront of international best practice in this area, and took the opportunity to highlight a number of good management practices, which include the intergenerational report, the future fund, the higher education endowment fund and the Charter of Budget Honesty.
Finance ministers engaged in a productive discussion on their experience in managing fiscal risks. Ministers highlighted the importance of APEC fiscal sustainability principles which have been developed to guide further progress on improving fiscal sustainability, with particular focus on collecting, reporting and managing the off-balance contingent liabilities of government. They also encouraged further work by the IMF and World Bank on best practices in managing fiscal risks.
Global capital flows and strengthening investment in the Asia-Pacific region
Ten years after the Asian financial crisis, investment in many emerging Asian economies is yet to recover fully. This poses a serious challenge to growth in the medium term and to regional prosperity.
Facilitating investment, particularly higher quality investment, requires stable policy settings, growth-oriented macroeconomic policies, removing inappropriate barriers and controls on investment, and efficient capital markets. It was recognised that these factors can all be supported by sustaining domestic structural reform through improved governance, more efficient regulation, and stronger competition, and greater openness in the services sector. Ministers noted the need for greater liberalisation of capital flows and called for a successful and balanced outcome from the Doha Development Round particularly for financial services.
The orderly reduction of global imbalances remains a priority. Flexibility of exchange rates and prices will facilitate the necessary adjustments and reduce the costs. Such changes are in the interests of each individual economy, are desirable from a multilateral perspective, and would help dampen protectionist sentiment.
Making private capital markets work better in our region
Private capital markets can assist governments in achieving their social and economic objectives, particularly by financing new infrastructure and other investment. They also help manage key risks, including the effects of volatile energy prices and an ageing population.
At Australia’s initiative, a select group of business representatives from the APEC Business Advisory Council (ABAC) participated in a working lunch with ministers to discuss ways to strengthen domestic infrastructure and institutions to support the development of private capital markets. This reflects ABAC’s importance in the APEC community as a facilitator of dialogue and partnership between government and business to address policy challenges.
Ministers discussed the need to strengthen the foundations that underpin the operation of private capital markets, expand the investor base, increase the range of financial instruments and increase the compatibility of financial systems in the region. By improving private capital markets, economies can enjoy greater access to a wider range of saving and investment opportunities, lower the cost of capital for borrowers, and increase rates of return for lenders.
Ministers agreed to the development of a web-based information system — the APEC Catalogue of Policy Experience and Choice — for finance ministries, central banks and regulatory agencies in the APEC region to collect and share knowledge on financial reform based on the practical experience of member economies and international agencies. This is one of many capacity building initiatives underway in the APEC Finance Ministers’ Process.
Money laundering and illicit financing
Ministers reaffirmed their commitment to fighting money laundering, terrorist financing and other illicit financing that threaten the stability and integrity of financial markets. They saw merit in the Financial Action Task Force examining the risks involved in financing the proliferation of weapons of mass destruction.
Further information
The meeting outcomes are documented in the Joint Ministerial Statement which is available on the APEC 2007 website www.apec2007.org/fmm/.