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GENERAL ECONOMIC AND SOCIAL COMMISSION FOR ASIA AND THE PACIFIC Fifty-sixth session EMERGING ISSUES AND DEVELOPMENTS AT THE REGIONAL LEVEL: REGIONAL ECONOMIC COOPERATION (Item 7 (a) of the provisional agenda) EMERGING ISSUES AND DEVELOPMENTS RELEVANT TO THE SUBPROGRAMME: REGIONAL ECONOMIC COOPERATION Note by the secretariat
CONTENTS A. An analysis of the failure of the Seattle Conference C. Implementation of existing agreements F. Implications of the Seattle Conference for the Asian and Pacific region II. INFORMATION TECHNOLOGY AND THE COMPETITIVENESSOF INDUSTRY III. FACILITATING TRADE AND INVESTMENT USINGINFORMATION TECHNOLOGY 1. Over the last decade, globalization has accelerated, affecting the political, social, cultural and economic aspects of life in numerous ways and making national economies more interdependent and vulnerable to external shocks. Among other things, advances in the multilateral trading system based on the General Agreement on Tariffs and Trade (GATT)/World Trade Organization (WTO) and information technology around the globe intensified the process of globalization. The Asian and Pacific region has been in the centre of this globalized economy. 2. In order to maintain the dynamism of the region in terms of economic growth and increased trade and investment, and to maximize the benefits of globalization, it is imperative for developing countries and economies in transition to integrate effectively into the world trading system. One powerful tool which can facilitate such integration and enhance the process of economic development in the region is information technology. 3. Against this background, three issues which have important implications for developing countries in the region are discussed in the present document: the outcome of the Third Ministerial Conference of WTO, held at Seattle, United States of America, in December 1999, information technology and the competitiveness of industry and facilitating trade and investment using information technology. I. PRELIMINARY ANALYSIS OF THE OUTCOME OF THE THIRD MINISTERIAL CONFERENCE OF THE WORLD TRADE ORGANIZATION 4. The liberalization of international trade in goods and services that had been gathering momentum since the formation of WTO in 1995 received a setback at the Third Ministerial Conference of WTO member countries held at Seattle in 1999. The Conference failed to resolve the differences between developed and developing countries and those that existed among developed countries themselves. A. An analysis of the failure of the Seattle Conference 5. Despite the considerable progress made in evolving an acceptable package on implementation issues, negotiations failed at Seattle for a number of reasons, which include the following. First, there were fundamental differences with regard to the scope of liberalization of agriculture; second, the Conference could not respond satisfactorily to the demand of developing countries for the effective implementation of existing agreements; for example, the major textile exporting countries were dissatisfied that their suggestions to enhance liberalization in the area of textiles and clothing were unacceptable to some of the major developed importing countries. Third, another important area of disagreement was anti-dumping measures and in particular their misuse. Fourth, fundamental differences on the inclusion of new subjects in the agenda for the next round remained unresolved. Finally, the attempt to push through labour standards raised serious fears of protectionism among the majority of the WTO membership. 6. Agriculture was a core issue at Seattle. The debate was over the level of the target to be set for the further reduction of tariffs and domestic and export subsidies. The United States, supported by the Cairns Group of countries, wanted the negotiations to aim at the elimination of export subsidies. A number of WTO members, the European Union, Japan, Norway, Republic of Korea and Switzerland, which have a defensive position on agriculture, wanted to embed ideas in the negotiating mandate which would have enabled them to undertake commitments during the negotiations on a more gradual basis. Thus they emphasized non-trade concerns and the "multifunctionality" of agriculture. A number of developing countries drew attention to the dependence of a large segment of their population on agriculture and the role it played in rural development. They therefore wanted consolidation and extension of the special and differential treatment provisions in the Agreement on Agriculture, an area on which there was in principle no disagreement from any side. C. Implementation of existing agreements 7. For a number of developing countries, which had a somewhat minimalist approach towards multilateral trade negotiations, the most important issue was the implementation of the existing WTO agreements in letter and spirit. With regard to the Agreement on Textiles and Clothing, many countries believed that the schedule of integration adopted by the developed importing countries had not led to any significant liberalization of existing quota restrictions, and thus the spirit of the Agreement had remained unfulfilled. Again, this demand was not acceptable to the key textile/clothing importing countries, on the grounds that it would be tantamount to a reopening of negotiations on this subject. 8. Anti-dumping was an important area of disagreement between the United States on the one hand and Japan and many Asian and some Latin American countries on the other. The agreement related to anti-dumping was originally meant to ensure that goods were not dumped in others' markets. These delegations strongly asserted the view that the existing rules on the subject had too many loopholes that allowed protectionist measures to be taken against efficient producing countries. While some challenged the fundamental economic rationale of anti-dumping action, others were demanding a minimum tightening of its disciplines so that the flexibility of rules in allowing protectionist action could be limited. But the United States was not willing even to consider these proposals. 9. There were also fundamental differences over the four subjects which have come to be known as the "Singapore issues", that is, investment, competition policy, transparency in government procurement and trade facilitation, for which work programmes and working groups had been formed following the first Ministerial Conference of WTO held in Singapore in 1996. With regard to investment, there was resistance from a number of Asian and African countries to the idea of commencing negotiations within the WTO framework. Their main concern was related to the perceived erosion of sovereignty and loss of flexibility in economic decision-making that they feared would result from a multilateral agreement on investment. In responding to this objection, the proponents explained that they envisaged only a positive list approach. This implied that the obligations of a future agreement would apply only to the sectors and areas in which specific commitments were undertaken. However, by the time this concession was indicated, the positions taken by a number of developing countries had hardened. In the end, all that the developing countries opposed to the proposal were willing to concede was that the work programme started in Singapore would continue. However, the proponents were not satisfied with this. 10. The main issue on competition policy before the ministers at Seattle was whether to launch negotiations in the area or to provide for a continuation of the Working Group on the Interaction between Trade and Competition Policy. Opposition to the idea of launching negotiations in the area came from the United States, which has seen an increasing number of mergers between major players, and from a number of developing countries. Those countries felt that they were not sufficiently well prepared and feared that negotiations might impair their ability to support selected national companies. 11. With regard to transparency in government procurement, the delegations maintained three divergent positions. At one extreme was the position of a number of developing countries that the Working Group on Transparency in Government Procurement should only continue its work on the identification of elements for inclusion in a possible agreement. At the other extreme was the view that the ministers should adopt an agreement at Seattle. Most developed countries and some developing countries favoured a middle path whereby a mandate would be given to conclude an agreement by a date to be determined, with a list of agreed elements that such an agreement would cover. 12. Conceptually, trade facilitation is a relatively non-controversial subject among delegations. It is generally recognized that simplified, harmonized and widely automated trade procedures are to the benefit of traders, consumers, transport operators and governments. However, a number of developing countries felt that trade facilitation problems were essentially capacity and infrastructure problems that could not be addressed appropriately through rule-making. They were concerned that they would be confronted with another set of rules that they were ill-equipped to handle. 13. The issue on which the division between the WTO members was the deepest was international labour standards. The subject had already received considerable attention at Singapore, where it had been agreed that (a) all WTO members were committed to the observance of core labour standards; (b) the International Labour Organization (ILO) was the competent body to set and deal with those standards; (c) economic growth and development fostered by trade contributed to the promotion of the standards; and (d) the comparative advantage of developing countries, particularly low-wage developing countries, must in no way be put into question. Both the United States and the European Union were, however, keen to ensure that the matter received further attention and proposed the setting up of bodies to examine the matter. Towards the end of the Seattle Conference, a proposal was worked out informally by the Chairperson, envisaging the establishment of a joint ILO/WTO standing working forum on trade, globalization and labour issues, outside the WTO structure, with a view to promoting a better understanding of the issues involved through a substantive dialogue between the governments. Participation was to be open to relevant international organizations, such as the United Nations Conference on Trade and Development (UNCTAD), ILO, the World Bank and WTO. While the developed countries explained their position by stating that it was necessary to keep the anti-liberalization labour unions at bay, the developing countries suspected that protectionist motives were underlying the proposal. What deepened their suspicion were the threats that eventually trade sanctions would need to be considered for the enforcement of labour standards. 14. In summary, in overall terms, the main point of contention among the WTO members was the scope of multilateral trade negotiations to be launched by the ministers. Some countries favoured comprehensive negotiations as they wanted to diffuse attention on the politically sensitive area of agriculture which is up for review under the built-in agenda of the Agreement on Agriculture. Many of the agricultural exporting countries in Asia and Latin America supported broad coverage of the negotiations, as they felt that only in comprehensive negotiations would there be the possibility of cross-sectoral trade-offs, which are essential for obtaining the required results. During the run-up to the Seattle Conference, the opposition of a few developing countries to the proposal to include industrial tariffs in the negotiations was already wearing thin. However, fundamental differences persisted over the inclusion in the negotiations of investment and competition policy. There was also a strong difference of opinion on the proposal to review and consider amendments in the agreements on anti-dumping, subsidies and technical barriers to trade, and also on the inclusion of labour standards. F. Implications of the Seattle Conference for the Asian and Pacific region 15. What then are the implications of the failure of the Seattle Conference for developing countries of the Asian and Pacific region? At the outset, given the differences in the levels of development among developing countries within the region and the wide variations in their factor endowments and comparative advantage, it is easy to see that the Seattle outcome has different implications for different groups of countries. 16. Thus, for instance, the unwillingness of the major textile/clothing importing developed countries to consider speeding up the integration of their quotas into GATT/WTO means further frustration for one group of the region's textile and clothing exporting countries. On the other hand, it gives more time to another group of quota-dependent textile-exporting countries to restructure and modernize their apparel industry in order to prepare for the challenge of the phasing of the Multifibre Arrangement (Agreement Regarding International Trade in Textiles).(1) 17. Similarly, the lack of consensus on extending the scope of negotiations on agriculture to cover the elimination of export subsidies will be received as a positive outcome for those developing countries of the region that prefer a more gradual approach. However, this outcome would be a disappointment to the Cairns Group members from the region, whose agricultural exports would continue to face depressed world prices caused partly by such export subsidies. 18. The inability of WTO members to achieve a breakthrough on a review of the anti-dumping provisions means that an important opportunity has been lost to do away with one of the most controversial of the WTO agreements. Developing countries of the Asian and Pacific region have been the primary targets of anti-dumping measures in recent years(2) and the situation is not likely to change significantly in the short run. 19. On the other hand, developing countries successfully thwarted attempts by some developed countries to push labour standards into multilateral trade negotiations. Many regard this as an important achievement for the developing world, whose chief asset is relatively cheap labour and who suspect protectionist motives behind the repeated attempts by some developed countries to bring up the issue even after the Singapore Ministerial Conference had clearly indicated that it was a subject best left to ILO. 20. However, the implications for developing countries of the absence of consensus on the inclusion of such new subjects as competition and investment policy, government procurement, trade facilitation and e-commerce in a new round of negotiations are less than clear. Some developing countries hold the view that before widening WTO negotiations to cover new issues, members ought to try and set right aberrations within existing WTO agreements. However, others believe that while some of these subjects may seem daunting in the short run, they have the potential to give net welfare benefits to developing countries over a period of time. On balance, it would appear that the postponement of negotiations on the new subjects is, for the time being, in the interests of developing countries, as it would give them more time to understand the implications fully. 21. Within the above background, all that can be conceded is that the lack of accord at Seattle will result in the slowing of the pace of liberalization. However, there are no signs of backsliding on liberalization or of a rebirth of protectionism. Tariff cuts have continued on agricultural and industrial products in accordance with the agreement reached in the Uruguay Round. Export subsidies in agriculture are also being reduced on schedule. Despite the complaints of backloading of the liberalization process in the area of textiles and clothing, the integration of the sector into the mainstream has been making progress, albeit slowly. There is no reversion to grey-area measures, to voluntary export restraints and orderly marketing arrangements, as was the case before the WTO Agreement came into force. It can only be concluded that the failure at Seattle was a temporary setback, not a major calamity for the trading system. 22. At the UNCTAD X Conference that took place in Bangkok in February 2000, many countries reaffirmed their commitment to a multilateral trading system that would provide benefits to all countries. There was also a clear articulation that what mattered was not just the integration of countries into the global economy but the quality of integration. The Plan of Action that emerged from UNCTAD X reflected some convergence of views among countries on a number of issues raised at Seattle, including the need to improve market access for goods and services of particular interest to developing countries; resolving issues relating to the implementation of WTO agreements, especially those related to textiles/clothing and agriculture; preventing the misuse of anti-dumping provisions; fully implementing special and differential treatment provisions, especially those that require WTO members to provide increased trade opportunities in goods and services of interest to developing countries; facilitating access to WTO; and providing technical assistance, especially to least developed countries. In a sense, the deliberations during UNCTAD X appeared to have contributed to a softening of the antagonism that had emerged between countries as an aftermath of the discussions at Seattle on the vexed issues of the multilateral trading system. 23. At UNCTAD X, the Director General of WTO announced that after a post-Seattle lull in activities, work had begun in WTO on a number of subjects. The first of these was the beginning of the review on the Agreements on Agriculture and on Services. In view of the fact that agriculture is a subject of enormous importance to developing countries, the need for developing countries to play a proactive role in the course of this review cannot be overemphasized, especially as the existing Agreement is relatively weak.(3) However, it is necessary to ensure that the interests of exporting countries in liberalizing trade in agricultural products in no way compromise those of net food importing countries. 24. In the case of the review of the General Agreement on Trade in Services (GATS), it is essential to realize that liberalization of trade in services is not a classic North-South divisive issue. Just as service suppliers from the developed world seek markets for their services abroad, so do developing countries need these services in order to mitigate their problems of basic infrastructure. However, developing countries need to work harder in order to redress the existing imbalance that exists in GATS commitments towards market access through commercial presence compared with market access through the temporary movement of natural persons, in which they have a comparative advantage. 25. With regard to the package of benefits for least developed countries, past experience on the work done in WTO under the Integrated Framework for Trade-related Technical Assistance to Least Developed Countries admittedly has been rather disappointing. All countries need to work to ensure that tangible results emerge from any such package. There was also the suggestion that WTO would attempt to expand its core budget for technical assistance. 26. Finally, as the issue of implementation of the existing Uruguay Round provisions was reportedly being taken up seriously by the concerned bodies of WTO, developing countries need to work together to ensure that attention is paid not only to the need to extend transition periods in several agreements under which many developing countries have genuine difficulties in meeting the deadlines, but also to ensure that critical issues are resolved, namely those relating to misuse of anti-dumping measures, the Sanitary and Phytosanitary Measures and other technical barriers to trade, the removal of tariff escalation on exports of developing countries, and bringing the dispute settlement mechanism within the reach of the poorer members. II. INFORMATION TECHNOLOGY AND THE COMPETITIVENESS OF INDUSTRY 27. In an increasingly globalizing environment, the application of information technology for enhancing the competitiveness of industries is very important, especially as the impressive economic growth in many of the developing countries in the 1980s and the first half of the 1990s was spearheaded by export growth and foreign investments in their manufacturing sector. Following the experience of Japan, the Asian newly industrializing economies, and then the South-East and South Asian economies progressively underwent a structural change, in which industry emerged as the most dominant sector in terms of the rate of growth in value added as well as export earnings. Furthermore, as many of these countries initially succeeded in building internationally competitive labour-intensive industries characterized by technology regimes suitable for repetitive processes, they have now moved to exploit the window of opportunity provided by knowledge and information-intensive industries. 28. However, as the recent economic crisis demonstrated, the process of the structural changes has proved to be complex and varied and in many instances is yet to register meaningful progress. With external and internal conditions undergoing rapid, and sometimes unpredictable, changes owing to globalization and the introduction of information technology, many developing countries are faced with the challenge of pursuing more vigorously a set of policies and programmes even to sustain their international competitiveness, achieved after decades of painstaking efforts. 29. The effect of information technology on competitiveness across different sectors of the economy, industries and firms varies considerably. At the same time, information technology, being genetically pervasive, results in new organizational practices leading to a significant increase in the productivity of even very traditional industries, such as clothing, being upgraded, segmented and put on an innovative path. At present, only a few firms in the more advanced developing countries use information technology from the original design concept through to production and marketing. The new paradigms involving computer-aided design, computer-integrated manufacturing, flexible manufacturing systems and computer-aided engineering, which are heavily dependent on information technology, enable the firms to design customized, information-intensive and environmentally friendly products, change their production mix in a cost-effective manner, achieve just-in-time inventory and establish quality control management systems leading to the adoption of ISO 9000 and ISO 14000. These firms also use e-commerce effectively to market their products and acquire production inputs. 30. However, many industries in developing countries still struggle with outdated labour-intensive technologies relying heavily on low labour costs for their competitiveness. In general, small and medium-sized enterprises rely on less sophisticated technology involving less use of information technology. With the intensification of globalization and liberalization, these enterprises face increasing competitiveness pressures affecting their prospects for survival and growth. As the experience of some countries of the region has demonstrated, one of the reasons for these enterprises being hit hardest by the crisis was the lack of access to new technology and product innovation.(4) Therefore, measures to enhance their long-term competitiveness should particularly include technological upgrading and human resources development. Besides, government support and facilitation, foreign direct investment may be a very important means of creating the conditions for the start-up and development of competitive small and medium-sized enterprises, especially as such investment may be accompanied by transfer of technology and related training.(5) 31. The flow of higher levels of technology through foreign direct investment increases the efficiency of the use of capital and labour and accordingly contributes to the higher factor productivity of recipient firms. In particular, foreign direct investment brings in competitive technology to export-oriented industries since foreign companies often tend to transfer their latest technology to contend with an open and competitive environment in the local market. If such industries are to compete effectively in global markets, they must incorporate technological processes, such as computer-aided design and manufacture, in their production activities. Without these facilities, they could face considerable competitive disadvantage in an era of rapidly changing products, processes and designs. With increased access to information through the Internet and better communication networks, foreign investors are in a better position to identify local partners and suppliers, while small and medium-sized enterprises too are better informed about prospective investment partners. 32. In general, the application of information technology for gaining access to information has become increasingly important for all small and medium-sized enterprises from tiny businesses located in rural areas, such as makers of traditional crafts in the Philippines and food processors in China, to subcontractors and suppliers of parts and components to large-scale companies, including transnational corporations. On the one hand, they can access readily information on demand and supply of required materials and components, available technologies, credits opportunities etc. On the other hand, they can use e-commerce for marketing their products. Furthermore, the electronically available public information can be of major assistance to the enterprises in such areas as administrative procedures for export and import, tax, government assistance programmes, scientific and technical knowledge, and training opportunities. 33. The introduction of information technology, however, does not automatically lead to an expected increase in competitiveness and productivity. This phenomenon, often called the "productivity paradox",(6) mostly results from the lack of capabilities at the firm level both to adapt the technology to the needs of the firm and to adjust the firm to the requirements of technology, as old organizational models are not able to cope with the nature of information technology. The potential of information technology is realized only when the organizational structure, including job requirements, lines of authority, attitudes and processes, are redefined and supported by the requisite skills as well as information technology, is adapted and integrated in accordance with the strategic vision of the firm. 34. The availability of competent human resources is a prerequisite for the successful diffusion of information technology. It has been estimated that technological changes in 30 industries in Singapore were rapid during the period 1983-1992(7) while efficiency declined in many of them. One of the explanations for this was that new technologies were introduced too fast, exceeding the adoptive capacity of human resources at both the managerial and worker levels. This happened despite the fact that highly developed institutional infrastructure and supportive policies for training and science and technology education are already in place in Singapore. 35. A survey of small and medium-sized enterprises in Asia-Pacific Economic Cooperation(8) further identified additional requirements for the increased adoption of e-business by those enterprises. In particular, raising the level of trust and confidence, including establishing a suitable domestic and international legal framework for e-commerce, was identified as important by 70 per cent of the enterprises; lack of access to information on suitable business models and technologies for e-commerce was considered a barrier by 60 per cent of them. Addressing security, legal and liability concerns, as well as building business awareness and improving the information infrastructure, were recognized as requirements for moving forward. 36. The experience of most advanced countries of the region has demonstrated that in order to maximize the opportunities offered by information technology for the increased competitiveness of local industries, well-coordinated efforts are required in establishing an integrated policy and institutional framework conducive to the transfer, development and adoption of information technology, particularly by the private sector. While liberalization and export orientation have appeared to be vital incentives for such technology-based industrial development, the participation of the private sector should be encouraged in technological capability-building, especially the development of qualified human resources. Concerted efforts and the partnership of all stakeholders in information technology are especially required for establishing or strengthening institutional and information infrastructure, including communication links and Internet providers, research and development institutions, technology transfer and promotion organizations, patent offices, and consultancy and financial services. While various assistance schemes for small and medium-sized enterprises are available in most of the countries in the region, the long-term competitiveness of the enterprises could be promoted through increased awareness and human resources development for the adoption of information technology, particularly e-commerce, setting up special credit schemes, technology promotion and consultancy services. 37. Regional cooperation may significantly complement national efforts in promoting the adoption of information technology for the increased competitiveness of industries. All countries in the region and least developed countries, Pacific island countries and economies in transition, in particular, could benefit from sharing their experience in the facilitation of access to information technology by industries, especially small and medium-sized enterprises, to improve their competitiveness; human resources development; the financing, development and transfer of information technology; the building of institutional and information infrastructure; and the building of information technology capabilities at the national and firm levels. III. FACILITATING TRADE AND INVESTMENT USING INFORMATION TECHNOLOGY 38. Information technology has the potential to magnify existing inequalities but, if applied effectively, can be a powerful tool for facilitating the integration of developing countries into the world economy. The growth of the Internet and e-commerce has been phenomenal in the last decade. The increased movement of goods resulting from the growth of business transactions through the Internet will make it all the more essential for countries to have effective courier and postal services, speedier customs clearance and less bureaucratic formalities.(9) 39. In addition to its effect on the movement of goods, information technology has enabled a wide range of services to be traded digitally.(10) The Internet has reduced telecommunication costs considerably, making it easier for companies to outsource back office operations to lower cost locations. To take advantage of new trade and investment opportunities, governments need to be aware of growth areas for exports relating to information technology, such as long-distance data processing and customized software programming, new areas in medicine, engineering, education and tourism services. 40. In this connection, the Expert Group Meeting on Facilitating Trade and Investment in the Pacific Island Countries was held at Nadi, Fiji in November 1999. It explored the possibilities for the Pacific island countries to develop digitally the deliverable services sector and how information technology could help them overcome the limitations of market size and distance. The Meeting agreed on an action plan which identified the following six areas:
As a first step in the follow-up process, national focal points at the senior level have been established in order to ensure that the use of information technology can be addressed as a national policy element in a comprehensive and coordinated matter. Subsequently, a study visit using the technical cooperation among developing countries framework was organized, in collaboration with the Global Knowledge II Secretariat under the National Information Technology Council of the Government of Malaysia, to provide the national focal points with an opportunity to learn from Malaysia lessons in technology awareness, capabilities and usage in an operating environment. 41. Diversification of the export base for countries with limited resources and geographical disadvantages could be achieved by attracting investment through the effective use of information technology. However, exploiting this niche requires capital investment in high-quality infrastructure for telecommunications, reliable power supply, skills and cost competitiveness that can support such investments, and an educated pool of labour that can be readily transferred into the service sector. To meet these requirements, policy formulation must be pursued at the national and regional and subregional levels. 42. At the national level, countries should consider a comprehensive set of policies to strengthen and revitalize several areas of public sector concern, such as a human resources development programme, the strengthening of key institutions, improving access to hardware, improving the investment incentive framework, strengthening infrastructure and reforming the regulatory environment. Private sector participation in all these areas is essential. Flexible and timely policy responses must be a built-in feature of policy-making. 43. Multi-country cooperation offers one avenue through which the high costs of implementing information architecture can be distributed more easily to justify capital-intensive investments in infrastructure to support information technology applications. A subregional framework to exploit the use of such technology also offers possibilities for collective marketing of the region, strengthening educational facilities through networking and creating ancillary services to existing businesses and offshore services.(11) 44. The investment incentives must be created by allowing faster depreciation of capital goods, duty-free imports of capital goods, entry of foreign talent and expatriates and lower bulk costs of telecommunications and electricity in order to accommodate the specific requirements of the information technology service sector, such as the need to import specialized skills and equipment. The regulatory structure could also incorporate common tariffs and cost-sharing measures. As a common information technology environment is created within a subregion through joint negotiations, common technologies and vendors and increased transactions through seamless connectivity, it will have an impact on the movement of goods and services, which may eventually call for greater harmonization of other investment and trade policies. 45. The intention of the Association of Southeast Asian Nations to create an information infrastructure will have significant repercussions for investors and traders in the Asian and Pacific region. It will create a significant electronic marketplace with a potential reach of around 500 million people, as connectivity becomes universal. Significant learning and experience-sharing effects can be stimulated through this relationship, which may also allow greater private sector participation across subregional borders. The Philippines is leading the taskforce, and the planning for some key areas is being done by Singapore. Such subregional development strategies will attract more investors to the whole subregion and mitigate the likelihood of reduced economic gains resulting from competitive incentives within the group. 46. Developing countries that seek to use information technology as a vehicle to widen their economic base have to consider the policy responses needed in a comprehensive and strategic manner. Flexible policy response is a key feature of decision-making in coping with changing technology trends, as well as ensuring human resources development to foster flexible skills. The policy reforms and strategies for creating the information technology service sector require quick action if developing countries are to remain within these changing rules of engagement. 47. Seeking private sector partners can alleviate the cost burden to some extent and also provide a direct marketing channel through which to seek appropriate user clients. A willingness to provide an adequate regulatory regime remains important to the overall development strategy for using information technology as a vehicle for increased economic activity. 48. The ultimate challenge for developing countries is to formulate consistent policies within a robust framework to support private sector interests in locating digitally exportable services at the national level. At the same time, regional and subregional cooperation should be pursued so as to create an enabling environment for investment in the information technology sector and to market effectively to the constituency making the investment choice. 49. ESCAP should support the facilitation of trade and investment using information technology. In this regard, it should pursue activities to create awareness of the technology in developing countries and provide assistance in building the capacity to attract investment in the information technology service sector in these countries. 50. Activities related to these three issues are included in the programme of work, 2000-2001 under subprogramme 1, Regional economic cooperation. The Commission is requested to consider these issues, give policy guidance and make recommendations for further action. 1 See the theme study for the current session of the Commission, "Development through globalization and partnership in the twenty-first century: an Asia-Pacific perspective for integrating developing countries and economies in transition into the international trading system on a fair and equitable basis", to be issued as a publication under the symbol ST/ESCAP/2054. 2 For details, see the forthcoming theme study "Development through globalization…". 3 For further details, see the forthcoming theme study "Development through globalization…". 4 Fiscal Policy Office and the Office of Industrial Economics, Ministry of Industry of Thailand, Country Report: Thailand, submitted to the World Bank Conference on Asian Corporate Recovery: Corporate Governance and Government Policy, Bangkok, March 1999. 5 UNCTAD, Handbook on Foreign Direct Investment by Small and Medium-sized Enterprises: Lesson from Asia (United Nations publication, Sales No.E.98.II.D.4). 6 Hean Tat Koh, "Using information technology to achieve competitive advantage and improve productivity", in Productivity in the Age of Competitiveness, Asian Productivity Organization Monograph Series 16, 1995, pp. 120-123. 7 Hing-Man Leung, "Productivity of Singapore's manufacturing sector: an industry-level non-parametric study", Asia Pacific Journal of Management, vol. 15, Issue 1 (April 1998). 8 SME Electronic Commerce Study, prepared for Asia-Pacific Economic Cooperation by PricewaterhouseCoopers (September 1999). 9 The forthcoming theme study for the current session of the Commission addresses, in detail, the need for trade facilitation measures to ensure timely and cost-efficient delivery of goods. 10 The projected offshore services market in 2010 is around US$ 180 billion, an 18-fold increase from the estimated figure of US$ 10 billion in 1998 (McKinsey & Co., cited in "At your service", Far Eastern Economic Review, vol. 162, No. 35 (2 September 1999). A significant portion of the US$ 180 billion is expected to be generated in Asia. Several offsite activities are already located in parts of Asia, where a large pool of skilled, English-speaking workers operate in an environment of cost-effective and reliable telecommunications and power supply. 11 For example, offshore company registration requires adequate accounting supervision in some jurisdictions and may also require translation services. Similarly, offshore banking requires speedy servicing of funds transfer, checking of authorizations, account updates etc. As banking legislation changes, many of these manual records may become obsolete and Internet-based authorizations with secure codes may suffice. In this event, the skills currently attached to maintaining offshore banks may have to migrate to other areas such as maintaining and servicing the banking portals which hold the accounts, security codes and funds. |