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APEC SENIOR OFFICIALS’ POLICY DIALOGUE ON STRUCTURAL REFORM LIMA, PERU 29 February 2008 APEC SENIOR OFFICIALS’ POLICY DIALOGUE ON STRUCTURAL REFORM LIMA,

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Presentation on theme: "APEC SENIOR OFFICIALS’ POLICY DIALOGUE ON STRUCTURAL REFORM LIMA, PERU 29 February 2008 APEC SENIOR OFFICIALS’ POLICY DIALOGUE ON STRUCTURAL REFORM LIMA,"— Presentation transcript:

1 APEC SENIOR OFFICIALS’ POLICY DIALOGUE ON STRUCTURAL REFORM LIMA, PERU 29 February 2008 APEC SENIOR OFFICIALS’ POLICY DIALOGUE ON STRUCTURAL REFORM LIMA, PERU 29 February 2008

2 Jane Drake-Brockman Managing Director Trade and Environment Solutions & Executive Director Australian Services Roundtable

3 A few words about the Australian Services Roundtable  The peak business body and voice of the services sector  Sectors covered (4/5 of employment and GDP) include financial services, communications & IT services, education, health, tourism, professional & technical services, energy services, transport, logistics, environmental services, audiovisual, entertainment, cultural services, product-related services etc  Member of Global Services Coalition  A key objective is to identify the regulatory obstacles to international competitiveness and promote the need for domestic regulatory reform to enhance Australian export performance  because inefficient regulation means excessive compliance burden which adds to costs, inhibits innovation and constrains competitiveness - too often the domestic regime crowds out our pursuit of export opportunities  The peak business body and voice of the services sector  Sectors covered (4/5 of employment and GDP) include financial services, communications & IT services, education, health, tourism, professional & technical services, energy services, transport, logistics, environmental services, audiovisual, entertainment, cultural services, product-related services etc  Member of Global Services Coalition  A key objective is to identify the regulatory obstacles to international competitiveness and promote the need for domestic regulatory reform to enhance Australian export performance  because inefficient regulation means excessive compliance burden which adds to costs, inhibits innovation and constrains competitiveness - too often the domestic regime crowds out our pursuit of export opportunities

4 What does domestic regulation have to do with trade & economic integration?  In a globalising world economy, where trade and investment in services is at least as important as goods trade, freeing up trade is nolonger just about making it easier for goods to flow across borders.  In the modern economy, trade policy also has to be about making it easier for global and regional participation in all sorts of services transactions, most of which take place well beyond the border.  If you look behind the border, at the domestic economy, what you usually find is that Governments have a strong inclination to intervene in (even micro-manage) every internal market, for some legitimate public policy or other. Or sometimes for political purposes associated with vested interests.  This especially applies to the key infrastructural services sectors, many of which have only recently been privatised and therefore only recently entered the realm of the market place.  There are usually also some significant pockets of under-regulation.  Trade Ministries are often the least well informed about what goes on domestically.  In a globalising world economy, where trade and investment in services is at least as important as goods trade, freeing up trade is nolonger just about making it easier for goods to flow across borders.  In the modern economy, trade policy also has to be about making it easier for global and regional participation in all sorts of services transactions, most of which take place well beyond the border.  If you look behind the border, at the domestic economy, what you usually find is that Governments have a strong inclination to intervene in (even micro-manage) every internal market, for some legitimate public policy or other. Or sometimes for political purposes associated with vested interests.  This especially applies to the key infrastructural services sectors, many of which have only recently been privatised and therefore only recently entered the realm of the market place.  There are usually also some significant pockets of under-regulation.  Trade Ministries are often the least well informed about what goes on domestically.

5 What does domestic regulation have to do with trade & economic integration?  In many APEC economies, there is no single Ministry with full understanding of all the specific details of any particular regulatory regime; many Ministries are unaware of the requirements imposed by other Ministries.  The result can be a highly complex, uncoordinated, overlapping and duplicative regime.  One shop stops for business are similarly rare.  No-one wants to reform what they don’t even know exists, let alone what they don’t have line responsibility for  In the interests of trade and economic integration, however, its time for Trade Ministries to get on top of this issue and start to champion regulatory review in their own economies  In many APEC economies, there is no single Ministry with full understanding of all the specific details of any particular regulatory regime; many Ministries are unaware of the requirements imposed by other Ministries.  The result can be a highly complex, uncoordinated, overlapping and duplicative regime.  One shop stops for business are similarly rare.  No-one wants to reform what they don’t even know exists, let alone what they don’t have line responsibility for  In the interests of trade and economic integration, however, its time for Trade Ministries to get on top of this issue and start to champion regulatory review in their own economies

6 Why is regulatory reform at home, and around the region, so important to business in meeting today’s global challenges?  Because the competitive pressures are now so fierce that the extent to which regulation at home is efficient or burdensome can make or break you in the global market place.  Because the extent to which you can connect effectively with business elsewhere in the region depends on how familiar that regulatory environment is.  Because effective connection has become critically important for international business performance, as the global supply chain model becomes increasingly pervasive  Because business transaction costs would be reduced if Governments achieved a degree of regional harmonisation in regulatory practice  Because the competitive pressures are now so fierce that the extent to which regulation at home is efficient or burdensome can make or break you in the global market place.  Because the extent to which you can connect effectively with business elsewhere in the region depends on how familiar that regulatory environment is.  Because effective connection has become critically important for international business performance, as the global supply chain model becomes increasingly pervasive  Because business transaction costs would be reduced if Governments achieved a degree of regional harmonisation in regulatory practice

7 Why is regulatory reform so important to regional business today?  Because in a rapidly changing global environment, business is having to handle an increasing level of risk and future uncertainty.  The business case to do anything always entails a risk but the pace of technological change is now so rapid that the future is becoming much harder for companies to read.  Government can help reduce business risk and uncertainty by at least ensuring that the regulatory environment is straightforward and predictable.  Because business decision-making has to be fast and governments are generally way too slow. Companies need to get all their regulatory consents in place more quickly.  And because the regional business experience with red tape is not good.  Because in a rapidly changing global environment, business is having to handle an increasing level of risk and future uncertainty.  The business case to do anything always entails a risk but the pace of technological change is now so rapid that the future is becoming much harder for companies to read.  Government can help reduce business risk and uncertainty by at least ensuring that the regulatory environment is straightforward and predictable.  Because business decision-making has to be fast and governments are generally way too slow. Companies need to get all their regulatory consents in place more quickly.  And because the regional business experience with red tape is not good.

8 Regulatory fog across the Pacific  First a new market entrant cant necessarily get through the door - they cant necessarily get a licence to operate - at all - or sometimes the rules arent that clear -maybe they can get a licence  If they are patient  When they do get the licence, its scope is often unexpectedly limited  And the regulatory compliance obligations are unexpectedly expensive  Importantly for services companies (where human capital costs are often 70-80 % of total cost) everything to do with recruiting, training and deploying people can be extraordinarily complex.  The degree of regulatory frustration is too high  First a new market entrant cant necessarily get through the door - they cant necessarily get a licence to operate - at all - or sometimes the rules arent that clear -maybe they can get a licence  If they are patient  When they do get the licence, its scope is often unexpectedly limited  And the regulatory compliance obligations are unexpectedly expensive  Importantly for services companies (where human capital costs are often 70-80 % of total cost) everything to do with recruiting, training and deploying people can be extraordinarily complex.  The degree of regulatory frustration is too high

9 Why is domestic regulatory reform so important to business in Australia?  In Australia we had become a bit complacent. Too many years of not enough action on the regulatory reform front. And the services industries (that employ 8.5 out of every 10 Australians) think we’re in trouble. What trouble? Australia’s in the middle of a mining boom! An economy at near full employment! Business has never been better….  In fact the warning signs are very real. Productivity growth has declined, including in services, that great enabler of the other sectors. Business costs are up. Innovation is failing. Competitiveness is dropping. (And this isnt only because of a strong exchange rate). Despite strong growth, our relative share of the global services market is falling.  The services sector thinks that one contributing factor might have a lot to do with a massive reemergence of government red tape, at every level, including state and local government.  In Australia we had become a bit complacent. Too many years of not enough action on the regulatory reform front. And the services industries (that employ 8.5 out of every 10 Australians) think we’re in trouble. What trouble? Australia’s in the middle of a mining boom! An economy at near full employment! Business has never been better….  In fact the warning signs are very real. Productivity growth has declined, including in services, that great enabler of the other sectors. Business costs are up. Innovation is failing. Competitiveness is dropping. (And this isnt only because of a strong exchange rate). Despite strong growth, our relative share of the global services market is falling.  The services sector thinks that one contributing factor might have a lot to do with a massive reemergence of government red tape, at every level, including state and local government.

10  The Australian Government is now embarking on what is described specifically as a business de-regulation agenda, in order specifically to reduce our costs in order to regain international competitiveness.  Australian services firms can never compete in Asia-Pacific on cost considerations alone. But we can never afford to forget the cost factor either.  Australian services firms can win work for the global market place with up to 20-25 % cost differential if we have some other special expertise - to offer. If we don’t, we wont win the work.  So we have to offer something really special and we have to keep costs down so there is no more than a 20-25% cost differential  And you still want to know why we want domestic regulatory reform?  The Australian Government is now embarking on what is described specifically as a business de-regulation agenda, in order specifically to reduce our costs in order to regain international competitiveness.  Australian services firms can never compete in Asia-Pacific on cost considerations alone. But we can never afford to forget the cost factor either.  Australian services firms can win work for the global market place with up to 20-25 % cost differential if we have some other special expertise - to offer. If we don’t, we wont win the work.  So we have to offer something really special and we have to keep costs down so there is no more than a 20-25% cost differential  And you still want to know why we want domestic regulatory reform?

11 But regulatory reform might also make it easier for our competitors to do business here? Reform might then make it harder for our small local businesses - what can we do to support them? How often do you hear these two questions?

12 Structural reform isn’t necessarily easy but this is no excuse for inaction  The cost factor will ultimately prevail. If the immediate business environment is too costly, business will eventually relocate elsewhere. That includes high value- add services expertise.  Whatever other obstacles government puts in place, global experience is that work does eventually flow to where it is performed best and “best” does include a cost dimension.  You can and you must make your regulatory regime more conducive to doing new business. (And Im not talking about tax breaks and incentives!)  The cost factor will ultimately prevail. If the immediate business environment is too costly, business will eventually relocate elsewhere. That includes high value- add services expertise.  Whatever other obstacles government puts in place, global experience is that work does eventually flow to where it is performed best and “best” does include a cost dimension.  You can and you must make your regulatory regime more conducive to doing new business. (And Im not talking about tax breaks and incentives!)

13 What kind of action does business want to see, individually and collectively?  A consciously articulated, dedicated policy focus on lifting the regulatory fog behind the border.  A big whole-of-government effort on domestic regulatory transparency, including to identify and understand any inefficiencies.  Activity aimed at building effective institutions for regulatory review processes.  A close regional policy dialogue to facilitate a regional shift towards better regulatory practices, sector by sector.  Greater accountability - a stock-take of progress.  A consciously articulated, dedicated policy focus on lifting the regulatory fog behind the border.  A big whole-of-government effort on domestic regulatory transparency, including to identify and understand any inefficiencies.  Activity aimed at building effective institutions for regulatory review processes.  A close regional policy dialogue to facilitate a regional shift towards better regulatory practices, sector by sector.  Greater accountability - a stock-take of progress.

14 In general a vibrant business community prefers a lighter regulatory touch, subject to safeguarding of all legitimate consumer, end-user and other public interests.


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