specific structural policies are needed to achieve the KBE characteristics and subsequent New Economy outcome. For example, if a KBE is characterized by innovation, one must ask, “What factors give rise to innovation?” If the answer is, “Efficient financial intermediation,” then one must ask what policies promote this outcome.
Or, if a facilitating business environment is key, one must ask, “Do domestic regulations stand in the way of creating this environment?” Second, the increasing complexity and dynamism of the New Economy (in which economic transactions are bundles of goods and services) implies that the set of structural policies is better addressed together than in a piece-meal fashion. For example, if competitive markets are key to improving the performance of ICT infrastructures, then pro-competitive domestic policies and trade and cross-border investment liberalization both need to be working toward that goal. Pursuing policy reforms simultaneously yields positive synergies among them.
Third, the forces of the New Economy affect how fundamental policies work to transform an economy. For example, technological advances may alter the strategy for achieving competitive outcomes in communications; for example, cable modems can erode the power of the domestic telecommunications monopoly faster than privatization could, making pro-competitive regulation a more prominent ingredient for a healthy outcome than it may have been the case previously. Or, faster information flow and electronic trading have altered the formula for exchange rate and international capital flow regimes.
Or the New Economy affects the ability of a government to raise revenues by making more transactions services or digital products. While policymaking uncertainties and debates remain, many (if not most) of the fundamental policies underpinning prosperity are clearer with the New Economy, not murkier. Therefore, this Report presents to APEC members the opportunity to address and discuss in a direct manner the basic policies themselves, now that the members have agreed on the intermediate conditions and have a common resolve to drive the determinants of regional economic development when possible, rather than be driven by them.
A discussion of policy allows members to go beyond stating what everyone wants (e.g., an environment of innovation), to addressing how to achieve the goals. As Zhu Rongji said at the commencement of the Chinese National People’s Congress in March 2001: “We have already reached the point where we cannot further develop the economy without making structural adjustments." He went on to specify policy postures needed for structural adjustment. Each economy in the APEC forum can benefit from a similarly frank discussion of the underlying policies conducive to maximizing growth, as indeed, some of them have in the context of the APEC E-Commerce Readiness Guide.
This Report does not demand policy reforms. Policymakers may abstain from growth- enhancing policies – no matter the reason, which is a sovereign affair, and which may under some circumstances make sense. But, that should not keep us from clarifying what set of policies leads to the most economically productive outcome – not least because that will help us forecast the severity of widening economic disparity due to a divergence of policy choices made today, allowing us to better plan the policy response to the consequences. - 14-