APES at the WEF - diary of a delegate
17 September 2000
Webb-site.com is just back from Melbourne where we attended the World Economic Forum's Asia Pacific Economic Summit (or APES, to use its unfortunate acronym).
The WEF, a not-for-profit non-governmental organisation based in Geneva, Switzerland, has no official standing in world affairs - unlike say the United Nations, World Bank or IMF. Nevertheless, through a combination of skillful marketing and the aggregation of quality content (read people), they have become a magnet for CEOs and senior government officials. The annual meeting in Davos is a repeat entry in many a billionaire's and politician's calendar, and the APES is its regional spin-off. We often think of established religions as just successful cults, and in that sense the WEF is a successful conference organiser, run since its inception in 1971 by Professor Klaus Schwab.
At the invitation of the WEF we were staying in the Crown Towers Hotel Casino, a temple of hedonistic opulence now controlled by Kerry Packer after he apparently bought it for a song in one of his famous asset trades. Had the hotel realised how much attention the event would attract, we doubt they would have agreed to host it, since they ended up having to shut down the Casino.
The authorities had clearly been warned to expect large-scale protests against the global dominance that we were all supposed to be plotting inside, and a group calling itself S11 (after the September 11th start date) had assembled especially for the event. The police had taken concrete barriers normally used for the Melbourne Grand Prix and surrounded the huge complex with them, leaving just a few gaps for access. We had a pleasant Sunday afternoon looking around the clean and attractive city of Melbourne and using its extensive tram network (Hong Kong take note), but spent some time on the initiative test of finding the gap in the barriers afterwards.
As events kicked off on Monday, the protestors blockaded the entrances, locking out delegates coming from other hotels. As the organisers rightly pointed out, this was more a case of protestors preventing free speech by delegates rather than exercising it themselves. However, the police were obviously under instruction not to use physical force to remove the protestors. Delegates toured Melbourne in buses for several hours, striking up vital business relationships which arise from being in such close quarters and presumably wishing they hadn't drunk so much coffee at breakfast.
Finally the organisers arranged some boats and attempted a landing at the hotel from the adjacent Yarra River as they dodged protestors' dinghies. A few VIPs made it in by helicopter, presumably including Australian Prime Minister John Howard, who delivered a speech, but not before the WEF chief repeated in Mr Howard's presence assurances received from the authorities that delegates would be unimpeded the next day.
Mr Howard was a man with a lot on his plate with the Olympics just around the corner, but his spin-meisters should at least teach him to smile and enjoy it. Not so much as a smirk crossed his face as he grimly made his way through the speech.
Open Gates
The next day, the police put their visors down and used necessary force to clear a path for delegates. Bill Gates flew in and told Australia that it had made slow progress in broadband development (they are just rolling out ADSL). Telstra's CEO Ziggy Switkowski, also on the panel, declined to reply, but as if to underline Gates' point, the internet connections provided at the venue were woefully slow as data trickled down the now-famous IP backbone from Hong Kong.
We asked Mr Gates about the high prices being paid for 3G mobile licenses in Europe, which prices seem to imply that the operators will be able to extract "gatekeeper" revenue for directing users to partner sites on the internet. That compares with today's model where most internet access providers (possibly excluding AOL) make very little money that way, since the net is open and the browser goes anywhere. Stalling for thought, Mr Gates described it as an "insightful question" before voicing the hope that in each market there would be at least one "open" competitor to push the others along.
We suspect the answer in the future will depend on the interface through which a 3G connection is used. If all we have is thumbwheels, small screens and remote controls, then we are likely to navigate through the menu we are given by default, and access providers will extract commissions for menu positioning. On the other hand, if the wireless graphic tablet enters the mainstream as we expect, then the ease of selecting your own destination on the web will mean your access provider gets only a utility-type connection fee. That makes 3G license prices look very expensive.
On Tuesday evening, we were treated to a full-scale motorcade of 15 buses with police motorcycle outriders, the streets were cleared and we headed for a very enjoyable gala dinner at the Grand Hyatt, sampling the best of food, wine and arts that Australia has to offer.
Farm Subsidies
Several speakers at the conference raised what is a valid concern in Australia and elsewhere, that of continued large-scale agricultural subsidies and import barriers to foreign farm produce in Europe and the US. These conditions distort free trade and lead to unsound agricultural practices in other countries. As the world becomes more integrated, governments are going to have to recognise that subsidising and protecting farmers is no longer appropriate.
In the past, there has been a notion that economic efficiency should take second place to "strategic interests" such as food supply, since a war might otherwise put the populus at risk of starvation. Memories of food rationing during World War II perhaps emphasised this point. However in the oil age, recent protests over fuel prices in Europe have demonstrated that any net oil-importing country is no longer economically self-sufficient as they might have been in the 19th century. Shut down the oil supply and the country rapidly shuts down with it. Lacking energy-independence means there is no longer any point in trying for food-independence.
Globalisation
Contrary to popular belief, not all delegates at the WEF were tycoons or politicians. Several non-profit entities like Webb-site.com were there to advance other agendas, in our case to speak on improving corporate and economic governance of the region.
In a lively session on Tuesday on Globalisation, Sharan Burrow, President of the Australian Council of Trade Unions recited how the percentage of Australians in the poverty bracket had increased, and how many manufacturing jobs had been lost in the last several years. Of course, the Australian definition of poverty probably includes drinkable tap water, electricity, education for children, basic healthcare and social security handouts. On the same panel, Vandana Shiva, founder of the Research Foundation for Science, Technology and Ecology in India, was able to speak about poverty Indian-style, where clean running water, literacy and electricity are still out of reach for so many people who struggle with agricultural subsistence.
As we listened to this juxtaposition of complaints we couldn't help thinking how neatly this encapsulated the globalisation issue. Rich developed nations face friction in upgrading their work force and surrendering the labour-intensive jobs to lower paid people in poorer nations. Surely it is not "socially irresponsible" for a multinational corporation to create new adult jobs in India or China at the expense of jobs in Australia or the USA, thereby expanding the economy and raising the living standards of developing nations. The workers freed up by such movement can then retrain for more economically productive output.
At the same time, many delegates recognised that the smokestack industries of the world cannot be allowed to embark on "environmental arbitrage" where they seek out the least-protected nations to pollute. Agreement and enforcement on minimum environmental protection levels is needed.
If you want a greater discussion on the issues behind Globalisation, we recommend John Gray's False Dawn - the Delusions of Global Capitalism and George Soros' The Crisis of Global Capitalism.
Financial Markets
A Wednesday afternoon session focused on the effect of the internet on financial markets. It is quite clear that the net has made investors more able to access information on both their local and overseas markets. In addition, internet dealing, still in its infancy in Asia, will make it very feasible for investors to deal across borders. This brings down the barriers to competition between monopolistic national exchanges, and gives rise to what we call "competitive decay" of investor protection frameworks as exchanges try to attract listings to boost their volumes and hence their revenues.
By way of example, Hong Kong's GEM managers cited the competitive threat of Nasdaq in attempting to justify waiving several of its new listing rules earlier this year.
HKEx Chief Executive Kwong Ki Chi attended the session just long enough to deliver an unremarkable speech but did not stick around for the Q&A, which is a shame. And no, his speech is not on their web site. As far as we know, nobody from the HK Securities and Futures Commission attended the forum.
Webb-site.com asked the panel whether the time was ripe for a global or regional effort of Securities Commissions to standardise the listing and disclosure regimes in each country, in a similar way that the European Union has a directive on the subject, before competitive decay between markets gets out of control.
While consensus seemed to be generally in favour of this, Ali Abdul Kadir, Chairman of the Malaysian Securities Commission, did not think it would happen soon. Fellow panelist Jack Wadsworth, regional Chairman of Morgan Stanley, reminded the audience that the legal protections offered in the United States and through the litigative environment there, were not available in most Asian jurisdictions, and so regulators needed to decide what will stand in their place.
This is a point we have made before on Webb-site.com - one cannot compare Nasdaq and GEM's listing rules without comparing the securities legal framework which backs them up (or doesn't, as the case may be).
Hong Kong and Competition
Next year, the WEF East Asia summit will be in Hong Kong.
At the Hong Kong Networking Lunch, we took the opportunity to ask Chau Tak Hay, our Secretary for Commerce and Industry, whether Hong Kong would follow first-world practice and establish a centralised competition regulator. The US has the Department of Justice, the European Union has a region-wide Directorate-General of Competition, the UK has the Office of Fair Trading, Australia has the Competition and Consumer Commission, and Hong Kong has... well, a system of well-entrenched cartels with sporadic outbreaks of competition in some sectors.
Notably, the most competitive sector of HK's economy recently has been the telecommunications sector, where OFTA has been busy breaking down barriers. This was cited by Mr Chau in defence of Government policy that "we don't need anti-trust laws or general competition law". But the very success of telecoms deregulation underlines the lack of progress in other sectors where competition regulation is weak or non-existent.
In another session, we asked Roberto Romulo, a member of the APEC Business Advisory Council, whether there was any prospect of APEC harmonising competition laws across the Asia region, thereby helping to level the cross-border playing field. "Not in my lifetime" came the 61-year-old's less than optimistic reply.
What makes Hong Kong so different that it could not benefit from a competition authority? It is well-accepted now that free markets without strong competition regulation lead not to efficient markets but to monopolistic behaviour. As the WEF turns its attention towards Hong Kong, producers of reports on economic competitiveness such as the WEF and the Heritage Foundation would do well to look beyond the "positive non-interventionism" Government rhetoric and focus on the real substance of the cozy Government-business partnership which perpetuates so many vested interests here.
© Webb-site.com, 2000
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