Korea-India economic ties slow to take off

First published in The Korea Herald.


It has now been five years since the India-Korea Comprehensive Economic Partnership Agreement ― a de facto free trade agreement ― went into effect, but the trade statistics do not present a very rosy picture.

It was widely anticipated that the CEPA, which came into effect in January 2010, would lead to more bilateral trade and investments. South Korea has abolished tariffs on 93 percent of Indian imports, and India has done the same on 75 percent of Korean imports. Besides, the agreement sought to increase the interactive trade account, as it includes investment in various sectors like goods, services and even intellectual property.

However, according to the latest statistics released by the Korea International Trade Association, while bilateral trade has slightly improved, it is still way below expectations.

Bilateral trade between both countries was $12.15 billion in 2009, which spiked to $17.11 billion in the first year of the agreement. However, since then, it has been a rollercoaster ride, increasing to $20.55 billion in 2011, and then falling to $18.84 billion and $17.57 in the following two years. In 2014, bilateral trade inched up a little to $18.05 billion ― well below the CEPA target of $30 billion.

Clearly, there is something wrong here. Even as Korea’s bilateral trade with the U.S. and the European Union has leaped, its economic relationship with India appears to be stumbling.

It is a wonder what happened to the grand proclamations that were made when the CEPA was being negotiated and finally signed.

Clearly, while considerable scope exists, it is not possible to pump up trade between both sides without government efforts. It is all the more important for South Korea to do so, as its economy has thrived on export-led industrialization.

Now, coming to the foreign investment figures. According to the latest statistics published by Eximbank Korea, total Korean investments in India to the end of 2014 amounted to just $3.53 billion ― 1.3 percent of their $270.43 billion overseas investments.

In comparison, Korean companies have pumped $49.69 billion into China, $15.70 billion into Hong Kong, $10.72 billion into Vietnam, $7.96 billion into Indonesia and $6.02 billion into Singapore. In the entire Asian region, Korean companies have invested $115.57 billion.

Looking at it from India’s point of view, the latest available analysis of FDI equity inflows by the Department of Industrial Policy & Promotion shows that Korea continues to rank low with only around $1.5 billion in investment.

Clearly the economic ties are still way below potential and CEPA has not really been very effective.

It is true that large Korean brands are household names in India and their strength has grown in the years since they first started operations. However, the fact remains that Korean FDI inflows have been growing at a very tardy pace, and companies seem to be keener to explore other emerging markets.

Many Korean companies were the first movers as FDI investors in India, following the spate of reforms and liberalization since 1991. They started to invest by forming joint ventures with local companies or established wholly owned subsidiaries, predominantly in automobiles and white consumer goods. With clever business models, they managed to make deep inroads into the Indian market in a relatively short period of time, led by technology giants Samsung Electronics, LG Electronics and Hyundai Motor. More recently Lotte Group, Doosan Heavy Industries and POSCO have become familiar names in the Indian business lexicon.

It may come as a surprise, therefore, that India figures quite low on the list of favored investment destinations for Korean companies.

Part of the explanation could be the nontariff barriers that continue to exist in India. The main irritants for Korean companies there are poor infrastructure, corruption, labor management, taxes, administrative services, fluctuating government policies at the central and state levels, political intervention, and customs and clearance procedures. Such uncertain policies have made investors opt for divestment or delaying their planned investment as they consider India a less attractive investment outlet than other Asian countries.

A case in point is the troubles faced by POSCO in India ever since it decided to start operations there. It has still not gotten clearance to start full-scale operations and the latest news suggests that there could be further delays.

As for Indian investments in Korea, among the noticeable investors are Tata Motors (which acquired Daewoo Commercial Vehicle in 2004); Novelis Inc., a subsidiary of Hindalco Industries Ltd. (which acquired Alcan Taihan Aluminum Limited in January 2005); and Mahindra and Mahindra (which acquired Ssangyong Motors in March 2011). Among the smaller investors are Nakhoda Ltd. and Creative. While Indian software companies such as TCS, Wipro and L&T Infotech have a small presence in Korea (with representative offices), they have not made any large commitments.

Does this mean that Korea does not offer any potential for Indian businesses? On the contrary: As an FDI destination, the nation has several strengths compared to China and Japan.

The economies of India and Korea are highly complementary in terms of factor endowment, capabilities and specialization. If the investment barriers are effectively tackled, India’s cost-effective human resources may complement growing labor scarcity and rising wages in Korea, and a number of companies may consider India an ideal destination for their relocation or global sourcing.

As experts have noted, India’s booming knowledge-based service industry complements the hardware and manufacturing-based economic structure of South Korea. India’s capability in the pharmaceutical, IT software and auto components industries usefully complement Korean competence in heavy engineering, automobiles, machinery and electronic hardware.

So it is all the more important for the two governments to become more active in sorting out the problems and realizing the full potential of the CEPA. India could make a conciliatory gesture and give permission to POSCO to start full-fledged operations.

Luckily for Korea, Indian Prime Minister Narendra Modi ― unlike his predecessor ― is business-friendly. Realizing this, most of the advanced countries are rushing to strengthen ties, with U.S. President Barack Obama even making a second state visit to India during his tenure ― something unprecendented ― and has accepted the invitation to be India’s Chief Guest at its Republic Day celebrations on Monday ― the first by a U.S. president. Modi has promised to bring sweeping economic reforms to make doing business in India easier. He is well on his way to doing it, and it not too late for the Park administration to take the initiative and sort out the problems plaguing trade and investment relations by initiating a comprehensive dialogue.

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Curious case of Uber in Korea

First published in The Korea Herald.


Over the past couple of years, the sharing economy ― a system built around the sharing of human and physical resources ― has caught the world by storm. While the practice of sharing goods has always been common between closed groups ― friends, family and neighbors ― now the concept has evolved into a profitable business model.

It has been helped largely by the strides in information technology that led to the worldwide boom in Internet penetration and smartphone use.

The sharing economy has many advantages. It can reduce costs for available goods, services and time. You can use a product or service only when necessary, and don’t have to deal with the normal headaches. On the other hand, an owner can unlock the potential value of an item, such as a room, a vehicle or a consumer good when it’s not in use. The sharing economy also offers access to things that might not be practical to own or obtain.

Some of the most notable businesses that have boomed on the concept of the sharing economy are Airbnb, Snapgoods, DogVacay, RelayRides, TaskRabbit, Getaround, Liquid, Zaarly, Lyft, LendingClub, Fon and Poshmark.

With the range of services offered, one can rent a room or a whole home, get petsitters for dogs, allow people to borrow cars from neighbors, help people to hire others for jobs and tasks, rent bikes and cars, and even get hard cash when in need, share a home Wi-Fi network, and buy or sell used clothes.

Given the huge advantages that this system offers, similar services are bound to proliferate around the world, and most likely in technology-driven Korea.

On the face of it, people should welcome such businesses with open arms and governments should have no objections.

Then why is it that the so-called sharing economy business Uber is being hauled over the coals by the Seoul city government? And moreover, is the government unfairly targeting the app that helps summon a car for a cost?

As 2014 drew to a close, the Seoul Central District Prosecutors’ Office issued an indictment against CEO Travis Kalanick and the firm’s Korean unit for violating a law prohibiting individuals or firms without appropriate licenses from providing or facilitating transportation services.

This was immediately met with protest by the company, which was echoed by countless “sharing” enthusiasts across the world.

However, although I am all for disruptive technologies and hugely back the concept of the sharing economy, I am with the Seoul government on this case.

Over the past several months, Uber has asked the mayor of Seoul to revise the laws so that citizens can use the service without worrying about breaking the law. However, even after it was flatly refused it went ahead and started offering the service without getting clearance.

It began offering UberX as a paid service, with a base fare of 2,500 won ($2.24), with an additional 610 won per kilometer and 100 won per minute. By comparison, base fare for local taxis starts at 3,000 won plus 100 won per 142 meters and 100 won per 35 seconds.

It smacked of arrogance to believe that since they were able to operate in so many cities around the world, they should be able to operate in Seoul. Uber had no right to start services when they knew that it was a gray zone they were operating in, and had been repeatedly warned.

The company knows that under current laws, anyone using his own passenger car to carry paying customers is subject to imprisonment for two years or less, or fines of up to 20 million won.

When you want to start a flourishing business, you just don’t abuse the goodwill of the government and cock a snook at the authorities. Wait till all the regulatory hurdles are cleared and then start your business. Lobby for amending the regulation, but do not jump the gun.

To make matters worse for the company, a city ordinance has been passed to criminalize the violators and reward up to 1 million won to those reporting illegal Uber taxi operators beginning in January. Using a private car for a taxi service is also punishable by an immediate six-month suspension for that car.

Coming to my second point of defense of the Seoul government decision. The reason Uber has grown so quickly worldwide is because it is not regulated the same way that traditional taxi services are. Proponents of the service say that it’s about time for monopolistic, overregulated city cab services to be broken up. They argue that people deserve options, better pricing and more nimble technology, which Uber offers.

However, the way I see it, taxis are a public utility and the government has every right to regulate them. Imagine if companies started offering other public utilities without regulation ― a sure recipe for chaos and disaster.

It is not very easy to get a taxi service license in Seoul, and the market is already saturated with around 6,000 taxis. Given this, the service offered by Uber has the potential to deal a severe blow to the taxi industry, whose hands are tied due to excessive regulations, even as the upstart “illegal” taxis are waiting to pounce on the opportunity. Most taxi drivers come from a lower-income background, and it is like kicking them in the stomach; the issue is not about depriving “unregulated” taxi drivers of additional income as Uber is making it out to be.

On top of it all, data privacy is something that has not been clearly addressed by the company. There are also doubts about the screening process and the training that is provided to the Uber drivers, which has become an issue in many cities. Because of the way their system operates, the safety concerns will only increase. Maybe that is why Uber claimed that “UberX is safer than any other mode of transportation in Seoul.”

However, safety is not really an issue for the public when it comes to taxis in Seoul. The taxis here are amongst the safest in the world, unlike in, say, Delhi. It is just an ad line that holds no water. Moreover, the company says the same thing in all places it operates, but molestation cases are not dying down. The company has a standard answer when faced with such cases: We are cooperating with the authorities. We are just a platform to connect people to drivers and are not directly responsible.

Given these clouds, it will be better for the company to clear all the regulatory hurdles before offering the service here, instead of readying for a legal battle.

Having said that, now that the Seoul government has taken on Uber, it should ensure that the misdemeanors of its taxi drivers ― for example rash driving or refusing passengers ― should be strictly dealt with. It should push forward regulations strengthening the crackdown on taxi drivers, and increase the supply of alternative transportation. Once the public stops complaining about the existing taxi services, the government will be on a firmer footing.

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Corruption and business ethics in Korea

First published in The Korea Herald.

On most occasions, the Korean government latches on to any new international report or study that commends the country, be it on competitiveness, ease of doing business, regulatory reforms or education. However, there has been remarkable silence from bureaucrats and government officials regarding the latest Corruption Perceptions Index recently released by Transparency International.

In its much-awaited yearly report, the nongovernment organization ― calling itself the “global coalition against corruption,” with 100 national chapters and an international secretariat in Berlin ― gives a comparative list of corruption worldwide. The organization is widely recognized as a corruption crusader and has built up a solid reputation since it was established in 1993.

The cornerstone of its work is the annual Corruption Perceptions Index. It also publishes the Global Corruption Barometer, Bribe Payers Index and Government Defense Anti-Corruption Index.

The CPI quantifies the perceived levels of public sector corruption around the globe, and over the past two decades has become one of the key corruption indices worldwide.

It focuses on corruption that involves public officials, civil servants or politicians. The data sources used to compile the index include questions relating to the abuse of public power and focus on bribery of public officials, kickbacks in public procurement, embezzlement of public funds, and the strength and effectiveness of public sector anticorruption efforts. The scores, therefore, provide a reflection of the amount of corruption faced by ordinary people and businesses in a country.

In the 2014 CPI, Korea ranked 43rd among the 175 countries surveyed. The Asian countries and territories ranked above Korea include Singapore (7), Japan (15), Hong Kong (17), UAE (25), Qatar (26), Bhutan (30), Taiwan (35) and Israel (37). Interestingly, Korea was ranked No. 39 in 2010 and No. 40 in 2005.

What does this tell us?

Clearly, Korea has a long way to go when it comes to tackling corruption. As long as its government and politicians are perceived to be corrupt, this will hamper investment and affect growth. With other territories in the vicinity being perceived as less corrupt, it is natural for investors to eye them first.

It is true that over the years the country has made many efforts to tackle corruption and has tweaked a lot of regulations to ensure transparency. Anticorruption acts have also been enacted. But it clearly is not enough.

Excessive bureaucracy, weaknesses in corporate governance, inconsistent application of laws and regulations, and nontransparent regulatory processes are among the challenges that have been cited by many foreign companies in Korea.

Moreover, the corruption watchdog Anti-Corruption and Civil Rights Commission has been criticized for its poor ability to focus on corruption issues as it lacks independence and efficiency. It does not have a mandate to independently initiate investigations, but it can request cooperation from the relevant agencies, such as public prosecutors.

In the 2013 Global Corruption Barometer, the current government’s anticorruption efforts were found to be “ineffective,” with 39 percent of those surveyed perceiving that the level of corruption had increased in the previous two years. Moreover, 70 percent of households evaluated Korean political parties as being “corrupt” or “extremely corrupt.”

In last year’s World Competitiveness Report issued by the World Economic Forum, Korea ranked 26th out of 144 countries, its lowest position in 10 years. It also ranked 33rd in terms of transparency of government policymaking, and 97th in terms of public trust.

For that matter, for many years now the foreign media has constantly reported that the chaebol in Korea are so powerful that the ACCRC has no jurisdiction over them, even when they are involved in tax evasion, bribery and price-fixing. Except for a few outlets, the local media has been largely silent on the close nexus between politicians and the large business houses. It is evident that despite the protests by civil society, they are only getting stronger.

Each time a big-shot chaebol head is snagged by the prosecution and convicted by the courts, our politicians step in to bail them out of their misery. The constant refrain one hears from them is their “importance to the national economy.” Earlier the courts too used the same logic to give suspended sentences and a rap on the knuckles to “powerful” white-collar criminals, but thankfully now such judgments are rare.

In fact, it has become a global joke, and Korea has become a laughing stock for continuing with the policy of frequently granting special presidential pardons to businessmen, but the thick-skinned politicians have blinders and shamelessly continue their routine.

In the latest instance, ruling party politicians started howling for presidential pardons for some prominent chabeol owners in end-December. Finance Minister Choi Kyung-hwan too is reported to have recommended for the presidential office to release top chaebol owners.

By their logic, if you are rich and powerful with a huge business empire, you can freely break the law, because putting you behind bars will hamper your company, and since your company is so important for Korea, it will hamper economic growth and push Korea down from its advanced country status. What they do not realize is that if businessmen are given a free hand to evade taxes, set up slush funds and cheat investors, the country will automatically fall in the eyes of the world. Overseas investors will be put off, which will only stall economic growth ― much more so than if the businessmen are behind bars.

President Park Geun-hye has vowed to administer the law strictly and treat all criminal offenders equally. To that end, she has not granted special pardons to any politicians or businessmen in prison since taking office in early 2013. It remains to be seen whether she will succumb to pressure this time around. If she does, then many of the businessmen will continue to have scant regard for the law and Korea’s corruption ranking will continue to slip. If she does not, then it will be a strong signal that the law is equal for everyone.

As it is, Korea is perceived to have a pervasive system for conveying favors in return for monetary consideration, along with lax enforcement of existing anticorruption laws.

President Park should walk the talk and make abolishing corruption a top priority by overhauling the anticorruption systems. She should go beyond the Kim Young-ran law ― a comprehensive anticorruption bill aimed at public officials, likely to be enacted by January 2016 ― and end the practice of dealing out pardons to convicted chaebol chieftains.

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Regional agreements gaining steam

First published in The Korea Herald.

While bilateral free trade agreements, as a means to further the market-opening and rule-making agenda, have been globally picking up steam, there have also been parallel efforts to usher in a plethora of regional trade agreements and economic unions.

Given the uncertainty of the multilateral agreement under the ambit of the World Trade Organization, which has been dragging on for years, efforts to form regional agreements are picking up. Although many of them are overlapping, 2015 could see some progress being made on at least some of the deals.

They will have a significant impact on global trade. It is an opportunity for countries that seek to diversify their trade partners to closely follow the deals that are being put in place, to get first-mover advantage.

Eurasian Economic Union

First off the block is the Eurasian Economic Union that is still “warm from the oven.” The Commonwealth of Independent States established an economic community in 2001 with the aim of creating a fully fledged common market. However, as it was not making much headway, the leaders of the CIS gathered in Minsk in October 2014 to formally cancel the 14-year-old setup to pave the way for the EEU to be the largest common market in the ex-Soviet Union region.

The treaty on the establishment of the EEU, which just launched on Jan. 1, is the basic document defining the accords between Russia, Belarus and Kazakhstan for the free movement of goods, services, capital and labor and conducting coordinated, agreed or common policies in key economic sectors such as energy, industry, agriculture and transport.

It is sought to rival the European Union and seeks to be the most advanced organization for regional cooperation the former Soviet bloc has seen. Armenia recently joined the union and Kyrgyzstan is expected to join on May 1, with more countries likely to follow.

Although many Western countries are concerned that it is simply a resurrected version of the Soviet Union, the EEU is a powerful economic bloc that accounts for one-fifth of the world’s gas reserves and around 15 percent of its oil. With the start of a new year, a new and serious geopolitical player is indeed emerging, and other emerging markets had better start paying close attention.

Trans-Pacific Partnership

The most talked-about deal in 2014, the Trans-Pacific Partnership, is a proposed regional regulatory and investment treaty that has gained traction recently, but seems to be stuck in a limbo. As of now, 12 countries throughout the Asia-Pacific region have participated in negotiations on the TPP: Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. South Korea has expressed interest in joining but has not taken a step forward.

The agreement intends to “enhance trade and investment among the TPP partner countries, to promote innovation, economic growth and development, and to support the creation and retention of jobs.”

If concluded as envisioned, the TPP potentially could eliminate tariff and nontariff barriers to trade and investment among the parties and could serve as a template for a future trade pact among APEC members and potentially other countries.

Over 20 chapters are under discussion in the negotiations. In many cases, the rules being negotiated are intended to be more rigorous than comparable rules found in the WTO.

As the countries that make up the TPP negotiating partners include advanced industrialized, middle income, and developing economies, the TPP, if implemented, may involve restructuring and reform of some participants’ economies. It also has the potential to spur economic growth in the region.

So far 20 formal rounds of TPP negotiations have been held, but the members have not reached a consensus on a number of contentious issues like intellectual property and liberalization of agricultural markets. Another problem has been that, the U.S. could not proceed because of political difficulties at home regarding the passage of a Trade Promotion Authority by Congress.

Transatlantic Trade and Investment Partnership

The so-called “mega deal,” the Transatlantic Trade and Investment Partnership is a trade agreement that is presently being negotiated between the European Union and the United States. Talks started in July 2013, but have faced a lot of opposition from civil society and trade unions in Europe.

The aim is to increase trade and investment between the EU and the U.S. by unleashing the untapped potential of a truly transatlantic marketplace. The agreement is expected to create jobs and growth by delivering better access to the U.S. market, achieving greater regulatory compatibility between the EU and the U.S., and paving the way for setting global standards.

In more concrete terms, the goal will be to eliminate duties and other restrictions for trade in goods. Freeing up commercial services, providing the highest possible protection, certainty and level playing field for European investors in the U.S., and increasing access to U.S. public procurement markets are also objectives.

The T-TIP negotiations will also look at opening both markets for services, investment, and public procurement. They could also shape global rules on trade. The seventh round of negotiations on the agreement concluded on Oct. 3, 2014.

Together, the European Union and the United States account for about half of world GDP and one-third of global trade flows. Latest estimates show that a comprehensive and ambitious agreement between the EU and the U.S. could bring overall annual gains of 0.5 percent increase in GDP for the EU and a 0.4 percent increase in GDP for the U.S. by 2027. While the road is quite long, all eyes are on this deal and some progress may be made in 2015.

Free Trade Area of the Asia-Pacific

A road map for the Free Trade Area of the Asia-Pacific was sketched out at the recent Asia-Pacific Economic Cooperation Summit in Beijing.

Ministers of the 21 APEC member nations agreed to “launch and comprehensively and systemically push forward the FTAAP process.”

In the summit declaration, it was stated that the rules-based multilateral trading system would remain a key tenet of APEC. The FTAAP should be pursued on the basis of supporting and complementing the multilateral trading system.

“The FTAAP should do more than achieve liberalization in its narrow sense; it should be comprehensive, high quality and incorporate and address ‘next generation’ trade and investment issues.”

A collective strategic study on issues related to the realization of the FTAAP by building on and updating existing studies and past work, providing an analysis of potential economic and social benefits and costs, performing a stock take of FTAs in force in the region, has been announced and will be submitted by the end of 2016.

The member countries account for 40 percent of the world’s population, 54 percent of its economic output and 44 percent of trade, making it a very powerful entity and clearly a deal to watch out for.

It will take a while, but given the interest shown by China, it may proceed faster than the TPP.


Regional Comprehensive Economic Partnership

In what could be a game-changer, the Regional Comprehensive Economic Partnership is a 16-party FTA launched by the leaders of the Association of Southeast Asian Nations ― Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam ― and six of its FTA partners: Australia, China, India, Japan, New Zealand and South Korea.

The negotiations for the agreement started in 2013 and are expected to be concluded by year’s end.

The RCEP would lead to greater economic integration, support equitable economic development and strengthen economic cooperation among the countries involved.

The agreement will cover trade in goods, trade in services, investment, economic and technical cooperation, intellectual property, competition, dispute settlement and other issues.

The sixth round of negotiations took place in New Delhi in the first week of December. However, members were unable to agree on a template for negotiations.

The grouping envisages regional economic integration, leading to the creation of the largest regional trading bloc in the world, accounting for nearly 45 percent of the world’s population with a combined gross domestic product of $21.3 trillion. The regional economic pact aims to cover trade in goods and services, investment, economic and technical cooperation, competition and intellectual property.

As of now, it is unlikely that the 2015 deadline will be met, but one can always be ready for surprises.

ASEAN Economic Community

The ASEAN Economic Community seeks to establish ASEAN as a single market and production base, making ASEAN more dynamic and competitive with new mechanisms and measures to strengthen the implementation of its existing economic initiatives; accelerating regional integration in the priority sectors; facilitating movement of businesspersons, skilled labor and talents; and strengthening the institutional mechanisms.

Other areas of cooperation are to be incorporated later. The AEC envisages key characteristics: a single market and production base; a highly competitive economic region; a region of equitable economic development; and a region fully integrated into the global economy.

Although ASEAN has come a long way toward realizing its goal, the challenges that remain suggest that it may miss its end-2015 deadline.

Union of South American Nations

One dark horse is the Union of South American Nations, which is going to be a regional organization integrating two existing customs unions: Mercosur and the Andean Community of Nations, as part of a continuing process of South American integration. It is also modeled on the European Union and was established in Brasilia, on May 23, 2008, and entered into force on March 11, 2011, but full integration is yet to take place.

On Dec. 5, 2014, the 12 members ― Bolivia, Colombia, Ecuador, Peru, Argentina, Brazil, Paraguay, Uruguay, Venezuela, Chile, Guyana and Suriname ― announced new proposals at a summit meeting in Ecuador.

They have taken steps to create South American citizenship and freedom of movement and also opened the organization’s new permanent headquarters in the Ecuadorian capital of Quito.

Part of this proposal is to create a “single passport” and homologate university degrees in order to give South Americans the right to live, work and study in any UNASUR country and to give legal protection to migrants ― similar to freedom of movement rules for citizens of the European Union.

Plans are also afoot for the advancement of financial integration and sovereignty, such as the Bank of the South and Reserve Fund, a currency exchange system to minimize the use of the dollar in intercontinental trade, the creation of a regional body to settle financial disputes, and a common currency “in the medium term.”

African Free Trade Zone

For long an underestimated region, the East African Community, Common Market for Eastern and Central Africa, and Southern African Development Community have already begun negotiations to merge, which is a precursor to a single trade area across the continent.

Africa’s free trade zone is expected to be operational by the end of 2017. They include Angola, Botswana, Burundi, Comoros, Djibouti, Democratic Republic of Congo, Egypt, Eritrea, Ethiopia, Kenya, Lesotho, Libya, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Rwanda, Seychelles, Swaziland, South Africa, Sudan, Tanzania, Uganda, Zambia and Zimbabwe.

In October 2014, they agreed to launch a tripartite FTA as a way of contributing to economic growth of the blocs and the entire continent. The tripartite FTA will encompass 26 member states from the three blocs with a combined population of 625 million people and a gross domestic product of $1.2 trillion and will account for half of the membership of the African Union.

The free trade area is expected to offer huge opportunities for business and investment and will attract foreign direct investment into the tripartite region. The business community is also expected to benefit from an improved and harmonized trade regime in a 26-nation free trade zone and enjoy the reduced cost of doing business.

Pacific Agreement on Closer Economic Relations ― Plus

The Pacific Agreement on Closer Economic Relations, or PACER, is a framework agreement to deepen trade and investment liberalization in the broader Pacific on a step-by-step basis.

Participants in the PACER Plus negotiations are: Australia, Cook Islands, Federated States of Micronesia, Fiji, Kiribati, Nauru, New Zealand, Niue, Pala, Papua New Guinea, Republic of Marshall Islands, Samoa, Solomon Islands, Tonga, Tuvalu and Vanuatu.

PACER Plus negotiations for a regional trade and economic integration agreement were launched in August 2009. A series of meetings on the PACER Plus were held in Fiji in December 2014 to progress the negotiations. It is expected to boost private sector development and create economic growth and employment opportunities, and bring the Pacific Forum economies closer.

There are some bumps, of course, with many Pacific countries wary of the dominant roles played by Australia and New Zealand.

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Crucial year for tackling climate change

First published in The Korea Herald.


Toward the end of 2014, there was incremental progress in global efforts to tackle the fallout of climate change. It is now expected that all countries will reach a broad consensus when they meet in Paris in November and December this year.

The United Nations Climate Change Conference was held in Lima, Peru, from Dec. 1-12, to negotiate a global climate agreement. This was the 20th yearly session of the Conference of the Parties, or COP 20, to the 1992 U.N. Framework Convention on Climate Change, or UNFCC, and the 10th session of the Meeting of the Parties, or CMP 10, to the 1997 Kyoto Protocol.

While this was a conference in the annual series, and was hailed as an important first step ― it resulted in a five-page text now officially known as the Lima Call for Climate Action ― toward a full climate change deal, more attention is being directed toward the 2015 UNFCC in Paris.

In Lima, about 190 nations agreed on the building blocks of a new-style global deal to combat climate change amid warnings that a lot tougher action will be needed to limit increases in global temperatures. The proposals call on countries to reveal how they will cut carbon pollution.

Under the deal, governments will submit national plans for reining in greenhouse gas emissions by an informal deadline of March 31, 2015, to form the basis of a global agreement at the Paris summit.

Notably, most of the tough decisions about how to slow climate change were postponed until then.

The text, agreed two days into overtime after two weeks of talks came close to collapsing, because of objections by emerging economies led by China and India, who were concerned that previous drafts imposed too heavy a burden on emerging economies compared to the advanced ones.

The compromise preserved a notion enshrined in a 1992 climate convention that the rich have to lead the way in making cuts in greenhouse gas emissions. It also satisfied rich nations that want the fast-growing emerging economies to rein in emissions.

Some environmental groups, however, were not satisfied and said that the deal was far too weak. They also warned that negotiators had left too many contentious issues unresolved before the deadline for reaching a deal in Paris.

The countries put off decisions about the legal structure of the agreement, and deferred decisions about ensuring a flow of finance to developing countries. The biggest issue left unresolved for Paris is the burden for cutting greenhouse gas emissions.

However, that does not take away the fact that the Lima deal, with obligations for all nations, is a shift from the 1997 Kyoto Protocol that obliges only the rich to cut emissions.

As per the agreement, national pledges will be added up in a report by Nov. 1, 2015, to assess their aggregate effect on slowing rising temperatures, but there will not be a full-blown review to compare each nation’s level of ambition.

The text also lays out a vast range of options for the Paris accord, including the possibility of aiming for zero net global emissions by 2100 or earlier in a drastic shift from fossil fuels toward renewable energies such as wind and solar power.

If all goes well, China, whose emissions have overtaken those of the U.S., will as part of the agreement formally pledge to cut its greenhouse gas emissions, as will India, Brazil and other emerging economies. But much remains uncertain about the prospects. That is why the year 2015 is very crucial.

There is more hope than ever before that all the countries will be able to iron out their differences. Especially because before the Lima meeting several major economies declared targets to curb emissions. In October, the European Union committed to reduce greenhouse gas emissions by at least 40 percent below 1990 levels by 2030. In November, the U.S. and China jointly announced their reduction targets. The U.S. would reduce greenhouse gas emissions by at least 26 percent below 2005 levels by 2025, and China would seek to stop CO2 emissions from rising around 2030.

China has also promised to cap its annual coal consumption through 2020, after which its use of coal is expected to decline. In parallel, more than 20 countries have come forward to financially support the Green Climate Fund, a new multilateral fund that will help developing countries shift to pathways of low-carbon and climate-resilient growth. As of now it has received more than $9.5 billion in commitments.

For many years now, the division between the rich and poor nations have reduced hopes at U.N. climate talks. Going forward, it is hoped that this will be a breakthrough year.

As a recent report, “Paris 2015: getting a global agreement on climate change,” notes, a strong deal will make a significant difference in the ability of individual countries to tackle climate change.

“It will provide a clear signal to business, to guide investment toward low carbon outcomes. It will reduce the competitiveness impacts of national policies, and create a simpler, more predictable framework for companies operating in different countries.”

More importantly, a strong climate deal will also help to meet international development aims, which are at increasing risk from rising global temperatures. Eliminating poverty, improving health and building security are all outcomes linked to tackling climate change.

The joint report by Christian Aid, Green Alliance, Greenpeace, RSPB and WWF states that to ensure meaningful action on climate change, the deal must contain the following elements: ambitious action before and after 2020; a strong legal framework and clear rules; a central role for equity; a long-term approach; public finance for adaptation and the low carbon transition; a framework for action on deforestation and land use; and, clear links to the 2015 Sustainable Development Goals.

Making this conference a success is therefore essential. Will it be just another conference of big promises and disconcerting results? We have to wait and see how serious the countries are in tackling climate change.

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