The Effects of afta on Macroeconomic Variables and Poverty: Evidence of Laos

2.0. ECONOMIC INTEGRATION IN SOUTH EAST ASIA 

2.1. APEC  

Asia-Pacific Economic Cooperation (APEC) and the Association of Southeast Asian Nations 

(ASEAN) are the two main economic forces of integration and cooperation in East and South 

East Asia (Mukhopadhyay and Thomassin,2010). 

 

APEC, founded in 1989, aims to enhance economic growth and prosperity and to reinforce 

the Asia-Pacific community. It serves as a hub for promoting economic growth, cooperation, 

trade and investment in the Asia-Pacific region. As an inter-governmental group, APEC 

operates based on non-binding commitments, open dialogue and equal respect for the views 

of all participants. The key distinct feature of APEC is that it has no treaty obligations 

required of its members. The decision-making process within APEC is done by consensus 

and commitments are made on a voluntary basis. APEC has 21 members, accounting for 

approximately 40% of the world’s population, 55% of world GDP and about 44%of world 

trade (APEC, 2013). APEC has committed to reduce tariffs and nontariff barriers across the 

Asia-Pacific region in order to create efficient domestic economies and to significantly boost 

exports. Adopted by leaders at their 1994 meeting in Bogor in Indonesia, APEC’s vision is to 

liberalize trade and investment in the Asia-Pacific by 2010 for industrialized economies and 

2020 for developing economies. 

 

Since it was founded, APEC has made much progress in the areas of trade and investment 

liberalization, business facilitation and economic and technical cooperation.  Average trade 

barriers in the region had been brought down from 16.9% in 1989 to 5.8% in 2010, resulting 

in nearly a six-fold increase in intra-APEC merchandise trade (exports and imports). By the 

same token, between 1989 and 2010 APEC’s total trade had increased more than five times, 

while that of the rest of the world had increased about 4.6 times.  Moreover, APEC twice 

launched the ‘Trade Facilitation Action Plan,’, resulting in a reduction of the cost of business 

transaction across the region by 5% between 2002 and 2006 and by a further 5% in real terms 

between 2007 and 2010. Such cost reduction of business transaction represents a total savings 

for business of $58.7 billon. Finally, around 1600 projects have been initiated since APEC 

first began to engage in capacity building work in 1993. APEC contributes funding to around 

100–150 projects each year, with a total value of over $23 million committed by APEC to 

projects in 2010–2011 (APEC, 2013).