Sunday, February 25, 2018 03:55:48 PM
Jomo Kwame Sundaram :
The World Bank and other influential international financial institutions and development agencies have been touting Southeast Asian (SEA) newly industrializing countries as models for emulation, especially by African developing countries seeking to accelerate their development transformations. But these recommendations are usually based on misleading analysis of their rapid growth and structural transformation.
Typically, various cultural and other justifications are offered to justify recommending SEA, rather than Northeast Asia (NEA), as the better sub-region for emulation. Consequently, important lessons from East Asian experiences have been misrepresented, drawing erroneous lessons from the region's undoubtedly impressive economic performance during its high growth periods.
Despite SEA's much greater resource wealth, NEA's growth performance was superior over the long term in the second half of the 20th century until the 1990s, when Japanese economic growth collapsed following its financial liberalization 'big bang' shock and the strong yen (endaka) decade from 1985. For over two decades, growth in Japan, Korea and Taiwan averaged 8 percent, compared to 6 percent in Malaysia, Thailand and Indonesia.
Population growth has been much lower in NEA, increasing per capita differences over at least a quarter century. While income inequalities have grown in most of SEA, they have remained lower in NEA. Hence, economic welfare improvements have been much greater in NEA.
Most accounts of the 'East Asian miracle' emphasize education. But educational achievements in Indonesia, Malaysia and Thailand have been greatly inferior to NEA's. Ironically, the Philippines, which long had the highest share of tertiary educated in East Asia, has not had an impressive economic growth record.
Thus, actual experience compels scepticism about the facile policy recommendations that governments should enhance human resources, but only subsidize primary schooling. Instead, there is now compelling evidence that industrialization and productivity gains have been slowed by the region's modest progress on education.
Foreign direct investment
Greater SEA dependence on foreign direct investment (FDI) has impeded the development of industrial and technological capacities and capabilities, raising concerns as to whether their industrialization processes were sustainable.
The region has become less attractive for new FDI in the face of growing competition from alternative locations seeking to be part of 'global value chains'. Meanwhile, the supposed 'middle income country' trap in SEA is essentially due to limited development of indigenous industrial and technology capacities owing to modest 'technological learning' from the presence of 'foot-loose' FDI temporarily locating parts of their 'value chains' in the country.
Investment policy reform to promote more sophisticated industries in SEA is long overdue and needs to be coordinated with technology policy reform. SEA governments have not been conducive to elaborating and implementing appropriate investment and technology policies. The rest of SEA has not emulated Singapore's pro-active technology policy attracting desired investments in line with its own national development priorities besides developing capacities and capabilities using government investments.
Favouring FDI has weakened the influence of domestic industrial capital in the region, allowing financial interests, both domestic and foreign, to become more influential. Finance capital has developed symbiotic relations with other politically influential rentiers, dubbed 'cronies' following the 1997-1998 (mainly Southeast) Asian financial crisis. This powerful alliance successfully promoted partial financial liberalization in the region before the crisis.
Although capital account liberalization greatly increased short-term capital flows, which precipitated the 1997 crisis without increasing FDI, the region has opened up again to short-term capital inflows after accumulating reserves believed sufficient to withstand future crises. This is wrongly referred to as 'self-insurance' although there is no insurance element involved. Meanwhile, regional monetary cooperation has advanced beyond earlier bilateral swap arrangements, but there has been little progress beyond that.
After 1997, the 'Asian model' fell into disrepute as the East Asian miracle was written off as a debacle. Hence, it is crucial to also recognize the reasons for its inferiority and vulnerability during the high growth period from the 1960s to the 1990s when the Asian financial crisis exposed its new vulnerabilities.
But it would be a mistake to throw the baby out with the bathwater as there are undoubtedly important lessons to be learnt from SEA as well. Also, some of the very policies that the West has criticized were actually crucial for rapid growth and structural transformation in East Asia.
NEA has generally had more sophisticated and effective industrial policy compared to SEA. This accounts, in no small way, for the major differences in industrial and technological capabilities between the two East Asian sub-regions. Of course, there have also been different industrial policy orientations, emphases and instruments within SEA, sometimes involving discernible contrasts in investment and technology policies.
As these policies were inappropriately or prematurely undermined or terminated, the 'miracle' ended, often rather abruptly, due to the financial crises precipitated by liberalization. Contrary to popular Western narratives of the debacle, East Asia's previously successful 'catch-up' efforts had in fact been undermined by financial liberalization promoted by the Washington Consensus.
(Jomo Kwame Sundaram, a former economics professor and United Nations Assistant Secretary-General for Economic Development, received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought in 2007).
AFP, Beirut :Air strikes and rocket fire hit the Syrian rebel enclave of Eastern Ghouta for a seventh straight day on Saturday after the United Nations again delayed a vote on a ceasefire.The Damascus government launched a devastating bombardment of the enclave just outside the capital last Sunday that has ...
Aid workers have identified 32 victims of human trafficking so far at Rohingya camps in Cox's Bazar and also reported lack of access to basic services and self-reliance opportunities - especially for women and girls increasing the risk of trafficking. If such risks were assessed from the very beginning when ...
Former adult film actress Sunny Leone made a swift move into the Hindi film industry in 2012. And now the Indo-Canadian actress is all set to make her debut in a Tamil film. She says south Indian films would help her grow as a person and an actress. Sunny, whose ...
REMARKS by Indian Army Chief, Gen. Bipin Rawat on Thursday that a 'planned influx' of people from Bangladesh into India's north-east is underway as part of a proxy war by Pakistan with support from China, so to keep the area disturbed. Moreover, he also said migration from Bangladesh are happening ...
Priyanka Chopra has decided to cut ties with billionaire diamond trader Nirav Modi's brand following the news about the alleged banking fraud carried out by him. "In the light of recent allegations, Priyanka Chopra has chosen to terminate her contract with the Nirav Modi brand," a spokesperson of Priyanka, who ...
AP, Washington :Dramatically escalating the pressure and stakes, special counsel Robert Mueller filed additional criminal charges Thursday against President Donald Trump's former campaign chairman and his business associate.The filing adds allegations of tax evasion and bank fraud and significantly increases the legal jeopardy facing Paul Manafort, who managed Trump's campaign ...
Human rights group Amnesty International has accused Donald Trump of "hateful" politics and of being a threat to human rights. "President Trump takes actions that violate human rights at home and abroad," the group said. Amnesty put Mr Trump in the same group as the leaders of Egypt, Russia, China, ...
PHYSICIANS must provide treatment, President Abdul Hamid said to common people at affordable cost so that no one remained deprived of receiving treatment for lack of money. He made the call while addressing the third convocation of Bangabandhu Sheikh Mujib Medical University in the city on Monday. He has also ...
Oscar-winning actress Alicia Vikander said she loves "independent and arthouse" cinema, but is also attracted towards the big adventure films.The actress, who will be soon seen as Lara Croft in the forthcoming film 'Tomb Raider', also shared that she found training and muscle-building exercise for the role, empowering. "My mother, ...
Reuters, Berlin :The European Union must develop a response to growing global political and economic pressures and this will be the spirit of an EU summit this week, German Chancellor Angela Merkel said on Thursday.Merkel pointed to the crisis in Syria and the growing importance of Asian economies as needing ...