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Southeast Asia: Development Challenges

Southeast Asia: Development Challenges. Sisira Jayasuriya and Gary Magee Monash University. SE Asia. Huge diversity: income levels, size (land area, population), resource endowments and economic structure

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Southeast Asia: Development Challenges

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  1. Southeast Asia: Development Challenges Sisira Jayasuriya and Gary Magee Monash University

  2. SE Asia • Huge diversity: income levels, size (land area, population), resource endowments and economic structure • Since 19th C, fortunes of the region shaped by its integration into global –the Western- economy through trade and investment links, and buffeted by external shocks emanating from the West • 21st C: as a region with fastest (and longest) growth in the world, greater linkages with Asian neighbours (China –North Asia; India..) which both mediate its links with the West (N. America and Europe) but increasingly important as final export destinations/import sources.

  3. Challenges • Managing the structural transformation: greater heterogeneity, industrial and semi-industrial economies: • changing sources of exogenous shocks • changing sources of growth • Demographic shifts: slowing population growth, ageing populations • Environmental problems and natural resourcedegradation • Political economy and distribution: rising inequality • Regional economic integration and political frictions: managing the rise of China (and, India?) and associated geo-political issues

  4. Changes in Economic Structure • In 19th c, all countries basically commodity/resource rich, agrarian economies with some domestic pre-machine age ‘manufacturing industries’ • In 21st C: greater heterogeneity, industrialisation and urbanisation more advanced, though commodity exports remain important for some • Commodity booms, Dutch Disease and de-industrialisation: impact different across countries • Sources of growth: Catch up technology gap with advanced countries (Rodrik) so productivity change will be driver? • Sources of macroeconomic instability and volatility: source of shocks changing from TOT to external demand shocks not well reflected in TOT – because of product fragmentation in manufacturing and high import content of exports - and financial/capital flow shocks

  5. Demographic Changes: slowing population growth, ageing populations • Social security financing • Implications for savings: deliberate surplus policies in response to 1997 crisis reversed position as net capital importers but changing demography will undermine this trend. Savings set to fall? • Huge continuing need for investments in infrastructure, human capital – hence investment funds: • Will the pattern of the emerging economies funding consumption in the rich West change? What implications for SE Asia? • Can China continue as both exporter of goods and capital (as UK during first wave of globalisation)

  6. Environmental issues and natural resourcedegradation Implications for: • rate and patterns of growth • food and agriculture • Regional collaboration and conflict (Mekong waters, smog..)

  7. Political economy and distributional Issues: maintaining social cohesion • Increasing inequality across several dimensions • Rising expectations

  8. Regional economic integration and political frictions • Within Asia differences and complementarities drive regional integration. • Unless politics undermines market openings, likely to intensify integration across entire region (north Asia and Australia/NZ) • Role of China (and India?) as sources of growth – trade and, increasingly investment, following earlier key role played by Japan • Managing the implications of the geo-political changes of rise of China in the context of regional history, ethnic issues etc…

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