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Asian Economies

Asian Economies. Sisira Jayasuriya Department of Economics. This subject aims to give you a general understanding of the following topics:. A picture of the structure of Asian economies and historical experiences influencing policies

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Asian Economies

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  1. Asian Economies Sisira Jayasuriya Department of Economics

  2. This subject aims to give you a general understanding of the following topics: • A picture of the structure of Asian economies and historical experiences influencing policies • The debates about the role of state and market, and process of economic policy reforms • Nature of trade and investment links between Asian economies, and between Asia and the rest of the world • Changing international trading and investment framework: issues facing Asian economies • Implications for Asian business environment and business firms skj/asianeconomies/1

  3. Globalisation: implications and issues • Markets are opening: trade in goods and services increasing • Larger role for markets • Foreign investment: inward-outward FDI, portfolio • International economic and political context • Political, legal, institutional and economic volatility skj/asianeconomies/1

  4. Asian economies • Regional identity and diversity: economic, political, historical, cultural skj/asianeconomies/1

  5. Diversity • Some of the largest countries and some very small countries • Some of the richest and some of the poorest • Some natural resource-rich, some natural resource-poor • In some population predominantly urban, in manufacturing/services, some, still predominantly rural, in agriculture skj/asianeconomies/1

  6. Historical background: links, similarities and differences • historical links in Asia go back many centuries • Chinese and Indian cultural influences and links • Trade links • direct western colonial rule: South Asia, Southeast Asia (except Thailand) • British, Dutch, French, Portuguese, Spanish-American • western domination : China, Thailand • Japanese colonialism skj/asianeconomies/1

  7. Independence and post-independence • nationalist movements: relatively peaceful vs revolutionary/violent • communist movements in independence struggles • regional conflicts • political ideology and circumstances, and economic policy skj/asianeconomies/1

  8. Convergence in economic policies: all countries are increasingly adopting similar policies • Since late 1970s, process of economic policy liberalization – market oriented policies • Late 1980s-early 1990s, pace of liberalization accelerated • 1997 crisis and aftermath • But history, culture, structure, politics matter skj/asianeconomies/1

  9. Asian economic integration? • geographical proximity • some (limited) sense of common cultural heritage (rice eaters???) • economic links have been growing: • regional integration arrangements • ‘natural’ economic complementarities • “Asian” economic crisis and ‘contagion’, “yen” zone……. skj/asianeconomies/1

  10. Regional Integration Agreements (RIAs) • ASEAN • CER • SAARC • APEC skj/asianeconomies/1

  11. Intra- and inter-regional trade sharesexports - 1999 Destination ____NA__ LA__WE Asia Origin N. America 39.6 15.6 19.4 21.1 Latin America 61.6 16.0 12.9 6.0 Western Europe 9.9 2.4 69.1 7.5 Asia 26.3 2.5 18.1 46.6 World 22.0 5.4 42.2 20.9 Source: WTO skj/asianeconomies/1

  12. Asia in global economy • Population: majority (>50%) • Production: Gross Domestic Product (GDP): • by conventional $ measure, >20% • but by another measure (PPP), >30% (with three of the world’s largest economies: China (2), Japan (3), India (4)) • International Trade: exports imports Merchandise (‘goods’) 25 21 Services 19 25 • Foreign Direct Investment (FDI): 20% skj/asianeconomies/1

  13. Asia: the big 3 Population Area GNP per cap income (millions) (‘ooo km2) (bn$) $ PPP $ PPP$ ------------------------------------------------------------ Japan: 126 328 4,290 2,928 32,390 29,180 China: 1,239 9,597 929 3,984 750 3,220 India 980 3,228 421 1,661 430 1,700 skj/asianeconomies/1

  14. Asia’s International Trade: merchandise trade • Asia (including Australia/NZ): 25.5% of world’s exports and 20.9% of world’s imports in 1999 • growth in volume value 1980-85 5 2 1985-90 13 14 1990-99 7 6 (note: 1997 crisis hit both exports and imports) skj/asianeconomies/1

  15. Trade growth: selected Asian countries average annual growth rate: 1990-99 exports imports Japan 4 3 China 14 13 (excl HK) India 7 7 Philippines 18 11 Vietnam 19 17 Australia 4 6 skj/asianeconomies/1

  16. Merchandise Trade by product group:1999(shares as % of total value) exports imports Agricultural products 7.1 10.6 Mining products 6.3 14.5 Manufactures 84.5 72.5 skj/asianeconomies/1

  17. Japan dominates trade, but China challenging Japan’s share in 1990: Exports of Asia 38.9% Imports of Asia 33.2% But, share falling – others’ trade growing faster 1999: Exports of Asia 30.1% Imports of Asia 25.9% skj/asianeconomies/1

  18. Japan and rest of Asia Direction of trade 1990 1999 exports to Asia (%) 34.2 39.7 imports from Asia (%) 35.1 44.6 most important partners in Asia: China, Hong Kong, Taiwan, Korea skj/asianeconomies/1

  19. Composition of exports: diversity reflects resource availability and stage of development • Japan: passenger motor vehicles integrated circuits telecommunication equipment other electronic machinery computer parts • China: clothing footwear toys games and sporting goods telecommunications equipment computers skj/asianeconomies/1

  20. Indonesia natural gas crude petroleum plywood etc jewellery coal New Zealand milk and cream meat fruits and nuts cheese skj/asianeconomies/1

  21. Malaysia, Philippines, Singapore and Thailand: integrated circuits, telecommunications equipment, computers/parts Korea: integrated circuits, passenger vehicles, ships/boats, telecommunications equipment skj/asianeconomies/1

  22. India: has largest number of people who cannot read/write and very low per capita income but huge and fast growing exporter of computer software skj/asianeconomies/1

  23. Many Asian economies’ exports depend heavily on global demand for:electronics/computers/telecommunications skj/asianeconomies/1

  24. Economic links in capital and labour markets • FDI and portfolio capital flows • Changing attitudes to FDI • Multinationals: first world and third world MNCs • development of equity markets and relaxation of controls on cross-border capital movements • Labour movements in Asia: labour migration from low wage countries to high wage countries skj/asianeconomies/1

  25. FDI-inflows (1999) Developed countries $ 636 billion East and SE Asia $ 93 billion (mostly to China/Hong Kong - $ 63 billion) South Asia: $ 3.2 billion, most to India A significant part of investment in Asia is from within Asia: mainly Japan, but also Taiwan and others – including China, India skj/asianeconomies/1

  26. Development • What is development? A Multi-dimensional concept • Basic economic needs –food, clothing, adequately met • Access to health and education facilities • Political and broader ‘human rights’ • Clean environment skj/asianeconomies/1

  27. Measuring growth • Per capita income – standard measure- US$: GNP/population – adjust by exchange rate • two major measurement problems: • Measurement errors – underestimation • Prices of goods and services are different across countries – purchasing power of a dollar differs skj/asianeconomies/1

  28. Purchasing Power Parity (PPP) measure • Prices of ‘Traded’ and ‘non-traded’ goods (and services): different determinants of prices • Determine international average relative prices of goods and services and use them to value domestic output/income • PPP: ratio of domestic currency expenditures to international price value of output • Two sets of national income figures skj/asianeconomies/1

  29. Asia: the big 3 Population Area GNP per cap income (millions) (‘ooo km2) (bn$) $ PPP $ PPP$ ------------------------------------------------------------ Japan: 126 328 4,290 2,928 32,390 29,180 China: 1,239 9,597 929 3,984 750 3,220 India 980 3,228 421 1,661 430 1,700 skj/asianeconomies/1

  30. Average per capita income - even when adjusted for price differences - does not give full picture of ‘welfare’ How is income distributed? per capita share (%) of income share of income(PPP$) of bottom 40% top 20% Sri Lanka 2,990 22 39 Guatemala 3,350 8 63 Brazil 5,370 7 65 Costa Rica 5,520 13 50 skj/asianeconomies/1

  31. Measuring development • Multi-dimensional, so any single measure has limitations • Food availability • Life expectancy • Education • Position of women, minorities, castes, ethnic groups • environment skj/asianeconomies/1

  32. High per capita income and higher human development indicators not always closely linked Sri Lanka Upper middle income country average per cap income (US$) 420 3240 life expectancy female 73 70 male 68 65 infant mortality(/1000) 21 42 illiteracy female 17 31 all 13 24 Source: World Development Report, 1990 - figures for 1988 skj/asianeconomies/1

  33. Human Development Index (HDI) • A composite index produced by the UN, published in Human Development Report • Includes: • Literacy/education • Life expectancy • Per capita income • Takes values between 0 and 1 • Has limitations, but overcomes some limitations of ‘per capita income’ measure skj/asianeconomies/1

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