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East Asian Economy: Southeast Asian Economy and Comparison

East Asian Economy <Lecture Note 4> 2013.10.17. East Asian Economy: Southeast Asian Economy and Comparison * Some parts of this note are borrowed from the references for teaching purpose only. Semester : Fall 2013 Time: Thursday 2:00-5:00 pm

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East Asian Economy: Southeast Asian Economy and Comparison

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  1. East Asian Economy <Lecture Note 4> 2013.10.17 East Asian Economy: Southeast Asian Economy and Comparison * Some parts of this note are borrowed from the references for teaching purpose only. Semester: Fall 2013 Time: Thursday 2:00-5:00 pm Professor: YooSoo Hong Classroom: 423 Mobile: 010-4001-8060 E-mail: yshong123@gmail.com Home P.: http://yoosoohong.weebly.com 1 1

  2. Geography, History and Culture

  3. South East Asia

  4. ASEAN Member Countries Lao PDR Myanmar Thailand Viet Nam Brunei Darussalam Philippines Malaysia Cambodia Indonesia Singapore

  5. ASEAN Basic Data • Total population : 497.56 million • Total GDP : US$ 737.48 billion • Total trade: US$ 720 billion • Total area : 4,495,493 sq.km

  6. Southeast Asia  Background (Cultural) • Southeast Asia is a land of large and small peninsulas and islands. • The region is a cultural and political mosaic of diverse peoples and lands. • Influence of India and China on the historical development of the region • Buddhism strongly entrenched in Burma, Thailand, Cambodia, Laos, Vietnam. • Hindu cosmology and beliefs influential in the region

  7. Overseas Chinese factor • Overseas Chinese are major entrepreneurs in large urban areas. • Thai people pushed out of southern China in 13th. • Only Thailand (Siam) has never been colonized by the West. • Thai monarchy practiced skillful diplomacy to preserve their independence. • Vietnam occasionally was ruled by China influence of colonialism • Most states under colonial rule from 19th to 20th C, i.e. UK • (Myanmar, Singapore and Malaysia); France (Cambodia, Vietnam • and Laos); Netherland (Indonesia); US (Philippines)

  8. Population • Southeast Asia has a large, expanding population • In 1965, combined population of all countries was 250 million; by 1993 it increased to 400 million; and by 2025 it is expected to rise to 550 million. • Most countries growing at 2% per year; Thailand and the Philippines growing at 3%; Cambodia and Laos have rates close to 1% reflecting ravages or war. • Urbanization increasing in all countries though Cambodia, Laos and Vietnam still have less than 20% living in urban areas. • Indonesia and Thailand have 30% of their populations in urban areas • Philippines just over 40%; Malaysia 50% • 100% of the population in Singapore live in the city. • Most Southeast Asian states have a high percentage of their people living in a primate city, i.e. Bangkok, Thailand; Manila, Philippines, Phnom Penh, Cambodia, etc. • Migrations from rural areas to cities have strained governmental budgets, made it difficult to provide adequate services.

  9. Diversity of Ethnic Groups and Religions

  10. Economic Growth and Status

  11. ASEAN6 GDP Growth 1990-2011 Source: Chia, S. 2013. p.8.

  12. CLMV GDP Growth 1990-2011 Source: Chia, S. 2013. p.9.

  13. South East Asian Model Singapore Malaysia Import-substitution during 1959-1965 Until the economic recession in 1985 • Industrialization with Export-promotion with the 1965 split with Malaysia • Strong government intervention to attract FDI • the late 1950s: • Industrialization with Import-substitution • the late 1960s: • Industrialization with Export-promotion • the 1970s: • Establishment of Export-processing areas led • by MNCs • the 1980s: • Import-substitution with increased GOV’T • intervention • during 1985-1986: • Loosened regulation and Repeal of control • while going through economic recession In a case of Singapore, they pursued import-substitution during 1959-1965, but with the 1965 split with Malaysia they focused on promoting exports, which was led by MNCs. Malaysia also promoted MNCs activities from the early stage: in the 1970s establishment of export-processing area led by MNCs

  14. South East Asian Model (cont.) Thailand Indonesia • Industrialization since the 1960s but higher portion of agricultural sector until 1980 Stabilizing economy by controlling inflation during 1966-1970 Building infrastructure • Import-substitution until 1971 • Government preferred liberalization and market economy Strong government intervention in finance, heavy industry, tariff barrier, and developing their own industry • Export-oriented industrialization until now • Dramatic decrease in oil price during 1985-1986 • Currency depreciation • Repeal of financial support • Committing customs services to Swiss company (SGS) in 1985 • Duty drawback system in 1986 • liberalization of foreign investments in 1986 • Reducing tariff barrier • Too rapid increase of population: • 1.7 million in 1947/ 2.6 million in 1960 • / 5.0 million in 1980 • MNC-led industrialization Thailand government preferred liberalization and market economy since the 1970s, and the government tried to lead the export-oriented industrialization with their own strength, but they couldn’t. One of major factors was too rapid increase of population. So MNCs led industrialization. Indonesia government strongly tried to strengthen their own industries, intervening finance, heavy industry and tariff barrier. But facing dramatic decrease in oil price during 1985-1986, the government took more market-friendly measures.

  15. Economic Development • Several Southeast Asian economies have made substantial economic progress since the1960s. • Thailand, Malaysia, Singapore, Indonesia and Philippines have good economic growth rates with rising incomes. • Cambodia, Laos, Burma (Myanmar), Vietnam have lagged behind the rest of the countries of the region. • Recently Vietnam opening the country up to market forces, foreign investment, development of a thriving business community.

  16. Economic and Social Development in Southeast Asia  Southeast Asia has been one of the world’s most dynamic and fastest growing regions in recent decades. (1990-2007) - GDP growth 5.5% (the world: 2.9%)  In 2007, the region’s average per capita income was estimated at $4,020.3 (at 2000 constant prices), slightly higher than developing Asia. High levels of investment in physical and human capital, pragmatic trade and industrial policies, a vibrant external sector and, especially after the 1997/98 Asian financial crisis, structural reforms supported this favorable economic performance. The crisis sparked a wave of recession in many directly affected economies, but this was short lived and recovery was swift.

  17.  The region still faces the daunting task of eradicating income and non-income poverty. - Rapid economic growth and structural transformation has helped lift millions of Southeast Asians out of extreme poverty. During 1990- 2005, poverty incidence in Indonesia declined by 32.8, Philippines by 7.0, Thailand by 9.0, and Viet Nam by11.4 percentage points. - But as of 2005, about 93 million(18.8%) Southeast Asians still lived below the $1.25-a-day poverty line, and 221 million (44.6%) below the $2-a-day poverty line. Although most Southeast Asian countries are on their way to achieving the income Millennium Development Goals (MDG) by 2015, many face great challenges in achieving the non-income MDGs.

  18. Selected Economic and Social Indicators

  19. Main Indicators Source: ASEAN Secretariat, 2010

  20. GDP Growth Comparison: Actual and Forecast Source: OECD

  21. Poverty Estimates in Southeast Asia

  22. Disparity in Productivity Output per worker, 2008 (constant 2009 US$) Note: Labor productivity is not the same as wage. Source: Conference Board and Groningen Growth and Development Centre Total Economy Database, January 2010.

  23. Land Use • Increasing demand for food and industrial crops in recent years has led to intensification of agricultural production, generating considerable environmental pressure. - Growing population, rising incomes, and changing consumption patterns have boosted demand for food and industrial crops from within and outside the region, and to rising food prices on a global scale. - In response, the region has intensified production of grains, animal feed, and industrial crops. • Rising agriculture production puts considerable pressure on water resources already under stress from high population and economic growth. - Many parts of the region have been experiencing increasing water stress, including water shortages and deterioration of water quality due to rapid population and economic growth and climate change.

  24. International Competitiveness, Trade and FDI

  25. Export Performance Compared

  26. Trade Performance

  27. Closer Integration in ASEAN and East Asia Share of intra-regional trade (percentage of total trade) Average tariff rate under AFTA, % Source: SAEO 2010

  28. FDI Source: ASEAN Secretariat, 2010

  29. Division of Labor: Parts Procurement of a Hard Disc Drive Assembler Located in Thailand USA Mexico SPNDLE MOTOR BASE CARRIAGE FLEX CABLE PIVOT SEAL VCM TOP COVER PCBA HGA HAS DISK HEAD SUSPENSION HEAD China Japan PCBA CARRIAGE HGA BASE HEAD SUSPENSION COVER DISK SCREW SEAL RAMP TOP CLAMP LATCH PLATE CASE LABEL FILTER, PCBA SUSPENSION Taiwan Thailand TOP CLAMP Malaysia Hong Kong Philippines BASE PIVOT SPACER VCM BASE CARD TOP CLAMP DISK FILTER CAP DAMPING PLATE COIL SUPPORT PCBA Singapore COVER SCREW PIVOT PC ADP DISC Indonesia W.SUSPENSION VCM PCBA

  30. FDI Inflows into ASEAN 1993-2011 Source: Chia, S. 2013. p.14.

  31. Weakness of Southeast Asia

  32. Socio-Economic Development

  33. Human Development in Southeast Asia

  34. Geopolitics and Security

  35. Association of Southeast Asian Nations (ASEAN) • Foundation • The Association of Southeast Asian Nations (ASEAN) was established • on August 8, 1967 by Indonesia, Malaysia, the Philippines, Singapore, and Thailand. • Brunei Darussalamjoined in 1984, Vietnam became • the seventh member in 1995, and Laos and Myanmar joined two years • later in 1997. Cambodia joined in 1999. • Objectives: • To strengthen the economic and social stability of the region • To ensure peaceful and progressive national development • To ensure stability and security from external interference

  36. Association of Southeast Asian Nations with China, Japan, and South Korea (ASEAN+3) • The meeting of ASEAN+3 (China, Japan, South Korea) was first held at • the Second Informal ASEAN Summit in 16 December 1997. • To promote greater cooperation between ASEAN and three Northeast • Asian nations with an objective of becoming a building block for regional • cooperation in East Asia

  37. Trade Agreements in AsiaActual and prospective

  38. Dynamic and Outward-Looking  ASEAN’s centrality + Dynamic leadership in external relations: - ASEAN+1 (10 Dialogue Partners : Australia, Canada, China, EU, India, Japan, RoK, New Zealand, Russia, USA) - ASEAN Regional Forum (ARF) : 27 participants (10 ASEAN Member States, 10 Dialogue Partners, PNG, Timor-Leste, DPRK, Mongolia, Pakistan, Sri Lanka, and Bangladesh - ASEAN Plus Three (China, Japan, RoK) - East Asia Summit (EAS) : ASEAN, Australia, China, India, Japan, RoK, New Zealand - cooperation with the UN, World Bank; regional organizations/institutions (ECO, SAARC, PIF, GCC, Mercosur, SCO, ADB, UN-ESCAP, MRC)

  39. Dynamic and Outward-Looking (continued)  Active participation of ASEAN and/or Member States in international and inter-regional dialogue and cooperation: + ASEAN-UN + Asia-Europe Meeting (ASEM) + APEC (Cambodia, Laos and Myanmar are still waiting to join) + G-20 (Indonesia + ASEAN Chair country) + World Trade Organization + Non-Aligned Movement (NAM) + Forum for East Asia – Latin American Cooperation (FEALAC) + Asia-Africa Summit + Asia Cooperation Dialogue (ACD)

  40. ASEAN Economic Community (AEC) A Single Market & Production base AEC Transform ASEAN into a stable, prosperous and highly competitive region with equitable economic development, and reduced poverty and socio-economic disparities • Free flow of goods • Free flow of services • Free flow of investment • Free flow of capital • Free flow of skilled labor Source: Reaping the benefits of AEC & ,www.asean.org, as of December 2009

  41. ASEAN and Dialogue Partners Dialogue Partners Australia Canada China India Japan Korea New Zealand European Union (EEC) Russia USA UNDP EAS - Australia - New Zealand - India ASEAN+3 - Japan - Republic of Korea - People’s Republic of China • ASEAN • -Indonesia • - Malaysia • - Philippines • - Singapore • - Thailand • - Brunei Darussalam • - Vietnam • - Myanmar • - Lao PDR • - Cambodia ASEAN+6 Other Groupings/Relations Pakistan South Pacific Forum Gulf Cooperation Council Rio Group SAARC SADC EFTA Mercusor NAFTA

  42. ASEAN Centrality in the Global Landscape Source: ADB.Emerging Asian Regionalism: a Partnership for Shared Prosperity.

  43. Implications and Prospects

  44. Futureof Southeast Asia

  45. Future Policy Focus by Country Source: OECD

  46. Challenging Issues • What made Southeast Asia to be united? • Among Southeast countries which country will be the strongest country in 20 years? Why? • For the future of ASEAN countries, which northeast country is the most important country in the future, why? • (A hypothetical situation) Suppose a sea battle between China and Japan started because of the island dispute. They also stopped economic relations between them. What would be the economic impact of this on each of the economies (i.e. Korea, China, Japan, and ASEAN) in the East Asian region? • China is a big country. Compared to China, Singapore is a tiny country. However, Singapore has maintained No.1 competitiveness rank and the highest income per capita (except Japan) in Asia. Does this fact imply that smaller country is usually easier to be a competitive country than a large country, why or why not?

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