Almost 20 years ago, the World Bank released a groundbreaking report – The East Asian Miracle – that called worldwide attention to the economic success of eight economies in the region, leading to a discussion on the extent to which policies followed by them could be replicated.
A Paper for Discussion
In recent decades, export competitiveness in a changed and increasingly changing world has been at the heart of growth and development debates in almost all countries. Drawing upon the lessons of experience of the most successful exporters in the developing world1, this paper provides an overview of institutions and policy practices successfully experienced for the expansion and diversification of exports, and the strengthening of industrial competitiveness in some developing countries.
Although exports are important for growth and development, developing countries have been struggling with the challenge of expanding and diversifying their export baskets beyond their primary product bases for a long time. Based on research in recent two decades, it is now well established that, openness to trade and integration into global markets is a central element of successful growth strategies; and higher and sustained economic growth is associated with export growth (Dollar and Kraay (2001).
Against the background of growing disparity in income between the developed and the developing world due in large part to divergence in industrial competitiveness, the central question has always been: what can and should be done in developing countries to boost their export growth, accelerate their export diversification and enhance their competitiveness in international markets? While there is considerable agreement on some of the policy lessons learned from successful exporters of the developing world (need for sound macroeconomic management, appropriate exchange rate and general encouragement to exporters), there is more controversy on the role and usefulness of some other policies and particularly on selective policies targeted to specific activities. However, a look at the experience of the most successful exporters of the developing world that were able to reverse more than a hundred years of sluggish development and achieve unprecedented manufacturing performance, suggests that they may have done something right.
When I think about the biggest frustrations that typically come with living in, or simply visiting, a big city, bad traffic probably tops my list. For me, few things are more maddening than being stuck in a slowly moving (or worse, stand-still) line of cars. This is why it's not too surprising that bicycle-sharing programs have become quite popular here in Washington, D.C., and in several North American and European cities.
Now in Asia, these programs, which provide people with free or affordable access to bikes, are apparently starting to take off in popularity. The Springwise entrepreneurial blog points us to ambitious new bike-sharing organizations in the Taiwanese cities of Taipei and Kaohsiung City, as well as similar programs in Changwon, Korea and Hangzhou, China.
Cities and communities love and often support bike-sharing programs because they help reduce traffic congestion, noise and pollution. And the rentals are usually cheap, giving another option for transportation to more people. I suppose bicycle congestion still has a potential of being an annoyance, but at least they don't smell of exhaust and can't honk at you.
Unfortunately, we start this roundup as we did the last – with more economic bad news. Exports dropped 2.8 percent and imports declined 21 percent in China on annualized basis in December. Also, China reported the first slowdown in growth of its foreign reserves since 1998, although reserves still rose by $45 billion in the fourth quarter of last year to about $1.95 trillion. Debate is also now swirling about rate of China’s economic growth for 2009, and even the central bank governor now is publicly setting expectations that the target rate of 8 percent may not be achievable.
The December export numbers for China showed a 2.8 percent decline from the year before. This was the worst showing in a decade, but better than the 4-5 percent decline expected by the business press. There is still plenty of cause for worry, as economist and blogger Brad Setser wrote in a recent post, "This really doesn’t look good". While Setser is talking about the breath-taking drop in Korean and Taiwanese exports in December, some of those exports normally would be on their way to China for further processing and re-export. So, the grim news from those economies in December probably presages more tough times ahead for China's exports.
In this deteriorating global environment, the Ministry of Finance and the World Bank's Beijing office last week held a seminar with some very good international and Chinese economists to discuss China’s macroeconomic policy options. While the economists had a wide range of views, I took away a pretty strong consensus from them on three things:
This is the first blog entry of what I hope to be regular updates from the financial sector and related areas across the East Asia and Pacific region. So, let’s see how the New Year began in Asia.
Unfortunately, the bad news keeps coming on the economies in the region in terms of exports and industrial output. Exports and industrial production fell 6.2 percent in Malaysia in November and exports from Thailand fell 18 percent in November. Surveys of consumer confidence, business sentiment, and manufacturers across the region have all shown significant declines.
In my last post, I discussed how emerging Asia is getting hit by the financial storm and the early signs of stress in the financial systems across the region. The intensity of this storm appears to be getting worse, but governments across East Asia are taking a wide range of measures to bolster their financial systems.