As Malaysia redefines its growth strategy, the question of which sector to promote has been a subject of ongoing debate. Some have argued that the strategy should emphasize manufacturing – and preferably high-tech manufacturing – as innovation activity is most forthcoming in this sector. Others have countered that services are key, as the typical economic structure of an advanced economy is oriented towards services. Tradable services are also fast becoming an engine of growth.
The prediction season is in full swing, and prognosticators have, as usual, appended the warning that economic forecasts at this stage are subject to exceptional uncertainty. Such exceptional uncertainty is always with us when looking ahead – there is always a fork in the road, no matter what the circumstances are.
The nuance this year is that, while the recovery in East Asia will depend on prospects for the rest of the world, notably in the advanced economies, the outlook for those economies hinges on policies to address the causes of the financial crisis. Thus far, it’s clear that very little has been done to redress the regulatory issues that led to a near meltdown of the global financial system – while the rebound from the financial and economic crisis has been substantially stronger than anticipated only months earlier. And these developments explain why opinions differ on the future path of regulatory reforms and their impacts.
When I was asked to look back at Cambodia's economy in 2009 and ahead to 2010, I began to wish I had some magic tools such as this ox (although in that case, the ox was not that magical, since the 2009 harvest turned out to be quite good).
In the years since the 1997/1998 Asian financial crisis, the Bank of Thailand (BoT) worked hard to build a heavy fortress around the nation’s financial sector. As a result, at a time when credit markets froze in developed countries and investors “fled to quality,” large amounts of capital still flowed into Thailand, where banks remained solid and well capitalized. Despite the financial strength brought by prudent policies, for the first time since the financial crisis, Thailand will see GDP and household consumption drop, and poverty could even increase in 2009. It is clear that the financial armor was insufficient to protect the economy from another crisis.
The culprit has been identified as Thailand’s excessive reliance on external demand, and talk of “rebalancing” growth towards domestic consumption and investment has become quite common (pdf). The idea of rebalancing makes some sense – but it can also be misleading. Let me explain.
It surprised me a little bit when I was driving my family along the west coast of Aceh a couple of weeks ago. Not too far from Banda Aceh, the capital city of Aceh’s province, a 15 meters wide- fresh-paved asphalt road built by the US absolutely has framed Aceh into another window of opportunity. This strategic road will connect Banda Aceh and some other districts in the west coast, which was washed away by the tsunami.
The online population in Asian and Pacific countries grew by 22 percent last year. China led the growth with an incredible 31 percent increase – to 220 million – in total unique Web visitors. These latest numbers of the region’s explosive Internet growth are according to a report, released last month by Internet researcher comScore, measuring online audiences in the region and individual countries between September 2008 and 2009.
The report indicates that Internet audiences in Japan, India and South Korea also saw double-digit growth and that the Asia-Pacific region now has 41 percent – or 441 million people – of the global Internet audience. It’s interesting to see how quickly things have changed since the last time we wrote about an earlier report from comScore.
If you want to examine more of the report’s findings you can see the related press release, or download a presentation on the subject here. (Note: To download the slides, you have to provide them with your name and some contact info.)
I’ve pointed before to World Bank evidence that shows the Internet may lead to improved economic growth, job creation and good governance. What else do you think such increased connectivity could mean for development in the region?
What’s the Gross Domestic Product (GDP) of India? If you type the inquiry into Google now, a graph will immediately display the data ranging from 1960 to 2008 and a figure showing that it is currently $1.22 trillion. If you click on the graph, it will immediately expand and allow you to compare historical figures as well as with that of other countries. I noticed, for instance, that India had a GDP of $36.6 billion in 1960; a 33 fold increase over the last 48 years!
The popular search engine has joined forces with the World Bank in sharing development data through the Data Finder, featuring 17 development indicators based on information provided by the World Bank to make the easy to understand information accessible to a broader audience. The public data tool is exceptionally easy to use and is excellent for comparative research or exploration of data over time. The indicators are as diverse as carbon dioxide emissions, fertility rates, GDP growth, and number of internet users.
The future is unpredictable and yet, from time to time, we must take stock of what we accomplished and where we are heading. Over the past decade, better policies and rising integration with the global economy have pushed growth in South Asia upwards. By 2007, the peak year just before the global financial crisis, the region’s GDP growth had reached nearly 9 percent a year (just slightly behind East Asia’s). This growth acceleration extended to all the countries of the region.
The global financial crisis took South Asia’s growth down by about 3 percentage points (from 8.6% in 2007 to 5.6% in 2009). This was the smallest growth decline among all regions of the world and the prospective recovery is already underway. The World Bank expects GDP growth to recover to nearly 7 percent per annum on average in 2010-2011.
Dipak Dasgupta, a Lead Economist at the World Bank, points to four key factors that have cushioned South Asia’s growth decline during the crisis and are helping in the strong recovery.
(1) Remittances held up much stronger in South Asia than in other regions. In Nepal, the reliance on remittances is the highest, and without these flows, growth in consumption would have collapsed.
(2) The resilience of some key export-oriented sectors also helped. Garments in Bangladesh and IT software exports from India, for instance, have held up relatively well.
The winds of change are blowing in Malaysia, as the government is taking on an ambitious agenda of structural reform. The objective is to climb up the income ladder and join the league of high-income economies. This is a difficult challenge – one which not many countries have successfully met in the post-war period.
Against this backdrop, the World Bank’s launch of a new report on the Malaysian economy (full disclosure: I lead the team who authors the report) is timely. The Malaysia Economic Monitor, which will be published twice a year, aims to provide context to the challenges facing Malaysia and serves as a platform for discussion and the sharing of knowledge.