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East Asian Economy: Supplements- Each South East Asian Economies G1

East Asian Economy <Lecture Note 4S1-Singapore Malaysia Thailand Indonesia Philippines> 2013.10.17. East Asian Economy: Supplements- Each South East Asian Economies G1 * Some parts of this note are borrowed from the references for teaching purpose only. Semester : Fall 2013

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East Asian Economy: Supplements- Each South East Asian Economies G1

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  1. East Asian Economy <Lecture Note 4S1-Singapore Malaysia Thailand Indonesia Philippines> 2013.10.17 East Asian Economy: Supplements- Each South East Asian Economies G1 * 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. Singapore

  3. History of Singapore’s Economic Development The 1960s: A time of turbulence and economic uncertainty Poor infrastructure, unemployment, labor unrest..such were odds against Singapore in 1960s. The 1970s: The move into skills-intensive industries Economic Development Board of Singapore positioned as a quick operations start-up location where factories were built in advance of demand and a highly-skilled workforce was readily available. The 1980s: The era of capital-intensive and high-technology industries Singapore manages to attract the first wafer fabrication planet in he South East Asia region. The move into R&D, engineering design, and computer software services marked what was known as the Second “Industrial Revolution” for Singapore. The 1990s: Services identified as a second pillar of the economy As manufacturing was further strengthened, the service sector was identified as a second pillar of the Singaporean economy. The 2000s: A focus on innovation, knowledge and R&D Innovation, R&D and Intellectual Property became Key economy drivers, requiring new commercial and legal framework.

  4. Major Economic Indicator-Singapore Source: Korea Eximbank Overseas Economic Research Institute. 2010. 2010 World Country Review

  5. Development Strategies • Expanding external ties - embracing globalization through the multilateral trading framework of the WTO, regional co-operation as well as bilateral Free Trade Agreements. • Maintaining competitiveness and flexibility - keeping the burden of taxes as low as possible, reviewing the labor market and wage system to make them more flexible, and pricing factors of production competitively. • Promoting entrepreneurship and domestic companies - encouraging people to be innovative and improving the ability of firms to develop new ideas and businesses, tap new export markets and broaden the economic base. • Growing manufacturing and services - upgrading these sectors by improving cost competitiveness, equipping the labor force with relevant skills, and developing new capabilities and industries. • Developing human capital - investing in education, helping workers train and upgrade, and welcoming global talent to augment the indigenous talent pool.

  6. Singapore’s GDP Growth

  7. Singapore's Ranking in Doing Business (Out of 183 economies) • -Singapore is ranked first for having the most open economy for international • trade and investment • -Ranked as the world's easiest place to do business • -Ranked the most competitive country in the world Source: The International Bank for Reconstruction and Development/The World Bank. 2010. “Doing Business 2010, Singapore”

  8. Skilled Employment • -Ranked 7th in the world and 2nd in Asia for having the most motivated • workforce • -Among the top 5 in Asia for the best skilled labor • -Labor regulations are the most business conducive in Asia Source: Economic Development Board, Singapore

  9. Trade and Singapore’s Economy -Singapore’s trade in goods and services was more than four times of its GDP in 2007. -In nominal terms, Singapore trade in goods and services reached US$698.6 billion in 2007. -Merchandise trade comprised about three-quarters of Singapore’s trade (78.3 per cent) in 2007. In nominal terms, domestic exports stood at US$155.9 billion in 2007 while Re-exports was US$162.0 billion in the same period. -Malaysia, China, the United States, Indonesia and Japan are Singapore’s top five trading partners, accounting for 48 per cent of total merchandise trade in 2007

  10. Composition of Singapore’s Merchandise Exports

  11. Growth of Singapore’s Merchandise Trade and GDP Source: Singapore’s Department of statistics and IE Singapore. Note: Data in Current Market Prices.

  12. Growth of Singapore’s Merchandise Trade with Asian Countries, 1980-2007 • -Singapore’s trade moved in tandem with its trade with Asia • -63% of Singapore’s trade was with emerging Asian countries. • -Main Asian trading partners: • Malaysia (Top trading partner with a 13% of Singapore’s trade in 2007) • Indonesia (4th ranked trading partner with a 7.8% share of Singapore’s trade in 2007). Source: IE Singapore, 2009

  13. Singapore’s Exports to China as per cent of Singapore’s Total Exports, 1985-2007 -Singapore’s trade with China rose from US$2.59 billion in 1985 to US$60.8 billion in 2007. -Singapore’s exports to China also rose impressively by an average annual rate of 24.4 per cent between 1986 and 2007; with China’s share of Singapore’s exports increasing from 1.5 per cent in 1985 to 9.5 per cent in 2007. -About 40% of Singapore's Exports were destined for China. Source: IE Singapore, 2009

  14. References Asian Development Bank. 2010. “Asian Development Outlook 2010”. Economic Development Board, Singapore. 2010. “EDP Annual Report”. International Enterprise Singapore. “Globalization Effect on Singapore's Trade”. The International Bank for Reconstruction and Development/The World Bank. 2010. “Doing Business 2010, Singapore”.

  15. Malaysia

  16. Basic Information of Malaysia - Population : 28.3067 million (2009) - Age structure (2009): - Total fertility rate : 2.95 child born/ women (2009) - Life expectancy (2009): - GDP 2009 : -3% - GDP per capita 2009 : USD 5,406 - Major Industry : Manufacturing (55%) - Major trading partner (2008) :

  17. Nominal and Real Growth Rate Source : Central Bank of Malaysia

  18. Nominal and Real GDP Source : Central Bank of Malaysia

  19. Major Economic Indicator-Malaysia Source: Korea Eximbank Overseas Economic Research Institute. 2010. 2010 World Country Review

  20. Four Phases of Economic Growth - In the last 5 decades, Malaysia has witnessed major structural transformation of the economy. 1986-99 1957-70 1971- 85 2000 onwards Rapid industrialization and global integration Towards higher knowledge-based economy… Commodity-driven and import substitution Rural development and nascent industrialization 2009Global Recession 1997-98Asian Crisis 1985 Recession 1960 1970 1980 1990 2000 2009 • Post-crisis, Government pursued rapid industrialisation, export promotion and introduced economic liberalisation • Malaysia entered second recession in 1998 – due to speculative attacks on Asian currencies • A private-sector driven, commodity-based economy • Pursued an import substitution strategy • Government emphasised on rural development and initiated effort on industrialisation • Malaysia entered first recession in 1986 - collapse in commodity prices, twin deficit position • Policy thrust to develop Malaysia into a knowledge-based economy • Growth was driven by domestic demand

  21. Economic Development - The standard of living has improved immensely for the average person since 1957. From close to zero, access to piped water, electricity and TV are all 100%. The Malay poverty level is < 17%. - The New Economic Plan (NEP) of 1971 was a 20 year plan to eliminate prosperity as a function of race. It sought rapid growth in the Malay sector without weakening Chinese enterprise. - The NEP also sought to increase the Malay share of capital ownership to 30%, reduce foreign share to 30% from 63% and allow a 40% Chinese share. - Malaysia’s economy is a market oriented, export economy with state ownership of heavy industry, only. Growth rate of GNP has been about 8% in the 1980s and 90s. - Factors include global market liberalization, competition for FDI, especially from China and Vietnam and difficulties integrating into global supply chains.

  22. Per capita income of US$6,800 (2009) clearly significant achievement but seemingly caught in “middle income” trap • Major preoccupation with identifying new sources of economic growth; episodic promotion of ICT, biotechnology, Islamic finance, tourism, services, etc. • Key policy thrusts include human resource development, innovation clustering, etc. i.e. knowledge-driven activities. • After 50 years of empowerment through development, citizens are educated, have choices and less susceptible to patronage. • Close political-economic nexus also necessitated being trade, market and private enterprise-friendly to large degree.

  23. Growth and development story incomplete without (A) primary commodities, (B) foreign direct investment, and (B) oil and gas to furnish foreign reserves. • In late 1980s to mid-1990s, growing economic confidence led to massive infrastructure privatization, supported by foreign capital inflows. • Malaysia moved from being ‘someone else’s production platform’ to recognition as a significant economic entity and market in its own right. • 1997 Asian Financial Crisis meant “openness” threatened stability of multiracial coalition; political-economic nexus, however, was not at risk. • Rebounding from contraction in 2009, GDP rose at a faster rate than anticipated in the first half of 2010. • Exports recovered strongly, sparking a broad-based increase in domestic demand that powered the growth in GDP.

  24. Foreign Investments Foreign Investments By Country 2009 Foreign Investments To Malaysia In 2009 • NOTES: • Summation of totals may not be exact due to rounding difficulties. • 2009 : US$1 = RM3.42 SOURCE: MIDA

  25. Malaysia’s Trade openness • Source: Department of statistics Malaysia, various years. Source: Department of statistics Malaysia, various years.

  26. Outcomes of Economic Transformation •  Transformation into an upper middle income economy • 7-fold increase in per capita income from RM1,132 in 1970 to RM25,800 in 2008 • Incidence of absolute poverty reduced from 49% in 1970 to 3.6% in 2007 • Sectoraldiversification into services and manufacturing • Services share of GDP grew from 42% in 1970 to 55% in 2008 • Manufacturing share of GDP rose from 13% in 1970 to 29% in 2008

  27. Investment Abroad Source : Central Bank of Malaysia

  28. Innovation Challeng and the Restructuring of theMalaysian Economy • Value drivers, levers and enablers in the economic value chain

  29. The New Economic Model • From a Middle Income to a High Income Economy by 2020. • New Economic Model is expected to be anchored on: • Innovation • Creativity • High value sources of growth • Modern services sector • Skilled manpower

  30. The Way Forward • Private sector leads, • Government Facilitates, • Review of subsidies, • Innovation, creativity, • value-added activities 30 30

  31. Issues and Challenges • Middle income trap. • Slower economic engine and emergence of other developing economies. • Declining investment and attractiveness as investment destinations. • Composition of exports were mainly commodities and low value-added manufactured products. • Slow productivity growth due to low creativity and product innovation (less focus on R&D). • High dependency on low skilled workers and foreign labors. • Critical stage of human capital – brain drain, migration. • Wider gap between the rich and poor. • The Government is burdened with subsidies.

  32. Reference Saleem, Ayesha, et al. 2009. “Malaysia’s economic situation from Macroeconomics perspective”.( google: ppt) Wong,Steven C.M. “Malaysia’s Growth and Development Story”. (google:ppt) Zakaria, Muhd Shahrulmiza.2009. “Malaysian New Economic Model”. (google:ppt)

  33. Thailand

  34. Thai Economy Source : NESDB

  35. Major Economic Indicator-Thailand Source: Korea Eximbank Overseas Economic Research Institute. 2010. 2010 World Country Review

  36. Thai and World Economy: Trends and Projection (%) Note : 2004-2011 Actual Source : IMF, World Economic Outlook (September 2011)

  37. Thailand GDP Growth Trends and Forecast (%) Note: Update September 2011 Source: IMF. World Economic Outlook (September 2011)

  38. Economic Development • Adopted market capitalism since 1960 • During 1960s – 1970s, the role of external sector was still small, less than 50% of GDP • From 1980s --- greater foreign exposure resulted from various trade and investment promotion policies, - Investment Promotion Act, 1977 • Encourage FDI • Set out the types of rights and benefits offered to foreign investment • BOI has been established to promote FDI to Thailand - Export-oriented strategy in 1982 • From 1960 – 2010, Share of external sector has increased overtime, especially during 1980s - Agricultural share decreased, whereas industrial share increased

  39. - Share of external sector increased from 75.8% in 1990 to 89.8% and 98.7% in 1995 and 2000 respectively - More linkage with global capital market Source: BOT

  40. Potentials of Thailand in ASEAN Source: ASEAN Secretariat, 2010

  41. Potentials of Thailand in ASEAN (cont’) Source: ASEAN Secretariat, 2010

  42. International Trade of Thailand (Bil. US$) (%) Source : Thailand Statistical Office.

  43. Thailand International Reserves (Bil. US$) Note : As of Feb 2012 Source : http://www.bot.or.th/Thai/Statistics/Indicators/Docs/indicators.xls : Table8

  44. Indonesia

  45. Major Economic Indicator-Indonesia Source: Korea Eximbank Overseas Economic Research Institute. 2010. 2010 World Country Review

  46. A Story of Growth and Stability… Strong and Consistent Real GDP Growth (% yoy) Demonstrated resilience throughout the global financial crisis 2006 – 2010 Avg. = 5.7% Source: Ministry of Finance, BPS and Bank Indonesia *Medians derived from S&P – no data available between 2000 to 2003 Source: Ministry of Finance and Moody’s Statistical Handbook Ranked according to 2009 GDP growth rate Above Average GDP Growth Lower Growth Volatility Volatility of GDP (%) 5-year Real GDP Growth Average (%) 5-year Standard Deviation Source: Ministry of Finance, BPS, Bank Indonesia and Moody’s; Moody’s Medians Source: Fitch Ratings, as of 2010 (latest available)

  47. Strong Investment Underpinned by Competitiveness and Stability Realized Foreign Direct Investment (USD bn) Realized Domestic Direct Investment (Rptn) USD6.7bn Source: BKPM Source: BKPMNote: USD / Rp. exchange rate of 8,597, the BI middle exchange rate as of June 31, 2011. US dollar values are for convenience only FDI By Sector (USD mm) Significant Improvement in the Global Competitive Scorecard GC Index Rankings Source:World Economic Forum Source: Bank Indonesia

  48. Indonesia’s growth remains strong in Q2 2011… GDP Growth (%) • Some countries experiencedsome GDP slowdown vs Q2-2010. • Indonesia GDP growth in Q2-2011 was 6.5% or higher than Q2 2010 of 6.1%. Source: Statistic Bureau (BPS) & Bloomberg

  49. Global inflation tends to increase along with the higher food and energy price…. Inflation in ASEAN Inflation in Developed Countries - Higher food and energy prices have driven higher inflation in China and USA - Inflation in ASEAN also tends to increase in which Vietnam shows the highest inflation 23.02%.

  50. Trading Partnership • Indonesia’s export shares to Japan and US has been declining, however export to ASEAN countries and China increase. In addition, export share to PIIGS relatively small (3.17%). • It shows that the exposure from US and PIIGS debt crisis will be limited for Indonesia. 51

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