Ec dev Flashcards
Comparative advantage
o T: focused on agricultural development from 1947, expanding irrigation land from 600,000 to 2.2 million hectares by 1969 before turning to investment and exports in the 1980s. The result was that by 1968 the export value of other crops surpassed that of rice for the first time.
S: given impt of entrepot trade, S focused on investments and human capital development as early as the development plan of 1960-1964 before independence, and continued under Goh Keng Swee. As a result, foreign investment in manufacturing rose by 24 times by 1970.
State-led corporations
o I: Bulog and Bimas as programs/boards which oversaw the logistics of rice production and trade, led to increased rice production by 50% btw 1960-1980, a rate “unparalleled in Asia” (Vatikiotis)
o M: Heavy Industry Corporation (HICOM), which provided subsidies to domestic capital goods industry, gave rise to impt industrial corporations such as Proton and Perwaja Steel from the 1980s with Mahathir’s new economic direction.
ISI Strategies
o P: import and forex controls were extended to new industries, led to rapid industrialization as manufacturing expanded from 8% to 20% of GDP from 1950-1960
T: the 1960 Promotion of Investment Act which guaranteed private enterprise against stater competition and nationalization. Other investment incentives in the act included conditional repatriation of profits, tax holidays and exemptions etc. led to a period of growth in manufacture and industry from 17.5% to 25.7% respectively while agriculture declined from 50.1% to 29.8%.
o M: pioneers industries programme in 1958 focuses on processing and other consumables. Led to a 10% increase in consumption goods as a % of industrial output till 1970.
Redistribute land and money (equity) (B,M)
o B: The tenancy law of 1965 abolished tenancy and re-distributed land to the poor farmers
o M: The New Economic Policy (NEP) of 1971-1990 distributed ec wealth to the bumiputras, achieving 20% of corporate equity for them by 1990, from a mere 2.4% in 1971.
Ec growth -> Pol stability (I,M,s)
o I: First decade of Suharto’s New Order and subsequent longevity of Suharto’s rule.
o M: NEP following the 1969 riots and suspension of constitution. Continued BN rule.
o S: SG’s ec prosperity because of sound ec policies ->PAP’s continued domination of SG politics
Complete, excessive Nationalisation of all parts of ec (I,B vs M)
o I: Sukarno’s nationalization and expropriation of Dutch businesses and property led to reduced trade, declining GNP per capita and a collapsing ec by 1965.
o B: Nationalization of all manufacturing and commerce sectors led to a collapse of the private sector and intl trde, and continued negative export rates of close to -5% in the 1980s, in contrast to other capitalist ec
o This is unlike M’s nationalistic NEP which has a moderate nature. Despite retaining bumiputera control of certain sectors of ec, private enterprises were allowed at the same time.
Bailing out of cronies
o P: Marcos bailed out Bemedicto’s sugar empire with 14 billion pesos despite the collapse in sugar prices in the 1970s, led to complacency and lack of incentive to produce efficiently. By the end of Marcos’ era, Philippines was nursing one of the world’s largest debts, much less move to EOI.
o I: Despite attempted deregulation, the highly protected automobile industry continued to be dominated by Soerjadjaja and Liem Soe Leong, such that tariffs reached 300% in the 1990s and Indonesia never developed efficiency in producing engines for the industry. The result was that Indonesia remained dependent on export earnings from primary commodities (70%-80%) by 1980.Over-protectionism led to a lack of motivation for efficiency and thus some economies failed to transit from ISI to EOI.
Over-reliant on foreign capital, high indebtedness
o I: By 1989, foreign loans made up 42% of Indonesia’s development budget nursed Asia’s largest debt at USD58 billion
P: Philippines borrowed funds were not put to effective use and by the end of Marcos rule was facing a debt of $25b.
Over-emphasis on heavy industry in socialist ec, neglect gds with CA
o V: Vietnam’s second five year plan in 1976 had led to the neglect of agriculture and by 1978 per capita food consumption was well below subsistence levels
o B: Burma’s focus on heavy industry led to a stagnation in rice productivity by 1972. Rice exports fell from 1521 thousand tons to 204 thousand tons within a decade despite GI in tech..
Ec nationalism
o P: Congress bill in 1958 for at least 60% of all impt industries to be at least 60% owned by native Filipinos. Led to three-fold increase in Filipino participation in the import trade from 1948 to 1965.
o National ownership of strategic resources
I: Pertamina
M: Petronas
S: Singapore Petroleum Company
B: Steel Brothers
P: Philippines National Oil Company
Later period, GI less direct participation to allow private sector to play greater role to EOI
o T: 6th Five Year Plan in 1987 re-envisaged the role of public sector as “planner, supporter and facilitator” of the private sector, evident in NESDB being relieved of its role as supervisor for all major government investment projects. Led to 14% growth in exports In the 1980s- highest in SEA.
Singapore government over time scaled back on government participation and monopoly to allow the emergence of the private sector with the Regional Business Forum in 1986, thus illustrating the effectiveness of appropriate government strategies at different points in time.
CW, external aids
o I: A group of US-trained Indonesian economists became Suharto’s New Order technocrats from 1960s-80s, acting as chief mediators between Indonesia and the West. They also sought foreign investments which were frightened away by Sukarno’s nationalistic policies:
Returned Dutch and other nations’ expropriated assets
Promulgated the 1967 Foreign Investment Law to attract foreign investors with tax concessions and a guarantee against expropriation.
In 1967, fourteen nations including the US and intl organizations formed the Inter-Governmental Group on Indonesia (IGGI) as a major funnel for aid. Total IGGI assistance was estimated at $2.5 billion in 1985/86
o P: Borrowed a lot from external states including the US. Resulted in it accumulating a foreign debt of US$25 billion in 1983, making the P one of the ten most indebted developing nations in the world. Also relied on international advice e.g. the consultative group created under the WB.
Private sector
o T: Contrasted to the other SEA countries, there was always a business community ready to step into the vacuum of foreign businesses after the war, as well as the void left by the state after 1985, enabling the Thai economy to make the transition to EOI succ.
o S: As early as 1947, a sizeable group of SG’s labor force was already engaged in the services sector and commerce, supporting conditions for industrialization much earlier than other countries.
Continued government participation led to inefficient industries (P)
in the Philippines under Marcos, the role of the state intensified and public enterprises proliferated to more than 300 companies.
In the L/R, nationalism was detrimental to EG and created more challenges because it discouraged much needed foreign investments for capital.
I: A group of US-trained Indonesian economists became Suharto’s New Order technocrats from 1960s-80s, acting as chief mediators between Indonesia and the West. They also sought foreign investments which were frightened away by Sukarno’s nationalistic policies:
Returned Dutch and other nations’ expropriated assets
Promulgated the 1967 Foreign Investment Law to attract foreign investors with tax concessions and a guarantee against expropriation.
T: Phibun’s anti Chinese economic policies
e.g. In 1952, the military government issued a directive for the Chinese to establish centralized associations for gold trading, jewelry trading and banking. The purpose was to better control Chinese economic activites and tap on Chinese wealth.
vs
Sarit’s pursuit of foreign investment
E.g. In Thailand, the 1960 Promotion of Investment Act which guaranteed private enterprise against stater competition and nationalization. Other investment incentives in the act included conditional repatriation of profits, tax holidays and exemptions etc. led to a period of growth in manufacture and industry from 17.5% to 25.7% respectively while agriculture declined from 50.1% to 29.8%.
