REGIONAL ECONOMY

Question 1

INDO: nationalism
#initially 👍 - oil
#later 👎 - corruption

Answer 1

initially:

1966 - assets and interests of Royal Dutch Shell of company were largely handed over to the state-owned company Pertamina
-> wrestle control of factors of production from foreign ownership and redistributed wealth away from immigrant communities
-> Pertamina has exclusive rights in oil and gas industries

• oil accounted for 78% of export earnings in the late 1980s (increase from 19% in 1969)
• benefitted from oil crises: export earnings increased to over 30% by 1980, petrodollars enabled them to invest heavily in ISI such as steel, fertilisers

perpetuated corruption by using Pertamina to boost revenues of army supporters
- army officers saddled Pertamina with US$10 billion debt

Question 2

INDO: equity
— employment

Answer 2

effect: unemployment lowered to about 7%

Sukarno’s development of a welfare state:
- 8 year plans with projects aimed at improving health, education and provision of basic necessities
- development of agriculture created jobs (accounted for 2/3 of employment)

BUT unemployment still persisted as a whole, further exacerbated by economic inequity in the migrant Chinese’s dominance

Question 3

INDO: inequity
— migrant Chinese community

Answer 3

effect:

‘Ali Baba’ arrangements: indigenous businessman (Ali) was the frontman for the Chinese capitalist (baba) who is still in charge of the business

Suharto expanded upon the Chinese business elite’s strength, who are Suharto’s cronies to support his regime (helped to carry out government’s infrastructure projects)
- Bob Hasan (logging companies)
-> closer relationship with military and political elites, enjoy economic clout out of proportion of their small size

• by the 1990s, 3.8% of Chinese population controlled 73% of economy by 1990s
  -> led to inter-ethnic tensions (1973 Bandung riots, 1974 Malari riots, 1997 anti-Chinese riots)

Question 4

INDO: growth
— agriculture
(government investment)

Answer 4

government investment in agriculture:
- 1965 BIMAS: provide padi farmers with a package of agriculture-inputs, primarily fertilisers
- Suharto allocated 23% of Repelita I five-year plan (1969-74) to irrigation expenditure
-> contributed ton a sustained growth of padi yields
- National Logistics Body (BULOG) which sets floor and ceiling prices for rice and other food crops
-> such controls promote the interests of domestic consumers over those of exporters

Question 5

INDO: growth
— agriculture
#effect

Answer 5

change: labour that was freed up from productive efficiency was the basis for Indonesia’s growth spurt in the later 1980s-1990s

late 1950s to mid 1990s, average annual rice production grew from 12.4 million to 49.2 million tonnes, a fourfold increase

agriculture accounted for 1/3 of GDP and 2/3 of employment

Indonesia went from being the world’s largest importer of rice under Sukarno’s time, to self-sufficiency in rise, announced by Suharto in 1985

Question 6

INDO: external

Question 7

INDO: growth
— ISI
#change
government investment

Answer 7

5-year Repelita plans: steer economy towards industrialisation
- Repelita IV prioritised industrial growth over agricultural growth by targeting 9.5% growth rate for industry
-> resulted in a leap of manufacturing exports
-> from a negotiable part of the economy to more than 1/3 of all exports

Question 8

INDO: growth
— EOI
#change
government role to promote foreign investments

Answer 8

effect:

1967 Foreign Investment Law: provided tax concessions and provisions against expropriation of foreign assets
-> actively attracted foreign investment

• much of the new manufacturing industry was controlled by MNCs, funded by FDI
• within 2 decades, Indonesia almost doubled the share of manufacturing production as a share of total economic output

Question 9

THAILAND: nationalism
— heavy protectionism to protect domestic goods (compromised growth)

Answer 9

effect

tariffs/ taxes imposed on imported goods:
high levels of protectionism on capital intensive industries (textile, automobile, pharmaceutical industries)
high tariff walls on finished consumer goods to protect domestic manufacturing.
- tariff barriers set up in 1960
- 1954 Industrial Promotion Act promote investment in ISI through tariff protection, reduction of taxes on imported raw materials and machinery
- 1959 Board of Investment promote domestic industry
- placed severe restrictions on foreign trade and monopolised all international transactions

• 1957: as many as 141 state enterprises
• by the 1970s, the Thai economy reached a stage where component parts and other intermediate goods could be produced locally
• sustained growth at over 3% per capita in the 1950s and 5% in 1960s as agriculture grew through expansion of irrigation and increased use of machinery

(-) compromised growth:
- export industries barely existed and export promotion policy was a neglected issue
- gave little incentive to technical innovation
- lack of emphasis on EOI caused an excessive balance of payments deficit since there were more imports than exports

Question 10

THAILAND: nationalism
— promotion of migrant communities
(+) economic asset for growth
(-) compromised equity

Answer 10

ISI protectionism nurtured the rapid growth of Sino-Thai businesses which became conglomerates

especially in terms of commercial banking due to restriction of foreign banking:

Ministry of Commerce injected huge amounts of cash into the ethnic Chinese-owned Bangkok Bank, making it into the largest bank in Thailand.

-> the Chinese used their commanding predominance in the banking sector to finance new businesses

Question 11

THAILAND: inequity
— migrant Chinese
— regional disparity

Answer 11

1. dominance of Chinese conglomerates:
   by the 1970s, there were at least 65 family groups holding assets worth US$6 billion which were mostly ethnic Chinese
2. regional disparity
   - GDP per capita in the North East was only 15% of Bangkok and 30% of the Central region

Question 12

THAILAND: equity
(+) efforts

Answer 12

initially: through agriculture (1940s-50s)

• distribution of agricultural profits

Investment Promotion Act 1977:
encouraged both Thai and foreign investors to locate their projects in Thai provincial areas

Industrial Estate Authority of Thailand provided assistance and special incentives for investors who operated within industrial estates in 1979

-> helped to spread the benefits of development to the countryside

Question 13

THAILAND: growth
— ISI
(government)

Answer 13

• 1954 Industrial Promotion Act and 1960 BOI promote investment in specific activity, mainly through tariff protection, tax holidays and reduction of taxes on imported raw materials and machinery
• growth of manufacturing output in the 1960s characterised by ISI

Question 14

THAILAND: growth
— EOI

Answer 14

effect

move to EOI in the 1980s:
- 1985: BOI relaxed import duty exemption for raw materials and machinery for projects
- BOI lowered its registered capital requirement for potential projects from 5 billion baht to 1 million baht
- granted a wide range of financial and non-financial incentives and guarantees to investment projects
- 1992 BOI liberalised its investment promotion criteria which overruled the requirement on bank guarantees

• manufactured exports grow at 26.6% a year due to greater involvement of FDI and TNCs between 1986-1991
• FDI totalled US$8 billion
• 50% of country’s industrial output and 20% of industrial workforce attributed to foreign investors

Question 15

THAILAND: excessive liberalisation
(-ve role of government)

Answer 15

government’s promotion of foreign short-term investment without adequate controls or regulatory measures
-> massive influx of hot money which went to speculative activity in real asset
-> and other unproductive assets
-> creating the asset bubble in AFC
-> Thai economy became closely linked to the fortunes of the Asia-Pacific and wider global economies

Question 16

THAILAND: external
(-) influence *oil crises

Answer 16

withdrawal of aid in 1969 and 1973 oil crises compounded the deficit on commodity trade
- from 10.8 billion baht in 1973 to 20.2 billion baht in 1975
-> government forced to engage in extensive foreign borrowing which increased foreign debt and further weakened Thai economy

(ca): government’s unsound policy - foreign borrowing

Question 17

MALAYSIA: nationalism (+)
— state control of foreign assets
— state intervention to address ethnic differential
— government participation in economic activity

Answer 17

effect

— state control of foreign assets, acquired foreign companies and equity through open stock market:
- 1970s-80s: acquisition of shares on stock exchanges in Kuala Lumpur and London, government took over the plantation and mining interests of British companies
-> redistribute wealth from foreign and non-indigenous communities to ethnic Malays

— state intervention to address ethnic differentials:
NEW ECONOMIC POLICY : redistribute corporate ownership and employment
- set up credit facilities, preferential share allocates and subsidies to boost Malay business and ownership
- state-led investment in the form of “bumiputera-non-bumiputera joint ventures” - Chinese business tied up to commercial relationships with a partnership of Malay interests
- public expenditure rose from 8.5% to 14.4% from 1970 to 1980

• foreign share decreased from 63% to 33%

Question 18

MALAYSIA: nationalism (-ve)
*proton car project

Answer 18

effect:

(bumiputera-favouring policies)
-> became an economic burden to the country

• poor product quality quashing demand
• total sales dropped to about 30 000 in 1987
• Malay bureaucracy overlooked such issues of ineffeciency and profitability as they were more concerned with restructuring the economy and redressing social balances by providing more opportunity to Malay businesses

• public sector deficit rose to RM400 million by 1970 and RM15.2 billion by 1982, of which more than half were debts owned by state enterprises, statutory boards and state governments

Question 19

MALAYSIA: equity

Answer 19

(government as a major investor)
- public sector employment jumped 4-fold

NEP: eradicate poverty
- government expanded university education, all-Malay colleges and sent Malays abroad of higher education
- mandated at least 30% of bumiputera equity parcipation
#effect
- reduction of poverty level from 30% in 1977 to 17% by 1989
- more bumiputera Malays in businesses which they have formerly been underrepresented

NATIONAL CAR PROJECT:
-1988 proton factory employed 1300 people, 94% of whom were ethnic Malays
- Malay participation in manufacturing employment grew from 20% in 1957 to 54% in 1980

Question 20

MALAYSIA: inequity
— migrant Chinese community

Answer 20

endurance of pre-independent Chinese businesses :
- despite NEP’s efforts of state acquisition, industries like banking and property remained mostly in the hands of Chinese capital
- target of 30% capital ownership not met by Malays
- non-malay locals share increased from 37-47% took up the difference of foreign share

-> chinese still retained dominant share

Question 21

MALAYSIA: growth
— ISI

Answer 21

effect

1960s ISI grew rapidly averaging at 17% per year between 1959-1968, contributing to an average of 3-4% growth per capita in GNP

government investment under NEP
- 4th Malaysia Plan (1981-1985) conceived under Mahathir, 27.3% of governments expenditure allocated to industry’

• growth rate of 7.2% in industrial sector over the next decade
• threefold increase in the share of manufacturing goods in Malaysia’s exports

• manufacturing was the fastest growing sector, grew at an annual rate of 12% in 1960s and 13% in 1970s
• Malaysia became the world’s producer and exporter of natural rubber, palm oil and pepper by the 1980s

Question 22

MALAYSIA: growth
— EOI
#change

Answer 22

effect

government de-emphasise ISI and embarked on EOI through promotion of foreign investment :
- 1968 Investment Incentive Act: incentives given to foreign companies to encourage more FDI into export-oriented activity
- establishment of Export Processing Zone (EPZ)
- adopted a more open economy with high investment as a proportion of GDP
- established Malaysian Industrial Development Authority (MIDA): controls all foreign investments

• by late 1960s, foreign-owned share capital at about 63%
  attracted many foreign firms as they provided an incentive for labour-intensive American electronic firms such as INTEL and National Semiconductor
• helped the country to maintain 8-9% growth rate through 1990s

Question 23

MALAYSIA: external
(+ve) MNCs/ TNCs

Answer 23

growth of TNCs which took advantage of improved communications to internationalise their operations to countries where labour and taxes are the cheapest and lowest

• 1985-1999 large inflow of foreign investments from Japan and the Asian NICs
• Japanese investment alone increased from less then rm500 million in 1980 to rm4.2 billion in 1990

Question 24

SG: nationalism
— image as a regional hub
— nationalised companies (financial and transportation sectors)

Answer 24

through education and re-skilling, the government produced a highly valued/ prized workforce
[government’s investment in developing human capital]
- Ministry of Trade and Industry (MTI) maintain a high quality workforce
- EDB lead the charge of ensuring the necessary skills for transfer of technology
- MOE provide long-term investment through continuously revising the system of education

+ government oversaw the labour conditions that aimed to provide a favourable labour environment
- Employment Act: standards of employment to prevent and solve problems between employees and employers
- 1972 government formed the National Trade Union Congress (NTUC): single labour union to oversee employment and wage problems

-> attract foreign investors
-> shaped SG into a MNC and regional hub
-> financial service sector

Question 25

SG: equity

Answer 25

effect

ideology of meritocracy: where people are awarded their ability and hard work
-> pragmatic foundation to feed capitalist economy

institutions to ensure equity:
- compulsory savings (CPF)
- provision of basic social security benefits (medicare, edusave, bursaries, elder subsidies)
- provision of efficient and world class public transport (SBS, MRT, LTA)
- compulsory and world class education system
- affordable and quality public housing

-> create job opportunities in SG
- from 13.5% unemployment in 1959 to 2% in 1990s
-> built a workforce that was based on hard work, thrift and self-help
-> 80% of Singaporeans live in HDB flats, more than 90% of Singaporeans own their housing

Question 26

SG: inequity
(growth comprising equity)

Answer 26

however, SG’s policies focusing on equity has come under criticism over the years. tension between prioritising growth and widening inequity by 2000s.

• system of awarding government/ public service scholarships has come under fire for being elitist as it tends to favour those who already come from higher SES

-> social inequality, widening income gap
- Gina Coefficient rising from 0.4 in 1990s to 0.48 in 2007

in SG’s pursuit of economic growth, equity was made a secondary goal

Question 27

SG: growth
— pursuit of foreign investments
(government role in planning, orchestrating)

Answer 27

effect

pursuit of foreign expertise and investment:
- sought support from UN to send economic advisors
- 1961 Economic Development Board: attract foreign capital
- develop Jurong Industrial Town: provide a manufacturing base in Singapore
- 1967 Economic Expansion Incentive Act: granted tax benefits to foreign corporations up to 5 years, helped to lower foreign investors’ production costs by about 20%

1960s GDP growth at 6% per year, manufacturing share of GDP grew from 10% in 1960 to about 15% in the late 1960s

Question 28

SG: growth
#continuation by switching from labour-intensive services to high-tech sectors

Answer 28

effect

government re-skilled workforce and focus on services
- 1981 National Computer Board: establish good knowledge and training of workers in IT-related industries
-> provide sufficiently IT-savvy workforce required to attract global IT firms to produce and sell their software through SG
- NCB committed $2 billion from 1991-1995, and $4 billion from 1996-2000

• proportion of skilled employees rise up 11% in 1979 to 22% in 1985
• IT domestic and export sales had increased by more than 10 times by 1990

Question 29

BURMA: nationalism
(-ve) compromised growth
* expulsion of Indians
* 1987 demonetisation policy

Answer 29

ideological subscription to Burmese Way of Socialism:
- all internal trade in essential supplies declared government monody
- all private companies nationalised
-> isolationist
-> over-centralisation of economy
#effect
- by 1963, some 15 000 private businesses were expropriated by the state
- 200 000 Indians forcibly expropriated, shrinking of business class
-> held specialised professions serving as merchants and moneylenders
-> served as a critical bridge between Western finance and Burmese cultivators
-> industry and mining suffered from lack of managerial and technological expertise and coordinated planning
- left Burma with few trade partners
- exports went down by 50%

1987 demonetisation policy:
- render 75% of currency worthless
- serious riots, 8888 uprising

Question 30

BURMA: nationalism in agriculture
(-ve) negative equity/ growth
*collectivisation

Answer 30

effect

collectivisation:
Revolutionary Council’s control over pricing and distribution
-> extremity of strategies
-> decrease in FDI due to lack of investor confidence

-> vast majority of population became poor
- 1963-1968 economy registered a negative growth rate of -1.2% a year
- by the 1960s, production of rice and teak and still not reached pre-war levels
- by 1970, Burma decreased to just 2% of the world rice trade from 28% during

Question 31

BURMA: negative equity

Answer 31

effect

tenancy law of 1965:
distributed land based on needs and not efficiency

by 1970s, paddy yield stagnated around 31 baskets per acre
- remains a significant proportion of wealth accumulated in the hands of the powerful (military and political elites)
- highest income 5X more than the lowest

Question 32

BURMA: growth
#change 1988
limited success

Answer 32

effect

1988: government made adjustments to attract foreign investors
- tried to head from socialism towards free market
- permitted the modest expansion of private sector
- allowed some foreign investment
- invited foreign investors to enter joint ventures with state-owned enterprises
- 1988 SLORC introduced new foreign investment laws
- lifted restrictions on private companies trading in rice and other basic commodities

• increase in foreign investment from US$10 million in 1988, to US$150 million in June 1989

but still low compared to other SEA states due to high competition for capital and competitive wages

Question 33

BURMA: growth
#continuity of government’s monopoly and harmful control

Answer 33

effect

changes were cosmetic in nature

1996 military crackdown on NLD and Aung San Suu Kyi’s house arrest
- US banned all new investments
-> saw many foreign investments pulling out
-> lack of investment due to fear over political uncertainty

government monopoly:
- continued presence of SOEs which have close relationships with the military Junta
- Union of Burma Economic Holdings was the biggest company in Burma in 1990, owned and supported by the military
-> continued state hindrance
- lack of capable economic policy-making institutions:
- Central Bank of Burma lacked expertise and independence in formulating economic policy
- government still controlled the financial sector with 4 government owned banks holding 90% of kyat deposits and foreign exchange deposits

• high inflation averaging 20-30% annually in the 1990s
• excessive deficit in the balance of trade of USD 1 billion by 1997

Question 34

VIETNAM: nationalism
(-ve) growth
*collectivisation

Answer 34

effect:

1975-1986 the economy was tightly controlled by the Communist Party of Vietnam
- strictly adhered economy to socialist principles and planning
- diminished capitalist structures in the South
- establishment of New Economic Zones
- further agricultural collectivisation:
- land was taken from those judged to be wealthy for redistribution to the poor
- farmers in the South were compelled to combine their labour and sell a quota of grain to the state at fixed prices

huge resistance from peasants in the South, resisted participation in any collective program that eliminated property rights
- required oppressive approach by party
- efforts were in vain:
- decline of national income by 2% from 1976-1980
- by 1982, only 0.6% of households in South Vietnam’s most fertile regions had joined the agricultural cooperatives
-> inefficiency of state agricultural sector:
- small private plots produced 2-3 times the yield per hectare of state-run collective farms
- rice production fell from 11.3 million tonnes in 1976 to 9.9 million in 1979

Question 35

VIETNAM: equity
(mixed)

Answer 35

by 1965, 90% of peasant households were organised into collective farms.

attempts at collectivisation of agriculture sought to achieve equity though there were questionable outcomes of efficiency and output: standard of living remained low for most

• national income dropped 2% (1978-1980)

Question 36

VIETNAM: growth
#initially negative

Answer 36

poor performance of economy in initial period as Communist government sought to follow socialist principles in addressing economic issues and rebuilt its economy almost from scratch.

• average GNP was only half the rate of population growth
• national income grew at about 1/5 of the rate of population growth
• failure of collectivisation
• most economic targets sets in the second Five Year Plan not met

Question 37

VIETNAM: growth
#change 1986

Answer 37

change in relations: Vietnam began to reach out to international community, entered talks with UN to end its occupation in Cambodia from 1989 onwards

(change in leadership catalysed reformist aims)
economic reforms under Doi Moi:
- 1987 Investment Law: established EPZs where foreign companies could import materials, use low-cost labour for assembly and export final products

insertion of market principles into agriculture reforms through introduction of privatisation:
- Politburo adopted Resolution 10 in 1988: privatised agricultural sector
- farmers guaranteed a 10-15 year tenure on land they cultivated
#effect
- re-emerged as a major rice exporter in 1989 since 1950s
- growth rates started to increase to 8% per annum by mid 1990s

• warming of relations with SEA states by 1991
• 1994 US lifted trade embargo on Vietnam
• 1995 formally joined ASEAN

-> represented the final breakdown of last external barriers to Vietnam’s economic development
-> allowed the flow of foreign investment at a greatly increased rate
-> total of $173 million investments by SEA states
-> expansion of international and regional trade

Question 38

VIETNAM: inequity in the 1990s
(as a result of growth)

Answer 38

uneven development and income disparities:
- development was more rapid in the south than in the north
- 1993-1998, poverty fell from 32.7% to 11.1% in Southeast but Northern regions only 78,6% to 59.6%
- wealthiest to poorest gap increased to 12 times by 1999
- minority groups 14% of population but 29% of them in poverty