SEA Economic development Flashcards

Question

Philippines financial cronyism + negative outcome of DEBT

Answer 1

No regulation on borrowing -> Borrowing increased greatly in the 1970s Debt service ratio increased beyond dangerous level of 20%, Total foreign debt increased by 10 fold to 25 billion between 1972 and 1983, one of the 10 most indebted developing nations Repayment took up to 10% of GDP annually during Aquino’s term in the 1990s

Answer 2

Intended to break up monopolies in the major sectors (Privatisation) 1992: Philippine Long Distance Telephone (PLDT) company owned by the Cojuangco family owning 90% of 1 million telephone lines. 1993: 13 companies competing to provide lower cost services, but PLDT continued to dominate the telecom industry

Answer 3

1980s: 1.3% of the population but 60% of economic control 1993-1997: 1789-286 victims of anti-Chinese violence and kidnappings

Answer 4

1957: Expropriation of Dutch Property 300 Dutch plantations and 300 firms in other areas expropriated Reduced trade, declining GNP / capita and collapse of economy by 1965, hyperinflation of 500% [excessive]

Answer 5

1959: initiated an 8 year ‘Guided Economy’ development plan under Sukarno which entailed a 12x increase in government expenditure (Failed due to little experience) + OUTCOME: 1959-66: Value of exports fell from US931m to US685m 1960-67: foreign reserves fell from 313 million- 17 million. Contributory factors include the rejection of foreign aid, Konfrontasi and West Irian dispute

Answer 6

Bulog→ coordinated rice procurement, distribution, pricing Bimas→ provided credit/ physica inputs to promote rice production From 1968-1989, annual rice production increased from 12 million to 29 million tons Yields increased from 2.14 tons of padi per hectare to 4.23 tons per hectare Indonesia self sufficient by mid 1980s

Answer 7

Bimas, Bulog, State Secretariat (Sekneg) allocated construction contracts for government

Answer 8

Pertamina (oil) and Department of Industry led investments in petrochemicals, steel, cement and forestry products 1975: state firms produced 75% of cement, 52% of both paper products and machinery and 40% of food Allowed Indo to build up industrial base and diversify away from relying on primary products and agriculture for export revenue // SG JTC & MSIA FELDA, PERNAS

Answer 9

1967 Foreign Investment Law to attract foreign investors with tax concessions and a guarantee against expropriation After the October 1988 reform package encouraging capital inflow, FDI increased six-fold 1980-90!

Answer 10

1965: main sponsors were the USSR and other communist states 1967: Intergovernmental Group on Indonesia (IGGI) formed among 14 nations to raise aid for Indo , raising 2.5 billion in 1985-1986 Relied on IMF for advice Consultative Group under WB to discuss capital inflows for Indonesia

Answer 11

Limited diversification and industrialisation 1980: Oil contributed 80% of export earnings 1985: top three exports constituted 69% of total exports Cronyism in protection resulted in a narrow industrial and manufacturing base, constrained by tariff and protectionism barriers to the most lucrative markets Astra/Indomobile (see below

Answer 12

OUTCOMES Positive: Share of non-oil exports rose from 31% to 50% by the end of the 80s Positive: GDP growth: 7% in 1990 Negative: Concentration of economic power in Sino-Indonesian businessmen 1989: Nursed Asia’s largest debt at US 58 Bill

Answer 13

Early 1960s-1970s, Sutowo, director of Pertamina, embarked on an ambitious investment programme that included huge liquified LNG projects, fertiliser plants, oil facilities Nov 1974, Pertamina debt was US 10 billion, ⅔ of Indonesia’s GNP at the time 1988: Bulog awarded a soymeal monopoly to Sarpindo, which was owned by Tommy Suharto and Bob Hasan 1990: MOT awarded clove crop monopoly to Tommy Suharto, venture financed by US $550 million from Bank Indonesia which was reserved for agricultural production

Answer 14

Deregulation allowed them to gain ascendancy in the car industry in particular, with Astra 40% of production & Indomobil having 21% Highly protective tariffs of 100%-300% on imports of completely built up passenger vehicles, Indonesia failed to develop the capacity to produce engines as the basis for a national industry

Answer 15

88 Reform Package: deregulation of finance sector and allowing for private banks to start lending money out Boosted investor confidence and 40 banks were given licences in 2 years Liem Sioe Leng and the Liem Group Lending regulations were unchecked, Liem bank was owed 60% of its loan portfolio by other loan companies and had to rely on a government bailout Private sector debt was 36 billion more than foreign reserves Lending of money was name-driven and relationship-driven, with few checks and balances to ensure they were being put to good use and could be serviced. Massive fluctuation of the rupiah, sometimes as much as 10% a day

Answer 16

1980: foreign loans constituted 42% of Indonesia’s state development budget ⇒ Largest debt at USD58b [1989]

Answer 17

Chinese 1980s: Chinese occupied 3.8% of the population but controlled 73% of the economy Astra Group and Liem Group had substantial holdings Result: Social instability 1973: Bandung Riots 1974: Malari riots

Answer 18

1990: average urban incomes 42% higher than average rural incomes, by 1993 this had risen to 92%