38538 Public Disclosure Authorized EAST ASIAN
Public Disclosure Authorized VISIONS PERSPECTIVES ON ECONOMIC DEVELOPMENT AUN PORN MONIROTH • ROBERTO F. DE OCAMPO • TOYOO GYOHTEN • YUJIRO HAYAMI JOMO K. S. • CAO SY KIEM • TOMMY KOH • HARUHIKO KURODA • LONG YONGTU
KISHOREPublic Disclosure Authorized MAHBUBANI • FELIPE MEDALLA • MARI PANGESTU • MINXIN PEI • ANDREW SHENG WU JINGLIAN • JOSEPH YAM • ZHENG BIJIAN EDITED BY INDERMIT GILL, YUKON HUANG, AND HOMI KHARAS Public Disclosure Authorized
EAST ASIAN VISIONS
EAST AS I AN VI S I ONS PE RSP ECTIVE S ON E C ONO MIC DEVELOP ME N T
EDITORS INDERMIT GILL • YUKON HUANG • HOMI KHARAS
AUTHORS AUN PORN MONIROTH • ROBERTO F. DE OCAMPO TOYOO GYOHTEN • YUJIRO HAYAMI • JOMO K. S. CAO SY KIEM • TOMMY KOH • HARUHIKO KURODA LONG YONGTU • KISHORE MAHBUBANI FELIPE MEDALLA • MARI PANGESTU • MINXIN PEI ANDREW SHENG • WU JINGLIAN • JOSEPH YAM ZHENG BIJIAN
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ISBN-10: 0-8213-6745-5 ISBN-13: 978-0-8213-6745-2 eISBN: 0-8213-6746-3 DOI: 10.1596/978-0-8213-6745-2
Library of Congress Cataloging-in-Publication data
East Asian visions : perspectives on economic development / Indermit Gill, Yukon Huang, and Homi Kharas editors. p. cm. Includes bibliographical references and index. ISBN-13: 978-0-8213-6745-2 ISBN-10: 0-8213-6745-5 ISBN-10: 0-8213-6746-3 (electronic) 1. East Asia—Economic integration. 2. East Asia—Economic policy. 3. East Asia—Foreign economic rela- tions. 4. China—Economic policy. I. Gill, Indermit Singh, 1961- II. Huang, Yukon. III. Kharas, Homi J., 1954- HC460.5.E277 2006 338.95—dc22
2006037028
The Institute of Policy Studies (IPS) is a think-tank dedicated to fostering good governance in Singapore through strategic policy research and discussion. It focuses on Singapore’s domestic developments and its external relations. It takes a multidisciplinary approach in its analysis, with an emphasis on long-term strategic thinking. IPS began operations in 1988. Key activities include research projects, conferences, and publications.
The institute’s mission is threefold: Ⅲ Analysis: To analyze policy issues of critical concern to Singapore and contribute to policy development Ⅲ Bridge-building: To build bridges among diverse stakeholders, including government, business, aca- demia, and civil society Ⅲ Communication: To communicate research findings to a wider community and generate a greater awareness of policy issues
Cover design by Drew Fasick. Contents
ACKNOWLEDGMENTS ix ACRONYMS AND ABBREVIATIONS x
1 Perspectives on East Asian Development: An Introduction 1 Indermit S. Gill, Yukon Huang, and Homi Kharas
2 Economic Integration in East Asia: Cambodia’s Experience 24 Aun Porn Moniroth
3 The Case for East Asian Financial Cooperation 53 Roberto F. de Ocampo
4 The Future of Asia 69 Toyoo Gyohten
5 Rural-Based Development in East Asia under Globalization 82 Yujiro Hayami
6 Economic Development and Regional Cooperation in East Asia 107 Jomo K. S.
7 East Asian Economic Integration: Problems for Late-Entry Countries 128 Cao Sy Kiem
v vi CONTENTS
8 Asia’s Challenges 142 Tommy Koh
9 Toward an Integrated, Poverty-Free, and Peaceful East Asia 149 Haruhiko Kuroda
10 China’s WTO Accession: Implications and Key Lessons Learned 178 Long Yongtu
11 From Confucius to Kennedy: Principles of East Asian Governance 188 Kishore Mahbubani
12 Economic Integration in East Asia: A Philippine Perspective 203 Felipe Medalla
13 Visions of East Asia: Three Engines for a Way Forward 231 Mari Pangestu
14 Political Foundations for Sustainable Growth in Asia 244 Minxin Pei
15 The Asian Network Economy in the 21st Century 258 Andrew Sheng
16 Does China Need to Change Its Industrialization Path? 285 Wu Jinglian
17 Reflections on Financial and Monetary Developments in Asia 309 Joseph Yam
18 The Internal and External Environments of China’s Development over the Next Five Years 323 Zheng Bijian
ABOUT THE AUTHORS 339 ABOUT THE EDITORS 347 INDEX 349 CONTENTS vii
Box 7.1 The ASEAN Integration Gap 136
Figures 1.1 East Asia Rebounds: Share of World Gross Domestic Product 6 3.1 Share of East Asian FDI in Developing-Country FDI 54 5.1 Operations of an Intervillage Vegetable Collector, Upland West Java 97 15.1 Population Share of the Workforce in China, India, and Japan, 1950–2050 261 16.1 Secondary Sector Employment and Urban Unemployment 1991–2004 292 16.2 The GDP Share of Services in China and Selected Countries 298 16.3 Changes in the GDP Share of Services in China and Selected Countries 299 16.4 Investment as a Share of GDP 301 16.5 Investment Efficiency: The Incremental Capital-Output Rate 302
Tables 1.1 Contributing Authors 3 1.2 A Roadmap to the Essays 5 1.3 Major Themes, by Author 21 2.1 Share of Intraregional Trade in Total Trade, 1985–2001 32 3.1 Average Annual GDP Growth Rate 54 3.2 Pre- and Postcrisis GDP Growth 55 3.3 Exports as a Share of GDP 57 3.4 Net Total Private Capital Flows 59 3.5 East Asian Savings as a Share of GDP, 1993–2003 61 3.6 Corruption Perceptions Index, 2005 65 5.1 Cost of Credit to Vegetable Producers under Alternative Schemes, Majalengka District, West Java, 1990 100 9.1 Intraregional Trade Share, 1980–2004 151 9.2 FTAs and Economic Partnership Agreements in East Asia, April 2006 153 9.3 Selected Indicators for East Asian Economies 157 12.1 Average Annual Per Capita GDP Growth in Selected Asian Countries 208 viii CONTENTS
12.2 Export Growth Rates in Selected Asian Countries 211 12.3 Growth in Philippine Exports 212 12.4 Share of Worker Remittances and Two Key Exports in Per Capita GNP in the Philippines 218 12.5 Worker Remittances, by Source in the Philippines 219 12.6 Share of Traditional Manufacturing in GDP in the Philippines 220 12.7 Philippine Exports, by Recipient 225 12.8 Government Capital Expenditures as a Share of GDP 227 14.1 The Leadership Response to Crisis in Selected Asian Countries 249 16.1 Impact on Efficiency and Energy Consumption of Unsubsidized Energy Prices in China 290 16.2 Per Capita Ownership of Resources in China Relative to the World Average 291 16.3 China’s Resource Consumption as a Percentage of the World Total 295 16.4 GDP Share of the Output Value of the Tertiary Sector, 1980–2004 300 Acknowledgments
This collection of essays was produced by the Office of the Chief Economist, East Asia and Pacific Region of the World Bank. It is the result of a collective effort by a World Bank team led by Homi Kharas (chief economist), Indermit S. Gill (economic adviser), and Yukon Huang (senior adviser). Tommy Koh (chairman) and Arun Mahizhnan (deputy director) of the Institute for Policy Studies (Singapore) provided guidance and wise counsel at all stages of the project. The editors are grateful for valuable comments and logistical support from a number of people. Foremost, we would like to thank Radu Tatucu for his valuable contributions during all stages of the preparation, which involved not only logistical support, but also an essential coordinating role that ensured the timely completion of this publication. Without his assistance, this volume would not have been possible. At the World Bank, among the many colleagues who contributed their ideas and inputs are Nisha Agrawal, Adelma Bowrin, Huot Chea, Jianqing Chen, Tianshu Chen, Doris Chung, Kazi Matin, Vera Songwe, Thang-Long Ton, William Wallace, and Chunlin Zhang. We are also grateful to Arun Mahizhnan, Kee Wee Tan, Chang Li Lin, and Andrea Wong of the Institute of Policy Studies, Singapore, and to Made Marthini in Indonesia, Junko Mogi in Japan, and Sunny Yung in Hong Kong (China). Robert Zimmermann has done a fantastic job as language editor, and Patricia Katayama, Susan Graham, Stuart Tucker, and Santiago Pombo, of the Office of the Publisher, have steered the publication and dissemination efforts for the book.
ix Acronyms and Abbreviations
ADB Asian Development Bank AFTA ASEAN Free Trade Area APEC Asia-Pacific Economic Cooperation ASEAN Association of Southeast Asian Nations EMEAP Executives’ Meeting of East Asia–Pacific Central Banks EU European Union FDI foreign direct investment FTA free trade area FYP Five-Year Plan (China) GDP gross domestic product GMS Greater Mekong Subregion GSP generalized system of preferences IMF International Monetary Fund NIE newly industrializing economy ODA official development assistance SARS severe acute respiratory syndrome WTO World Trade Organization CHAPTER 1 Perspectives on East Asian Development An Introduction
INDERMIT S. GILL, YUKON HUANG AND HOMI KHARAS
collection of essays by A Diverse Region Aeminent East Asians: Some say this will be Asia’s century. If so, the ori- All are senior policy mak- gins of the century in this sense began more than ers, statesmen, or scholars 40 years ago with Japan’s postwar revival and who have had to address acceptance into the Organisation for Economic Co-operation and Development, the club of the some of the most critical 24 rich economies, in 1964. Japan’s remarkable development issues con- economic growth was quickly duplicated by other fronting their countries Asian economies and, most recently, by the mete- oric rise of China. Terms like “Asian miracle,” and and the region. “high-performing Asian economies” became part of the lexicon of economic development (World Bank 1993). Yet, it all went wrong for a while. Japan is only now emerging from its longest period of stagnation in 50 years, and the currency and banking crisis of 1997–98 brought four major countries in the region to their knees. The region is now well on its way to recovery again, returning to historically high growth, surging trade volumes, and an unprecedented accumulation of foreign reserves. But the memories of the recent setback are fresh; there is a feeling of unease concerning the extent to which benefits are being shared, and growing dismay over the stresses that the once cohesive Asian societies are facing. Policy makers are anxious not to be lulled again into a false sense of complacency about the region’s future.
1 2 Indermit S. Gill, Yukon Huang, and Homi Kharas
No region is as diverse as East Asia. Not only does per capita income (excluding Japan) vary from about US$500 to over US$25,000, but major differences in less quantifiable factors such as language, culture, resource endowments, and political systems also persist. Despite this or perhaps because of this diversity, East Asia is integrated as never before. Goods, money, and, increasingly, knowledge are being traded across the region. The new terminology emphasizes regional produc- tion networks rather than country policies or leaders as keys to success. In many ways, East Asia is now undergoing a renaissance: redefining itself from a collection of disparate nations that once looked mainly to export markets in the West to a more self-reliant, innovative, and net- worked region. In the process, countries in the region are seeking to build stronger economic and political relationships among themselves, as well as more strategic partnerships with the rest of the world. In this complex landscape, East Asians are debating options for the region. Much is at stake, including ensuring that any new East Asian economic architecture complements the evolving global architecture. This volume provides an opportunity to understand, firsthand, how some of the most influential thinkers in East Asia view the challenges for the region. East Asian Visions: Perspectives on Economic Development is a collec- tion of essays by 17 eminent East Asians who represent a broad spec- trum of backgrounds and experiences.1 All are senior policy makers, statesmen, or scholars who have either had to deal with or think through some of the most critical financial and developmental issues confronting their countries and the region. Collectively, 10 of them have, at some point in their careers, been at the head of key ministries and central banks; nearly a dozen have been academics and scholars of distinc- tion; several have served as ambassadors to the West and bring a more global strategic perspective; and many have been influential policy advisers and decision makers in governments and international financial agencies. Table 1.1 lists the authors, where they come from, and key posi- tions they have held. Their essays reflect individual experiences at crit- ical economic junctures and are occasionally quite personal, not sur- prising since each author selected a topic of his or her own choosing. Given their backgrounds, they have chosen to write about the highly diverse country experiences of East Asia, covering rich, middle- income, and poor countries, and they speculate on how their coun- tries fit into a rapidly changing region and globalizing world. Perspectives on East Asian Development 3
■ TABLE 1.1 Contributing Authors Author Country Key position(s) Aun Porn Moniroth Cambodia Secretary of State, Ministry of Economy and Finance; Chairman of the Supreme National Economic Council Roberto F. de Ocampo Philippines President, Asian Institute of Management; former Secretary of Finance Toyoo Gyohten Japan President, Institute for International Monetary Affairs; former Chairman, Bank of Tokyo; former Vice Minister of Finance Yujiro Hayami Japan Chairman, Foundation of Advanced Studies of International Development, Japan; former Professor, Tokyo University and Cornell University Jomo Kwame Malaysia United Nations Assistant Secretary-General for Sundaram Economic Development; former Professor, University of Malaya Cao Sy Kiem Vietnam Academy of Social Sciences; former Governor, Central Bank Tommy Koh Singapore Ambassador at Large, Singapore; Chairman, Institute of Policy Studies; former Ambassador of Singapore to the United Nations and to the United States Haruhiko Kuroda Japan President, Asian Development Bank; former Vice Minister of Finance; Professor, Hitotsubashi University Long Yongtu China Secretary-General, Boao Forum for Asia, China; for- mer Vice Minister; former Chief Negotiator for China, World Trade Organization Kishore Mahbubani Singapore Dean, Lee Kuan Yew School of Public Policy; former Ambassador of Singapore to the United Nations Felipe Medalla Philippines Professor, University of the Philippines; former Secretary for Planning; former Director General, National Economic and Development Authority Mari Pangestu Indonesia Minister of Trade; Board Member, Center for International and Strategic Studies, Indonesia Minxin Pei China Senior Associate and Director, China Program, Carnegie Endowment for International Peace, Washington, DC Andrew Sheng Malaysia Visiting Professor, University of Malaya, Malaysia, and Tsinghua University, Beijing; former Chair, Securities Commission; Deputy Chief Executive, Hong Kong Monetary Authority, Hong Kong (China)
continued 4 Indermit S. Gill, Yukon Huang, and Homi Kharas
■ TABLE 1.1 Contributing Authors (continued) Author Country Key position(s) Wu Jinglian China Professor, Chinese Academy of Social Sciences; Senior Fellow, Development Research Center, State Council; Member, Standing Committee, Chinese People’s Political Consultative Conference, China Joseph Yam Hong Kong, Chief Executive, Hong Kong Monetary Authority China Zheng Bijian China Chairman, China Reform Forum; Executive Vice- President, Communist Party School Source: Compiled by the editors. Note: The names in italics are the last names. “Country” refers to place of birth or residence during the bulk of the individual’s career.
Four themes permeate these essays (see table 1.2):