Transcript Document
IS THE EAST ASIAN
ECONOMIC MODEL STILL
RELEVANT?
Manu Bhaskaran
Centennial Group Inc
July 2002
KEY POINTS
East Asian Model
Definition / Was there such a model?
New arguments
Shift to domestic-driven growth?
The real story:
Major re-thinking of growth models
THE EAST ASIAN MODEL
Common features
1.
2.
3.
4.
5.
High savings rate
Emphasis on education
Export-friendly policy regimes
Pragmatic, non-ideological
Egalitarian approach
Agriculture in Korea,Taiwan
Public housing in HK/Singapore
THE EAST ASIAN MODEL (2)
Were these features unique to Asia?
Good economic housekeeping rules
Other success stories shared these
Botswana: fastest growing economy
NOT UNIQUE TO EAST ASIA ALONE
EAST ASIANS PURSUED
DIFFERENT MODELS
1. Government role
Hong Kong: laissez-faire
Taiwan: focused in some sectors
Korea: allocated capital,…
Singapore: hyper-active govt
Each had different starting points
Each evolved own responses
DIFFERENT MODELS
2. Foreign capital inflows
Korea:
xenophobic
Taiwan: wary
Singapore: open
Hong Kong: ultra open
Portfolio capital: earlier opening
Direct investment: liberalised later
DIFFERENT MODELS (2)
3. Capital markets
Korea: heavily distorted
Taiwan: some political influence
Singapore: Relatively free, ex-CPF
HK: Free, main allocator of capital
Banks under tight govt control ex-HK
DIFFERENT MODELS (3)
4. Size of companies
Korea: chaebol-driven
Taiwan: Mainly small companies,
govt-backed ones in crucial sectors
Singapore: MNCs and GLCs
HK: Vibrant, early globalisers
DIFFERENT MODELS (4)
5. Other degrees of openness
Labour market
HK/Singapore: Highly open
Korea: closed
Protectionism
Korea/Taiwan: High
HK/Singapore: Very low
DIFFERENT MODELS (5)
6. Domestic competition policy
HK: Some cartels, otherwise free
Taiwan: Generally free
Singapore: GLCs dominated
Korea: SMEs/consumers squeezed
RE-THINKING MODELS
SHIFT TO DOMESTIC DEMAND?
Slowdown in global demand
More competitive export markets
Means better depend on domestic
DOMESTIC DEMAND AS
DRIVER?
Is this possible?
Domestic linked to external demand
Trade sector generates incomes
Freer trade increases incomes
Can policy discriminate?
Favouring domestic demand distorts
NEW THINKING
1. Economic philosophy
HK: Shift away from laissez-faire
S’pore: Allowing more laissez-faire
Korea: Substantial opening
Taiwan: Opening up as well
Malaysia: Reviewing NEP
Thailand: Moderating growth targets
NEW THINKING (2)
2.
Resource allocation
Bond markets: less bank financing
Banks liberalised
Prices less distorted
Interest rates freed
Product prices closer to world prices
NEW THINKING (3)
3. Savings and consumption
Freer banks: easy consumer credit
Trade liberalisation: prices fell
Consumption/GDP rose post-crisis
NEW THINKING (4)
4.
Corporate sector
Restructuring: more efficient
More policy emphasis on
Local companies vs MNCs
Consumer protection, competition
policy
CONCLUSION
No single model
Pragmatism prevailed
Substantial re-thinking going on
BEWARE APPLYING SIMPLISTIC
MODELS TO ECONOMIES