Transcript EU-enlargement and Economic Outcomes of Identity

What Lessons can be
Learned from the Experience
of Asia and the Pacific
Kenichi Kashiwagi
Alliance for Research on North Africa
(ARENA), University of Tsukuba, Japan
19 February, 2007
1. Introduction
☆The key to success in economic development
of emerging East Asian economies:
Application and implication of the
advanced foreign technology
☆The purpose:
・to test the effect of FDI on economic
growth from comparative perspective.
・to find implications from the experience
of Asia & Pacific to the Mediterranean
countries (MED).
2. East Asia: Invisible hand → visible
“Market Friendly
Approach”
Fundamental
Policies
・Macroeconomic
stability
・Human Capital
Formation
・Openness to
international trade
“Market-Enhancing
View”
Selective
Interventions
・Export Promotion
・Financial Repression
・Industrial Policy
East Asian policy makers went beyond the
fundamentals.
3.1. MED: Stabilization & S.A.
1970s: Two oil shocks
1980s: Stagnation of developed economies
Negatively affected
Balance of payment
& Foreign Debt in MED
Stabilization and Structural Adjustment
Conditionality: deregulation & linearization
3.2. EU-enlargement towards East &
South of Europe
Enlargement
towards East
・Re-integration of Europe
・Bulgaria & Romania (2007.1)
・Candidate: Croatia & Turkey
Enlargement
towards South
EU
(source) European Union, Wikipedia
・Regional Security & Stability
・Association Agreement (FTA)
with MED from the mid-90s
・ENP (European Neighborhood
Policy)
・Strategic partnership with
Africa (2005)
3.3 Openness to International
Trade is Inevitable
・Multilateral Trade Process: WTO (1995)
・Abolition of Multi-fiber Agreement (2005)
・Ratification of IMF Article XIII
Policy choices are getting
constrained
Enhance MED’s competitiveness ?
4. Theoretical model
“Endogenous growth theory”
Technology diffusion
☆Import if High-technology Products
☆Adoption of Foreign Technology by FDI
☆Accumulation of Human Capital
to test empirically the effect of FDI on economic
growth: 1992-2004
・Asia &Pacific
・Mediterranean (MED)
・East &Central Europe
5. Empirical Model
To test empirically,
g = g( M, FDI, Mt, L )
g: Real growth rate, M: volume of import,
FDI: foreign direct investment, Mt: import
of technology, L: a specific condition
git = β0 + β1X1it + β2X2it + γ1D1 + γ2D2 + uit
X1it: Export/GDP, Import/GDP, X2it: FDI/GDP
D1: East Central Europe, D2: East and
South Asia
6. Empirical Estimation & Results



Pooled data: 15 countries (1992-2003); N=180
Pooled OLS
Empirical Results (brackets: t-values)
git = 2.609 – 0.018X1it(trade) + 0.375X2it(FDI)
(3.784) (–2.600)
(2.304)
– 0.075D1 + 1.899D2 R2 = 0.071
(–0.076)
(2.470)
Adj-R2 = 0.050
git = 2.373 – 0.029X1it(import) + 0.322X2it(FDI)
(3.483) (–1.972)
(1.894)
+ 0.227D1 + 1.91D2 R2 = 0.056
(0.230) (2.452) Adj-R2 = 0.035
7. Four Implications
1. FDI inflow is an important vehicle of
economic growth.
2. Diffusion of technology and knowledge
spillover was effective through FDI inflow
rather than import of capital goods.
3. Effect of trade and export expansion on
economic growth is not always positive.
4. Effect of FDI on economic growth was
remarkable in East and South Asia,
compared with East Central Europe and
MED.
8. What Lessons can be Learned?
1. It is important to shift from the policy of
protection of domestic industries to industrial
policy to encourage the attraction of FDI from
EU.
2. Positive cycle of trade and investment i.e.
attract FDI to promote export is necessary for
the MED to deepen the regional integration.
3. Transformation towards the international
division of production between EU and the
MED is necessary to encourage the linkage of
trade and investment.
Thank you very much !!!