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SCUSSIONPAPERNO.1
08
Southeast and East Asia in 1980

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The Center forSoutheast Asian Studies
Kyoto U
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yoto, JapanDISCUSSIONPAPERNO.1
08
Southeast and East Asia in 1980by︶
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Southeast and East Asia

Shinichi Ichimura

1・. The countries in East and Southeast Asia have always been the brightspot in generally gloomy picture of underdeveloped economies in the world.
A readily available summary table of the world economy, Table 1, shows
this fact both in terms of growth rate and inflation rate (CPI) in therecent years. This is true also for foreign trade. See Table 2.

Table 1. World Economic Summary発Real GNP

Inflation (CPI)

1979($ bil)1978 1979 1980
(percent change)

1978 197"
9 1980(percent change)World$9,268

4.0

3.3

3.
0

11.1

12.3

11.ラ

North America

2,688

4.0

2.0

‑0.4

8.2

11.3

10.4

2,359

4.0

1.7

‑1.1

7.7

11.2

10.4

Western Europe

2,830

3.0

3.2

2.9

8.6

10.1

9.1

Eastern Europe

1,140

4.3

4.0

4.0

N.A.

N.A.

N.A.

Latin America

422

4.3

4.4

4.8

う6.3

44.8

35.8

1,601

ラ.
8

う.
2

う.
0

4.9

7.3

7.3

Middle East &North Africa(OPEC)

27ラ

4.0

4.04.o I1ラ.0

1ラ.o

20.0

Middle East &North Africa(non‑OPEC)

120

5.0

5.0

5.o24.0

20.0

20.0

Sub‑Sahara Africa

192

4.02.う2,525.0

20.0

2ラ.0

u.
s.
.

Asia

普Bank of .
America estimates for 1979; forecasts for 1980.

‑1‑

Table 2. World Tradee
Exports

Imports

1979
1978 1979 1980
1978 1979 1980 1979($ bil) (percent change) ($ bil) (percent change)
6 16.2 13.l
$1,363 1ラ.

$1,367 16.3 17.ラ 13.2

242 lラ.7 24.7 lラ.
9269 1ラ.
1 18.9 11.9

主‑8217.7 28.4 16.0

210 16.
l 20.0 11.0

Weste‑rn Europe

614 21.0 14.6 12.1

613 1ラ.3 16.9 12.9

EasternEurope

40 10.0 10.0 10.0

ラ0 10.0

Middle East &N̲
orth Africa

1ラ6 ‑4.0 27.0 19.l

122 18.0 23.0 23.0

ぬ ara
Sub‑$Mrica

ラl 10.0

8.0

8.0

ラ6 22.0 1ラLaU
1n America

47

2.1

ラ.
9

8.4

48 1
3.l

As土a

213 18.2

YorldNo'fth America
U.S.

9.4 ll.ラ.
o 8.0

ラ.
o 15.01.0

7.4

209 18.7 21.3 12.6

Bank of America estimates for 1979; forecasts for 1980.

2. f,
his is evenmore conspicuous if we look back over the performance・inthe 70 s. Despiもe the oil crisis and the world stagflation 1.
hecountries and areas in East and Southeast Asia (Korea, Taiwan, Hong Kong,
Singa'Pore, Malaysia, The Philippines, Thailand and Indonesia) performed
very鷲 ellduring the l亀sも eightyears, averaging the growもh raもe around
7 色‑0 12 percent. The exceptionally high pace of growth is likely to slow
down in 79 and 80': never油 eless no country is expected もo go below 煩a year. Some countries like Korea and Singapore may achieve もhe growthrate of 8'1,in79 ‑, and somewhat lower in80. At the same time, however,
all the couatr主es appear to con‑cert the effort inbeaもingt
he inflation
eallsed by the r:ecent jerk in oil price, which will make theirgrowthl'&t.
es厄bout ラ t.
o 7一
瞬 in 80. Inflation まs pa吋 icularlyserio~s inー2 ‑. a year in 79 and perhaps.
,0Indonesia and Korea. rcadnng as high as 2
around lラ係 in 80.
All tnese seem もu demonstrate the 1mpress1ve economic performance inn.
this part of the world, particularly the so‑called Gang of Four' 1Asia or New Japans （South Korea, Taiwan, Hong Kong, and Singapore).

弾 in early 70 s but slowed down
As Singapore's rate of growth exceeded 10to 7 to 8弾 now, the remaining newly 1ndustrializi時

countries also look係．
1ike もaking the same path and converging to the rate around ラ to 7
This change of pace seems 七o have come somewhat earlier than it did inthe case of Japan. The difference may be explained by the lower pro‑pensity もo save, slower もechnical progress in industries, the smaller．
nal environmenも， and the changing internatio
size of domestic markeもFor these reasons, their growth ra七es in the 80 s may not be as rosy as
most government s development plans prognosticate. For example, theactual performance of The Philippines economy around 5 to 6係 seems to.ラ係 1n the five year plan. Table) andfall short of the target of 7n Asia.
' these countries 1f,
Table 4 summarize the performance c')‑:.
Table 1. GDP Growth Rate (.
Singapore Malaysia Ph1l

Thailand Indonesia

Korea

Taiwan

HK71

9.0

11.5

2
3.

.う
2
1.2
8.(J42
8.

7.0

72

7.4

.9
1
1

7.2.4
3
1

6.6.8
4

4.1

9.4

73

.1
7
1

12.0

2
4.
1

ll.5

12.3

7
8.

.3
l011.)

74

8.8

.う
0.2
2.3
6

6.7

『.)

6.7

7.6

7ラ

8.8

3.1

2.9.9
3う.
）

6.6

7
7.

う

76

0
lう.

11.8

16.9.う712.0̲.)
7

8.2

7.0

77

3
10.

8.4

4
1.
1.l87,76.2

6.2

.ラ
778

.う
21

12.6

.う
0
1.う
8.う
78ラ.

8.7

7.0）
う79 I 8.

8.0)

）
.う
68.0)

7.0)

)
う.57.0)6.5).0)(6.0)(56.0)

6.0)

)
う.0

6.0)

）
.ラ
680）
.う
7

‑3‑o.

Table 4. Rate of Inflaもion (GDP‑deflator)

Singapore Malaysia Phil.

Thailand Indonesia

Korea

TaiwanHK

71

11.ラ3石6

8.
9

4.4

ム 3.9

4.3

6 1.7

6.2

72

14.
5

5.0

7.4

5.4

2.9

6.8

9.1

13.6

73

9.
う

12.7

11.4

12.1

14.3

17.8

19.
0

33.0

74

26.
8

34.6

12.2

lラ.
6

12.3

31.8

19.8

47.3

7ラ

24.
6

3.4

2.7

3.3

8.0

2.0

12.5

76

lラ.
6

4.9

8.6

1.0

11.6

8.2

3.6

14.4

11

13.
6

ラ.
3

3.0

1
.9

4.7

9.3

う.
o

11.8

78

18.
0

6.0

10.
0

4.5

う

.
o

7.5

6.0

12.0

79 (20.0)

(9.0)

(9.
0)

(8.5)

(6.
0)

(9.0 )(8.
0)(20.0)

80 (15.0)

(7.
o)

(7.
0)

(6.0)

(4.0)

(7.
o)

(6.0)

(14.o)。

3. N~.edless も o say, they all have many difficulも problems. In parもicular,
mosも countries in this region are now going through the difficult sもage,500US Dollars,of dev.
elopment 9etween per capita income of ラ00 and 1lie.
re social 戸・essure mounも up and poli七ical conflicts become very acuもe.

司，Realizing 七hese socio‑political problems, the government of Korea, The
Phil主p:pines, Thailand,Malaysia and Indonesia have shifted emphasis tothe projects in the rural area and 'Socially‑Drien七ed undertakings inorder tomitigaもe the social grievances and・fill 七he gap between urban
and rural incomes. This certainly adds an ex七ra burden on the governmen
もbudget, so that もhe prevailing deficit finance becomes harder to overcome
and‑‑inflation less con
もrollable.
~s'piもe 。f もhegovernmen七 effor七， iも is by no means easy もo reduceincome inequality around the income per capita level of 1,000 US Dollars.
For instance, the Bang
kok Bank recently revealed in its semiannual rep
ortthat .
the pooresも 2o%of もhe population or about 8 million people had le.
ss‑4‑

than が of the national income in 73, which is even less もbanthe sharein 63. The similar study by national economic and social developmen
もboard have also shown that farmers earn only one forth of wage‑earners
and salarymen who earn only half of self‑employed proprietors and proper
もypwners income. The regional gap is also significant: income in Bangkok
is about 600 US Dollars: whereas 七hat in northwest is only 90 Dollars.
Anyone admits 七hat this has always been a major obstacle in Thai socieもy.
But the rural poverty in Thailand due to recent floods and drought in 77
was not rescued in any way due to official neglect. This has been poinもedout by Prime Minister Kriansak himself. This must be regarded and indeed
is regarded as a cause of political instability, if not so imminent asurban unemployment especially in the capital city. The situaもions in。
もher countries except for Taiwan and Singapore do not differ very much.

It is feared もhaも poverもy may breed corrununisrn. This is an aspecも veryimportan
も in judging もhe future of the country r
isks in East and Southeast。

Asia. The r穆eent p litical turmoil in Korea may be an unfortunate outcomeof insもability of this nature.

4. Another aspect of economic instability which can easily lead to socio‑
political disturbance is inflation. Dilemma between balanced budgeも andsもable food price can be solved either by good harvest or excellent
performance of export industries which permit 七he import of necessary
food stuffs. Indonesia benefitted from good crops when she was sufferingfrom the inflaもion due to the bold devaluation of rupiah from RP 41ラ to62ラ to one US Dollar on November 15, 1978. Malaysia could overcome thedamage on food and plantation products due to the droughも in 77 and 78 by‑ 5‑

an enormous growth of about 14
係 perannum in 76‑78 in the manufacturingsector. The agricultural production in Southeas七 Asia seems もo beincreasing its fluctuations, and iもs upward trend is tapering down.
ff.
enc
e the manufacturing production and.its exports are becoming moreand more important even for Indonesia and Malaysia as well as Thailand.
or The Philippines.
This is all the more imporもant for the countries in East and SouもbeastAsia, beca
use their imports are greatly increasing due 七o the expansionof domestic demand for raw materials and capital goods, anもi‑inflationarymeasures of increasing import of consumption goods and the rising trendof import prices for goods from Japan and U.S. As a resulも， excep
t for
Taiwan, all the coun
七ries are going to suffer from the unfa
vorable balanceof もrade in 1979 and 80.

ラ.

The third aspect of difficul七y is the problem of exchange‑rate. It

has an aspect which can excite the nationalistic sentiment of the people
and government officials. Continual inflation, however, makes the hefty
devaluation inevitable.

Indonesia offered a remarkable experiment. Her

inflation has abated in recent years, but has been consistently higher
than those in her main trade partners. She last devalued the rupiah in1971. By 1978 local producers had to compete with imports at a cosもー
price disadvan七age of 40 to 60
弘The dualistic pic七ure of the Indonesian

economywas very obvious: a strong oil economy carrying the burden ofsubsidizing its ailing non‑oil manufacもuring and other sectors. Of course
this cannot go on. Dr. Widjojo Nitisastro, the Coordinating Minisもer for
the Economy,Finance, and Indusもry, justified the policy by saying,

‑6‑

。

I
f devaluation had been postponed，もhe state o・
f もhe econmywou
ld havecaused a speculative outflow of funds. This in turn would have caused
disruption of economic growth and endangered national sもa‑bil主七y. When
the world economy was saddled with a new oil crisis with a slide in theUS Dollars, and Indonesian products were not able も。 compeもe in theinternational market, devaluation is a necessity.

In East and Southeast

Asia where most national cul'rencies are verもually fixed agains七 US Dollars,
more flexible exchange rate must be considered as an effec七ive policy
ins七rument in the fu
七ure. It must be recognized that devaluation gave aもunatelyfavorable effect on the government revenue in terms of rupiah. For

the rising trend of 七he prices of Indonesian non‑oil export commodities
increased the export value soon after the devaluaもion, and the balance ofpayment improved the question is whether もhe government succeeds inもrol of money supply and suppress inflaもionbelow
maintaining もhe もight con

弘20

Private enterprises are pressed to get more loans as a result ofwage increase and raw materials price rise. Exporters are worried whether
the gove‑rnments continue 七o place the quantitative controls on raw materials
expo‑
rt and even processed goods export in order 七o stabilize domesもic prices.
もries show a substantial increase in theUnless the exports of these councoming years, devaluation of their currencies seems unavoidable in viewof the expected rise in oil price and the import of peもroleum.

6. On もhe oもher hand, prospects for the increase in foreign capital
inflow seem to have brightened slighもly as a result of new attemptsof oil explora
もions in Indonesia and governmenも encouragement of foreign
investment like lowering corporate income tax. Similar policies havebeen taken by other government as well.

ー 7‑Indonesia not only reduced corporate income tax but also reduced
import duties and import sales tax on agricultural commodity, and also
revised the transfer 七ax for export promotion. Malaysia simplified
procedure for inves七ment permit, and promised not to nationalize thejoint venture. Thailand gave promotional priviledge for shipbuilding
and repair industry, and created investment promotion zone. South Korea
liberalized the import of about 300 items. Taiwan permitted tax exemption
for export enterprises to import machinery and revised more favorably
the staもutes of foreign investment.

In fact there have been a sign ofdecline in US and Japanese investment in Southeast Asia. There was aworry that the US and Japan s capital may move more toward China. A
number of steps have been taken by almost all governmen
七s in the region
もo stimulate foreign investment.

All these seem 七o help 七he high growthrate of this region keep its pace in the 80 s
. Despite the expectedslow‑down of US economy (2 弼 or below) and Japan (3 to 4）
係 . Moreoverthe continuing high growth of expor七s from this region to the US may
cause the concern of US business circles and induce protective measures.
Diversification of in
dustries is the only way out of newly indusもrializing
countries in this region to overcome this difficulもy in 七he transi七oryperiod.

7. The rapid grow七h of もhis region described above, however, does nothold in the case of socialist countries like North Korea,Burma, Vietnam,Cambodia and Laos, whose economic performance impressed nobody in recentyears. North Korean economy seems to have slowed down significantly due
to the shortage of foreign exchange caused by poorly planned‑8‑industrialization policies in recent years; Burma seems to have emergedout of inward‑looking closed economy type of policies and may be able tomaintain the growth rate of 4 もo 矧 for some years to come. Vietnam andits satelites can only maintain the present level of per capiもal income
at best.
Such a con
七rast between "Gang of Four" and the rest of Southeast
Asian countries including the socialist countries has sometimes madesome experts assert 七hat 七he Sino‑cultural counもries in the wesもern
periphery of the Pacific have certain advantageous socio‑culturalcharacteristics suitable for economic development. But the existenceof もardygrowth of socialistic economies suggests that i七 is a hastydeduction. What seems to have been proven is that a combinaもion‑ofwesもern private enterprise and outward‑looking open economy type ofpolicies wiもh Sino‑culもural and social もradiもion is capable of following
up the Japanese precedent, even without any significant supply ofnaもural resources endowment. It remains still to be seen whether or
not they can go beyond the middle income level and really reach theEuropean or Japanese standard of living as fast as Japan did. Needlessto say, this remarkable performance was possible only under もhe very
favorable international, political as well as economic environmen
も．
For one thing an enormous amount of international aid and loans madeavailable throughout the post‑World‑War‑II years has been really
essential to supporting their economic development and even politicalstability. The People s Republic of China, the mother country of these
East Asian Sino‑cultural nations, may be learning the lessons now.

弾 a year
Somewhat optimisもic projections of the Chinese economy above ラ‑9‑

t is a big questionin 1979‑80 had be七ter be viewed with caution. I
mark in Asia in 七he 1980's.

‑ 10 ‑