bluuebunny/crossref_metadata_2025 huggingface dataset:
Foreign Direct Investment: Trends, TRIMs, and WTO Negotiations
Authors: Brooks Douglas H. , Fan Emma Xiaoqin , Sumulong Lea R.
Published: June 2023

Foreign direct investment (FDI) flows have increased dramatically in recent decades. As developing countries, particularly in Asia, remove restrictions and implement policies to attract FDI inflows, trade and investment have become increasingly intertwined. As such, there have been growing calls for a multilateral framework of foreign investment rules to be negotiated under the auspices of the World Trade Organization (WTO). This paper reviews recent developments in FDI flows and their impacts in developing Asia, and the importance of the policy context in which those flows occur. It discusses advantages and disadvantages of including FDI in WTO negotiations, and related policy options for developing Asian economies.
Lessons of the Asian Financial Crisis: What Can an Early Warning System Model Tell Us?
Authors: Zhuang Juzhong , Dowling Malcolm
Published: June 2023

Using an early warning system model, this paper provides empirical evidence on the causes of the 1997 Asian financial crisis, with a view to shedding light on policy lessons. The model shows that there were warning signals of heightened economic and financial vulnerabilities in each of the five most affected countries prior to the crisis, suggesting that weaknesses in economic and financial fundamentals in these countries played an important role in causing the crisis. The warning signals point to fundamental weaknesses, including real appreciation of domestic currencies, deterioration in current account positions, excessive external borrowing by banks and currency mismatches in their balance sheets, excessive growth of domestic credit, economic slowdown, and burst of asset price bubbles.
From the Washington Consensus to the Post-Washington Consensus: Retrospect and Prospect
Authors: HAYAMI YUJIRO
Published: June 2023

The past two decades have witnessed major changes in the paradigm of international development assistance. During the 1980s the import-substitution industrialization strategy (ISI) advocating for government market interventions to promote large-scale modern industries gave way to a new paradigm referred to as the Washington Consensus, which identified the market as a universally efficient mechanism to allocate scarce resources and promote economic growth. Scarcely a decade later, in the mid-1990s, the Washington Consensus was replaced by a contrasting paradigm called the Post-Washington Consensus. It emphasized the need for different institutions in different economies and recognized cases in which government market interventions can play a positive role. The post-Washington Consensus focused on poverty reduction, emphasizing the need for delivery to the poor of social services, such as education and health care, by government and civil society. Sustainability of this approach is questioned, however, because of its relative neglect on the provision of production-oriented infrastructure and services needed to supply profitable work opportunities for poor people.
Liberalization and Foreign Direct Investment in Asian Transport Systems: The Case of Aviation
Authors: FINDLAY CHRISTOPHER , GOLDSTEIN ANDREA
Published: June 2023

The aviation industry is critical for Asia to gain from participation in the global economy. The airline industry in developing Asia is generally dominated by state-owned enterprises, and the record of state ownership is poor. Foreign direct investment would provide the managerial and technical skills needed to improve productivity. Paradoxically, however, this is an industry that combines extensive cross-border activities with almost insurmountable obstacles to foreign investment. Airline alliances and marketing arrangements have emerged as an imperfect substitute to consolidation through (cross-border) mergers and acquisition. This paper sketches the main features of international air transport, focusing in particular on the bilateral and multilateral regimes; presents the main characteristics of the developing Asia market and the specific Association of Southeast Asian Nations and Asia-Pacific Economic Cooperation forum objectives in this domain; analyzes ongoing developments in selected countries, in particular in privatizing flag carriers in India and Thailand and consolidating airlines in People’s Republic of China; and concludes by putting findings from the region in the wider context of experiences in other developing regions and regulatory development at the multilateral level, including at the World Trade Organization.
Economic Growth, Poverty, and Inequality in Indian States in the Pre-reform and Reform Periods
Authors: BHANUMURTHY N.R. , MITRA ARUP
Published: June 2023

The paper assesses the impact of economic reforms on poverty incidence by decomposing the change in poverty ratio into growth/mean effect, inequality effect, and population shift effect for the rural and urban areas of 15 major states and at the all-India level. Using National Sample Surveys, data were analyzed for two time periods: (i) 1983 to 1993/4 and (ii) 1993/4 to 1999/2000, broadly representing the pre-reform and reform period, respectively. The growth/mean effect dominates in both periods over the inequality effect and the population shift effect. The growth effect, which is beneficial for poverty reduction, seems to have gone up in the reform period. The adverse inequality effect also fell during the reform period. States with a greater beneficial growth effect in the reform period also show a fall in the magnitude of an adverse population shift effect in the urban areas, i.e., a relatively smaller increase in the incidence of urban poverty caused by rural-urban migration.
Asia’s Current Account Surplus: Savings Glut or Investment Drought?
Authors: Felipe Jesus , Kintanar Kristine , Lim Joseph Anthony
Published: June 2023

Over the last few years economists have started referring to the existence of “global payments imbalances”, reflected in the growing current account surpluses and deficits among different regions of the world (surpluses mostly, but not only, by a number of Asian countries; deficits mainly by the US), together with a substantial accumulation of international reserves (also by a number of Asian countries). This paper examines Asia’s current account surplus from the perspective of the savings−investment gap in order to determine whether the surplus is a result of an increase in savings rates (i.e., a savings glut) or a decline in investment rates (i.e., an investment drought). The analysis indicates that Asian current account surpluses are mostly associated with significant investment declines after the Asian financial crisis. Using data from 1986 to 2003 for a group of Southeast Asian countries, we find that the decrease and stagnation of domestic credit, the creation of excess capacity, and the relative decline of profit rates have contributed to the fall of investment rates across Asia, indicating a return to export-led growth.
Achieving Equity and Efficiency Simultaneously in the Primary Distribution Stage in the People’s Republic of China
Authors: Lin Justin Yifu , Liu Peilin
Published: June 2023

This paper establishes a theoretical framework addressing the long-debated issue of efficiency and equity. Empirical evidence shows that a comparative-advantage-following development strategy promotes growth and narrows the income gap, achieving both efficiency in production and equity in income distribution. A review of the past three decades of reform reveals that development in line with the comparative advantage of the People’s Republic of China accounts for its outstanding economic performance. The dominant causes of the country’s current problems are the remaining distortions in prices and government interventions in resource allocation. Therefore, to put the government’s “scientific development outlook” into practice and to realize development with quality and speed, the country should deepen market-oriented transformation by eliminating these distortions and interventions. The inclusiveness of development can be further strengthened with financially sustainable social security and transfer payment policies.
Achieving Global Cooperation on Economic Recovery and Long-Term Sustainable Development
Authors: Sachs Jeffrey D.
Published: June 2023

The global financial crisis results from three factors: overly expansionary US monetary policy; inappropriate financial deregulation; and a financial panic following the bankruptcy of Lehman Brothers. Asia is now experiencing a serious downturn as the result of falling consumption and exports, and an intensifying credit squeeze due to global deleveraging. Through appropriate monetary, financial, and public-investment policies, Asia can lead the world to recovery, in essence by replacing the declining consumption spending with increased public spending on critical goods and services (such as health and education) and public investments in sustainable infrastructure, including pollution control, sustainable energy systems, efficient water use, broadband connectivity, and other priority areas.
Trademarks and Geographical Indications: Policy Issues and Options in Trade Negotiations and Implementation
Authors: Wattanapruttipaisan Thitapha
Published: June 2023

Trademarks and geographical indications have been the focus of contention in bilateral and multilateral trade negotiations and in the implementation of agreed trade obligations and regulations among World Trade Organization members, including partners in free trade agreements with Association of Southeast Asian Nations (ASEAN) members. This paper examines these issues, and the related policy implications and options, in terms of specifications and scope, priority rights and coexistence, and the treatment of generic names in the registration and protection of geographical indications. The development, commercialization, and protection of geographical indication products can benefit trade and development in ASEAN economies. However, a geographical indication system similar to that in the European Union would likely reduce ASEAN imports of competing products from non-European Union sources. An agenda for further research, policy facilitation, and information dissemination is mapped out, emphasizing the importance of adequate and affordable policy incentives and business development services.
A General Equilibrium Analysis of the Impact of Climate Change on Agriculture in the People’s Republic of China
Authors: Zhai Fan , Lin Tun , Byambadorj Enerelt
Published: June 2023

This paper examines the potential long-term impacts of global climate change on agricultural production and trade in the People’s Republic of China (PRC). Using an economy-wide, global computable general equilibrium model, this paper simulates the scenarios of global agricultural productivity change induced by climate change up to 2080. The results suggest that with the anticipated decline in agriculture share of gross domestic product, the impact of climate change on the PRC’s macro economy will be moderate. The food processing subsectors are predicted to bear the brunt of losses from the agricultural productivity changes caused by climate change. Production of some crop sectors (such as wheat), in contrast, is likely to expand due to increased demand from other regions of the world.
Outward Foreign Direct Investment and the Financial Crisis in Developing East Asia
Authors: Hill Hal , Jongwanich Juthathip
Published: June 2023

This paper examines two interrelated aspects of Asian economic dynamism and the management of external shocks, in the context of outward foreign direct investment (FDI) from developing East Asia. Outward FDI from these economies has been growing rapidly, driven by deeper economic integration, more open FDI regimes, growing technological and financial sophistication, and rising savings levels. The paper underlines these common region-wide determinants while pointing to a range of country-specific circumstances. Economic crises, such as the Asian financial crisis of 1997–1998 and the current global financial crisis, have large and unpredictable effects on the behavior of FDI and other forms of capital flow, with the general expectation that FDI will be less volatile than portfolio investment. This has been confirmed in both crisis episodes. Investment outcomes during the current crisis have accelerated the growing importance of developing East Asia in the global economy.
A Comparative Empirical Examination of Outward Foreign Direct Investment from Four Asian Economies: People’s Republic of China; Japan; Republic of Korea; and Taipei, China
Authors: Fung K. C. , Garcia-Herrero Alicia , Siu Alan
Published: June 2023

This paper compares and contrasts the determinants of outward foreign direct investment from the People’s Republic of China (PRC) with those of outward foreign direct investment from Japan, Republic of Korea, and Taipei,China. The paper examines descriptively and econometrically the motives and factors behind the investment abroad from these four Asian economies. The hypotheses being tested include the market-seeking hypothesis, the natural resource-seeking hypothesis, the technology acquisition hypothesis, and the human capital hypothesis. The paper examines outward foreign direct investment by the PRC for the years 1991–2006, Japan for 1983–2007, the Republic of Korea for 1980–2007, and Taipei,China for 1968–2007. Results using the full set of determinants yield uniform support for the market-seeking hypothesis. The natural resource-seeking motive holds for Japan and the Republic of Korea, while the technology acquisition hypothesis seems relevant for Taipei,China. The PRC’s investments tend to go to destinations with poorer labor quality. In addition, openness is important for Japanese investment abroad, while distance deters investment from the PRC and Republic of Korea.
Can Trade with the People’s Republic of China Be an Engine of Growth for Developing Asia?
Authors: Park Donghyun , Shin Kwanho
Published: June 2023

The recession in the United States in the wake of the global financial crisis has dampened developing Asia’s exports and growth. As a result, developing Asia is looking increasingly to the People’s Republic of China (PRC) as a source of demand and growth. This paper empirically assesses the PRC’s potential an engine of growth for developing Asia. The most significant finding is that the share of final goods in the PRC’s imports from East and Southeast Asia has been growing while the share of parts and components has been shrinking, suggesting that the PRC is becoming more of a consumer and less of an assembler. This provides some grounds for optimism about the prospects of trade with the PRC as a source of resilience against extra-regional demand shocks in the short run and an additional source of growth in the long run.
Human Capital Development
Authors: Son Hyun H.
Published: June 2023

This paper has two main objectives. First, it assesses and measures the gaps in the stock of human capital across the world. It presents how effectively different regions are improving their stock of human capital, and how long it will take for developing countries to catch up with the current level of human capital in industrialized countries. Second, it revisits the contribution of human capital to economic growth, proposing a decomposition method to account for employment growth—which is also impacted on by human capital growth—in explaining growth in total output per worker. The proposed methodology introduces employment growth in the growth decomposition through the employment growth elasticity. It is conjectured that as human capital increases, employment growth elasticity will decrease, making the economy less labor-intensive, resulting in higher economic growth. The proposed method points to the importance of the micro linkage between human capital and the labor market.
Poverty and Redistribution in Emerging Economies
Authors: Mirrlees James
Published: June 2023

Editor’s Note: This presentation is about poverty and redistribution in emerging economics. It was prepared for the Asian Development Bank’s Distinguished Speakers Program held on 25 October 2011 at the ADB Headquarters. Various types of poverty alleviation programs are discussed, and the central role of information in program design is highlighted. The informal style of presentation has been preserved.
Industrial Deepening in Malaysia: Policy Lessons for Developing Countries
Authors: Yean Tham Siew , Heng Loke Wai
Published: June 2023

The Malaysian economy has undergone substantial industrial transformation, shifting from primary commodity production to manufacturing in slightly more than 5 decades since achieving independence. However, efforts to deepen manufacturing development have not succeeded in nurturing a critical mass of domestic entrepreneurs with indigenous innovative capacities as industrialization continues to be dependent on imported technology and capital. Instead, the manufacturing sector is facing premature deindustrialization. In view of these developments, this study aims to assess the extent of industrial deepening in a country through the development of linkages, as well as the key factors that have contributed to this. This has important policy lessons for other developing countries that are following similar export-oriented, foreign direct investment-led strategies for their industrial development. The main findings of this study indicate that while trade and investment policies have contributed to the development of the manufacturing sector, they have also fostered closer integration with the rest of the world rather than within the domestic economy. The electrical and electronics subsector has relatively weaker backward linkages than other subsectors in the economy. Deepening internal integration requires complementary labor, human capital, and technology policies that can facilitate the development of linkages in the manufacturing sector.
Winners and Losers of Multinational Firm Entry into Developing Countries: Evidence from the Special Economic Zones of the People’s Republic of China
Authors: Ebenstein Avraham
Published: June 2023

This paper examines the impact of multinational firm entry into local labor markets on employment, productivity, and wages. It exploits the People’s Republic of China’s rapid implementation of economic reforms and assignment of cities to special economic zone status in the 1980s and 1990s. Using data on both firms and workers, it is found that these policies increased foreign direct investment, which raised average labor productivity in these labor markets. However, only modest increases in real median wage rates across these cities are observed in the face of large increases in wage inequality and rising local prices, limiting the benefits to most workers in these cities. Evidence is presented that corporate profits captured most of the increase in productivity in these areas.
How Effective are Capital Controls? Evidence from Malaysia
Authors: Athukorala Prema-Chandra , Jongwanich Juthathip
Published: June 2023

This paper examines the role of capital controls as a macroeconomic policy tool in light of the Malaysian experience. It consists of an econometric analysis of quarterly data over the period 1990–2010 using newly constructed capital inflow and outflow policy indexes as well as analytical narratives of episodes of controls imposed on inflows (1994) and outflows (1998–1999). The findings suggest that well-targeted controls have the potential to tame both short-term capital inflows and outflows without exerting a backwash effect on foreign direct investment, at least in the short to medium term. Controls on capital inflows introduced in the first half of 1994 helped moderate accumulation of short-term capital flows, particularly short-term bank credit. During 1998–1999, carefully designed temporary capital controls were successful in providing Malaysian policymakers a viable setting for applying the standard Keynesian therapy.
Are Capital Controls Effective? The Case of the Republic of Korea
Authors: Kim Soyoung , Yang Doo Yong
Published: June 2023

Capital controls have recently attracted interest as capital surges in emerging market economies threaten to bring about economic instability and heighten difficulties in implementing macroeconomic policies. While an option that can be taken to deal with huge capital inflows involves the use of capital controls, there is no consensus on their effectiveness. Against this background, our paper aims to investigate the effectiveness of capital controls in the Republic of Korea. This paper first reviews the history of capital account policy, which can be divided into five stages: (i) gradual liberalization during the 1980s and early 1990s, (ii) acceleration of liberalization during the early and mid-1990s, (iii) the big-bang approach to liberalization during the Asian financial crisis, (iv) liberalization for facilitation of capital market development beginning the late 1990s, and (v) the conservative approach during the global financial crisis. To quantify the trends, this paper constructs measures of capital account control/liberalization based on the official record of government policies. In the second part, it discusses the effects of capital account control/liberalization in four ways. First, the behavior of key macro variables in the Republic of Korea is reviewed by comparing the periods before and after serious capital account liberalization. Second, the effects of shocks to the capital account control/liberalization indexes on capital flows are examined using a VAR model. Third, the effects of the United States (US) monetary policy shocks on capital flows and the interest rate of the Republic of Korea are examined for the period of capital controls and the period of capital account liberalization. Fourth, a simple event study is conducted of recent capital control measures. The empirical results based on VAR models show that shocks to capital account controls do not have significant effects on capital flows in most cases. However, capital flows, the current account, and the exchange rate were far more volatile in the period of a liberalized capital account. It is also interesting that during the latter period, the Republic of Korea did not gain monetary autonomy despite adopting a freely floating exchange rate. This result may be related to volatile capital flows under a liberalized capital account. Finally, the results of the event study tend to support the effectiveness of capital controls in altering the composition of capital flows.
Asia’s Contribution to World Economic Recovery in the 1980s
Authors: Oshima Harry T.
Published: June 2023

A couple of years ago, I presented a paper at the Asian Development Bank which, at that time, was generally regarded as giving an unduly gloomy picture of the outlook for the 1980s. This view is now shared more widely. I believe that the time has come to reconsider development strategies and policies and to prepare for an uncertain era. When the future is not clear, it is better to plan for low growth — even if it would only make it easier to handle surpluses than deficits in the balance of payments, and in government and other accounts…
Newly Industrializing Countries and World Markets
Authors: Sicat Gerardo P.
Published: June 2023

During the past ten years or so, more and more attention has been focused on a small group of developing countries that have achieved high economic growth rates by following a strategy of exporting manufactures: the Newly Industrializing Countries or NICs, as they have come to be known. Their success in expanding exports to developed countries accounted, in no small measure, for the imposition of new protectionist measures by the developed countries in the 1970s. These countries have different backgrounds: their social systems are as varied as their geographical locations. All are now classified as middle-income developing countries, and the most successful of them are at the threshold of becoming developed countries.
Saving, Financial Intermediation and Economic Growth in Asia
Authors: Fry Maxwell J.
Published: June 2023

The level of national saving is one of the key determinants of sustained economic growth. Another is the efficiency with which both national and foreign resources are allocated among alternative investment projects. The bulk of national saving in the Asian developing countries examined here, as in most other countries, is routed to domestic investment via three channels – government appropriation, self-finance (in both the formal and informal sectors), and financial intermediation. The relative importance of each channel depends mainly on the level of economic development and the roles ascribed to public and private sectors of the economy. Countries that rely more heavily on government appropriation place less emphasis on financial intermediation for the financing of investment. Recently, however, a number of developing countries have given a larger role to the private sector in the development process. In the face of contracting net inflows of external finance and a tendency for greater reliance on the private sector, domestic resource mobilization and the efficient allocation of investible funds by the financial system have become increasingly important factors in the development process…
Development Financing and Law
Authors: Jhong Chun Pyo
Published: June 2023

Financial assistance to developing countries for their economic and social development has become a significant activity of the international community. It is now well recognized that external financial resources make an important contribution to the economic progress of developing countries. The Asian and Pacific region is particularly in need of development resources. Most of the countries in the region are poor, and their total population accounts for more than one-half that of the developing world. To help speed up socioeconomic development in the region, sufficient resources for development must be mobilized, and must be used efficiently…
Trends and Dynamics of East and Southeast Asian Economies
Authors: Shinohara Miyohei
Published: June 2023

During the 1960s and 1970s, the developing countries in East and Southeast Asia maintained real economic growth rates that were among the highest in the world. An important feature of their economic performance was the contribution of their manufacturing sectors. Rapid expansion of manufactured exports paralleled the high growth rates of gross national product (GNP) in not only the faster growing Newly Industrializing Countries – the Republic of China, Hong Kong, Republic of Korea, and Singapore – but also in middle-income Southeast Asian countries – Malaysia, Philippines and Thailand. While there is, undoubtedly, a relationship between the rapid growth of manufactured exports and the relatively high economic growth rates in these countries, it is a complex one…
Neoclassical Political Economy, the State and Economic Development
Authors: Srinivasan T. N.
Published: June 2023

In this article, I will focus on the role of the state in economic development. Recent research suggests that it needs some re-evaluation. I will begin with a discussion of the crowning achievement of neoclassical economics, namely, the two fundamental theorems of welfare economics to set the stage for an analysis of the role of the state. Then, I will describe and summarize briefly the dominant strands of recent research on this issue and their implications. Drawing on some of my own work with Jagdish Bhagwati and Richard Brecher, I will comment in some detail on the implications of one of these strands for the pure theory of international trade and policy. Finally, I will explore some of the implications of the theory for development policy, in particular, for trade liberalization, and relate them to the experience of India in more than three decades of development planning.
EEC Trade Policies towards Asian Developing Countries
Authors: Langhammer Rolf J.
Published: June 2023

In recent years, there has been growing international concern about protectionist tendencies in industrial countries against exports from the developing world. Estimates show that during the early 1980s, protectionist measures covered an increasing extent of the exports of developing countries. The evidence indicates that compared with Japan and the United States, the European Economic Community (EEC) has the highest relative level of manufactured imports facing non-tariff barriers and also the greatest increase of such trade restrictions. This may seem to suggest that the high rates of unemployment and the keen competitiveness of imports in recent years prompted the EEC countries to respond to the demands for protection from domestic labor organizations and producers. Such a view, however, would be misleading. Rather, protectionism in the EEC must be considered as a part of the process towards the formation of a customs union…
Foreign Direct Investment and Economic Growth in the Asian and Pacific Region
Authors: Rana Pradumna B.
Published: June 2023

In recent years, there has been a renewed interest in the flow of foreign direct investment to developing countries, both as a source of foreign capital and of improved technology and management systems. The developing (host) and industrial (source) countries, as well as international organizations, increasingly advocate a substantial expansion in the share of foreign direct investment in the overall flow of financial resources to developing countries that have deficits in their balance of payments. Two basic reasons have been suggested for this renewed interest…
Promoting Small and Medium Industries: The Korean Experience
Authors: Yun Yeo-Gyeong
Published: June 2023

The promotion of small and medium-scale industries is politically an attractive policy for achieving social equity and justice and economically desirable for attaining balanced growth. However, in practice, the promotion of these industries is an extremely difficult task, and usually the policies are costly for the government without producing the desired results. The reason is that it is generally difficult for governments to find a common denominator for establishing and executing policies for promoting small and medium industries because of their large numbers and diversity in their nature of business. There is, therefore, no simple or universal policy strategy.

In general, there are two kinds of promotional policies for the development of small and medium industries. One is to create as many industries as possible and help them to survive, and the other is to create and/or help small-scale industries to grow and become medium-scale industries through import substitution for the domestic market and eventually export promotion for the international market. In the case of the Republic of Korea, the government adopted the second approach for promoting small and medium industries.
Recycling Trade Surpluses: Policy Options for Taipei, China
Authors: Sun Chen
Published: June 2023

Trade imbalance contributes to economic growth in two different ways, depending on the relative position of saving and investment. For a trade surplus economy, where there is excess of saving over domestic investment, the surplus provides the economy with additional demand, preventing production and employment from declining; while for a trade deficit economy, where there is insufficient saving, the deficit brings in additional resources to help finance domestic investment. If every economy is to balance its trade with the rest of the world, its growth rate then would be limited by the smaller of the two factors, saving and investment, and the whole world economy would shrink…
Trade in Services and Asian Developing Economies
Authors: Quibria M.G.
Published: June 2023

The world economy has been undergoing rapid structural transformation for the last three decades. The service sector, which has often been neglected in most economic discussions, has come to play an increasingly important role in this transformation. This is most visible in major developed economies, many of which have passed from the stage of industrial societies to that of service societies. For instance, in the United States, almost 70 per cent of total output stems from the service sector, while in most western European countries, services account for between 55 and 60 per cent of national output. A similar transition has taken place in other developed economies. The exception seems to be Norway, where the relative importance of services has declined (due to the exploitation of North Sea oil). Similarly, in terms of employment, there has been a concomitant increase in the role of services, the increase being most dramatic in the last 20–30 years. In many developed countries, the share of services in total employment is more than 60 per cent and in some it has reached 70 per cent. Most Asian developing economies, however, are predominantly agricultural and are now making strides toward industrialization. As the role of industries has become increasingly greater in recent years, so has that of services. Barring a few exceptions, such as Singapore and Sri Lanka, the importance of the service sector as a source of income and employment has expanded significantly in the last 30 years…
Current Account Imbalance and Exchange Rate Policy
Authors: Intal Ponciano S.
Published: June 2023

The sharp rise in the price of crude oil during the latter half of 1990 resulting from the Middle East crisis brings to the fore the issue of the impact of external shocks to the economies in the Asian and Pacific region and how to respond to such shocks. The immediate impact of the Middle East crisis is on the balance-of-payments positions of the region’s economies, primarily due to the rise in oil import payments or oil export earnings and, for some countries, from a reduction in workers’ remittances. For countries which have a substantial current account imbalance even before the Middle East crisis, it exacerbated the current account imbalance and heightened the policy issues that must be tackled to address the imbalance. How much of the current account imbalance is financiable? How far should there be exchange rate change? Should there be a sharp one-shot devaluation? How tight should the fiscal and monetary regime be? How far can we sacrifice growth for stabilization? These are some of the questions that policymakers tend to ask when confronted with the problem of large current account deficits…
Intra-Asian Trade and Foreign Direct Investment
Authors: Riedel James
Published: June 2023

The purpose of this article is to explain the level and pattern of intra-Asian trade and foreign direct investment. The approach is positive rather than normative in that the aim is to explain the facts and not to suggest what should be the level and pattern of intra-Asian trade and direct investment. We shall therefore eschew making policy recommendations to promote intra-Asian trade and direct investment…
The Debt Crisis: Lessons of the 1980s
Authors: Williamson John
Published: June 2023

It is now over nine years since Mexico found itself unable to service its debt in August 1982, and was forced into declaring a moratorium that precipitated what quickly became known as the debt crisis. A vast literature has emerged since then on the causes of that crisis, on apportioning responsibility for its occurrence or persistence, and on prescribing remedies for ending it…
Institution Building for Development: Lessons Learned and Tasks Ahead
Authors: Narayanasuwami C.
Published: June 2023

It is now widely recognized that the availability of physical, technical and financial resources is not a sufficient condition for successful socioeconomic development. The strengths and weaknesses of institutions as well as behavioral factors play a significant role in determining the nature and pace of the development process. The link between project performance and institutional development has been increasingly evident in development projects financed solely by national governments or with assistance from bilateral and multilateral agencies. It has been generally noted that many failures in development projects are not only due to production or technological inadequacies but also to institutional deficiencies, largely because self-sustaining capacity to implement projects is not given due emphasis at the time of project formulation. Studies of rural development in Asia have confirmed that inadequacies in the institutional framework have hindered the effective implementation of rural development programs…
Rural Poverty in Sri Lanka: Priority Issues and Policy Measures
Authors: Gunatilleke Godfrey , Perera Myrtle , Wanigaratne R.A.M.C. , Fernando R.E. , Lakshman W.D. , Chandrasiri J.K.M.D. , Wanigaratne R.D.
Published: June 2023

Rural poverty in Sri Lanka has to be analyzed and evaluated in the context of development policies and the socioeconomic transformation that has taken place during the last four decades. These policies have resulted in a configuration of development that is unusual for a low-income developing country. On the human development index, Sri Lanka ranks above 82 other developing countries, including Brazil, Jordan, Thailand, Turkey and Philippines. The annual rate of population growth has dropped to 1.3 per cent and Sri Lanka is expected to reach the net rate of reproduction of 1 by 1995, well ahead of other Asian developing countries, with the possible exception of the Republic of Korea and Thailand. Infant mortality is falling below 20 per 1,000 live births, average life expectancy has reached approximately 70 years and adult literacy is 87 per cent. As about 75 per cent of the population live in rural areas, these social and demographic indicators reflect improvements affecting the rural sector. Data from socioeconomic surveys confirm no significant rural-urban disparities in these indicators…
Changing Pattern of Financial Flows in the Asia-Pacific Region and Policy Responses
Authors: Chen Edward K.Y.
Published: June 2023

Foreign capital inflows play an important role in supplementing and complementing the resources of developing countries in their endeavor towards development. This has been emphasized repeatedly in the development economics literature—the vicious circle hypothesis, the two-gap model, and the Kindleberger-Hymer approach to foreign direct investment (FDI). The process of economic development even in the most successful cases is necessarily long and slow. It is therefore important that foreign capital inflow be continuous and relatively predictable and stable. Disrupted financial flows can be worse than no flows. Unfortunately, the postwar experience of financial flows to developing countries indicates a considerable degree of instability…
Policies for Building Technological Capabilities: Lessons from Asian Experience
Authors: Lall Sanjaya
Published: June 2023

Should policymakers worry about technological activity in developing countries? Developing countries are clearly not technological “innovators” in the normal sense of the term and do not face the problems of stimulating frontier technologies that concern the advanced industrialized countries. Their technological activity does not consist of finding and introducing completely new products and processes: the entire developing world contributes only about five per cent of the world’s expenditures on formal research and development (R&D). Practically all the industrial technologies that developing countries use have been imported from the developed industrial countries…
Urban Poverty in the Philippines: Nature, Causes and Policy Measures
Authors: Balisacan Arsenio M.
Published: June 2023

As in other less developed countries (LDCs), urbanization and urban poverty have increasingly become major development policy concerns in the Philippines. The accelerating pace of urbanization is shifting the burden of poverty from rural to urban areas. The proportion of the population living in urban areas rose from 30 per cent in 1960 to 38 per cent in 1980 and 49 per cent in 1990. However, unlike in many LDCs where high levels of urbanization reflect a shift in the economy’s dynamic comparative advantage from one initially based on agriculture to one based on industry and services, the country’s high urbanization level has not been matched by a correspondingly high per capita income as well as by a significant shift in labor employment from low to high productivity areas. Its gross domestic product (GDP) per capita at the beginning of the 1990s was not much different from that in the late 1970s. The share of the industry sector in total employment remained virtually unchanged at about 16 per cent during the last three-and-a-half decades. The employment share of the manufacturing sector, which is the hub of dynamic growth in fast-growing neighboring countries, even contracted from 12 per cent in the mid-1950s to 10 per cent in the early 1990s…
Broadening the Tax Base: The Economics Behind It
Authors: Hamada Koichi
Published: June 2023

This paper discusses the questions of what type of taxation and what type of broadening of the tax base are desirable from the point of economic theory, and evaluates the experiences of Asian countries from a comparative perspective. A country with a larger government expenditure as a ratio to GNP is more likely to run a budget deficit. Trade taxes such as import and export tax are detrimental to development because they distort the market mechanism and lead to import-substitution oriented strategy. Land and property tax are desirable but seldom implemented because of political difficulties. Personal income tax is desirable, but its revenue-creating power is limited. Finally, the VAT, in spite of its regressivity on income distribution, is useful because of its less distortionary effect, encouraging effect on capital accumulation. In Asian countries, tax reforms by way of VAT generally attained revenue-enhancing objectives where alternative revenue sources hardly promise much potential in the immediate future.
Sustainable Development and the Role of Tax Policy
Authors: Parikh Kirit
Published: June 2023

The need for sustainable development is felt in all countries. An operational definition of sustainability is given to provide a framework to determine the extent to which the environment should be protected. The paper examines sources of environmental problems and then discusses various policy options to deal with them. Alternative policy instruments of both command and control policies and incentive-based policies such as taxes, subsidies, and tradeable permits are examined. The benefits, costs, efficiency, effectiveness, distributive implications, implementability, and appropriateness of alternative policy instruments for different types of problems are discussed.
Gender Issues and Employment in Asia
Authors: Behrman Jere R. , Zhang Zheng
Published: June 2023

A major means of engaging women more in development processes is increasingly productive employment. This paper adds perspective on gender issues and employment in Asian developing countries. First, employment experiences of Asian women, both across countries and over time, are characterized with aggregate data. There are some strong associations between development and many employment variables, though strikingly not for female / male wages. Second, some micro evidence on selected dimensions of Asian employment and gender issues is summarized: increasing relative female to male returns to schooling in labor markets at higher schooling levels, information problems and possible statistical discrimination against females in rural labor markets, and the limited impact of equal opportunity employment efforts. Finally, some employment and gender issues are summarized relating to women’s welfare and employment, the nature of discrimination in labor markets, efficiency reasons for policy interventions, the possible key role of information, and the role of education.
Managing Volatile Capital Inflows: The Experience of the 1990s
Authors: Reisen Helmut
Published: June 2023

The paper aims at deriving lessons for macroeconomic policy in developing countries in response to heavy temporary capital inflows as witnessed in the early 1990s. First, after spelling out the major reasons why policymakers should be concerned about cyclical inflows, the volatility of different capital-account items (bank lending, foreign direct investment, and portfolio flows) is assessed. Second, the recent capital flows are compared between Asia and Latin America for similarities and differences. Third, the paper discusses for 13 heavy capital importers in Asia and Latin America the extent to which they met the prerequisites postulated by the sequencing literature to avoid macroeconomic complications of heavy capital inflows, and how they used these external savings in light of the debt cycle theory. Finally, the paper draws five policy lessons for the next episode of heavy capital inflows: identify the origin of rising foreign exchange reserves; identify the limits of foreign debt; discourage above-limit, short-term inflows; observe the tradeoff between price stability and competitiveness; and design policies to target monetary aggregates and exchange rates, including fiscal policy, sterilized intervention, reserve requirements, and exchange rate management.
Grameen Bank: Impact, Costs, and Program Sustainability
Authors: Khandker Shahidur R.
Published: June 2023

Grameen Bank of Bangladesh is known worldwide for its innovative credit delivery to the rural poor. By incorporating group-based lending, mandatory savings and insurance, repayment rescheduling in case of disasters, and similar other schemes, it has been able to minimize both behavioral and material risks of lending. By 1994, Grameen’s coverage had increased to include 50 percent of villages of Bangladesh with more than 2 million members (94 percent of whom are women), with a loan recovery rate steadily above 90 percent. It also has noticeable positive impacts on participants’ economic and social well-being, and on the overall income growth and poverty reduction in the village level. To become cost-effective, Grameen Bank should not only expand its outreach, but also diversify its loan portfolio with more growth-oriented activities. This also requires sound macroeconomic policies from the government. Replication of Grameen’s financial model is possible with necessary modifications as long as it is social-conscience-driven and its operations are transparent.
Foreign Import Restrictions, WTO Commitments, and Welfare Effects: The Case of Republic of Korea
Authors: Pyo Hak K. , Kim Kiwhan , Cheong Inkyo
Published: June 2023

This paper examines foreign import restrictions on Republic of Korea’s exports and its two policy responses: a domestic response in trade policy, investment policy, and foreign exchange regime; and an external policy response in the form of WTO commitments. The paper also analyzes the welfare effects of trade liberalization under WTO Agreements based on two alternative tariff reduction scenarios using a computable general equilibrium model. The simulation results indicate that WTO is expected to create annual gains of US$38 to 50 billion globally, with Korea expected to gain relatively the most from the global implementation of the commitments by WTO member countries, earning $3.3 to 3.7 billion. Therefore, Korea’s policy response to increasing protectionism abroad in the form of a full commitment to WTO Agreements is fully warranted.