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Asian Economics

Prof. Foudy
Sessions 21, 22 and 23
Southeast Asia
Copyright : Joseph Foudy 2016 (charts and illustrations copyrighted by original sources)

Southeast
Asia

Overview
Preface: Crony Capitalism
1. Facts on Southeast Asia (ASEAN region)
2. Common Issues in Region
3. Vietnam (quick follow up from group)
4. Indonesia
5. Thailand
6. Cambodia and Myanmar
7. Malaysian model (quick follow up from group)
8. Philippines

Preface: Crony Capitalism

What is rent seeking?

What sectors are most amenable to rent seeking?

E.g. Sectors where favoritism and corruption prevail and


firms/individuals get rich insulated from market forces.

Industries vulnerable to rent seeking

Emerging Markets and


Crony Capitalism

Economist
Crony
Capitalism
Index
(% of Billionares in
industries
vulnerable to rent
seeking)

Tommy Suharto

http://news.bbc.co.uk/2/hi/asiapacific/6098010.
stm

1. Southeast Asia

Question
Most and Least Competitive?

GCR Analysis

Questions
-Largest Landmass
-Largest Population
-Largest GDP
-Highest GDP per Capita?

GCR Analysis

ASEAN
Landmass, Population and GDP

ASEAN Per Capita GDP

Source:
http://www.ft.com/intl/cms/s/0/04ec8f4c-0ea6-11e1-b83c-00144feabdc0.html#axzz1sJBizTBj

ASEAN
Per Capita
GDP Growth
(50s to 90s)

Source:
http://www.cairn.info/revue
-d-economie-du-developpemen
t-2006-5-page-5.htm

World Bank Doing Business Survey


Who is the leader in South
East Asia?
Who is the laggard?
(not counting pacific Islands)

World Bank Doing Business Survey

Easiest?
Hardest?

Days to Start a Business

Ease of Getting Electricity

Ease of Registering Property

Ease of Getting Credit

Investor Protection

Investor Protection

Ease of Paying Taxes

Time to Pay Taxes

Ease of Importing/Exporting

Ease of Enforcing Contracts

Indicators
on Asian
Business

Source:
http://www.heritage.org/res
earch/reports/2011/01/key-a
sian-indicators-a-book-ofcharts

Indicators
on Asian
Business

Source:
http://www.heritage.org/res
earch/reports/2011/01/key-a
sian-indicators-a-book-ofcharts

Indicators
on Asian
Business

Source:
http://www.heritage.org/res
earch/reports/2011/01/key-a
sian-indicators-a-book-ofcharts

Indicators
on Asian
Business

Source:
http://www.heritage.org/res
earch/reports/2011/01/key-a
sian-indicators-a-book-ofcharts

Facebook Use

Source: http://www.buzzom.com/2011/09/asias-4th-largest-nation-is-facebook/

Happiness with Standard of Living

2. Common Regional Issues

Role of Colonialism
Corruption
Role of Military
Religious and Ethnic Fractures, Role of
Ethnic Chinese (expanded in Malaysian
coverage)

Role of Colonialism

Only one country in region not colonized

Which one?

Other states were controlled by British or


French
What is the lasting impact?
Development experiences varied -British
colonies generally perform better than
French colonies.

Why?

(Differences in performance have been studied extensively by world bank


and other academic researchers)

Role of Colonialism

Source: http://teacherweb.ftl.pinecrest.edu/snyderd/mwh/projects/ppc/maps.htm

Corruption

Varies by country, but a larger issue than


in Northern Asia
Vietnam, Laos, Cambodia, Myanmar,
Indonesia and Philippines
Has not prevented economic development

But would states have performed even better?

Corruption in Southeast Asia

Transparency Intl Corruption Index 2014


The Best

Singapore

Hong Kong

40

Transparency Intl Corruption Index 2014


The Middle

Malaysia

India

41

Philippine
s
Thailand

Transparency Intl Corruption Index 2014


The Middle

Vietnam

China

Indonesia
42

Transparency Intl Corruption Index 2014


The Worst

Cambodia
Myanmar

Laos

43

State Ownership of the Economy

Two potential issues for these economies

1) Fixed assignment of natural resources or


industries (cartelization) to favored economic
elites

Rent Seeking and Crony Capitalism

2) Extensive use of State Owned Enterprises

Similar to China, Singapore

Geography and Infrastructure

In many Southeast Asian countries, geography


within countries is a challenge
Broken into Islands like Indonesia
Jungle and mountains cut into by only 1-2 lange
roads
Dense urban congestion
Underdeveloped port, insufficient electrical
generation

This is contrast to China and North Asia

Traffic

Role of Military

Military are political and economic players


Contrast with Northern Asia and India
Japan, Taiwan, Korea, India no longer an
important role
China player, but has been bought with growing
budgets, attempts to limit role in economy

In many ASEAN states


Military important economic power, influences
politics
Direct control: Myanmar

Religious and Ethnic Fractures

Japan and Korea ethnically homogenous,


China ethnically dominated by Han Chinese

None of these states has major religious cleavages

Situation is SE Asia is more mixed


For example:
Christian-Buddhist tensions in Vietnam
Buddhist-Muslim tensions in Southern Thailand
Ethnic minorities in Indonesia
Discrimination of ethnic Chinese in Malaysia

Religion Map

Source: http://teacherweb.ftl.pinecrest.edu/snyderd/mwh/projects/ppc/maps.htm

Ethnic Chinese (recall)


Continent/
Country

Article link about Chinese


population

Asia

Overseas Chinese
Population

% of local
population

% of Global
Overseas
Chinese

52,390,000 (2006)

0.7%

83.7%

Thailand

Thai Chinese

8.5 million (2006)

14%

11.7%

Malaysia

Malaysian Chinese,
Peranakan

7.59 million (2006)[3]

24.5%

12.1%

Indonesia

Chinese Indonesian

7.3 million (2003)

3.1%

11.7%

Singapore

Chinese in Singapore

2.7 million (2005)[4]

75.6%

4.3%

Vietnam

Hoa

1.3 million (2003)

1.3%

1.5%

Philippines

Chinese Filipino

1.5 million (2004)

2%

2.4%

Myanmar

Burmese Chinese, Panthay

1.3 million (2003)

3%

2.1%

Japan

Chinese in Japan

175,000 (2003)

0.1%

0.3%

Cambodia

Chinese Cambodian

150,000 (2003)

1.2%

0.2%

South
Korea

Ethnic Chinese in Korea

85,000 (2003)

0.2%

0.16%

Brunei

Ethnic Chinese in Brunei

56,000 (2006)

15%

0.1%

Source: wikipedia

3. Vietnam
My quick analysis:

Comparison to China very useful


Follows reforms in China with similar ones
Lower wages, but smaller market
A China hedge for some firm

Role of military, corruption more


troublesome

Vietnam Case

Vietnam

Saigon Vietnam War Period

Saigon Vietnam War Period

Saigon Today

Vietnamese Government

Vietnamese Government

Government and the Party

Similar to China, government is


subservient to Communist Party

Similar to China, What is still socialist


about Vietnam today post reforms?

How powerful is party/government?

How united is party/government?

And how centralized?

Wage Comparisons

http
://thinkprogress.org/yglesias/2010/07/18/1
97925/where-the-wages-are-really-low/
#

Performance Comparisons

Performance Comparisons

War
Communism
Doi Moi
Normalization
WTO
Not quite sure how they are
calculating/adjusting these
growth rates, but FYI

Demographics

Source: http://www.census.gov/ipc/www/idb/country.php

Recent Economic
Performance

Source: http://www.tradingeconomics.com/vietnam/gdp-growth

Recent Economic
Performance

Top 10 Firms in Vietnam (2012)


- Vietnam National Oil and Gas Group (PetroVietnam)
- Vietnam National Petroleum Corporation (Petrolimex)
- Vietnam Posts and Telecommunications Group (VNPT)
- Samsung Electronics Vietnam Limited Company
- Vietnam-Russia Oil and Gas Joint Venture (Vietsovpetro)
- Military-run Telecom Group (Viettel)
- Saigon Jewellery Limited Company (SJC)
- The Electricity of Vietnam Group (EVN)
- Vietnam National Coal-Mineral Industries Group (Vinacomin)
- Vietnam Bank for Agriculture and Rural Development (Agribank)

Source: http://www.dtinews.vn/en/news/018/26573/state-owned-firms-dominate-list-of-vietnam-s-top-companies.html
http://vietnamnews.vn/economy/246625/state-owned-enterprises-top-list-of-corporate-tax-payers.html

4. Indonesia

Former Dutch Colony


Most populous state in Southeast Asia

Indonesian GDP

Indonesian GDP

Population (2010 Census)

Indonesian Ethnic Map

Source: http://en.wikipedia.org/wiki/Languages_of_Indonesia

Indonesian Religious Map

Capital Jakarta

Volcanoes

Indonesia

Suharto (President 1967-1998)

What can you tell me about? Salient facts?

Indonesia

What was the nature of Suhartos rule?

What did Indonesia have going for it economically in


the 1950s and 1960s?

Indonesia

Who were the Development mafia?

What were the three competing groups for


development?

Development economists/Mafia
Economic Nationalists
Cronies/Corrupt Friends and Family

Tommy Suharto

http://news.bbc.co.uk/2/hi/asiapacific/6098010.
stm

Indonesia

What were Indonesia major failings under Suharto?

What do you make of the Indonesian customs system and


the reforms to it?

What happened with Cloves and Airplanes?

Indonesia

What were its successes? What sectors and


industries?

5. Thailand

As noted, only Asian state never to fall


victim to colonialism

Semi-functioning democracy

Uninterrupted Monarchy with mostly symbolic


powers
Yellow-Red Split illustrative of social and other
tensions within state

Military has played a strong political and


occasionally corrupt economic role

19 military coups since 1932 (latest one in 2014)

Thailand

Economy

Thai Economy

At the same time one of the more


successful ASEAN economies

Per capita GDP is $5,480

Manufacturing hub, including for


automobiles
Foreign investment has been very
patient, but a decade of political instability
as well as some natural disasters has
begun to take a toll on economy.

Thailand

Economy

Thailand

Economy

Thailand

Economy

Credit
Crisis
Floods

Asian Financial Crises

Thailand

Economy

Asian Financial Crises

Thailand

Economy

Source: http://asiapacific.anu.edu.au/newmandala/2010/04/30/thailands-disparity-between-agriculture-and-industry/

Thailand

2011 Flooding

Floods

Thailands King

King Rama IX (1946-Present)

Thailand
Nature of Political Conflict
Who was Thaksin Shinawatra?
Who are the Red Shirts?
Who are the Yellow Shirts?

Red vs. Yellow


Red Shirts: National United Front of
Democracy Against Dictatorship
(UDD) Backers of Shinawatra
family, support from rural poor,
especially in North and Northeast of
country
Yellow Shirts: Peoples Alliance for
Democracy (PAD) Urban, middle
class and pro-business, yellow is
color of Thai monarchy

Thailands Last Prime Minister


(Deposed in Coup 2014)

Prime Minister Yingluck Shinawatra

http://www.youtube.com/watch?v=kOTE8I9uLig&feature=related

The 2014 Coup

The 2014 Coup

Speed of military takeover led opposition to


peacefully accept takeover.

Status Quo does not seem sustainable

Military will have to hold election eventually


The larger divide between urban and rural
interests has not been solved (nor does military
junta seem to have a strategy)
Continues to hurt prestige of monarchy (as
succession is on horizon as King is aged)

6. Cambodia and Myanmar

Cambodia and Myanmar true frontier


states
Corruption and infrastructure major
challenges
Fragile democracies

7. Malaysian Development
My Quick Analysis:

History
Development model
Ethnic conflict

Malaysian History

1511 Portuguese Rule


1641 Dutch Take Control
1800 Growing British influence, then
control
1941-1945 Japanese Invasion and
Occupation
1961 Independence achieved
1969 May 13th Incident
1971 New Economic Policy

Development model

UMNOs New Economic Policy


Modeled explicitly on Japan and Korea
Less successful why?
Differences heavier state role/control, less
competition, export emphasis, more
corruption?
Was this an attractive state for FDI?

Malaysian Economic development


succeeds due to policies in other areas

Political System

UMNO dominance
What can you tell me about Mahathir bin
Mohammad?

Political System

Or Mahatirs successor PM (for now?)


Najib Razak

2 Metaphors for Malaysia:


1MDB and Malaysian Air

2 Metaphors for Malaysia:


1MDB and Malaysia Air

Ethnic Conflict

Chinese are of the Population, but


dominate economy
Strong anti-Chinese sentiment leads to
conflict and systematic discrimination
Chinese firms must have non Malaysian
executives
Discrimination in education (quotas),
government support and government
hiring

Economic Performance

8. Philippines

Failure case in Asia


Former Spanish and then US Colony
Headquarters for Asian Development Bank

Philippines History

Philippines political history has impacted its


development

Spanish Colony
US Protectorate
Japanese Invasion
Independence (with economic and military links to US)

Philippines History

How has the Philippines survived given its poor


economic performance?

US Aid for military bases

Closed for several decades now

International Aid, especially Asian Development Bank


Emigration and Remittances

Philippines Case

Booty Capitalism

Philippines Case

Philippines

Leaders of the Philippines

Ferdinand (and Imelda) Marcos (1965-1986)

Fled to Hawaii

2,700 Pairs

Leaders of the Philippines

Corazon Aquino (1986-1992)

Widow of a opposition politician


assassinated under Marcos
regime
Peacefully handed over power

Leaders of the Philippines

Fidel Ramos (1992-1998)

Former general led Philippines through a period of


peace, stability and economic growth

Leaders of the Philippines

Joseph Estrada (1998-2001)

Former movie actor


Overthrown in Peoples
Revolution
Put on trial for massive corruption
and found guilty of plunder

Sentenced to life in prison, later


pardoned

Leaders of the Philippines

Gloria Arroyo (2001-2010)

Accused of corruption and election rigging


Put on trial by successor, outcome pending

Leaders of the Philippines

Beningno Aquino (2010-Present)

Still in office

Emigration and Remittances


Data from an
unassigned HBS
Case on the
Philippines

Emigration

Emigration

Emigration

Brain Drain

How has the Brain drain hurt the Philippines?

How might it have helped other than remittances?

Philippines

What do you make of the leaders of the


Philippines in recent decades?

Philippines Case

What do these charts tell you?

Questions?