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THE East
Asian countries are experiencing an unfolding economic
renaissance, defying expectations after some of the
region’s emerging economies were each hit by a major
financial storm almost a decade ago, a new World Bank
report revealed.
The
World Bank asked: “An economic renaissance is unfolding
in the region in a world where development seems so
ephemeral; how is it that a dozen countries in East Asia
have all been successful?”
The
Bank’s report, “An East Asian Renaissance: Ideas for
Economic Growth” written by its own economists Homi
Kharas and Indermit Gill analyzes new forces and
challenges at play in the region.
The
authors provided several answers, emphasizing that some
East Asian economies were willing to experiment and
adapt policies to changing circumstances, especially
after the 1997 financial crisis in the region.
The
report refers to East Asia as the Asean countries plus
Mongolia, China, Hong Kong, Taiwan, South Korea, and
Japan. Emerging East Asia refers to all except Japan.
Developing East Asia refers to emerging East Asia minus
Hong Kong, South Korea and Singapore.
“Regionalism—formal economic trade agreements between
two or more countries within East Asia—has risen
sharply, with 24 new agreements concluded in the last 10
years and 34 more under negotiation,” said Kharas and
Gill, and said this is partially prompted by
policymakers’ newfound view of the flipside of
globalization.
“East
Asian countries that successfully integrated into the
global economy are now integrating regionally.
Remarkably, this regional integration is happening in
addition to, not at the expense of, global integration,”
the authors said.
The
lessons from the 1997 crisis appear to have taught East
Asian countries to fortify themselves for a continued
international integration, but the World Bank study said
East Asia’s economic renaissance is still fraught with
risks.
It said
the regional financial system may still not be fully
developed to absorb shocks, growing inequality and
increasing corruption.
“When
economies are linked by trade in final goods, a problem
in one country does not necessarily have a big impact on
its trading partners. But when economies are linked by
trade in intermediate goods, the spillovers between
countries are more real. . . This is the vulnerability
to which East Asian economies are exposed today.”
“The
financial system, if well structured, can help allocate
these risks and reduce the likelihood of contagion.
Financial structures in the region need to support
growth in regional production networks and the
supporting trade flows as well as funding innovation,”
it added.
The
study commented that while East Asian growth had been
linked with rapid poverty reduction and growing equity,
there is still a huge incidence of in-country inequality
so that despite successful global integration and
increasing regional integration, many East Asian
countries are failing with domestic integration probably
weighed down by the rural-urban divide as well as an
eschewed labor force structure.
Corruption is also becoming an increasing concern even
as some argue this is payback for the rapid economic
growth countries are experiencing.
“Political scientists hypothesize that if corruption is
organized and centralized, then economic rent can be
extracted from firms while also ensuring that not so
much is extracted that firms move elsewhere or go
bankrupt. In essence, a centralized corrupt organization
has an incentive to promote economic growth, even while
extorting benefits from firms,” the report said. |
