T17bP17 - Understanding Growth Slowdown in Asia and the Way Forward

Topic : Sectorial Policy - Economics

Panel Chair : Sasidaran Gopalan - sppsdg@nus.edu.sg

Panel Second Chair : Mulya Amri - sppmuly@nus.edu.sg

Objectives and Scientific Relevance of the panel

Call for papers

Session 1

A Cross-Country Analysis of the Impact of Predictability and Accountability Transparency practices and FTA on trade Growth in selected countries of Asia-Pacific Region:Trade Policy

Rosalyn Perkins - rosalyn.perkins@runbox.com - University of Santo Tomas, Manila - Philippines

Mary Caroline Castaño - marycaroline.castano@gmail.com - University of Santo Tomas - Philippines

Conrad Montemayor - ctmontemayor@yahoo.com - University of Santo Tomas Graduate School - Philippines

ABSTRACT


The expanding clique of research exhibits that predictability and accountability were indispensable dimensions of transparency in International Trade (Lejarraga & Shepherd, 2013; Turnes & Ernst, 2014), and at most important in a current setup of boosting trade policy on trade agreement. The current study indicated that predictability measured to selected Asia-Pacific Region data had a significant impact on trade growth. This impact maintained in same sense in the existence of both predictability and accountability transparency practices and the free trade agreement (FTA). Quantitative evidence was presented for these effects by centering on predictability and accountability transparency practices and FTA in trade policy. Panel data derived from World Trade Organization (WTO), World Bank Organization, and Asian Development Bank (ADB) databases of 15 selected countries of the Asia-Pacific region (ASEAN + 5) covering the period of 2009-2013 were used in the study. The parameters were estimated using Ordinary Least Square Regression (OLS) mechanism through three panel models namely a) Common Pooled Data b) Fixed Effect Model (FEM) c) Random Effect Model (REM) to examine the impacts of predictability and accountability transparency policy practices and FTA on trade growth. The study concluded that predictability and accountability dimensions of transparency practices were significant parameters to boost trade growth. The exchange rate predictability reduced volatility on various factors affecting trading activity. Also, transparency practices of regime’s accountability to its WTO commitments and obligations wards off efforts of protectionism at public policy measure actions and decreased number of disputes among trade partners. Moreover, study found that increased in numbers of FTAs had a significant impact on trade growth. Results showed that statistically predictability measured by exchange rate and free trade agreement measured by number of FTAs signed and in effect are significantly related to trade growth at 5% level. The accountability measured by the number of disputes had no significant relationship to trade growth. The study recommends that transparency practices incorporating predictability and accountability should be employed in Trade Policy and should form more numbers of Free trade agreement among other countries. The Trade growth model served as basis for trade policy formulation and innovation.


Keywords: Predictability; Accountability; Transparency; FTA

Prioritising Foreign Investment in APEC

Anthony Makin - t.makin@griffith.edu.au - Griffith Asia Institute - Australia

Economists since Adam Smith (1776) and David Ricardo (1817) have argued consistently that international trade in goods and services improves nations’ overall economic welfare, a view reflected in APEC’s motto: “Advancing Free Trade for Asia-Pacific Prosperity.”  A corollary is that trade restrictions are welfare reducing since they impose additional direct costs on consumers and indirect costs on exporters.  Restricted trade also implies that domestic producers operate in smaller markets than otherwise, while less import competition fails to check firms’ domestic market power.

 

The 1994 APEC Bogor declaration which advocated “free and open trade and investment in the region” provided a foundation for APEC’s subsequent program of regional economic integration.  However, in practice advocacy of greater cross-border investment has paled in comparison to APEC’s advocacy of greater international trade in goods and services.  Likely reasons for this bias include the greater political sensitivity of foreign investment and that, historically, the international economics literature has focussed more heavily on the theoretical benefits and evidence of liberalising international trade in goods and services than on liberalising foreign investment flows.  

 

Yet greater cross border investment within the APEC and between APEC and the rest of the world could play a greater role in Asia-Pacific economic development since significant further expansion of regional trade in goods and services has stalled in light of the already significant lowering of trade barriers to date, the abandonment of the Trans Pacific Partnership (TPP) and slow progress with the Regional Comprehensive Economic Partnership (RCEP) and overarching Free Trade Area of Asia and the Pacific (FTAAP).  As an alternative pathway to higher growth and living standards, facilitating greater foreign investment flows within APEC and with the rest of the world would allow capital to move to where it can most productively be employed, in the process delivering benefits akin to those bestowed by expanding international trade.

 

This paper proposes that liberalising foreign investment should be afforded a high priority in APEC in view of the mutually beneficial effects that accrue to both recipient and source economies.  Section 2 highlights the small scale of international investment flows in APEC economies relative to their international trade flows and examines APEC foreign investment trends in global context.  Section 3 advances the key micro- and macroeconomic economic arguments for accelerating international investment, before Section 4 examines the relationship between foreign investment and national income levels.  Section 5 concludes that liberalisation of foreign investment in APEC should be prioritised to bolster regional and world economic growth.

 

 

 

Retirement, work and aging in Korea: understanding the labor pool in an aging economy

Jimin Ha - j.ha@u.nus.edu - National University of Singapore - Singapore

Unprecedented pace, now and projected, of population aging in Asia has direct implications to the shrinking size of labor force, as older workers retire. It is vital for countries facing such challenge to improve their retirement systems that can help enhance the life quality and productivity of their senior people. As an abundant labor force was a driver for growth in the past in Asia as argued in demographic divided literature, aging phenomenon could be disruptive for growth if not prepared for. Policy recommendation in response is often suggested to be extending working lives of older workers. On that note, understanding retirement behavior is important in terms of when, how and why.

 

In Korea, the late average effective retirement age, rigid nature of labor market, and yet an existence of contractual mandatory retirement age in practice points to the following question: is the current arrangement and work practices ideal in enhancing the quality and productivity of their senior people at workplaces? It is important to understand the labor mobility of older workers near retirement age. On that note, effects of the contractual mandatory retirement age on workers and their policy implications will be explored as well.

 

Korean Longitudinal Study of Ageing (KLoSA) data will be used for analyzing labor mobility of older workers as the data inform how individuals change work at the time of survey reference point. How mandatory retirement age in employment contract condition affect older worker’s retirement behavior will be analyzed through panel regressions.

Policy Responses to External Economic Shocks: evidence from Uzbekistan

Salahodjaev Raufhon - salahodjaev@gmail.com - Central Asia Research Group (CARG) - Uzbekistan

Bekhzod Omanbayev - bekhzod.o@centil.law - Central Asia Research Group - Uzbekistan

Recently Uzbekistan government has set an ambitious goal to enter the league of higher upper middle income countries through the implementation of sustainable development policies. As shown by recent studies, it is equivalent to 8 percent annual growth in gross domestic product (GDP) over the next 15 years (Cornia, 2014).

Obviously, the achievement of this goal depends not only on the government’s efforts in dealing with internal socio-economic environment but also equipping the national economy with necessary instruments to withstand and cope with a number of external shocks.

Past Uzbekistan experience shows that much of the success of national economy within the first and second decades of the transition was predominantly determined by favorable prices for Uzbekistan’s key export items (cotton, gold, gas), inflow of remittances, government-led investment programs, and, gradual approach to development (Pomfret, 2012).

On the other hand, recent shocks on the commodity markets and worsening macroeconomic environment in EU and the US have posed a question whether resource rich Post-Soviet countries such as Azerbaijan, Russia, Turkmenistan and Uzbekistan can maintain stable growth rate in the mid-term. Indeed, the prices for oil have decreased by more than 50% in June 2014 creating much uncertainty and challenges for the ruling bodies in these countries. The evidence shows that the magnitude of this shock was very different across-both developing and developed resource rich countries.  For example, the GDP growth in Botswana decreased from 9.9% in 2013 (preshock period) to negative minus 0.3% in 2015.  While some countries such as Saudi Arabia, managed to maintain the GDP growth rate in line with past trends. Turning to the GDP growth of Uzbekistan, it may seem that external shock did not exert any sizeable impact on the overall GDP growth trends as the average growth remained stable at nearly 8% from 2013 to 2015 (Figure 1). However, in this study we show that the picture is more complex as the external shock had effect on various socio-economic variables.

Therefore, the aim of this report is to explore the effect of 2014 global oil price drop on Uzbekistan economy. Following the traditional approach and empirical literature, the study builds its line of argument on a three potential transmission channels of external (oil) shock on Uzbekistan economy: trade, remittances and financial channels.

In this study we argue that reforms aimed at structural transformation which will lead to inflow of FDI, technological advance and trade liberalization and trade diversification are the main policies to reduce the effect of shock and maintain rapid growth rates in the mid-term.

In the framework of structural transformation, we believe that international financial institutions (IFIs) may play important role by supporting large scale modernization and infrastructure projects and financing private sector. On the other hand, we also believe it is important to take into account high rates of dollarization of economy as it is observed in other post-soviet states. 

Winning back some lost Ground: What is the long term cost of Jokowi-Kalla's efforts to reduce Impact of Global growth slowdown on Indonesian economy?

MUYANJA SSENYONGA JAMEABA - muyanja.ssenyonga@gmail.com - Department of Management and Public Policy, Faculty of Social and Political Sciences, Gadjah Mada University - Indonesia

The thrust of this paper will be to identify and assess the impact, of various policies which Jokowi-Kalla government has implemented since assuming power that have characteristics  of  being a response to the consequences of protracted  deregulation, and economic liberalization of trade in the production, and trade of goods and services. Doubtless, thanks to the protracted global economy slowdown, countries in general and elected governments in particular are reverting  to populist autarky   policies that inward looking hence don’t consider the potential for retaliatory beggar-thy –neighbor-policies from  other countries in the region and other parts of the World, hence sparking off race to the  bottm policies that benefit no one.  To that end, this paper will look into policy innovations (regulations, laws, and programs), introduced or proposed by the Indonesian government to reduce the impact of   globalization on the economy and society, especially during the protracted global economic slowdown that begun in 2009. In addition, the paper will try to identify the problems that are emerging as the government lives to its pledges to implement what are no doubt anti-globalization policies, albeit mild and indirect ones), and how the government is trying to overcome them and to what degree of success. In trying to find answers to the above research objectives, this paper will use in-depth interviews of officials at the local government and central government level in the Ministry of economic planning and National economic development planning agency (BAPPENAS), Ministry of Trade, and Ministry of Agriculture. Secondary, I will also use information that is published by the government, ministries and local government offices in government annual performance evaluation reports, annual government budgets, and statistics that will obtain from a number of sources that will include central bureau of statistics, IMF outlook datable, Asian development bank, and world development indicators (World Bank). Economic sector wise, the research will focus on international trade, agriculture, and financial services

While the focus of this paper will be on the regulatory framework put in place, the study will also look into other policy forms implemented since Jokowi took office on October 20, 2004 to the present day, that are related to rolling back the effects of globalization on  Indonesian economic independence. Jokowi won the elections by touting himself as one of the common people, which fitted in well with his family background, hence outwitting his rival who despite promising similar populist policies lacked his Wong Cilik credentials and tumultuous post Suharto political history.  Jokowi pledged to revitalize the agricultural sector, especially the food crops subsector for long  neglected; pledged to re-orient Indonesia’s development focus from a territorial nation to a maritime one; pledged to improve and expand physical infrastructure; achieving  food security; and facilitate the emergency of proud, independent, creative  thinking Indonesians  through a mental revolution that will entail improving educational quality,  enhance creativity, reinventing the importance of the  collective spirit to forge   cooperation and collaboration, within the framework of unity in diversity moto, and all  underpinned  and informed by five  pillars of PANCASILA .  

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