Economic development strategy in Southeast Asian countries
Economic development strategy in Southeast Asian countries
Narongchai Akrasanee, Former Thai Minister of Commerce, Jakarta
What should we do about our economic development strategy for
the next phase of our development? The answer depends on our
background and the situation which our economy is in at this
time. Members of the public may be concerned about globalization
and Western domination, and may prefer a less open economy.
Economists may continue to insist on export and foreign
investment oriented strategy, with additional focus on
productivity/ creativity improvement.
Technocrats may insist on restructuring and reform, with
emphasis on sequencing. Businessmen may ask for both protection
and promotion, with support for commerce development. I do not
believe we have a ready-made formula for economic development
strategy.
The formula of the three "lions", i.e. liberalization,
deregulation, and privatization as endlessly advocated by the
World Bank and the International Monetary Fund (IMF) cannot be
taken as a cure for all strategy. The strategy should cover at
least three major areas, with each one designed according to the
development mode of the area.
Area 1 is foreign trade, which has three modes: More for more,
more for less and less for more.
Thailand is in the mode of "more for less", because we are
producing and selling products at lower prices, partly because of
more competition in the markets of the United States and the
European Union. In this case, we must move to the mode of "less
for more". We have to stress "productivity driven growth"
particularly in sectors which we believe we can compete
internationally such as food processing, tourism, and
automotives.
And we need sub-regional, regional cooperation in the forms of
the Greater Mekong Subregion (GMS), Association of Southeast
Asian Nations (ASEAN), ASEAN+ Japan, China and South Korea, for
the purpose.
Area 2 is international finance, which comprises three codes:
No access, accessing without owning, and accessing and owning.
Again for Thailand before 1990 we had no access to
international money and capital market. Our government could have
foreign borrowing, but not the private sector. We had some
foreign direct investment, but with foreign control.
In the 1990s we moved to "accessing without owning". We had
access to global finance, but we ended up owning hardly any
assets bought by that money. Now we need to move to "accessing
and owning". We must make sure that reliance on foreign financing
must be for the purpose of eventual owning of business.
Hence we must be aware of the volatility, mobility, and
sensitivity of global finance. As the 2002 Nobel Laureate in
economics, Daniel Kahneman, teaches his students, decision-making
under uncertainty is determined more by psychology than
economics. The best demonstration of his theory is how global
finance works.
Thus, we cannot afford a fully open capital account, despite
whatever the IMP tells us. And we need to have regional
cooperation to cushion the volatility effects of global finance.
Area 3 is technology, comprising pirating and reverse
engineering, accessing with conditionality and own technology.
Thailand is only moving from mode 1 to mode 2. Now we can
access technology, but with a lot of conditionalities on
intellectual property rights (IPR). We have to develop a system
conducive to innovation, which involves a very comprehensive IPR
system, apart from strong science and technology infrastructure.
For Thailand we are trying to take all those above actions.
We continue to promote exports, but we put much more effort on
the domestic market than before. Domestic capacity enhancement is
the key issue. For foreign market we put more emphasis on ASEAN,
East Asia, and other countries in Asia such as India.
We are active in the GMS, ASEAN economic cooperation, and the
ASEAN+3. And we have initiated an Asian Cooperation Dialog (ACD)
while we maintain links with traditional trading partners in the
West. We refer to this strategy as "Local/regional link-global
reach" or the "dual-track economic policy".
Some of these issues may be of relevance to the deliberation
of economic development strategy in Indonesia.
Do not shut out the West, their ideas and ideals, for there
are a lot of good things in them. Do not ignore economic theory,
for it is the truth. It is the interpretation and application of
the theory that is sometimes the problem.
Don't give up the technocrats, despite their improper
sequencing, for they certainly did a fine job for Indonesia up
until the early 1990s.
Do not blame only the businessmen for the heavy debt of the
economy. The crisis of 1997/1998 was a systemic failure for which
all parties must share the blame. I am a true believer of the
growth and development prospect of Southeast Asia.
We can achieve that by taking a multi-dimensional approach to
economic development strategy. Indonesia can do it. It is
important for Southeast Asia, for Indonesia to be able to do it.
Because, for Southeast Asia, for ASEAN, we can grow only as far
as Indonesia allows us to grow.
The above article is abridged from the writer's presentation
at The Jakarta Post's seminar on Strategy for Indonesia's
Economic Development held on April 28.