East Asian Economic Miracle and APECs Initiation and Viability - Example

The relationship between 1980s and early 1990s East Asian economic miracle and APEC’s initiation and viability Introduction In spite the 1997-1998 East Asian currency crises; the region is still the fastest growing in the world. The region has some of the first newly industrialized economies such as Hong Kong, Singapore, South Korea and Taiwan. It is argued that demographic transition from high to low rates of fertility and mortality has contributed significantly to economic miracle in East Asia. It is further argued that the demographic transition resulted in faster growth of working population than dependent population between 1965 and 1990 and as such per capita productive capacity of East Asian economies was expanded. The economic miracle was necessitated by social, economic and political institutions and policies that existed in East Asian countries that allowed the region to utilize the growth potential that was created by demographic transition (Ramos, 19). The Asia-Pacific Economic Cooperation (APEC) was founded by Australia in 1989. At the time, only 12 economies participated in the APEC forum that was held in Australia. Currently the forum has 21 members. APEC has become a regional pre-eminent economic forum. The forum facilitates economic prosperity and growth. It pursues a vision of creating seamless regional economy. These goals are pursued via trade and investment liberalization, economic and technical cooperation and business facilitation. APEC’s continuing viability For sometime, APEC has been criticized for spending much time talking and investing less time on acting on issues discussed. Thus, the forum is seen as one with strong goals and short on achievements. As such, critics have argued that APEC is organizationally weak and lacks continuity. The fact that the forum has survived for about two decades is a clear indication that it has been a success. Proponents of the forum argue that the forum has contributed remarkably to economic growth and transformation that has been witnessed in the region (Cammack, Paul & Richards, 13). The forum is based on voluntarism, consensus and concerted unilateralism. Australia is of the opinion that the forum is a valuable one and that there is need to strengthen organizational and operational output. The continued support of the forum by Australia could be attributed to continued economic growth in this region. It seems Australia still believes that since most countries, which experienced the East Asia miracle, are members of the forum, APEC offers a better opportunity for the region to share ideas and ensure sustainable economic growth. One of the factors cited for the growth of East Asia economies in 1980s and early 1990s is macroeconomic discipline and macroeconomic balances that was ensured in these countries. During the East Asia miracle period, the said countries kept inflation below 20%. Although single digit inflation was not a policy priority and was not ensured during this period, countries in the region strived to keep inflation below 20% especially in high performing Asian economies (Eglin 495). This seems to be related to APEC’s commitment to reduce business costs in the region. By attaining this objective, the region can attract unprecedented investment and economic growth. Thus, APEC is still a viable tool for ensuring the regions continued economic growth. Even though during East Asian miracle time, the fiscal balance and the current account of the balance of payments were not strictly adhered to, the macroeconomic balances that existed in these countries were largely responsible for rapid economic growth for the region. APEC as a forum also pursues similar goals of ensuring that macroeconomic balances exist in the region. Thus from the macroeconomic perspective it seems that Australia continued commitment to APEC seems to have been predicted on the 1980s and 1990s East Asia miracle economic development (Young, 655). Another reason provided for the rapid economic growth of East Asian countries was provision of physical and social infrastructure. Most physical infrastructure in East Asia with exception of Hong Kong was being provided by governments during the East Asian miracle period (Charles & Hyun-Hoon 270). This is contrary to Breton Woods’ institutions, which advocate for these facilities to be provided by private investors. In addition, social infrastructure in the region was mainly provided by the respective country government. Although Breton Woods’ institutions advocate for provision of universal primary education, countries in these region invested heavily in higher education, which resulted in increased skilled human resources in the region. APEC forum brings together view of both governments and private investors in the region. This implies that all stakeholders are involved in the discussion and resolution at the forum. Consequently, there has been an increased involvement of the private sector in the provision of both physical and social infrastructure in the region (Stephenson, 109). The concerted efforts of governments and private investors in the provision of these services have greatly been influenced by APEC and as such, APEC is a viable forum. Given that there has been integration of suggestion of the Briton Woods institutions and the actual experience of the East Asian countries during the economic miracle period, it could be argued that Australia’s continued support is partly predicted by the 1980s and 1990s East Asian economic miracle. Good governance is also cited as one of the reasons behind the 1980s and 1990s East Asian economic miracle. Good governance has often been used tautology instead of referring to ability to ensure that things go well. During this period there existed strong governments in East Asian countries that necessitated economic growth in the region. The governments had embedded autonomy that was characterized by institutional capacity and capability to effectively provide the coordination that necessitated rapid accumulation and economic transformation (Charles & Hyun-Hoon 280). The embedded autonomy was enabled by stakes, special interest groups, and distribution coalitions and rent seekers that existed in the East Asian countries. These groups were crucial in ensuring that regimes in East Asia effectively implemented favourable or conducive policies that ensured continued development oriented states. Governments in East Asia also put in place policies that encouraged saving and investment. Some of the countries in the region such as South Korea and Taiwan had policies that discouraged capital flight during this period. APEC has for sometime been committed toward ensuring that capital markets, transport, competition policies, government procurement processes, intellectual [property rights, regulatory measures and investment measures embraced among members are strong. This constitutes strong governance and as such ensures continued economic viability of the region. Thus, the forum can be argued to be still viable in the region. Furthermore, one could argue that the continued support of this forum by Australia is predicted on the events of 1980s and 1990s that took place in the East Asian countries. Creation of conditions that necessitated investment attraction, both foreign and domestic private investment, helped in reforming incentives and governance to attract specific types of investments for generation of particular sources of economic growth instead of liberalizing financial markets. This is contrary to what was instituted in Singapore and Malaysia, which sough to attract foreign direct investment into areas where indigenous industrial capabilities were not expected to become internationally competitive. The policies advocated during this period in relation to market liberalization seem to differ from those being advocated by APEC. APEC has laid focus on liberalization and facilitation of trade and investment through barrier reduction at the border to help economic growth and cooperation. Since cooperation would ensure increased market for the products produced in the region and access to large pool of human resource, APEC’s goals are still viable in times when market numbers are a great factor in ensuring economic growth (Eglin 490). Cooperation would in long term also ensure economic integration in the region and hence make the region to be one of the most prolific economic powerhouses. This objective pursued by APEC seems to divert from the view that continued support for the forum by Australia is premised on the developments that took place in 1980s and early 1990s in East Asia economies. APEC’s continuing utility APEC’s was mainly formed to champion for neoliberal reform that had never been witnessed before in the East Asian region. This implies that the initiation of the forum was not completely predicted upon the successful growth of economies in the region. It seems that the idea is being imposed on the region, which has little history of, or enthusiasm for such changes. Given that the forum was almost invisible during the late 1990s economic crisis that hit the region is an indication that its mode of voluntarism and consensually determined and cooperatively attained policy outcomes are not capable of attaining similar results. APEC has been criticized for acting as a response to a fundamental need in the 5region for a structure of certainty (Winters, 15). Moreover, the forum has been under fire for trying to economically and politically integrate members who have a wide range of political and economic formation and for having potentially incommensurate purpose and character. The decision by APEC to accept Russia as a member was seen as a limitation and as such, the forum was seen as being insignificant for attaining fundamental economic reform in East Asia. Australia is seen to have had finely grained perception of a national interest while it was forming the forum. Australia wanted to use the forum to pursue national interests via transnational mechanism when it formed the institution. It is argued that the participation of USA in the forum was critically important for providing the much-needed market that ensured rapid economic growth in the region. Australia has continued to support the forum because its policy is influenced by economic advisor who subscribe to the predominantly Anglo-American, market oriented orthodoxy, the strategic and economic reorientation toward Asia (Gareht & Colin, 690). During the time, Australia was loosing commitment toward multilateral principles and hence Australia had to establish insider status in some form of regional trade groupings. Australia was increasingly focusing on investment and trade in East Asia and hence the formation of the forum was vital to avoid being excluded from the region. It could be argued that the opportunities that existed in the region for trade and investment during the 1980s and early 1990s and the East Asia economic miracle influenced the formation of the forum (Eglin 505). The agenda promoted by APEC, fiscal discipline, financial and trade liberalization, privatization, deregulation, openness to investment and increased need for transparency of economic and political process, makes the forum to be of advantageous to the region. When these goals are realized, the region can reap from increased market and investment and trade opportunities. In spite having good agenda; the implementation of the ideas are faced with hurdles related to differing interests and positions held by member countries. Openness of the region is intended to reduce costs of running business in the region and as such reduce cost of goods. However, the non-binding nature of this notion does not conform to the existing political and economic patterns in the region. As such, the forum has often found itself at cross roads by advocating for both unilateral and reciprocal liberalization. Given this divergent advocacy, it seems the forum wants to move along with some of the policies that were in place during the East Asia miracle and at the same time wants to conform to market principles in existence. Thus, it could be argued that Australia’s continued utility of the forum is partly influenced or predicted by the events of 1980s and early 1990s in the region that necessitated rapid economic growth. APEC’s continuing prospects There exist various prospects for APEC. First, as a cheerleader, APEC can generally support the progress of multilateral trade negotiations and at the same time apply pressure to key countries while suggesting visionary initiatives and monitoring compliance. Second, APEC can act as a laboratory given its experience in the reform process and as such, it can act as a model or demonstration to the rest of the world. The forum can demonstrate the effectiveness of its own initiatives in areas such as trade facilitation and could tailor its work program to test out promising new ideas with possible wide-ranging application. Third, APEC can act as a coalition since it is made up of a large group of countries that could extremely be influential if it adopts a common approach and joint bargaining objectives. APEC could also act as a competitor in case there is no progress being made globally or if APEC members feel that they want to move faster. In this case, APEC could undertake its own program of liberalization. The continued stalemate in the economic cooperation in the region implies that APEC need to continue playing proactive role if its goals will have to be realized (Ki, 80). Given that the 2001 forum focused on the international terrorism, APEC has prospects of playing an important role in political and security related matters of the region even though this was not one of its initial roles or objectives. Critics of this move have argued that APEC has no history and expertise in security and political matters and it ought not to indulge itself in such agenda. In addition, it has been argued that the two main players in the forum, China and USA do not generally support multilateral approaches to security but instead they favour bilateral approaches. Moreover, china has refused to discuss security questions in any forum in which h Taiwan is also a member on the basis that Chinese Taipei was only admitted to APEC as a member economy. Even if this is the case, APEC could in future facilitate such bilateral approaches toward ensuring security in the region. Moreover, it has been argued that APEC has always played an implicit political and security role. Thus, the forum provides leaders with an avenue to meet as a group and especially when they have bilateral or small group meetings to discuss any pressing current regional or global problems. Thus, APEC is a de facto security forum. Since there has been no progress in the ASEAN Regional Forum, APEC could play a vital role in ensuring regional security. Given the changing economic environment, it is imminent that APEC will have to align its goals and objectives to the changing environment. It is thus arguable that although one could say that Australia’s continued support for the forum is premised on the region’s previous economic performance, this is no ;longer the case since the economic atmosphere in the region has greatly changed. The increased membership of the forum and inclusion of some of the most powerful economies in the forum is an indication that the prospects of the forum are bright especially at the time when many nations are advocating for economic liberalization. The interrelationship between economic and political considerations in foreign policy relations Although in the past there has been separation between economics and politics, the two concepts have been loosely linked although in a benign way. It was previously assumed that economic growth resulted in more trade and more interaction between countries. as a consequence of this there would be greater familiarity with others and increased economic interdependence that would result in a more stable world. Increased income is argued to encourage democracy to be established (Winters 20). This is important toward encouraging international relations that are more peaceful. This argument is premised on what is referred to as democratic peace theory. This theory postulates that no two democratic nations will go to war. Contrary to this, some opponents of the theory have argued that economic growth could increase the probability of destructive war. Proponents of this view argue that as the national income rises, the country is able to acquire more sophisticated and destructive weapons. In addition, as globalization increases and competition between trading countries intensifies, tensions may grow. New cause of conflict might arise due to competitive position of nations based on increased access to new technology, industrial and scientific rivalries. In case such a position is true then there is need for APEC to enhance the security environment of the region. As such, APEC could play an essential role of ameliorating the economic and trade rivalries in the region. Over the time, APEC has been confronted by issues related the structure, operation and funding of the forum. APEC’s structure and methods are based on ASEAN structures and methods. Decision making at the forum are mainly based on consensus rather rules based method advocated by some members such as USA (Wacziarg & Keith, 70). The consensus methods have received support because it is argued that it prevents bullying of smaller members by large nations. APEC also lacks a large secretariat, which makes it impossible to undertake complex analyses that could be helpful to leaders. The small secretariat is preferred in order to ensure that the freedoms and rights of action of the nation state do not become subordinated to an international body such as APEC. The forum also has limited funds that can help it implement its programs or to undertake new initiatives. Contribution depends upon the constituent governments. The forum also has diffuse and cumbersome decision-making system. The system is complex with various networks and committees of which some are unaware of what is being deliberated other groups. it is argued that for APEC to be successful in its agenda it ought to access more resources, larger and more proactive secretariat and ability of ensuring that participating nations live up to their obligations and promises. It is thus apparent that the interrelationship between economic and political considerations in foreign policy relations is dependent on the international body in existence. For the case of APEC, the relationship is mainly guided by the existing structure, operations and funding of the forum (Ponciano & Myrna 50). The interests of various groups in the forum have made it difficult for the institution to have binding rules that guide the forum. In addition, it has limited the establishment of a large secretariat and the ability of the forum to access enough funding. Conclusion East Asian remains the fastest growing region in terms of economy in spite the late 1990s economic downturn. The Asia-Pacific Economic Cooperation (APEC) was founded by Australia in 1989. At the time, only 12 economies participated in the APEC forum that was held in Australia. Currently the forum has 21 members. APEC has been criticized for spending much time talking and investing less time on acting on issues discussed. However, the fact that the forum has survived for about two decades is a clear indication that it has been a success (Toshio 50). The forum has contributed remarkably to economic growth and transformation that has been witnessed in the region. The continued support of the forum by Australia could be attributed to continued economic growth in this region. One of the factors cited for the growth of East Asia economies in 1980s and early 1990s is macroeconomic discipline and macroeconomic balances that was ensured in these countries. This seems to be related to APEC’s commitment to reduce business costs in the region. Another reason provided for the rapid economic growth of East Asian countries was provision of physical and social infrastructure. APEC forum brings together view of both governments and private investors in the region (Intal & Findlay, 95). This implies that all stakeholders are involved in the discussion and resolution at the forum. As a consequent, there has been an increased involvement of the private sector in the provision of both physical and social infrastructure in the region. Good governance is also cited as one of the reasons behind the 1980s and 1990s East Asian economic miracle. APEC has for sometime been committed toward ensuring that capital markets, transport, competition policies, government procurement processes, intellectual [property rights, regulatory measures and investment measures embraced among members are strong. Given these developments, it could be argued that Australia’s continued support for the forum is partly predicted by the 1980s and 1990s East Asian economic miracle. However, policies advocated during this period in relation to market liberalization seem to differ from those being advocated by APEC (Allen &smith, 74). This objective pursued by APEC seems to divert from the view that continued support for the forum by Australia is premised on the developments that took place in 1980s and early 1990s in East Asia economies. APEC’s role in promotion eradication of cross border trade and investment barrier and its emerging role toward security of the region make it to be advantageous to the region. Thus, it could be argued that the opportunities that existed in the region for trade and investment during the 1980s and early 1990s and the East Asia economic miracle influenced the formation of the forum. The forum has various prospects for the region ion ensuring economic growth, free trade and investment in the region (PECC 122). There has been increased relationship between economic and political consideration in foreign policies adopted by APEC in the region. The forum has over the time respected the autonomy of member states as it advocates for the liberalization of the regional economy. Work cited Allen Daniel & Smith Michael. ‘External policy development’. In Nugent, N, (ed). The European Union 2005: an annual review of activities (Journal of Common Market Studies), 34.4, 63-84. Cammack, Paul & Richards Gates. ‘Introduction: interpreting ASEM”. Journal of the Asian Pacific Economy 4.1 (2009): 1-12. Charles Harvie, Hyun-Hoon Lee. Export-led industrialization and growth: Korea's economic miracle, 1962–1989. Australian Economic History Review 43.3 (2003): 256–286. Eglin Michael. ‘China’sentry into the WTL with a little help from the EU’. Journal of International Affairs. 73(3): 489-508. Gareht Richards & Colin Kirhpatrick. “Reorientating interregional co-operation in the global political economy: Europe’s East Asian policy”. Journal of Common Market Studies, 37.4, (2009): 683-710. Intal, Paul and Findlay Collins. 2008. Beyond Liberalization of Trade in Goods: Alternative Strategies for Regional Trade and Investment Facilitation. In Europe East Asia and APEC." A Shared OlobalAgenda edited by P. Drysdale and D. Vines. Cambridge University Press. Ki Fukasaku “Overview: Miracle, Crisis and Beyond: The Impact and Coherence of OECD Country Policies on Asian Developing Economies”. June 2004. PECC (Pacific Economic Cooperation Council). Perspective on the Manila Action Plan or APEC. PIDS. The Asia Foundation. 2006. Ponciano Intal & Myrna Austria. “APEC: A Review and the Way Forward”. Journal of Philliphine Development 49.1 (2005): 49-105. Ramos, Fredric. Enhancing a Culture of Cooperation. Speech delivered during the opening of the 2006 APEC Ministerial Meeting. Manila, 22 November 2006. Stephenson, Silas. The Economic Impact of Rules of Origin in the Asia-Pacific Region. Paper Presented at PECC TPF IX, Seoul. 2006. Toshio Kamo. “An aftermath of globalization: East Asian economic turmoil and Japanese cities Adrift”. Journal of World-Systme Research 1.11 (2005) 23-87. Wacziarg, Reign, and Keith, Welch. “Trade Liberalization and Growth: New Evidence”, NBER Working Paper No.10152, National Bureau of Economic Research, Cambridge MA. 2003. Winters, Laban. “Trade Liberalisation and Economic Performance: An Overview”, Economic Journal, 114.2 (2004): 4-21. Young, Alfred. “The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience”. Quarterly Journal of Economics 110 (2005): 641–680. Read More