1989/AMM/018
Asia Pacific Economic Cooperation: World and Regional Economic Developments - Background
Information Paper
Submitted by: Australia
1st APEC Ministerial Meeting
Canberra, Australia6–7 November 1989
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APECI/lf2
ASIA PACIFIC ECONOMIC COOPERATION
WORLD AND REGIONAL ECONOMIC DEVELOPMENTS
Background Information Paper by Australia
This paper assesses economic developments and prospects in the Asia Pacific region and the world,against the background of the common economic interests of the economies of the region and their role in promotingsustained world economic growth. The paperemphasises the large and growing economic linkages and interdependencein the Asia Pacific region as well as the need to pursue policies that facilitate continued growth and dynamism. Outwardlooking cooperation is acknowledged as important in enhancing economic growth prospects and trade and investmentflows.
1. ECONOMIC DEVELOPMENTS AND PROSPECTS
A. Economic Developments and Prospects
2. Most economies in the Asia Pacific region(l) are progressively establishing more open economicenvironments with greater reliance on market forces for pricing and investment decisions. This has helped to improvethe performance of these economies and has increased their significance in the world economy. They have also becomeincreasingly influenced by economic circumstances in the rest of the world.
(i) International developments
3. World economic conditions have been relatively favourable over much ofthe 1980s. The industrialisedcountries are now in their seventh year of uninterrupted expansion. Over this period. inflation has fallen. employmenthas expanded and investment and world trade have been particularly buoyant In the industrialised countries, real GNPgrowth has averaged 2.7 per cent per annum over the 1980s and was 4.3 per cent in 1988. Inflation fell from a peak of11.8 per cent in 1980 to 2.4 per cent in 1986, before rising to 3.3 per cent in 1988. Gross fixed investment increasedstrongly throughout the period, particularly in recent years. World trade growth has also strengthened, averaging about4 percent perannum over theperiod but reaching almost9 percent in 1988. Key dataare inTables 1and 2 in theStatisticalAppendix.
4. This sustained economic performance of the industrialised countries in recent years reflects severalfactors: thc increased attention given to setting policies in a medium-term framework; generally lower fiscal deficitsreducing demands on private savings; micro-economic reform; wage restraint and strong productivity growth in manycountries; more cooperation among the larger industrialised countries on economic policy predominantly on exchangerates; the absence of major shocks; and relatively low oil prices.
5. Growth among the world's developing countries averaged around 3.25 per cent per annum during the1980s, but has been less evenly distributed. Performance in developing Asia (which averaged 7 per cent) greatlysurpassed that of other developing regions. Many highly indebted countries benefitted little from the favourable worldeconomic environment and their growth virtually stagnated while inflation rose sharply. These countries shared little inthe increase in world trade over the 1980s.
(ii) Developments in the Asia Pacific region
6. During the 1980s, the Asia Pacific region was the most dynamic in the world.
7. The region as a whole weathered well the global recession of the early 1980s and growth acceleratedover the remainder of the decade. There were disparities in the economic performance ofindividual economies, but realGNP growth of the region averaged 3.5 per cent per annum, exceeding that ofall industrialised countries. Real GNP percapita has improved greatly, rising by nearly 6 per cent per annum since 1980. Regional trade has been particularlybuoyant increasing by an average 6.5 per cent per annum over the period (compared with around 4 per cent per annumfor the world) and by 13 per cent in 1988. Business investment has also increased strongly. Further data are in Tables2 and 3 in·the Statistical Appendix.
(I) Defined for purposes of this paper as Australia, Brunei, Canada, People's Republic of China, Hong Kong,Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, The Philippines, Singapore, Taiwan, Thailand andthe US.
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8. The industrialised countries of the region are amongst dle latest growing of the indnstrialised group andmaintain~.{j solidgrowth over the 1980s (averaging 3.1 percentperannnm), whilegenerallyexpcriencing fail ing inflationand strong employment growth.
9. Most ofthe othereconomies in the rcgion have experienced higher rates ofgrowth. TIle growth in outputand trade ofthe Asian NlEshas been exceptional (with output increasing by 7.5 per cent per annum and trade by 11.5per ccnt per annum).
10. TI,e sound economic performance of these economies now seems firmly entrenched. 'TI,e steadymovement towards a policy framework that accords a more important place to outward-looking commercial, industrialand financial policies and that relies primarily on market forces to ensure efficieney in resource allocation decisions isone factor behind this performance. In recent years domestic policy reform has been extended to the non-traded goodssectors of these economies.
I!. The prolonged expansion of the world ~,conomy since 1983 and the relatively open internationaleconomic system have also assisted the economic performance of regional economies. Other important factors includehigh ratcsofsavingand investment; betterdomestic macroeconomic management; willingness to undcrtakemicrocconomicreform to facilitate necessary strnctural change; hard-working and increasingly well-educated work forces; politicalstability and, for dle most part, peace; maintenance of the competitiveness of their exports; and, since the mid-1980s,improvement in non-oil commodity prices.
12. One important result ofsuch developments is that the relative si,,c ofeconomies ofdifferent regions ofthe world now differs from dle situation two decades ago. As shown in the table below, the relative importance of theAsia Pacific rcgional economy has risen substantially.
Share of Share orWorld Trade World Output (a)
per cent per cent1967 1987 1967 1987
Nordl America 20 18 30 26Japan 5 8 5 13
OtherAsia PacificRegion 8 12 4 5
TotalAsia PacificRegion 33 39 39 44
EC (b) 39 40 18 23
(a) Includes World Bank non-member, non-reporting countries, such as the USSR.(b) As now constituted.
13. TIle region's trade performance over the past decade in particular has been unparalleled. In 1987, Uleregion accountcd for 38 per cent of world exports and 39 per cent of world imports, compared with 31 and 33 per cent,respectively, a decadc earlier. Growth in Asia Pacific exports'aecounted for over 40 per cent of the increase in worldexport' in the ten years to 1987.
14. The output of the rcgion comprised 44 per cent ofdle world's output in 1987, compared with 40 percentten years earlier.
15. The gready expanded trade and productivityofthe region have improvedeconomic well-beingata fasterrate than inouler regions. In 1987 average per capita output in the region was 38 per cent of that for the EC, comparedwith 34 per cent ten years earlier. Excluding China, average per capita output in 1987 was 86 per cent of that for the Ee.
16. The relative position of the Asia Pacific region in the world economy should continue to expand. TI,esheer size of the population of the region indicates its productive and demand potential. The 1.9 billion people in theregion in 1988 represented some 37 per cent of the world's population. Forecasts for 2000 put the GNP of the region at
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a level more than 220 per cent of that of the EC (compared with around double now) and show a continued reductionin the disparity between the per capita GNPs of economies in the region.
(iii) Short-term prospects
17. The short-term outlook for the world economy is for continued, but slower growth, with higherinflation.Latest IMF forecasts for the industrialised countries(2) suggest that real GNP growth will slow from 3.25 per cent in 1989to 2.75 per cent in 1990. In the developing countries, growth of 3.25 per cent is expected in 1989, followed by a pickup to 4 per cent in 1990. World trade expansion is expected to slow to around 6.5 per cent in 1989 and 5.s per cent in1990. Growth in gross fixed investment should decline and inflation in the industrialised countries, after rising to 4.5 percent in 1989, is forecast to ease to about 4 per cent in 1990. Further data are in Table 4 in the Statistical Appcndix.
18. Signs of the forecast slowing in activity are appearing in a number of industrialised countries. Theslowing should, however, reduce inflationary pressures. Lower inflation will also allow some easing of interest rateswhich, together with other factors, will contribute to sustaining growth in invcstment and reducing the debt-servicingburdens of indcbted developing countries.
19. Growth of the Asia Pacific region in 1989 and 1990 is expected to beslower than in 1988. A decelerationin trade growth is also expected. However, the region should still expand faster than other regions. IMF forecasts (3)suggest that the Asian developing countries will grow by around 6 per cent in both 1989 and 1990.For the NIEs, reflectingslower world growth, currency appreciation and rising labour costs, growth is forecast to slow from 10 pcr cent in 1988to around 6.5 per cent in 1989 and 1990.
20. The Pacific Economic Cooperation Conference forecasts a modest slowdown in economic growth forthc Asia Pacific region, from 7 per cent in 1988 to 5.8 per cent in 1989 and 5.1 per cent in 1990(4). The slowdown willbe most marked for those economies that experienced unsustainably fast growth in 1988. Consumer prices in the regionrose 5.9 per cent in 1988 and are expected to rise by around 5.5 per cent in both 1989 and 1990.
B. Influences on the Region's Medium-Term Prospects
21. Developments in the Asia Pacific region have a major impact on developments and prospects for theworld as a whole. At the same time, the importance of trade and investment flows to economies in the region means thatchanges in economic conditions and policies in other partsofthe world have a significant impacton the region. A numberof influences on the region need to be considered.
(i) Macroeconomic policies of the major industrialised nations
22. Notwithstanding the generally favourable near-term outlook for the world economy,there3)'9>*~l11e
threats to sustained growth in international economic activity and trade. Among these are inflationary pressures~wl'§gl11e
stalling in the correction of the current account imbalances between the major economies.
23. The continuation of firm policies should help to reduce inflation, although that may take some time. ltis encouraging that countries are very conscious of the costs ofinflation andare eager to reduce it to relatively low levelson a medium-term basis. The slow decline in external imbalances involves risks. Capital markets have continued tofinance existing imbalances, but current aceount positions that are symptomatic of serious underlying domesticimbalances need to be addressed through domestic corrections. Unless they are, there remains potential for disruptiveadjustments in financial markets, as well as in international trade flows. Correction ofexternal imbalances will proceedmore smoothly in an international trading environment that is relatively free of distortions. A multilateral approach totrade issues provides the best means of securing such an environment. An undue concentration on bilateral imbalancesand on steps to address them can, in a wider sense, be counter-productive.
24. A feature of the global economic expansion over the past seven years has been intensified efforts inrespect of international macroeconomic policy coordination-predominantly of exchange rates. 111e less volatile thanotherwise exchange rates have contributed to greater private sector confidence, investmentand international commerce.
25. AssIsted by policy co-ordination, tl1ere has been substantial appreciation ofthe Yen against the US dollarsince the Plaza Agreement in 1985. Currencies of most other economies of the Asia Pacific region also appreciatedagainst the US dollar in both nominal and real terms. At the same time they depreciated against the Yen. lnforn1ationon exchange rate issues and movements is in Attachment A.
(2) International Monetary Fund, World Economic Outlook, OCtober 1989.(3) op cit(4) Pacific Economic Cooperation Conference, Pacific Economic Outlook, 1989-90
(
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26. These currency realignments reinforced the adjustments in external balances and domestic policies thatwere under way and provided further impetus to stmclUral adjustment in the region. Moreover, they facilitated theexpansion of domestic demand in economies with lIade surpluses. TIle changes encouraged inveSlinent flows withill theregion, as some economies expand~-tl offshore production of certain goods, with associated changes in trade patterns.
(ii) Microeconomic policies
27. During the 1980s structural adjustment has been widely recognised as integral to the att~inmentofjobcreating, non-inflationary growth. Much impetus for structural reform stems from long-standing distDrtions andimbalances which impede growth. Extemal development~,such as the emergence of new competitors in export markets,exchangeratere-alignmcnl~and volatility in traded goods prices, as well as financial market deregulation, have also beenimportant influences.
28. While structural policy reforms take time lD bear full fruit, tlJey bring about more efficient use ofresources, expansionofpotential output and improvement in tlJe capacity ofeconomies to adjust to chauging conditions.Such reforms also enhance tlJe effectiveness of macroecouomic policy. Economic problems snch as inflation,unemployment and trade imbalances cannot be tackled by macroeconomic instruments alone. To a large extent, thevigour witlJ which siinctural reforms are carried out will determine the capacity of economies to continue to geueraterising standards of living.
29. The most successful economies in the region share the common features of trade-led growth and in mostcases microeconomic policy settings tlJat are consistent witlJ allowing market forces to predominate.
30. A broad range of structural reforms has been adopted in tlJe region, most of which are aimed atprogressively removing impediments to increased competitiveness and efficiency in some cases increasing thetransparency of domestic assistance, and generally integrating domestic economies more fully into the internationaltrading system. Examples are at Attachment B.
(iii) Trade and trade policies
31. An open multilateral trading system can play an important role in sustaining world growth and inassisting developing economies. It can also facilitate tlJe correction ofexternal imbalances. The rapid increase in worldtrade has substantially benefitted activity in tlJe Asia Pacific region, particularly in the NIEs and some ASEANeconomies.
32. The global recession of 1981-82 aggravated protectionist pressures in many countries and they have re-emerged in recent years, often in the form of various non-tariff barriers. The least developed countries are theaffected by a protected environment, since their competitive advantage in agriculture and labour-intensilvv~e~~:~~~ii~.~:most sensitive to restrictive policies ofindustrialised countries. All economies in tlJe region are suffering 01
whether it be self-imposed or imposed by other countries.
33. There ha~ been a tendency to dismantle trade restrictions on a regional basis (eg EC, Canadji./li;l$11i~iI
Australia/New Zealand). Such moves toward regional integration need to avoid raising barriers to tradetlJe world if tlJey are to be consistent witlJ moves toward more open international trade. .
34. Achieving anopen, multilateral trading system iscritical to the continued rapid growth and industrialisationoftlJe Asia Pacific region. The newly-industrialising economies depend heavily on exports as a platform for growth andother regional economies are pursuing tlJis path. This pattern of concentration on outward looking growth is likely tocontinue. However, if access to markets bol1J witlJin and outside tlJe region is limited, growtlJ will be placed in jeopardy.
35. The exports of some economies in the region are heavily weighted toward only one or two economies.All1Jough tlle domestic demand ofthese heavily export-orientedeconomies has expanded, tlJey would notbe able to offsetthe negative growtlJ effects associated with a significant slowdown in tlJe major industrialised economies, notably theUS(5). There have recently been trends towards diversification ofmarkets; continued diversification and the developmentof more flexible and adaptable economies will prove beneficial.
2. REGIONAL ECONOMIC INTERDEPENDENCE AND LINKAGES
36. Whichever way one examines tbe Asia Pacific region - whether in terms of developments in recentdecades, prospects, relationships as tlJey now stand, or the dynamics of changing relationships - the picture is Olle ofcomplementary economies, substantial and growing economic linkages and increased interdependence. The futures of
(5) Exports ofJapan and tlJeNIEs to tlJe United States, forexample,account foraroundone-tlJird oftheir total exports.
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regional economies are intertwined - the 'health' of each economy depends to a large extent and increasingly on the'health' of the others.
37. Economies in the region have greater economic linkages among themselves than they have witheconomies outside the region. And in some respects, the region is also more integrated than other regions. For example,whereas intra-Asia Pacific trade accounts for 65 per cent of total trade of the region, intra-EC trade accounl~ for around60 per cent of the total trade ofEC economies. Trade within North America accounts for around 30 per cent of the totaltrade oftheUS and Canada. The Asia Pacific region is remarkably integrated given the diversity ofstages ofdevelopmentof many regional economies, the relative absence of geogmphical proximity compared to other regions and the lack offormal institutional arrangements covering the whole region.
A. . The Dynamics of Growth and Development in the Asia Pacific Region
38. Economies of the Asia Pacific region are linked by a process of interconnected evolution and strncturaladjustment which (as also noted in the background paper under Agenda Item 2) has increased regional interdependence.
39. The US has played and continues to play a vital role in the realisation ofthe common objectives ofstrongeconomic growth and rising living standards in regional economies.(6) The trade and industrial growth of the economiesofEast Asia - in particular Japan - are, however, having an increasing impact on the strnctureofregional economies andpatterns of regional economic relationships. Japan is increasingly complementing the US as a major source ofdemandfor the region.
40. As recently as 1970, Japan's per capita income was about three-quarters of the OECD average on apurchasing power parity basis; it now equals the OECD average. Similarly, .in 1970 Japan was the third largest economyin the world, but for more than a decade it has been the second largest The impact ofJapan on other economies has beenpronounced because of the huge growth of Japanese demand for minerals and foodstuffs and, more recently, formanufactured goods, as well as through the massive flows of capital, technology and tourism it generates throughoutAsia, North America, Australia and New Zealand. As Japan continues to restrncture its economy, it wiII continue toinfluence structural adjustment elsewhere in the region.
4 I. For the economies of East Asia, increased trade orientation and integration into the regional andinternational economy was a necessary condition for successful industrialisation. Jnitially small, poor economies,deficient in natuml resources or capital and industrial technology, they have gained enormously in productivity andincome from trade growth and interdependence. The rapid growth in East Asian economies has also opened up newtrading opportunities for Australia, New Zealand, Canada and the US, resulting in increased linkages between theseeconomies.
42. Regional economic growth and trade specialisation have produced an intensive, muIti-Iay~rM!l~~~.~t~of trade and other economic ties. These ties bind together economies that cover the full spectrum ofpositions~19l,1.l;\'j.~e
development chain - from developing to advanced industrialised economies. Growing economic strength ands~j~~l)g
comparative advantages have been common features of the East Asian economies. As these economies have groWl),theyhave moved away from concentration on subsistence and the agricultural sector towards production oflabour-intensivemanufactures and scrvices. As real wages and skills have risen, economies have moved to morc capital and technologyintensive production, leaving labour-intensive production to lower wage countries. The process has involved importingtechnology. Thcse economies higher incomes have generated demand for consumption goods imports, as well as food,raw materials and intermediate manufactured goods from the regional economies WWI a comparative advantage in suchgoods.
43. Japan began Olis transition in the.I960s, leaving the way open for Hong Kong, Korea, Singapore andTaiwan to produce and export labour-intensive products. More recently, these economies began their own transitionaway from labour-intensive products, and other ASEAN countries and China are expanding their sales of lightmanufactures in international markets.
44. Structural change has not been limited to the East Asian economies. The industrialised economies havealso adapted to changing economic patterns, including greater competition. Theabundant natural resources of Australia,Canada, New Zealand and the US are an important and complementary component of the industrialisation process of
(6) It has been estimatcd, forexamplc, Olat an increase of I percent in the US grOWOI rate increases US imports fromthe NIBs by almost 4 per cent and their economic groWOI rate by around 2/3 of a percentage point. The effect ofUS expansion on Japan is to increase the lattcr's growth by 1/4 of a percentage point.
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the other regional economies. The significant domestic sectors of these economies, particularly the US, represcnt veryimporlllnt export destinations for the Asian economies and they have been important sources of invcstment, technologyand advanced services.
B.
(i)
Trade and Investment
Intra-regional trade
45. As shown in the Illble below, the significance of regional trade as a proportion of the tollli trade of AsiaPacific economies has risen steadily. Intra-regional trade represents 65 per cent of regional economies tOllll trade,compared with 54 per cent a decade ago. Even excludinq the US, which is by far the major export market for manyregional economies, trade between Asia Pacific economies averages 49 per cent of their tollli trade. Exclnding the USand Japan, it averages 31 per cent. The NIEs, widely known for their export success, have also beeome majorimporters.
Share of Share of Share ofexports going imports coming trade with
to Asia from Asia AsiaPacific Pacific Pacific
economies economies economies
per cent per cent per cent1978 1988 1978 1988 1978 1988
Japan 55 67 51 63 53 65China 56 70 50 65 53 67NIBs 65 73 70 75 67 74Other ASEAN 75 75 66 69 71 72Norul America 47 59 51 62 49 61Australia/NZ 63 68 57 66 60 67Total Asia Pacific 54 66 54 65 54 65
46. Trade (in US dollar terms) betweenJapan and the NIBs increased 34 times between 1968 and 1988; trad~.between Norul America and the NIBs increased 41 timcs; between North America and ASEAN, 19 times: and betweenNorUl Amcrica and Australia, 8 times. Over the same period, trade between the NIBs and ASEAN increased 23 ti'lles,betwecn Japan and ASEAN it increased 18 times and between th~ :,IEs and Australia, 35 times. Over this periQ<:l)\!9r!dtmde increased 12 times.
47. The increase in intm-regional trade as aproportion of[ollli regional trade is all ule more significariCwitcnviewed against the background of the growing share of the latter in world trade. Asia Pacific economies' t01ll1 trade hasgrown more rapidly than world tmde, but Asia Pacific economies' tmde with each oUler, particularly in manufactures,has grown cven faster.
(ii) Intra-regional investmcnt
48. Intra-regional dircct investment flows are an imporlllnt ecouomic linkage between regional countries.Dircct investment flows in the region have been influenced by a number of factors, including rapid economic growthratcs, large diffcrences in saving propensities and investment opportunities that genemte complemenlllry capilllishorlllges and surpluses between economies in the region, the trend towards globalisation of productiou based oncomparative advanlllge, and ure adoption of a much more liberal attitude towards foreign investment by Asia Pacificeconomies. Actual or threatened tmde barriers which have induced companies to invest in production facilities locatedbehind the barriers have also played a role, albeit not a constructive one.
49. 111e progressive negotiation of double taxation agreements (DTAs) has facililllted investment flowsbetwecn countries and a'sisted in fostering the developmentof trade and economic coopemtion. The Asia Pacific regionis now well covered by a nctwork of DTAs; there are 55 agreements between the countries in the region. The networkis shown in Table 6 in the Sllltistical Appendix.
50. Intra-regional direct investment flows in response to market forces carry subslllntial benefits forregionaleconomies. Much direct investment has stimulat~<1 economic restructuring, intra-regional trade and a higher degree ofregional integmtion. Direct investment in the NIBs and ASEAN has helped to accelerate the process of industrialisation
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and export growth in these economies. Very important non-financial resources such as new technologies, managementskills and attitudes accompany direct invcstment and, through diffusion to other businesses, contribute independentlyto economic development. Joint venture arrangements have helped accommodate concernsabout foreign invesunentandmaximize the transfer of the technological and OUler expertise of the investing company to local businesses. For theinvesting economies, direct foreign investment provides the opportnnity for better returns from funds and otherresources. 'TI,e linkages of businesses and business people that arise naturally from foreign direct investment havecontributed to uniting the region.
5L The available data indicate that intra-regional investment flows represent a high proportion of totalinvesunent flows ofthe AsiaPacifie regiou. Economies ofthe region have forged strong investment links, alongside theirtrade links, with other economies. For example:
At end-March 1989, the stock of Japanese direct foreign investment in the USA and Canada totalled $US75.1billion; in the four Asian NIEs $US15 billion; in other ASEAN $US 14.9 billion; in Australia and New Zealand$US8.7 billion; and in China $US2 billion. These invesunents, totalling $USI15.7 billion, represent 62 percentof total Japanese direct invesunent abroad.
At end-1988, US direct iovestment in the Asia Pacific region totalled $USllO billion or 33.6 per cent of total USforeign investment abroad. Of this investment, 83 per cent is in Canada (56 per cent), Japan (15 per cent) andAustralia (12 per cent).
At end-June 1988 the stock of Australian investment in the Asia Pacific totalled $US 9.5 billion or42 per centof its total direct foreign investment.
At end-1987 the stock ofNIE and ASEAN investments abroad was small, but growing, particularly in other AsiaPacific economies. For particular destinations these economies represent significant sources of fnnds. Forexample, Taiwan and Hong Kong ranked third and fifth among economies investing in Thailand; Singaporeranked third for Malaysia; and Hong Kong ranked second in Indonesia.
52. Attachment C lists the major investors in certain Asia Pacific economies. In all cases, these investorsinclude other Asia Pacific economies.
53. The role of foreign investment, joint ventures, technology transfer and international corporate links islikely to become more important as Asia Pacific economies became more specialised.
Co Changing Trade and Investment Relationships
54. Structural adjustment in the region has changed the pattern of regional trade relationsand has important implications for the future.
(i) Broadening of vertical trade and development of horizontal trade
55. For many years Asia Pacific trade relationships were based on vertical trade, commonly theexchangeofmanufacUlfes for raw materials and food. A major reason for this was variations between economies in factorendowments and comparative advantage. New Zealand, Australia, Canada, and, to a lesser extent, the US are very wellendowed in terms ofland per capita, and the latter three are well endowed with minerals and energy. In contrast, the NlEsand Japan have extremely low per capita endownments of land and minerals. The ASEAN economies in general havelow land endowment per capita but some are rich in certain mineral and energy resources. The bulk of the trade of Japanand the US with the NlEs and ASEAN economies and the trade of Japan with Australia and New Zealand were primeexamples of vertical trade.
56. The large differences in factor endowmeuts within the region and differences in labour costs andtechnology should ensure continued vertical trade.
57. In recent years, however, there has also been a marked increase iu horizontal trade. This is alsoparticularly evident in trade in manufactures between Japan and the NIEs and ASEAN. For example, in 1983manufactures represented 56 per cent of Japan's imports from the NIEs and 7.5 per cent of imports from the ASEANeconomies (other than Singapore). By 1988 these shares of manufactures had risen to 73 per cent and 18 per cent,respectively, This trend is also evident in trade betwecn ASEAN and the US. In 1983 manufactures represented 38 percent of total US imports from ASEAN; this share had risen to 61 per cent by 1987.
58. Intra··industry trade (that is, two-way trade in similar intermediate and finished products) has alsobe.engrowing as a resnltofglobal specialisation ofproduction. One aspect OfUlis is intra··finn trade, such as goods and services
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provided by a parent company to its overseas subsidiary. As more firms develop international links and operations, therole of intra-finn trade is likely to increase in importance.
(ii) Intra-regional investment patterns
59. Higher intra-rel,>ional investment has been associated with offshore production by enterprises from theUS, Japan and other industrialised economies, first in the NIEs and later in ASEAN economics and, more recently, bytile NIBs in ASEAN economics. Such offshore investment has been largely in goods and services produced in theinvesting economy and has increased trade.
60. Intra-regional invesunentpatternsarechanging. Japan's foreign inv('Stment presence in the Asia Pacificregion is quickly catching up to that of the US. In 1987 Japanese investment flows were higher than tllOse from the USfor a number of Asia Pacific economies.
61. Foreign direct investment in the region is now much more diversified and multi-directional. Inparticular, in recent years there has been an increase in direct investment by the NlEs in North America and ASEAN,and more direct investment from Au~tralia and New Zealand in ASEAN and China. While foreign investments in thepast has been mainly in manufaeturing, current investment eovers resources development, petroleum, real estate andservices.
62. Inereased trade and investment among Asian economies has been occurring over very recent years.Direct investment by NlEs in ASEAN countries, including relocation of some of their industries (in a manner similarto that 00apan and other industrialised economies) is expanding trade. In 1988 the exports ofSouth Korea to Thailand,for example, expanded by almost 100 per eent, to Hong Kong by more than 60 per cent and to Indonesia by more tlllln65 per cent.
(iii) Prospects
63. The potential for increased regional trade and investment is large. Realisation of tllis potential willfacilitate further development in all economies in the region. There are several sources of this potential:
a) Developments in vertical and horiwntal intra-regional trade mean that Asia PacifIe economies are progressivelyexpanding intensive trade (and associated investment) ties with a number ofeconomies in tile region, not jusllhefew partners with whom they traded earlier.
b) Rising populations and living standards and increasing emphasis on domestic demand-led growtlleconomies point to a significant expansion ofexpenditure on goods and services. The region has the po'tiri4Qjbe the major export market for its constituent economies to an even greater extent tllan it is now. I"r"",'"
has become important. As Japan has lost comparative advantage in the production of certain g(lOds, stil'l)\!l~i'¥J
domestic demand and lessened import barriers, it has imported more of a wider range of products.
c) The potential for specialisation flowing from different comparative advantages appears to be only just startingto be realised. This potential will only be fully realised ifeconomies concentrate on producing according to theirevolving comparative advantage and allow imports of other goods andservices and capital to flow increasingly freely in response to market forces.
D. Other Economic Linkages
(i) Financiallinkages
64. Financial deregnlation and the associated increasing internationalisation of world money markets hasstrengtllened financial linkages between economies. The Asia Pacific region is important in that integration process,particularly because the US and, increasingly, Japan playa major role in international capital markets and theinternational monetary system.
65. A number of regional economies peg their currencies to others within the region. For example, HongKong pegs its dollar to the US dollar and Brunei maintains parity with the Singapore dollar. More generally, the growingtrade and investment linkages within the region mean that effective oravemgeexchange rates of regional economies ru'eimportantly influenced by movements in other currencies within the region.
66. A number of regional eities, including Tokyo, Hong Kong and Singapore, are important financialcentres for surronnding economies. At the same time, relaxation of foreign bank entry regulations has encouraged thespread of multinational banks thronghout the region. This has facilitated capital and investment flows.
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67. The US dollar continues to be the major currency used for trade and capital transactions and officialholdings of foreign exchange. However, with financial deregulation and a recognition of the risks imposed by overreliance on anyone currency, there has been some move for a greater role for non-US dollar currencies. Most notably,the strong expansion of the Japanese economy has led to a demand for a greater international role for the Yen.
68. Moves towards greater convergence in the rules governing the operation of the capital markeL~ ofregional economies, along with progress by all economies towards financial deregulation, would facilitate the expansionof financial linkages.
(ii) Capital flows
69. An adequate level of investment is a necessary condition for long-term growth. While foreign directinvestment has contributed significantly to economic growth and structural adjustment in economies of the region, othertypes of foreign capital inflow such as official development assistance, portfolio investment and export credits have alsobeen important, particularly for the developing economies of the region. The available evidence suggests a regionalconcentration in capital flows, with the EC being the major external contributor.(7) Most external capital flows toASEAN and the NIEs has come from the five industrialised economies ofthe region. Similarly, Japan is also a significantsourceofcapital for the net capital importing economies of the US, Australia and New Zealand. In recent years, the NIEshave also become sources of capital for the region. Japanese capital flows have more of a regional concentration thanUS flows, so that the growing importance of Japan as a source of capital has reinforced stronger regional financiallinkages.
(iii) Tourism flows
70. Tourism is currently ranked third in world trade; its importance as an export industry and foreigncurrency earner for certain Asia Pacific economies is considerable. Tourism produces greater demand for the output ofwhat would otherwise be the non-traded sector and provides greater returns from investment in transportation,commnnication and general service infrastrnctnre. The contignity of the Asia Pacific region as well as its diversity lendsitself to tourism.
71. Estimates for 1987 indicate that of total passenger arrivals to economies within the region around 65 percent came from the region. Excluding travel to North America, the Asia Pacific area now receives about 10.7 per centof world tourist arrivals, compared with 7.7 per cent in 1983 and 3 per cent in 1970.
72. The Asia Pacific region is expected to be a focus for much ofthe expansion ofinternationalvi~it*B~~~fthroughout the 1990s and into the early part of the next century. Much of the recent growth in travel has beeQg"l)"~~(!ld
from withiu the region; this is expected to continue, in line with rising living standards in the region. (Fnrther discussionof tourism is contained in a background paper for Agenda Item 3.)
(iv) Immigration/labour flows and educational exchanges
73. Labour flows, be tlley by way of immigration or temporary visits or exchanges, and educationalexchangcs, are potentially very significant economic linkages within tile region. Such linkages can relieve shortages andsurpluses and (like tourism) help to sprcad knowledge and awareQess betw~.cn countrics. For example, for fiscal years1985-8746 Jlcr cent of immigrallls entering the US were born in Asia; the similar figure for Australia is 27 per cent.Furtllennore, in 1987-8851 per cent of foreign students enrolled in institutions of higher education in the United Statescame from SOUtil and East Asia, compared with a 30 per cent share in 1980-81.
3. ASPECTS OF CLOSER ECONOMIC COOPERATION
74. The Asia Pacific region has undergone fnndamental economic.ehange over the past 25 years. Much ofthe sueces s of the region has come from the ability and willingness of economics to adapt to changing patterns of
(7) See Chapter 7, International Economic Pluralism: Economic Policy in East Asia and the Pacific,P. Drysdale, Allen and Uuwin, 1988.
i,
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comparative advantage. Rapid expansion of the Asia Pacific region and its growing integration is occurring despite thcpresence of impediments to greater linkages. With further emphasis on outward-looking policies, tile considerablepotential of tile region is likely to be more fully realised. Closer integration, however, is dependent on mutnal benefitand to succeed it needs to take place in an environment of trust, security and cooperation.
A. Impediments to Greater Linkages
75. Greater specialisationofproduction on the hasis ofcomparative advantage is fostering closerintegrationand faster growth in trade and living standards. Such specialisation necessarily implies increased dependence of oneeconomy on another, since specialisation involves the foregoing ofat least some prodnction ofcertaiu goods and servicesin order to improve the allocation of productive resources. The long run prosperity of the region will be improved bywillingness to accept the dependence that specialisation reqnires. Snch willingness can beenhaneed by stable and securerelationships between economies.
76. Specialisation in production will tend to be driven by comparative advantage, bnt the relevant marketinfluences can be impeded by indnstry protection, misaligned currencies, structural rigidities and other barriers to tradeand the free movement of capital.
T7 Indnstry protection is perhaps the major obstacle to increased specialisation. It misallocates theresources of the protecting conntry and also distorts the signals received by other countries regarding comparativeadvantage, with adverse effects on investment decisions. Misaligned exchange rates result in a less than optimalorientation of an economy towards traded goods and have resource allocation costs. Structural rigidities also handicapefforts to increase potential output and to adjnst quickly to changing conditions; they foster inefficient allocation ofresources and reduce the effectiveness of macroeconomic policy measures.
78. There is considerable scope for expansion of trade within the region and between it and otiler parts ofthe world through adoption of measures that provide more confident access to domestic markets. Similarly, impedimentsto tlle free flow of investment in the region limit the gains from further specialisation both for host and investingeconomies. Invesbnent flows are also very important in the transfer oftechnology and expertise. Removal ofrestrictionson capital flows, together with adoption of measures which promote confidence in the security of foreign investments,would produce valuable gains in economic performance.
79. Much has been achieved in the region to improve the fnnctioning of markets. However, the process ofreform has been uneven, and, in all conntries, much remains to be done.
80. Decisions about the pace and sequence of reform involve difficult judgements which run ofdelaying action. Judgements depend importantly on the degree of('onsensus within a community on mcn",,,, f()fchH"rreand tilC institutional framcwork in which change is made. Structural reforms may involve short-teffil ad.justn)(~!)t
which can provoke concern among intcrest groups dependent on existing rigidities. However, the costs of ,r"ti)ml!1,,,,dto be weighed against thc net community benefit of a more productive economy.
81. These are areas of economic policy about which regional governments conld nsefully exchangeinformation, and benefit from sharing their views and experiences on structnral reform.
Il. Forms and Benefits of Cooperation
82. A multilateral focus for the conduct of international economic policy is generally the mOSt efficient andrewarding. Regional cooperation that is consistent with non-discriminatory principles and which is outward-looking canalso be an effective means of building and exteuding economic interdependence, and of maximising economic welfare.
83. Regional economics have important shared objectives in promoting growth and prosperity and manyeconomies bcnefit from relative contiguity. Thecomplementarity ofeconomies in the region means that the benefits fromdeveloping economic relationships and linkages tllrough cooperation are very considerable. The Asia Pacific economiesalso have a clear, common interest in furlllCr promoting economic progress and in the substantial degree of economicinterdependence that has already developed.
84. Given these common interests, regular regional consultationson economic issues focussed on snstainableeconomic expansion could be nsefnl in severill respects. Regional exchanges could carry forward the interests ofthe AsiaPacific economiesby providing to each other more information about theirpolicies, practicesand economic developments;providing opportnnities for exchanges on policy mauers amongst decision-makers of regional conntries; strengtheningthe capacities ofeconomies for analysis and policy formulation; and identifying common interests and problems that canbe targetted and better tackled from a co-ordinated regional platform.
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85. The increasing economic and commercial relationships amongst the economies of the Asia Pacificregion have created many new opportunities. The increased influence of economies in the region has brought with itchanging regional roles and responsibilities. Closer contact and exchanges between regional economies will put themin a better position to deal with problems that arise among themselves and with the rest of the world, and to maximisebenefits from theemerging opportunities. Theeconomic dynamism of the AsiaPacific region should continue, but everpresentuncertainties and threats require all regional economies to pursue, individually andcollectively, sound domesticeconomic policies and open international economic relations.
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ATTACHMENT A
EXCHANGE RATE REGIMES,
EXCHANGE RATES AND CURRENCY ROLES
With the progressive move away trom the Brewm Woods system since the early I970s, a wide varietyof exchange rate regimes is now opemting, including within O,e Asia Pacific region. The IMP classifies the exchangerate systems of certain countries in the region as follows (as at June 1989):
Pegged to a Basketof Currencies
MalaysiaThailand
Managed Floating
ChinaIndonesiaRepublic of KoreaSingapore
IndependentlyFloating
AustraliaCanadaJapanNew ZealandThe PhilippinesUnited States
Amoog the currencies not classified by the IMP, the Hong Kong dollar is pegged to the US dollar, theNew Taiwan dollar is pegged to a basket of currencies, and Brunei maintains parity with the Singapore dollar.
The diversity of exchange rate regimes in the region reflects the different characteristics .and stages ofdevelopmentofthe varions countries. Particularneedsofcountries have generated differentexchange rate arrangements.Some countries have retained constraints on their foreign exchange arrangements.
The attached charts indicate movements in nominal exchange rates for selected countries in the regionagainst the US dollar since the first quarter of 1985.
One very significantdevelopment over this period has been the substantial appreciation of O,e JapaneseYen against the US dollar. Currencies of most other countries in the region have also appreciated against O,e US dollar(the exceptions being Indonesia, China, Malaysia, the Philippines and Hong Kong). All currencies have depreciatedagainst the Yen.
These exchange rate changes have contributed to changes in the international c~;~~~::;;i6'{d;~~l~different economies. This is illustrated for some of the countries concerned in the attached charts d'exchange rates.
The charts show that the real effective exchange rates ofmost countries in theregiim have declined since1985· the main exceptions being Japan,New Zealand and Taiwan. (Because ofdata limitations,real effective. exchangerates for China, Thailand and Brunei are not shown.)
The US dollar continues to be the major international currency in terms ofcurrency ofdenomination forinternational trade and capital transactions and as the predominant form in which countries hold foreign exchange. TheUS dollar has also been the main currency for intervention in foreign exchange markets. However, with the growOl ofthe major industrialised countries, financial deregulation and a recognition of the COSL~ imposed by over-reliance on anyonecurrency, there has been some tendency fornon·US dollar currencies to take on larger rolr$. Forexample, the strongexpansion ofthe Japanese economy has been one factor favouring an increased international role for the Yen. In addition,there have been suggestions and proposals for a greater role for currency baskeLq (for example, the ECU and SDR).
- 74 -
EXCHANGE RATES (Agolnat SUS).......cetaCNT\.V fI'\..OItt.~ cu dLCJJCfta
.'0
.-....'00
no
! ,oe
• ,oe
I,..,-,ao110
.00
00
00
'''''
"'HIUPP.~IE
,... ,
"'0
.ao
110
! '00
•I ....
.,..
EXCHANGE RATES (Agolnat SUS)......".., NtIIO fI'COOCD aue tI:i I QIIIt8
~-atNG.A..P<:lJIl.I:
- ./---
~~ '--, ~"-x..... •
~........M....t...o"Y'$;..t..
-
\- cw.....
-INOONEStA.
,.... 1M? t
ttOUftCCt .. P1tWtQI'l ftA"I'ICn08
,... ,
EXCHANGE RATES (Agolnat SUS),... ttOlt .. OUCb £. •...,sa
"...
! ,ao
• ,ao
I ...110....
HONQ KOH'00
II,.... '_I ,M? , ,... , ,en.~ HA.'T1OtW.~Ta
- 75 -
REAL EFFECTIVE EXCHANGE RATES'!NlXI"l:l'ITl l"U)l.mQ' CUllllfl<lClD
150 ..,.------------------------,
130
120 NEW ZD,:!:U~.N!ll-_----
~ 110i
II 100~-------~..~
110
70 PHIUPPINES
19881"750 ;--------,--------,----------11~
REAL EFFECTIVE EXCHANGE RATES
IillHa I<OHCl
8- SOUlH KOREA
• 110 GAPORE:•-
70
INOONESIII
I'"11M IM7
J " IoICIft(WI atlYo\1ES
5O+-------..,----------r-------;1111
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ATTACHMENTB
STRUCTURAL REFORM IN THE ASIA PACIFIC REGION
Tax refonn has been a major policy focus. Many countries in the region have adopted measures aimedat improving the efficiency and equity of their taxation systems. Some have reduced marginal personal tax rates and/orcorporate taxes while others have introduced broader-based indirect tax systems.
Financial markets have been considerably deregulated during the 1980s. Many countries have. forexample, removed controls over domestic banks, reduced entry barriers to foreign banks and freed up capital flows.
Refonn of trade policies has also received attention. There has been progress in replacing non-tariffbarriers with more transparent systems of tariffs, sometimes at reduced rates. Other countries have also reduced theirtariff levels.
Governments have recognised the benefits of shifting the orientation of industry policy away fromselective industry support towards economy-wide measures, such as training and support forresearch and development.Some rapidly growing countries are responding to infrastructure constraints by allowing increased private sectorinvolvement in these areas.
Inrecognitionofthesignificantrolepublic sectorsplay in infrastructureandoutput,countrieshave takensteps to refonn their public trading enterprises, while public administration has also been made more efficient. Somecountries have also embarked on significantprivatisation of their public trading enterprises.
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MAJOR INVESTORS IN ASIA PACIFIC ECONOMIES
United States: Foreign Direct Investment Position at end-1988 ($US million)
ATTACHMENTC
1.2.3.4.5.
United KingdomJapanNetherlandsCanadaGennany, Federal Republic of
101,90953,35448,99127,36123,845
Japan: Foreign Direct Investment Position at end-FY1988 ($US million)
1.2.3.4.5.6.7.
Uuited StatesJapan (a)SwitzerlandGennany, Federal Republic ofUuited KingdomNetherlandsHong Kong
6,2681,653
928546518482390
(a) Direct investments in Japan by 'Japan' are those by foreign affiliates.
Australia: Foreign Direct Investment Position in Australia at end-1987-88 ($A million)
1.2.3.4.5.6.7.
United KingdomUnited StatesJapanSwitzerlandSingaporeGennany, Federal Republic ofNew Zealand
44,01939,23426,515
7,4396,8916,4465,264
Singapore: Cumulative Foreign Investment in Manufacturing at end-1985 ($S millIon)
1.2.3.
United StatesEECJapan
3,9903,8712,933
Indonesia: Foreign Investment Flows Approved, 1987 ($US million)
1.2.3.4.5.
JapanGennany, Federal Republic ofHong KongNetherlandsUnited States
53233113512373
Malaysia: Foreign Direct Investment Flows, 1987 ($US million)
1.2.3.4.5.6.
JapanSingaporeTaiwanUnited StatesAustraliaHong Kong
231135119613028
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MAJOR INVESTORS IN ASIA PACIFIC ECONOMIES (CONTINUED)
Philippines: BOI-Approved Equity Investment, 1987 ($US million)
l.2.3.4.5.6.
United StatesEuropeJapanCenlra1 AmericaHong KongTaiwan
31191917127
Thailand: Foreign Direct Investment Flows, 1987 (Million Baht)
1.2.3.4.5.6.
JapanUnited StatesHong KongSingaporeUnited KingdomGermany, Federal Republic of
1,952818720331184136
Sources: United States Department of Commerce, Survey of Current Business, June 1989News from MITI, July 1989Auslra1ian Bureau of StatisticsIndonesia Invesunent Coordinating BoardMalaysian InduSlriai Development AuthorityBank of Thailand
~
TABLE 1: KEY INDICATORS FOR INDUSTRIALISED COUNTRIES, 1980-1988 (a)(Annual changes, percent)
Average1980-88(b) 1980 1981 1982 1983 1984 1985 1986 1987 1988
RealOuputUnited States 2.6 -02 1.9 -2.5 3.6 6.8 3.4 2.7 3.7 4.4Japan 4.1 4.3 3.7 3.1 3.2 5.1 4.9 2.5 4.5 5.7Gennany 1.7 1.5 0.0 -1.0 1.9 3.3 1.9 2.3 1.8 3.4INDUSTRIAL~EDCOUNTRffiS 2.7 1.4 1.5 -0.3 2.7 4.9 3.4 2.6 3.5 4.3
•WORLD 2.7 2.2 1.5 0.5 2.6 4.3 3.2 3.1 3.3 4.0
Consumer PricesUnited States 5.6 13.5 10.4 6.1 3.2 4.4 3.5 2.0 3.6 4.1Japan 2.6 8.0 5.0 2.7 1.9 1.3 2.1 0.6 0.1 0.7Gennany 2.9 5.5 6.3 53 3.3 2.4 2.2 -02 0.2 1.2INDUSTRIALISED COUNTRffiS 5.7 1l.8 10.1 7.5 5.0 4.9 4.1 2.4 3.0 3:3
Gross Fixed InvestmentUnited States 2.3 -7.9 1.1 -9.6 8.2 16.8 5.3 1.0 2.6 5.8Japan 4.8 -0.1 3.1 0.8 -0.3 4.9 5.8 5.8 10.3 13.4
...,'"Gennany 0.9 2.8 -4.8 -5.3 3.2 0.8 0.1 3.3 2.5 5.8 I
INDUSTRIALISED COUNTRffiS 3.8 -1.5 -0.6 4.6 3.2 8.8 4.6 2.9 5.1 7.9
Unemployment Rates (c)United States 7.5 7.2 7.6 9.7 9.6 7.5 7.2 7.0 6.2 5.5Japan 2.5 2.0 2.2 2.4 2.7 2.7 2.6 2.8 2.8 2.5Gennany 7.0 3.3 4.8 6.7 8.1 8.1 8.2 7.9 7.9 7.7INDUSTRIALISED COUNTRffiS 7.5 5.7 6.6 8.0 8.6 8.0 8.0 7.9 7.5 7.0
Source: IMF World Economic Outlook, October 1989.
(a) Composites for the country groups are averages of percentage changes for individual countriesweighted by the average US dollar value of their respective GDPs over the preceding three years.
(b) Compound annual rates ofchange.
(c) Proportion of total labour force.
TABLE 2 :WORLD TRADE VOLUMES, 1980-88 (a)(Annual changes, percent)
Average1980-88 ( 1980 1981 1982 1983 1984 1985 1986 1987 1988
World 3.8 1.3 1.2 -1.8 2.7 8.6 2.9 4.5 6.5 8.9
Industrialised Countries 4.6 1.4 1.1 -1.3 3.8 11.1 4.7 5.6 6.4 9.2
Asia-Pacific Region (c)(d) 6.4 2.6 2.3 0.9 6.4 11.7 4.0 7.5 9.6 13.1
Industrialised Countries 5.0 0.6 0.5 0.4 4,6 12.1 4.9 5.7 6.3 10.7
NIEs 11.6 9.8 9.0 1.5 13.1 13.7 2.3 15.9 23.1 17.7
Other ASEAN 7.4 5.7 3.6 5.6 8.0 -1.3 -1.7 3.0 8.4 40.3 (e)
SOURCES; IMF World Economic Outlook, October 1989 and International Financial Statistics, Yearbook 1988; World Bank 'World Tables',1988-89; and Asian Development Bank 'Key Indicators', July 1989.
(a) Averages of growth rates for exports and Imports.(b) Compound annual rates of change.(C) Excluding China and BruneI.(d) Groupings weighted by 1987 merchandise trade.(e) Includes only Imports data for the Philippines and exports data for the
Philippines and Malaysia.
ggI
TABLE 3: KEY INDICATORS FOR ASIA-PACIFIC ECONOMIES. 1980-88
(Average per annum growth, percent)Real Output
Real Output (b) per Capita (c)ConsumerPrices (b)
Real grossfixed
Employment (d) Investment (b)
Industrialised Countries (a)Australia 3,6 1.6 8.5 2.1 3.3Canada 3.2 2.1 (I) 6.6 1.8 5.5Japan 4.1 3.4 (I) 2.6 1.0 4.8New Zealand 2.3 (e) 1.7 (e) 12.5 0.2 3.7United States 2.6 1.5 (I) 5.6 1.7 2.3Total 3.1 2.1 4.8 1.5 3.3
Newly-Industrialising Economies (glHong Kong 8.0 6.3 8.5 3.1 5.3Korea, Rep. of 7,6 6.2 8.4 2.4 7.4Singapore 6.9 6.4 2.8 2.2 6.4Taiwan 7.5 6.2 4.4 2.6 5.6Total 7.6 6.2 6.6 2.5 6.4
Other ASEAN (g)00Brunei (j) -1.4 (h) -5.1 (h) n.a. 4.9 (k) n.a. -
Indonesia 5.0 (h) 2.8 (h) 9.1 3.6 (h) 8.1 (h)(i)MalaysIa 4.5 2.2 3.8 2.9 4.5PhilippInes 1.6 -0.9 15.5 3.1 -4.8Thailand 6.3 4.1 5.8 3.5 (e) 5.4Total 4,5 2.3 8.6 3.4 4.3
China (g) 9.3 (h) 8.0 (h) 7.1 3.3 (h) 11.2 (h)(i)Total Asia-Pacific Region 35 5.7 5.0 2.9 3.7Total Asia-Pacilic Region excl. China 3.3 2,5 4.9 2.3 3.4
(a) Source: IMF International Financial Statistics, Yearbook 1988 and September 1989.Ib) Groupings weighted by 1987 GOP/GNP estimates.c) Groupings weighted by 1987 population eSlimates.
Idl Groupings weighted by 1988 employment eSlimates.e '1980 to 1988.
(I) Source: IMF World Economic Outlook, October 1989 and OctOber 1988(9) Source: ADS Key Indicators of Devetoping Member Countries of ADS, Juty 1989(h) 1980 to 1987.~i) Deftated using GOP deflalor.j) Source: World Bank Atlas 191i38
(k) 1982 fo 1986.
TABLE 4: WORLD ECONOMIC PROSPECTS(Annual changes, percent)
1988 1989 1990REAL OUTPUT
World 4.0 3.1 2.9Industrialised countries 4.3 3.3 2.8Developing countries 4.2 3.2 4.0-Asia 9.2 6.1 6.1-NIEs 9.8 6.5 6.7
Asia-Pacific region (a) 7.0 5.8 5.1
TRADE VOLUMES
World 8.9 6.4 5.5
GROSS FIXED INVESTMENT
Industrialised countries 7.9 5.3 3.9 00
'"IINFLATION (CONSUMER PRICES)
Industrialised countries 3.3 4.5 3.9Asia-Pacific region (a) 5.9 5.5 5.5
SOURCES: All forecasts are from IMF World Economic Outlook, October 1989,except for (a) which is from PECC Pacific Economic Outlook, April 1989.
TABLE 5: TRADE BALANCES OF ASIA-PACIFIC ECONOMIES. 1980-88
($US billion)
1980 1981 1982 1983 1984 1985 1986 1987 1988
Industrialised CountriesAustralia 1.4 -2.3 -2,6 0,0 -0,9 -1.3 -2.1 -0.5 -1.1Canada 8,0 6,6 15,0 15.0 16.0 12.6 7.6 8,8 8,5Japan 2,1 20,0 18.1 31,S 44,3 56.0 92.8 96.5 95,0New Zealand 0,3 0,3 -0,2 0,3 -0.2 0.1 0,2 0,5 2.0United States -25,S -28,0 -36,S -67.1 -112,5 -122.2 -144.5 -158.9 -126,8Total -13,7 -3,5 -6.2 -20.3 -53.4 -54,8 -46.0 -53,6 -22.4
Newly-Industrialising EconomiesHong Kong -13.4 -16,2 -15,5 -14,7 -1.9 3.7 0.6 0,1 -5,7Korea, Rep, of -4,4 -3,6 -2.6 -1.8 -1.0 0.0 4,2 7,7 11.4Singapore -4,2 -6,1 -6.8 -5,8 -4,1 -2.8 -2.1 -2,6 -2,3Taiwan 0.1 1.8 3,6 6,3 9.2 11.2 16,9 20,2 13,8Total -21.9 -24.1 ~21,2 -16,1 2,2 12.1 19,6 25.3 17.2
Other ASEAN (a) cow
Indonesia 9,2 6,8 1.9 1.0 5.7 5.8 2.5 4.7 5.7Malaysia 2.4 -0,1 -0.8 0.4 3,0 3.6 3.4 5,9 5,6Philippines -1,9 -2,2 -2.6 -2.5 -0.7 -0.5 -0.2 -1.0 -1.1Thailand -1.9 -2.0 -0.7 -2.9 -1.9 -1.3 0.4 -0.4 -2.1Total 7,7 2.4 -2.2 -3,9 6.1 7.6 6.0 9.1 8,2
China -2,8 1,7 4,2 2.0 0,0 -13.1 -9.1 -1.7 n.a.
Total Asia-Pacific Region -30,6 -23,S -25.4 -38.3 -45.1 -48,3 -29.5 -20,8 3.0
Sources: IMF International Financial Stalistics, Yearbook 1988 and September 1989;and Asian Development Bank Key Indicators. July 1989,
(a) Data for Brunei nOI available,
