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East Asian Economy: Supplements-Each South East Asian Economies G2

* Some parts of this note are borrowed from the references for teaching purpose only.

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EAE <LN4S2- Vietnam Laos Cambodia Myanmar> 13.10.24

Semester: Fall 2013 Time: Thursday 2-5 pm Professor: Yoo Soo Hong Classroom: 423 Mobile: 010-4001-8060 E-mail: yshong123@gmail.com Home P.: http://yoosoohong.weebly.com

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Vietnam

The Vietnamese transition

• Reforms started already in the late 1970s, through ‘fence breaking’ and ex-periments in agriculture and industry.

• In 1986 the CPV launched the doi moi (reform): from central planning to market economy

• The reform process was accelerated in the late 1980s by the collapse of Soviet Union

• By the early 1990s ‘price mattered’ but the government maintained a prudent step-by-step attitude

Vietnam’s Outperformance Relative to Other Transitional (Ex-Socialist) Economies

Source: WB. WDI 2010

A New Fifth Dragon: Lights and Shadows

• Growth is sustained and less unbalanced than in China.

• Poverty reduction has been outstanding.

• Inequality has increased, so far not dramatically, but risks are high.

• The WTO accession presents many opportunities and many challenges.

• The government is still in command of many economic leverages.

• Financial liberalization has been resisted; the booming stock market may become a vehicle of destabilization.

• SOEs are problem area.

The Vietnamese Economy: Facts

• Vietnam has a small economy with GDP amounting to around 90 billions USD and GDP per capita of around 1000 USD.

• Vietnam has a large population of 86 millions and young population struc-ture.

• More than 60% of the population live in rural areas and work mainly in agriculture.

• Vietnam has maintained a relatively high economic growth over the last two decades.

• High economic growth has led to a substantial improvement in living standard and poverty reduction.

• Agriculture plays an importance role in the economy. The manufacturing sector is dominated by agriculture-related and labor-intensive activities.

• Most of Vietnam’s exports are natural-resource based (crude oil and agricultural products such as coffee), and labor-intensive products (leather, textile and garments).

• Most of Vietnam’s imports are capital goods and production inputs, ranging from petroleum, iron and steel, fertilizers, plastics and chemical, electronic parts and products and materials for textile and garments.

• Vietnam’s exports have been largely directed toward the EU and US, and Japan, while the country’s imports have been largely sourced from China, ASEAN and other East Asian countries.

• Economic reforms conducted over the last two decades have transformed Vietnam from a centrally-planned economy to an open-market economy.

• The integration with the regional and world economy has been recently accelerated with the recent acquisition of WTO membership and the participation in the regional FTAs.

• The investment regimes have been liberalized through the simplification of administration procedures and deregulation, a greater autonomy for domestic and foreign investors. Foreign investments are allowed take different forms of investment, ranging from direct investment, acquisition and merging, and portfolio investment.

• Trade and investment liberalization have contributed to the overall economic growth.

Eradicate extreme poverty and hunger

-At the national level, the goal of halving poverty has been realized, af-firming the result of extraordinary efforts to reduce poverty in Vietnam.Year: 993 2002 2006 2008 2010

Achieving universal primary education

Achievement in Development

-Vietnam has achieved universal primary education. Liter-acy and schooling proportions continue to increase.Enrollment in primary educationSchool Year: 2006-7 2007-8 2008-9 Net enrollment 96.8 96.1 97.0 rate in primaryeducation (%)

Poverty rate (%): 58.1 28.9 16.0 14.5 1423

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Major Economic Indicator-Vietnam

2007 2008 2009 2010e 2011f

GDP (100 million dollar) 711 903 932 1,036 1,093GDP per capita (dollar) 830 1,008 1,070 1,180 1,230Economic growth (%) 8.5 6.2 5.3 6.8 6.4

Unemployment rate (%) 4.6 4.7 4.6 4.4 4.1Consumer price inflation (%) 8.3 23.1 7.0 9.0 16.9

Exchange rate (D/dollar) 16,078 16,444 17,800 19,146 21,108Current account balance

(million dollar) -6,953 -10,706 -6,117 -5,623 -6,122

Export (million dollar) 48,561 62,685 57,096 71,893 90,334Import (million dollar) 58,999 75,468 65,403 79,548 98,531

Foreign reserve (million dollar) 20,732 21,143 16,027 .. ..Debt balance/GDP (%) 34.1 30.5 29.4. 30.0 31.7

Source: Korea Eximbank Overseas Economic Research Institute. 2010. 2010 World Country Review

Growth Rate of GDP of ASEAN 6

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Indonesia Malaysia Philippines Singapore Thailand Vietnam

Ratio of Fiscal Balance%

Sanjay Kalra. 2012. “Vietnam: Economic Development and Outlook”.

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Vietnam’s Recent Economic Performance

The Problem of Productivity

The increasing role of factors, instead of productivity character-izes the recent growth.

Source: Vietnam Development Report 2012.

Industrial Parks and Economic Zones

Source: Vietnam Development Report 2012.

Economic Performance of SOEs and Rest Enterprises

Source: Vietnam Development Report 2012.

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Inflation Monthly 2008-2010

Inflation Compared

Sanjay Kalra. 2012. “Vietnam: Economic Development and Outlook”.

Successful Industrial Parks

Source: Vietnam Development Report 2012.

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Trade Indicators

A sharply narrower trade deficit reined in the current account deficit to 7.4% of GDP in 2009 from 11.8% in 2008.

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Balance of Trade Deficit

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Economic Prospects

Achieving middle-income status

- Under the World Bank’s classification, developing countries graduate from “low income” to “lower middle income” when per capita gross na-tional income reaches $976. In Vietnam it stood at $890 in 2008, ac-cording to the World Bank.

Selected economic indicators (%)

Strength and Weakness

Source: ONDO. 2012. March. “Vietnam”.

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Development Challenges Fiscal and current account deficits

- Shortages of foreign exchange in the formal market, which undermine confidence

in the currency, fuel inflation, and hurt investment, should be addressed through a combination of tighter monetary policy and increased exchange-rate flexibility.

- It will be important to improve the legal and institutional framework for monetary policy.

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References

ADB . Asian Development Outlook. 2010.

GIC . Economic Indicators Vietnam. 2010.

Joint Donor Report. 2011. Vietnam Development Report 2012: Market Economy for a Middle-Income Vietnam.

Kalra, Sanjay. 2012. “Vietnam: Economic Development and Outlook.” IMF.

Laos

L a o P D R

Myanmar

Thailand

Cambodia

Vietnam

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Basic Facts about Laos

Population (million) : 6.2 million Area (sq.km) : 236 800 Population Growth Rate (percent): 2.5 Infant Mortality Rate (per thousand): 70 Under 5 Mortality Rate (per thousand): 97.6 Life Expectancy at Birth(year)

Female : 63Male : 59

Adult Literacy Rate (percent) Female : 63.2Male : 82.5

Per capita GDP(US$) : 1, 087

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Eradicate Poverty and Hunger

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27.6 24

-

20

40

60

80

100

1992 1995 2000 2005 2008 2010 2015

On track

Proportion of population below poverty line

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Major Economic Indicator-Laos

Source: Korea Eximbank Overseas Economic Research Institute. 2010. 2010 World Country Review

2007 2008 2009 2010e 2010f

GDP (100 million dollar) 42 53 56 63 69GDP per capita (dollar) 694 856 886 984 1,058Economic growth (%) 7.8 7.8 7.6 7.7 7.5

Unemployment rate (%) 2.4 2.4 2.4 2.4 ..Consumer price inflation (%) 4.5 7.6 0.0 5.7 7.0

Exchange rate (D/dollar) 9,603 8,744 8,516 8,259 8,100Current account balance

(million dollar) 139 116 9.3 -23.7 5.9

Export (million dollar) 923 1,092 1,053 1,369 1,600Import (million dollar) 1,065 1,405 1,462 1,754 2,100

Foreign reserve (million dollar) 517 614 623 717 ..Debt balance/GDP (%) 101.2 96.6 101.4 92.1 92.8

HDI Value Trend

1980 1990 1995 2000 2005 20100.300

0.350

0.400

0.450

0.500

0.550

0.600

0.650

0.700ThailandPhilippinesIndonesiaVietnam

Incoming FDI to Laos, 2003-2008 (%) by country   by sector  

Thailand 23.7 Power generation 53.9China 16.9 Agriculture 11.4Vietnam 9.3 Mining 9.8Japan 5.8 Industry and Handicraft 7.5

France 5.7 Services 4.3India 4.8 Trading 3.8South Korea 4.7 Construction 2.9

Australia 4.6 Hotel and Restaurant 2.6Malaysia 1.8 Other activities 3.7Singapore 1.4

Others 21.3    

Source: IMF 2009

References

Lao DPR. 2011. “MDG Report” (PPT).

Andriesse, Edo. 2012. “State Capitalism and vulnerable livelihoods in Lao PDR” (PPT).

Cambodia

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Major Economic Indicator-Cambodia

2007 2008 2009 2010e 2011fGDP (100 million dollar) 86 112 106 124 159GDP per capita (dollar) 601 767 716 821 1,039Economic growth (%) 10.2 6.7 -1.5 4.7 5.1

Unemployment rate (%) 2.5 2.5 3.5 3.5 ..Consumer price inflation (%) 7.7 25.0 -0.7 4.0 6.1

Exchange rate (D/dollar) 4,056.2 4,054.2 4,139.3 4,184.9 4,086.0Current account balance

(million dollar) -488 -1,051 -866 -994 -1,553

Export (million dollar) 4,089 4,708 4,302 ,472 6,289Import (million dollar) 5,439 6,509 5,876 7,324 8,647

Foreign reserve (million dollar) 1,807 2,291 2,744 3,150 ..Debt balance/GDP (%) 43.7 37.6 42.1 39.7 32.8

Source: Korea Eximbank Overseas Economic Research Institute. 2010. 2010 World Country Review

Recent Facts of Cambodia

• GDP doubled in just five years, despite adverse exogenous shocks.

• Industry began to contribute over a quarter of total output.

• A steady increase in gross national saving.

• Record levels of investment in 2007 amounting to $866 million or nearly 10 per cent of GDP.

• The political settlement was steadily enhancing its development orientation with the development of institutional frameworks to address social goals.

• Economic performance in 2009 was marked by output declines in three of the four sectors that had contributed the most to Cambodia’s structural transformation and had begun to generate domestic value added to serve as a springboard for future growth.

• The crisis marked a watershed moment for Cambodia. It threatened the reversal not just of growth and development, but of a process of structural transformation that displayed enormous potential for Cambodia to signifi-cantly accelerate its development efforts and become part of the Asian in-clusive growth story.

• The Cambodian government responded energetically, actively using the monetary fiscal and sectoral policy instruments at its disposal.

• Improvement in Cambodia’s export performance in 2010. • GDP growth is positive and expected to be around 5 per cent. • Gross fixed investment has also improved, projected at 18 per cent of GDP

—the bulk of this increase, at the margin, has happened in the private sec-tor.

• The fiscal position is comfortable, with a reduction in the fiscal deficit pro-jected for 2010.

• On the external front, the import cover remains satisfactory.

• The government has successfully secured the country from the immediate risks posed by the crisis.

• Averted a deterioration in the macroeconomic position, reversed declining private sector confidence

• Negated the threat of a medium term reversal in growth and investment.

• The crisis reveals some important long term challenges to Cambodia’s en-deavor to secure its development transformation, based on the rectangular strategy

The Crisis and Respond

• Diversification

• Domestic market

• Socialization of risk and social protection

• Looking East and South

After Crisis

Diversification

• The structural challenge for Cambodia is to reduce its dependence on a few high performing sectors.

• Garments, account for 70 per cent of total exports and 80 per cent of manufactured exports; yet, according to UNIDO this is one of the slowest growing sectors globally.

• Studies indicate that Cambodia is potentially competitive in several other activity areas including footwear, agro processing, and light engineering.

 • Successful diversification will require investments in Human capital and in

infrastructure.

• There will also be continued need to pay attention to strengthening the regulatory framework and improving institutional arrangements

• Emerging Asian economies such as China and India, and the rapidly grow-ing ASEAN economies offer attractive markets and sources of technology and expertise to Cambodia .

• The regional dynamic has not succeeded in providing any significant growth impetus to Cambodia.

• International production networks based on the twin processes of fragmenta-tion and agglomeration have taken roots across a diverse range

of goods extending from cars to footwear, particularly in Asia.

• Cambodia’s participation in regional supply chains would, require a range of business facilitation services, logistic services and access to modern informa-tion technologies.

Looking East and South

• The medium term challenge: To diversify the Cambodian economy, protect the vulnerable, and continue to build institutions that promote resilience.

• The opportunities lie in the strengths of the Cambodian economy: - Vast agricultural potential, - Demographic dividend of the future - Securing macroeconomic fundamentals - Enhancing savings and investment - Ability to take advantage of the enhanced possibilities afforded by regional

and South-South co-operation.

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Myanmar

Nay Pyi Taw

About Myanmar

Name : Republic of the Union of MyanmarCapital: NaypyitawMajor cities: Yangon (Pop-7 m) and

Mandalay (Pop-1 m)Area: 676,578 Sq KmPopulation: 60 millionGovernment: President elected by Bicameral

assembly called Pyidaungsu Hluttaw Administrative States and Divisions: 7 states and

7 DivisionsMain Export: Natural gas, beans, pulses, teak, minerals, gems and rice

GDP: MMK 36,146.72 Ban (2010)

Literacy: About 95% in 2010

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Major Economic Indicator-Myanmar

2007 2008 2009 2010e 2011fGDP (100 million dollar) 202 314 352 430 513GDP per capita (dollar) 350 533 587 702 821Economic growth (%) 12.0 3.6 5.1 5.3 5.5

Unemployment rate (%) 4.0 4.0 4.0 4.0 4.0Consumer price inflation (%) 32.9 22.5 8.2 7.3 8.0

Exchange rate (D/dollar) 1,290 1,185 1,055 970 910Current account balance

(million dollar) 1,285 1,208 705 1,549 1,058

Export (million dollar) 6,170 6,677 6,862 8,813 9,749Import (million dollar) 2,964 3,461 4,020 4,296 5,497

Foreign reserve (million dollar) 1,783 2,541 .. .. ..Debt balance/GDP (%) 40.8 25.8 24.4 21.4 19.2

Source: Korea Eximbank Overseas Economic Research Institute. 2010. 2010 World Country Review

International Relations

• Rapprochement with the West

• High-profile visits of senior Government and National and UN officials

• Re-engagement with the international community

• Resumption of ODA

• Gradual lifting of Sanctions

• ASEAN Chairmanship in 2014

• AFTA/AEC in 2015

Development Priorities

• Foreign exchange rate unification

• Agriculture

• Natural resources management

• Competitive business sector

• Financial/Banking Sector

• Education and Health

• Legal structures

• Infrastructure

• Policy formation and implementation

• Millennium Development Goals (MDGs)

Development Priorities

• Education and Health• Legal structures• Infrastructure, and • Policy formation and implementation• Millennium Development Goals (MDGs)