Publication in Economics, Politics and Public Policy in East Asia and the Pacific

An important international climate change funding proposal from China

Author: Stephen Howes

Global climate change negotiations are at an impasse, and have been for some time. With the imminent arrival of a US President committed to acting on climate change, eyes will increasingly turn to China, and what position it will take in global negotiations.

China’s just released White Paper: China’s policies and actions on climate change gives little away. It reads mainly as a progress report on the 2007 publication, China’s National Climate Change Programme.

The White Paper exhorts developing countries to “reduce emissions to the lowest degree.” This sounds good, but what does it mean? China has many policies in place for reducing emissions, from planting more trees to shutting down inefficient plant, but its aggregate emissions continue to grow rapidly.

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The LDP will lose the next general election

Author: Tobias Harris

A mere two months into Aso Taro’s premiership, some LDP members are already looking for a way to throw him overboard.

Mainichi reports that the most vigorous criticism is from the party’s young reformists — not surprisingly, as they fear for their political lives — but the Mainichi article goes on to quote various senior LDP officials voicing their criticism over the beleaguered prime minister.

The criticism focuses mostly on a series of ill-considered remarks (which were clearly the downside risk of choosing Mr. Aso), the latest of which is a remark that the DPJ will undoubtedly repeat over and over again during a general election campaign: Mr. Aso lamented publicly about having to pay for elderly patients who do nothing but eat and drink.

Is Mr. Aso deliberately trying to bury the LDP? Read more…

Are there practical substitutes for coal in China?

Author: Xunpeng Shi

Huw Slater’s careful reading of my paper on the future of coal in China is most welcome. It is good to have his attention and contribution on the issues in such detail.

Huw Slater’s argument on CO2 data is more a misunderstanding than an issue of debate. The current data on CO2 is calculated based on a constant coefficient of emissions intensity. This is reasonable as CO2 emissions have been free from any regulation until now and emission intensity is thus decided by chemical and physical characteristics, not by the regulatory environment. My empirical study tries to show the changing pattern of emission intensity.

Thus, the published CO2 data appears adequate for analysis, but his comments on CO2 emissions are a good reminder for me to be clear in my story.

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1970s Déjà Vu: Creeping protectionism is on the rise

Authors: Fredrik Erixon and Razeen Sally

World leaders have sounded alarm bells against a repeat of the 1930s, when titfor-tat protectionism followed hard on the heels of the Wall Street crash. But they are fighting the wrong enemy. Current events suggest a different, but still vexing, scenario: the creeping protectionism of the 1970s, rather than the spiraling protectionism of the 1930s.

In the 1970s, oil-price hikes and other shocks triggered inward-looking, mercantilist policies, including in Europe and the United States. Immediate policy responses were not overly protectionist: There was no equivalent of America’s 1930 Smoot-Hawley tariff. But escalating domestic interventions on both sides of the Atlantic exacerbated economic stress and prolonged stagnation. Not least, they spawned protectionist pressures. Industry after industry, coddled by government subsidies at home, sought protection from foreign competition.

The result was the ‘new protectionism’ of the 1970s and 1980s.

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Traffic rules and alcohol regulation in Japan

Author: Luke Nottage

If you are one of those many more short-term visitors to Japan nowadays, and even if you are an old hand, watch out for signs setting out various rules that may be unexpected or new. Like these two signs:

The bigger one to the bottom left is one of many signs we see increasingly around Japan in English (and sometimes now Chinese or Korean). The text is small but reads: “In the Beautification Enforcement Areas you will be fined up to 30,000 yen for littering regardless of your nationality or status”. The kind of prohibition and penalty you might expect in Singapore. Not in Japan, where local communities have long taken pride in being tidy – although that has not excluded individuals or dodgy firms from dumping their rubbish in distant communities! But what is meant by the round blue sign up on the right? Read more…

Transparency in micro-economic reform

Author: Bill Carmichael, Former Chairman, Industries Assistance Commission

In introducing the recent Australian Financial Review editorial on trade policy, Denis Hussey suggested there is scope for improving the performance of our own economy. This raises important questions about the future of the advisory process that has, to date, underpinned bipartisan support for micro-economic reform in Australia.

Given the broad bipartisan agreement about the need to raise national productivity, there is an obvious need for continuity in the conduct of micro-economic reform. It is the driver of national productivity gains and has long-term ramifications throughout the economy and community.
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Bangkok: Dangerous days and provocative protests

Author: Nicholas Farrelly

Shutting down an international airport, particularly one as busy as Bangkok, is a big deal. By disrupting the ordinary bustle of global commerce and tourism it inevitably draws worldwide attention. As a protest tactic it also guarantees the inconvenience, annoyance and impoverishment of many. For protesters it is an audacious move; one that can only be contemplated by the irrational or by those with the confidence that powerful people are on their side.

Scenes of the ongoing siege at Bangkok’s new 4-billion dollar Suvarnaphumi Airport have, this week, been broadcast far and wide. Yesterday came the news that the city’s second airport, Don Muang, has also been closed. The world is now watching, with a degree of incredulity, as a group calling itself the “People’s Alliance for Democracy”, and basking in the reflected glow of the Thai king’s yellow, bangs its drum calling for the government to fall. Read more…

Neo-cons in Pyongyang

Author: Leonid Petrov

These days North Korea is heading for a major retreat, back to Military Communism. Only those elements of market economy which are necessary to keep the country afloat are being preserved. The economic policy of partial liberalization, which started on 1st July 2002 waned in mid-2005, and is now a history. The old patterns of central economic planning, public distribution system, and strictly controlled market activity are back in place. This might be surprising to those who expected from North Korea to open up and become a transitional economy, but its current economic policy attests to the contrary. We do not know whether this retreat had been planned from the start, but already in 2004 the North Korean authorities were talking openly about this possibility.

Kim Jong-il’s ill health became apparent in October 2007 during the summit with Roh Moo-hyun. In November-December 2007, active anti-market actions were launched in North Korea. This was the time when Chang Sun-taek, Kim’s brother in law, was promoted to the newly created post of first vice-director of the Korean Workers’ Party, with oversight responsibility for the police, judiciary, and other areas of internal security. He was sent to the border area with China to “clean up” smuggling and speculation. Read more…

China’s economic reforms pushed by civil society

Author: Yongsheng Zhang

Over the past three decades, institutional changes have been the major driving force for China’s economic development. But, as Ross Garnaut recently stated in Beijing, “many foreign analysts have underestimated the importance of institutions in economic development, and the inevitably gradual nature of successful institutional change”.

If China’s reforms prior to 2000 for establishing a market economic framework could be called the first generation of reforms, then subsequent reforms aimed at improving the market economic system could be called the second generation of reforms (2G), designed to eradicate the hardest institutional barriers incompatible to a market economy.

But the 2G reforms need momentum. For instance, it is not so easy to break the vested interests. However, proper application of the rule of law and civil society measures can provide the momentum and act as a warranty for the success of the 2G reforms and for China’s long term economic prosperity.

The recent strikes of taxi drivers in some places in China is a good example. Read more…

Rudd must act on trade reform

Author: Denis Hussey, Chairman, Tasman Transparency Group

With the threat of countries retreating to protectionism in the wake of the global financial crisis, the G20 and APEC leaders’ commitment to support multilateral trade liberalisation is welcome and timely. However, announcing that commitment is the easy part. Rudd returns home now to digest the Mortimer Review and to implement the domestic reforms needed to help us continue to reap the gains from globalisation. He has the additional complementary challenge, and opportunity, to sponsor an approach that would give substance to the G20 commitment to open world markets.

Following the release of the Mortimer Review and the additional analysis on the East Asia Forum, the Australian Financial Review on 25 November 2008 offered the following editorial comment:

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The end of the Vasco de Gama era

Author: Coral Bell

The new landscape of international politics is at the moment appearing before our eyes. It is being shaped by a vast redistribution of power, away from what might be called the North Atlantic world, of the US and Europe, towards particularly China and India, so it can be seen as the end of the Vasco da Gama era.

Indian scholars have long regarded the advent of the great European navigators, like da Gama , as the beginning of five hundred years of the ascendancy of the West over the non-Western world.

The power-redistribution now most evident is in the economic sphere, but it also extends into the diplomatic sphere, and will increasingly extend also into the strategic sphere. In contrast to the second half of the 20th century, which was bipolar during the 43 years of the Cold War, then marked by unchallenged US primacy during the ten years of the “unipolar moment”, the global landscape of the 21st century will be multipolar.

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Implementing the G20 commitment to World Trade Reform

Author: Saul Eslake, Chief Economist, ANZ Banking Group

After committing Australia to support the G20 goal of opening world markets, a commitment re-affirmed by Trade Minister Crean last week in Peru, Prime Minister Rudd has returned home to consider his government’s response to the Mortimer review of our own trade policy.

The G20 objective is just that—an objective. It will only become more if a way to implement it can be introduced into the WTO.

The document prepared with our two New Zealand colleagues explained why the Mortimer review does not help Prime Minister Rudd meet his commitment to support the WTO. It has the same relevance for the G20 objective. Any strategy to restore progress in the multilateral system must provide a basis for reducing the conflict, so evident in the Doha Round, between the two separate processes involved in multilateral trade reform.

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Vietnam’s banks under scrutiny

Author: Suiwah Leung

After Pakistan and Sri Lanka, Vietnam is reported to be the third country in Asia at risk of a credit-rating downgrade by Standard & Poor as global recession deepens, and the country’s banking system is cited as being the major concern. In May this year, Standard & Poor lowered Vietnam’s BB long-term foreign currency ratings outlook to negative as macroeconomic turbulence intensified. Since then, tight monetary and fiscal policies, as well as administrative measures and falling world demand, have managed to cool the overheating of the economy, but now, the country’s banking system is coming under scrutiny.

From a situation where the banking system was overwhelmingly dominated by a few state-owned commercial banks, Vietnam’s banking sector has diversified quite rapidly. Currently, Vietnam has four major state-owned commercial banks (plus a fifth, smaller one) which control around 55 per cent of banking sector assets; 37 joint stock banks occupying another 30 per cent of the market share, with the remaining 15 per cent spread amongst 37 foreign bank branches and five joint-venture banks. Whilst credit growth last year amongst the state-owned commercial banks was relatively modest (a little over 20 per cent), credit growth amongst the joint stock banks reached almost 100 per cent, raising concerns about credit quality.

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Aso in a tailspin

Author: Tobias Harris

Prime Minister Aso Taro is in Peru for this year’s APEC summit, a summit that will undoubtedly be an even greater exercise in futility than usual.

At home, his administration is faltering.

He is under fire from within the LDP for recent gaffes. (It was only a matter of time before Mr. Aso talked without thinking.) The most politically costly gaffe may prove to be his remark that many doctors lack “common sense.” Masuzoe Yoichi, the health, labor, and welfare minister, admonished his prime minister to stay on message, as he has struggled to make the case for the LDP’s efforts to fix medical care for the elderly. Mr. Masuzoe is not alone in criticizing the prime minister. Oshima Tadamori, the LDP’s Diet strategy chairman, cautioned the prime minister to “be careful with his words.” More significantly, Karasawa Yoshihito, the chairman of the Japan Medical Association, called upon Mr. Aso to take back his remark and apologize. Chairman Karasawa’s remarks are indicative of a growing rift between the LDP and the JMA, a longtime supporter of the LDP. While the JMA may no longer wield the clout it once did — as Gerald Curtis noted — the JMA can damage the LDP simply by making a public show of breaking with the ruling party. The Ibaraki prefectural medical association has already announced that it will endorse DPJ candidates in the next general election to protest the new eldercare system. How many more will follow Ibaraki’s lead after Mr. Aso’s remarks?

More significantly, Mr. Aso may be facing a wider rebellion within the LDP on matters of policy.

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Obama and Japan’s security policies

Author: Peter Drysdale

Japan’s muddle over the economic policy strategy is a teddy bear’s picnic compared to the muddle over where security policy might go, especially with the election of the new Administration in Washington.

As Obama prepares to take over, policy makers in Japan are thinking about how to extend and reinforce the Japan-US strategic relationship. Over the past decade, Japan has taken steps to upgrade and stabilize the security relationship. Yukio Okamoto, one of Japan’s most respected independent security analysts, lists the expanded role for the Self Defence Forces (SDF) in the fight against terrorism; the acquisition of sea and air assets making it possible for the SDF to conduct operations at a distance from the Japanese islands; increased SDF participation in multilateral security efforts (such as the Proliferation Security Initiative); and the introduction of the hardware and software necessary for integrated launch-phase and descent-phase ballistic missile defence.

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