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

Vietnam sails through the crisis but needs reform to sustain the growth

Author: Suiwah Leung, Crawford School, ANU

Vietnam weathered the global financial crisis surprisingly well. Real GDP growth of 4.6 per cent year-on-year for the period January-September 2009 is below that of China, but well above growth rates in most East Asian economies.

One factor behind this unexpected result is the still early stages of integration into the global economy. This has cushioned Vietnam from the immediate impact of the US financial crisis and from the more devastating effect of reduced manufacturing exports. The turnaround in monetary policy (from monetary tightening in mid-2008 to halving the official interest rate from 14 to 7 per cent per annum by November the same year) and the large program of fiscal stimulus (announced at around US$8 billion) also contributed to maintaining growth. Read more…

Economic and political developments in Malaysia: new players new game?

Author: Mahani Zainal Abidin, ISIS

There were two big game-changing events in Malaysia in 2009. Dato Sri Najib Razak became the country’s sixth prime minister and the economy was hit by the global crisis.

Malaysia avoided financial meltdown in the current crisis because of the financial reforms it made after the 1998 Asian Crisis. But the decrease in export demand drove the economy into recession. Read more…

Minimising uncertainty for Indian investment

Author: Rajiv Kumar, ICRIER, India

The rapid and sustained growth of manufacturing is a necessary condition for not only generating the required employment for our young workforce, but also for modernizing our society and eliminating the dualism—stark differences between the organized and unorganized sector—that currently characterizes our economy. Too much reliance on financial and information technology-enabled services could actually produce the opposite results by creating enclaves and exacerbating the dualism.

So this objective of accelerating the growth of manufacturing, increasing its share in India’s gross domestic product (GDP) and eliminating the dualism must form one of the cornerstones of our economic policy. Let me note right away that it is very difficult to achieve a consensus on any policy objective in our country Read more…

Year in review: Obama and Asia – Weekly editorial

Author: Peter Drysdale

The Obama administration brought high expectations in Asia of a new era in America relations with Asia and for America’s global standing. Obama’s victory was a triumph of hope in America’s future and hope for America’s positive role in world affairs. Much has changed through 2009, with Secretary of State, Clinton’s historic inaugural visit to Asia (not to Europe) and Obama’s trip to Japan, APEC in Singapore, China and Korea in November. Clinton’s signing of the ASEAN Treaty of Amity and Cooperation set the stage for Obama’s dialogue with ASEAN leaders around the APEC Summit and a new direction in American engagement in the region. But through the year the reality had set in. The lukewarm press on Obama’s Asian trip back home was less a product of what the President had achieved on his travels and what markers he had laid down for the future of America’s Asian engagements than it was a measure of how the Obama administration was travelling at home.

This week Wendy Dobson, in her review of America’s Asian initiatives, reminds us what difficult a job the Obama administration still faces at home in managing the exit from the global financial crisis. Read more…

Obama’s Asia Pacific presidency still not out of the woods at home

Author: Wendy Dobson, University of Toronto

The central domestic challenge for America in 2010 is economic. Unemployment is above 10 per cent and probably has not yet peaked, the recovery in economic activity is anemic and the massive fiscal and monetary policy responses have yet to show that they can successfully bridge to the resumption of organic activity. The recession was unprecedented in that its causes lie in the financial sector in which there is now deep risk aversion by traditional lenders and the weak recovery risks exacerbating protectionist sentiment.

In the coming year policy makers face difficult decisions about exit: timing the withdrawal of fiscal and monetary stimulus soon enough to avoid igniting inflation but not so soon that recovery is nipped in the bud. They also face potential political firestorms over the design of a long-term strategy for fiscal consolidation (after a deficit estimated to exceed 13 per cent of GDP in 2009) and a desire by some elected representatives to hold the Federal Reserve Board accountable for the perceived laxity in monetary policy which, along with weaknesses in financial regulation, is seen to have seeded the crisis. Read more…

Obama’s first steps in Asia

Author: Nina Hachigian, Center for American Progress, Washington

President Obama’s first steps in 2009 reveal a U.S. committed to reenergizing the role of the U.S. in Asia and set U.S.-Asian relations on a promising path.

Obama’s tenure began with an important symbolic gesture: The first trip that Hillary Clinton took as Secretary of State was to Asia, not Europe, where her predecessors for the last forty years had gone first. A few months later, without a great deal of fanfare, the Administration signed the Treaty of Amity and Cooperation, which paved the way for President Obama, in November, to become the first American president to attend an ASEAN summit. This, too, was an important symbol that America would re-focus on Asia, show-up, and take Asia’s regional institutions seriously.

In terms of America’s treaty allies, Japan’s elections were momentous, and while U.S.-Japan relations under the new DJP government have not been entirely smooth sailing, these are still early days, and in time they are likely to work themselves out. Read more…

The Oceanic Viking and Australia’s refugee dilemma

Author: Matthew Zagor, ANU

For several weeks in October and early November, Australian politics was dominated not by the economy or climate change, but by the conduct and fate of 78 Sri Lankan asylum-seekers aboard an Australian customs vessel, Oceanic Viking, outside the port of Tanjung Pinang in Indonesia. The incident exposed some of the fissures in international refugee law, as well as Australia’s uneasy relationship with those who arrive by boat.

Rescued in Indonesian waters by an Australian vessel at the request of the Indonesian authorities, the asylum-seekers refused to disembark until certain demands were met concerning their conditions of detention and expedited resettlement. Coming on top of a spike in boat arrivals in Australia, the incident presented a test of the Prime Minister’s stated policy of being ‘tough but humane’. Read more…

A tale of two cities: Chinese labor market performance in 2009 and reform priority in 2010

Author: Cai Fang, CASS

At the beginning of 2009 the global financial crisis struck hard at the real economy of China. While the whole country suffered, not all regions suffered equally. Looking at two industrial cities on which the crisis had a very different impact helps to explain the reasons for the uneven effect of the crisis, and highlights opportunities for policy reform.

The city of Dongguan in Guangdong province provides a telling example of the severe shock experienced by migrant workers in the wake of the crisis. Dongguan is located in the Pearl River Delta Region which has a high concentration of export-oriented labor-intensive enterprises and migrant workers. As early as the second half of 2008 due to a sharp drop in export orders some enterprises in Dongguan, shut down while others substantially reduced production. As a result, a large proportion of migrant workers in the city lost their jobs. An official source indicated 20 million migrants returned home earlier than expected because of the fall in demand for exports. Read more…

The EU’s view of China

Author: Razeen Sally, ECIPE

The EU views China with a combination of awe, ignorance, fear, confusion and ambition. It is awed by China’s rise. It is largely ignorant of China. Real knowledge of China, and Asia more generally, is pathetic in Brussels, as it is in all European capitals with the partial exception of London. European sophisticates constantly disparage American insularity, but knowledge of Asia is far superior inside the Beltway, and in think tanks and universities in the United States, than it is anywhere in Europe. Ignorance mixed with arrogance is not an American preserve; it is found in abundance on the Old Continent, as any visit to a Parisian intellectual salon will reveal.

Then there is fear of China, especially when relations with it are viewed in militaristic, zero-sum terms. Perhaps that reflects an atavistic French world-view. And confusion reigns, for the EU, being a non-nation-state hybrid, has no foreign policy towards China and is often undermined by the foreign policies of its big three member-states (UK, France and Germany). Last, despite these drawbacks, the EU’s ambition is to be a privileged interlocutor and at the top table with China. That reflects the EU’s self-image as a ‘power’ in the world. Read more…

Australia avoids the crisis, by luck and good management

Author: Ian Buchanan, Crawford School, ANU

Australia has emerged as the world’s strongest performing advanced economy in the aftermath of the global financial crisis. While the US unemployment rate is the highest it has been since 1983, at 10.2 per cent, the latest forecasts from the Australian Treasury have lowered the peak unemployment target from 8.5 per cent to 6.75 per cent, and unemployment unexpectedly fell last month to 5.7 per cent. In the May budget growth forecasts were raised from 0.5 per cent to 1.5 per cent for 2009/2010 and to 2.75 per cent for 2010/2011.  Australia’s strong economic performance has translated into a stronger Australian dollar — up 32 per cent against the US dollar over the year to December.

Prime Minister Kevin Rudd and his government deserve credit for their decisive actions in dealing with the onset of the crisis.

In October 2008, the Rudd government guaranteed bank deposits and wholesale funding for Australian banks. Then in February 2009 the Rudd government launched a A$42 billion ‘Economic Stimulus Package’. But the Rudd government also benefited from some luck Read more…

Bringing India in from the cold – and selling them nuclear technology

Author: David Brewster, ANU

The report of the International Commission on Nuclear Non-Proliferation and Disarmament (ICNND) released in Tokyo on 15 December 2009 recommends the establishment of a parallel nuclear non-proliferation system for three non-NPT (Non-Proliferation Treaty) states: India, Pakistan and Israel. The report was jointly commissioned by Australia and Japan with the ostensible purpose of reinvigorating the international nuclear non-proliferation system that has come under severe stress in recent years. The proposals, if implemented, would provide a way of dealing with ‘rogue’ nuclear weapons states that are currently outside the formal system.

Putting aside the many potential benefits of these proposals for international nuclear non-proliferation, the ICNND proposals could also be of significant benefit in Australia’s and Japan’s relations with India. Read more…

Japan: the DPJ preparing to retreat?

Author: Tobias Harris

As the Hatoyama government approaches the end of its first 100 days in office, the air is thick with condemnation of the DPJ-led government’s handling of the relationship with the United States, particularly the ongoing dispute over the future of Futenma air station and the US presence in Okinawa.

Smelling blood in the water, the LDP and its allies in the conservative commentariat have gone on the offensive against the government. On Thursday Tanigaki Sadakazu, the leader of the LDP, said that the government was acting irresponsibly when it came to the hopes of the Okinawan people and harming relations with the US. Compared to what others were saying, Tanigaki was being charitable. Read more…

Post-COP15 diagnosis and the promise of Japanese political change – Weekly editorial

Author: Peter Drysdale

The big news this week was the chaos over the negotiations on climate change in Copenhagen. Will Steffen was there and files this realistic assessment on whether the deal that was eventually done will generate sufficient momentum to continue to build through 2010 towards a much more comprehensive and effective agreement. His conclusion is that the jury is still out.

And this week, we begin the end-of-year, beginning-of-year series by leading analysts from countries around the region on what the year looks like in retrospect and what challenges there are looking at the year ahead. Over the next few weeks, along with our normal posts, we reflect on what has been a year of enormous change in the world and ahead, at a period of immense fluidity in which Asia seems bound to play a peculiarly important role. Read more…

A year of political transformation in Japan

Author: Yoichi Funabashi

The rise to power of the Democratic Party of Japan (DPJ) after half a century of almost uninterrupted rule by the Liberal Democratic Party (LDP) could bring profound changes to Japan.

One change will surely be generational: the new leaders, including Prime Minister Yukio Hatoyama, will be the first with little memory of World War II. Read more…

Climate change: a post-COP15 diagnosis

Author: Will Steffen, ANU

Not surprisingly, interpretations of the outcome from COP15 range from an outstanding success to an utter disaster, and everything in between.  Political leaders claim a big step forward towards climate protection, while the vast majority of the NGOs who flocked to Copenhagen blast the outcome as, at best, a wasted opportunity.

In many ways, views on the outcome of COP15 were strongly conditioned by expectations, especially for those who thought that the Copenhagen conference would ‘seal the deal’ for limiting anthropogenic climate change to a temperature rise of no more than 2 degrees Celsius above pre-industrial levels. But a comprehensive, final agreement was never really in the cards, even months before the meeting itself. The real question was whether COP15 would make enough progress to build unstoppable momentum towards a much tougher, legally binding agreement sometime in the next 6 to 12 months. Read more…