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

Re-igniting the Cold War in Asia

Protesters demand the return of operational control.

Author: Hyung-A Kim, ANU

More than 100 days after the sinking in March of the South Korean navy corvette, the Cheonan, with the loss of 46 lives, the UN Security Council presidential statement of 9 July epitomises the impasse that the global response to this incident has now reached.

The statement did not directly condemn or blame North Korea but simply stated that it ‘condemns the attack which led to the sinking of the Cheonan’, and called for ‘appropriate and peaceful measures to be taken against those responsible for the incident’. Yet, while the UN Security Council took more than a month to adopt this statement, the sinking has become the catalyst for some significant developments in Northeast Asia, reminiscent of the Cold War posturing of the past. Read more…

Globalisation with weak institutions: Cambodia

Author: Hal Hill, Jayant Menon and Chan Sophal

The charming riverside capital of Phnom Penh, home to about 1.5 million inhabitants, has seen a lot in its turbulent history. But nothing arguably is on the scale of its first sky-scraper, the 42-floor ‘Gold Tower’ now nearing completion, not to mention the university and bank complexes mushrooming throughout this ancient city.

This changing physical landscape reflects broader developments in the country, which has been experiencing rapid economic growth – the sixth fastest in the world in the decade to 2007 – for the first time in its history. Read more…

India: Controlling inflation without hurting growth

Author: Ashima Goyal, IGIDR

The expected spread of food price inflation in India to more industrial categories has provoked a crescendo of calls for sharp monetary tightening. Such a response would be appropriate if excess demand were driving inflation.

But the current high wholesale price index (WPI) inflation follows prolonged cost shocks and a period of very low inflation. This low base overstates inflation. Policy should rather reduce inflationary expectations without hurting the supply response. Read more…

Strategy more than commerce: China-New Zealand FTA

Author: Gary Hawke, NZIER

For domestic consumption, the New Zealand government frequently trumpets the success of the China-New Zealand FTA in terms of short-run economic gain. So Foreign Minister McCully told the Foreign Policy School in Dunedin on 25 June 2010, ‘During the darkest economic days of the global downturn, but in the early stages of the implementation of New Zealand’s Free Trade Agreement with China, our exports to China for calendar 2009 increased by a massive 43 per cent.’

Prime Minister John Key told his National Party conference last weekend, ‘At the heart of our trade push are living standards and jobs.’ Read more…

New Zealand, Australia and China’s rise

Author: Robert Ayson, Victoria University, Wellington

New Zealand’s Prime Minister John Key recently returned from a major visit to three of East Asia’s most important countries. He visited China, with whom New Zealand already has a Free Trade Agreement, the Republic of Korea, with whom Wellington is seeking to conclude FTA negotiations, and Vietnam, another growing Asian economy which New Zealand would like to see become a full partner in the Trans-Pacific Partnership.

It is no surprise that Prime Minister Key’s message to the New Zealand public was in tune with his own earlier career in foreign exchange markets: the big issue is positioning New Zealand so that it is best able to participate in Asia’s economic expansion. Read more…

China and the lessons of the past

Author: Amy King, Oxford

In its 50th year, the US-Japan Security Treaty has come under scrutiny in Washington and Tokyo.

Calls by former Japanese Prime Minister Hatoyama for a more equal place for Japan within the alliance, and the Hatoyama government’s fumbling over the Futenma base relocation, have caused tension in the bilateral relationship. At the same time, Hatoyama increased the rhetoric about building a more cooperative relationship with China, and is leading the charge for a stronger ‘East Asian Community’, which potentially excludes the United States. Read more…

Chinese abroad – strangers at home

Chinese in Shanghai

Author: Geremie R. Barmé

The people that the Chinese are often most worried about are other Chinese.

Chinese living and working abroad have played an enormous role in the country’s economic boom. For years, they have sent money back and offered hope to those at home during periods of calamity and chaos.

Yet holding a foreign passport doesn’t make these expatriates any less Chinese. Of all people, they are expected to be most attuned to the complex realities of life in China. When they fall short, they are treated with official suspicion and individual disdain. Read more…

US-Japan alliance: the 2006 roadmap’s impasses

U.S. Senator Daniel Inouye in discussion with former Japanese Prime Minister Yukio Hatoyama, January 2010

Author: Tobias Harris, MIT

In the wake of its defeat the Kan government has made it patently clear that the Hatoyama government’s ‘ratification’ of the 2006 realignment plan was nothing of the sort — it is now saying that it will be impossible to complete negotiations before Okinawan gubernatorial election in November. The government once again is considering alternatives to the V-shaped runways to be built at Henoko bay, and is reluctant to impose a solution on the Okinawan people.

But, as the Wall Street Journal reports, American domestic politics is emerging as a new constraint on implementing the 2006 agreement. Both houses of Congress have voted to cut funding for the construction on Guam that is necessary to prepare the island to receive the 8,000 Marines and their dependants that according to the plan will move from Okinawa to Guam in 2014. Read more…

Japan: Laying to rest the ghosts of history’s controversies

Author: David Fedman, Stanford University

We are well into the Democratic Party of Japan administration and it is patently clear that Japan’s leadership is taking engagement with its East Asian neighbours seriously. Major missions of DPJ lawmakers to China, high-level cabinet meetings with South Korean counterparts, and northeast Asian trilateral summits have signalled a newfound interest in and commitment to diplomacy and détente in the neighbourhood.

This ‘New Asianism’—to borrow a phrase from Daniel Sneider—was clearly outlined in the DPJ’s pre-election manifesto: ‘the DPJ will make the greatest possible effort to develop relations of mutual trust with China, South Korea and other Asian nations, and to strengthen the bonds of solidarity with Asian countries within the framework of the international community’. Read more…

Dangers lurk in North Korea’s leadership transition

North Korean leader Kim Jong Il inspects a fruit farm in Pyongyang.

Author: Yoichi Funabashi, Asahi Shimbun

Ever since North Korean leader Kim Jong Il suffered a stroke in August 2008, efforts have accelerated to ensure a smooth transition in power to Kim Jong Un, his third son.

However, many difficulties await Kim Jong Un, who is only 27.

The biggest hurdle will be dealing with the military. Read more…

Getting the sequence right in regional financial markets

Author: Jenny Corbett, ANU, and Christopher Findlay, University of Adelaide

Managing the global recovery and the transmission of shocks that might accompany economic integration continues to be a talking point around the region. An example is the recent conference in Korea organised by the IMF.

These meetings generally conclude with statements that everything matters and statements such as ‘actions in multi-country frameworks can be used to complement strengthening measures adopted at the individual economy level’. Read more…

Obama’s empathy — a strategy for America?

Author: Aaron L. Connelly, CSIS, Jakarta

President Barack Obama’s political philosophy has been the subject of intense debate in the United States. The protean nature of the President’s pragmatism leaves hardened ideologues frustrated, unable to plot his views on a simple xy axis. But if you want to know where Obama stands, you need only examine the moral philosophy that undergirds his politics. In this, the most explicit common thread has been the need for empathy in policymaking—placing the ‘empathy deficit’ alongside the budget and trade deficits as structural problems that American strategy must address.

This is no less true of Obama’s instincts on foreign policy than it has been of his instincts on healthcare or judicial nominees; in the preface to the second printing of Dreams from My Father, Obama speaks at length about the need for empathy in foreign policy. Read more…

Next generation on Asia

Author: Shiro Armstrong, ANU

The Asian region is diverse, dynamic and it faces immense challenges. Domestically most countries are experiencing rapid economic, social and political change and in the region there is a huge change taking place in the structure of power and influence.

The latest issue of the East Asia Forum Quarterly brings together essays from rising stars in the new region to address the changes taking place in the region and showcases the best from the new generation on Asia. Read more…

An East Asian development fund for North Korea?

Author: Geoffrey K. See, Yale University

During my last visit to Kim Il Sung University in Pyongyang, a student told me that she wanted to be a business leader. I asked her why. She said that she wants to show that ‘women can be good business leaders’. I later quizzed her on politics and she responded by asking me if I was interested in such issues. When I said ‘Yes’, she said ‘Politics are for men only.’

Maybe she has a point. Not so much that ‘politics are for men only’, but rather that in bringing North Korea back into the international system, we should separate politics from business. Encouraging trade and investments in North Korea can only make the country more cooperative on other issues. Read more…

Happy days ahead? Policy implications of the global recovery for India

Author: Suman Bery, NCAER

The Business Standard editorial ‘The IMF gets more upbeat’ noted that the IMF has had a patchy record in charting the evolution of the present crisis, following developments more than anticipating them. Despite this performance, and its poor performance in predicting the crisis, each update of its forecast for the global economy (the World Economic Outlook, or WEO) receives considerable international press attention and commentary.

While the Fund’s full analysis of the global economy is undertaken twice a year — in April and September at the time of the meetings of the governors (i.e. finance ministers) of the IMF and the World Bank — the organisation also undertakes summary intermediate revisions. Read more…