Growth and Trade Horizons for Asia: Long-term Forecasts for Regional Integration

Roland-Holst, David; Verbiest, Jean-Pierre; Zhai, Fan Working Paper Growth and Trade Horizons for Asia: Long-term Forecasts for Regional Integration ERD Working Paper Series, No. 74 Provided in Cooperation with: Asian Development Bank (ADB), Manila Suggested Citation: Roland-Holst, David; Verbiest, Jean-Pierre; Zhai, Fan (2005) : Growth and Trade Horizons for Asia: Long-term Forecasts for Regional Integration, ERD Working Paper Series, No. 74, Asian Development Bank (ADB), Manila, https://hdl.handle.net/11540/1903 This Version is available at: https://hdl.handle.net/10419/109277 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. http://creativecommons.org/licenses/by/3.0/igo 29ERD WORKING PAPER SERIES NO. 74 ERD Working Paper No. 74 GROWTH AND TRADE HORIZONS FOR ASIA: LONG-TERM FORECASTS FOR REGIONAL INTEGRATION DAVID ROLAND-HOLST JEAN-PIERRE VERBIEST FAN ZHAI November 2005 David Roland-Holst is Professor of Economics at University of California, Berkeley; Jean-Pierre Verbiest is Country Director, Thailand Resident Mission, and Fan Zhai is Economist in the Economics and Research Department, Asian Development Bank. Opinions expressed here are those of the authors and should not be attributed to their affiliated institutions. Special thanks to Dominique van der Mensbrugghe. 30 NOVEMBER 2005 GROWTH AND TRADE HORIZONS FOR ASIA: LONG-TERM FORECASTS FOR REGIONAL INTEGRATION DAVID ROLAND-HOLST, JEAN-PIERRE VERBIEST, AND FAN ZHAI Asian Development Bank 6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines www.adb.org/economics ©2005 by Asian Development Bank November 2005 ISSN 1655-5252 The views expressed in this paper are those of the author(s) and do not necessarily reflect the views or policies of the Asian Development Bank. 31ERD WORKING PAPER SERIES NO. 74 FOREWORD The ERD Working Paper Series is a forum for ongoing and recently completed research and policy studies undertaken in the Asian Development Bank or on its behalf. The Series is a quick-disseminating, informal publication meant to stimulate discussion and elicit feedback. Papers published under this Series could subsequently be revised for publication as articles in professional journals or chapters in books. 33ERD WORKING PAPER SERIES NO. 74 CONTENTS Abstract vii I. Introduction 1 II. Background 2 III. Baseline and Policy Scenarios 6 A. A Baseline Scenario to 2025 6 B. Alternative Integration Scenarios 10 C. Regional and Subregional Growth Poles 16 IV. An Agenda for Asian Regional Integration 17 V. Policies that Facilitate Integration 22 A. Infrastructure Investment 22 B. Regional Capital Markets 24 C. Trade Policy and Regional Integration 24 D. Policies to Promote Labor Productivity Growth 24 VI. Conclusions 25 Appendix: Overview of the SAGE Model and Data 27 References 28 35ERD WORKING PAPER SERIES NO. 74 ABSTRACT With the emergence of People’s Republic of China (PRC) and India, the economic landscape of Asia and its relation to the global economy have been changed. Using the new dynamic global model, we present forecasts for Asian expansion over 2025. These baseline growth forecasts elucidate shifting patterns of regional specialization and their consequences for growth and structural change in the Asian economies. The central role of trade is examined through analysis of a variety of hypothetical global and regional trade agreements. Our results indicate that trade within the Asian region is far from reaching its potential, and policies that facilitate integration and more efficient regional trade can accelerate growth, especially for lower-income Asia. A deeper and more inclusive Asian free trade area can achieve for its members large benefits. As a emerging growth bridge between the PRC and India, ASEAN economies have the most to gain from Asian economic integration. 1ERD WORKING PAPER SERIES NO. 74 I. INTRODUCTION Economic emergence of the world’s two most populous countries, People’s Republic of China (PRC) and India, is transforming the economic landscape of East and South Asia, contributing to fundamental shifts in global economic relations. While Asia’s traditional trade with members of the Organisation for Economic Co-operation and Development (OECD) continues to expand and intensify, intra-Asian trade is accelerating as the most dynamic economies provide growth leverage to their neighbors. This trend is facilitated by official efforts to liberalize trade, and private agency that propagates growth linkages over regional supply networks. Intensified Asian regional integration has the potential to raise incomes among a majority of the world’s poor, yet policymakers cannot foresee how trade patterns and domestic adjustments will evolve in the medium and long term. Using the new GTAP (version 6)1 database with a dynamic global model, we present forecasts for Asian expansion over the next two decades (2006–2025). These baseline growth forecasts elucidate shifting patterns of regional specialization and their consequences for domestic growth and structural change in the Asian economies. Regional differences in growth rates are then analyzed in terms of their fundamental determinants. In our examination of the central role of trade in regional growth, we provide detailed analysis of the impacts of a variety of hypothetical regional and global trade agreements. Generally speaking, our results indicate that the sustainable growth potential of the region remains great, but policies facilitating both integration and adjustment will be needed to fulfill this potential. This is particularly the case with regard to poverty alleviation and differing growth experience. In the absence of more focused policy commitments, there are risks that real growth benefits may be very unevenly distributed across the region, both at the international and subnational level. Other salient issues that emerge in this analysis include: (i) Trade within the Asian region is far from reaching its potential, and policies that facilitate integration and more efficient regional trade can accelerate growth and expand its basis, especially for lower-income Asia. (ii) Tariff barriers are only part of the challenge to further economic integration and trade expansion in the region. If trade within the Asian region can be made more efficient, even by small but continuing improvements in reducing distribution costs, the gains would be much greater than those resulting from tariff or other trade policy reform. A deeper and more inclusive Asian Free Trade Area can achieve for its members larger benefits than that would arise from global trade liberalization along World Trade Organization (WTO) lines. 1 Global Trade Analysis Project; see Hertel (1997). 2NOVEMBER 2005 GROWTH AND TRADE HORIZONS FOR ASIA: LONG-TERM FORECASTS FOR REGIONAL INTEGRATION DAVID ROLAND-HOLST, JEAN-PIERRE VERBIEST, AND FAN ZHAI (iii) The economies of the Association of Southeast Asian Nations (ASEAN) have the most to gain (in domestic terms) from Asian economic integration, provided that this happens in a relatively uniform way. This is because ASEAN will emerge as a growth bridge between the larger dynamic emerging economies of the PRC and India. (iv) There will be a shift of emphasis across the region from export competition to competition for imports. As absorption by the larger and more dynamic regional economies increases, this presents new export opportunities, yet the same absorption includes raw materials needed for higher value-added production in other economies. More empirical research of this kind can help policymakers better identify both the opportunities and challenges ahead. This ability to evaluate policy impacts ex ante will help them recruit beneficiaries in support of their policies and anticipate the adjustment needs of those who might be adversely affected. II. BACKGROUND Regional events of the last two decades have fundamentally changed the economic landscape of Asia and its relationship to the global economy. The PRC has moved from a command and control economy to a model of global resource allocation based on comparative advantage. In the process, the PRC’s export competitiveness has provided new standards for efficient international division of labor. At the same time, sustained growth by this economy has also shifted attention from its export competitiveness to the new basis for Asian regional growth: internal demand. Over the last decade, the PRC’s absorption has become one of the primary drivers of regional growth and development. The recent acceleration of India’s growth process, with attendant economic reforms, now promises to propagate rapid growth across the Asian region. As these two large economies proceed in tandem, they will confer growth leverage on their neighbors, directly via bilateral trade and indirectly across a web of supply chain linkages between their two economies and elsewhere across the region and beyond. Southeast Asia is especially well situated to benefit from the parallel expansion the PRC and India. Because of geography and established comparative advantages in resources, commercial facilitation, and intermediate production, ASEAN economies will emerge as a “growth bridge” between the dynamic markets of the PRC and India. In this process, growth externalities will be transmitted to some of the lowest-income and slower-growing ASEAN economies. Cambodia, Laos, Myanmar, and Viet Nam are all well situated to become pillars of the PRC–India growth bridge. This kind of recruitment into more dynamic growth trends will contribute significantly and positively to growth convergence across Asia. To realize the full potential of this process, policies that facilitate trade will be essential. Most important among these will be institutional change and public and private commitments to infrastructure. Institutional approaches to trade facilitation include both traditional trade reform and more determined efforts at economic integration. The Asian policy environment has historically relied on informal and nonbinding agreements to promote regional commerce, but more recent initiatives are striving for greater exactitude, coherence, and transparency. In the areas of regulation, legal conventions, and technical standards, movement to greater formality and uniformity can do much to facilitate private agency, trade, and growth. Indeed, an Asian counterpart of the OECD might do much to consolidate the basis for integration and growth. This model is very different from a more disciplined economic 9ERD WORKING PAPER SERIES NO. 74 FIGURE 6 BASELINE CHANGES IN REGIONAL TRADE FLOWS (PERCENTAGE CHANGE FROM 2005 TO 2025) Source: Simulation results. c c c c 133 201 166 285 159 298 343 182 183 BAU 118 146 115 East Asia 145 South Asia 255 Southeast Asia 151 L EVELS c c S HARES South Asia 49 Southeast Asia 5 East Asia 3 BAU -2 -8 26 62 9 67 86 18 19 -10 3 12 TABLE 2 BASELINE TRADE COMPOSITION (PERCENT CHANGE FROM 2005-2025) Regional Trade Flows (percent change from 2005 in 2025) BAU East Asia SE Asia South Asia ROW East Asia 145 159 201 118 SE Asia 166 151 298 115 South Asia 285 343 255 183 ROW 133 146 182 74 Regional Trade Shares (percent change from 2005 in 2025) BAU East Asia SE Asia South Asia ROW East Asia 3 9 26 -8 SE Asia 12 5 67 -10 South Asia 62 86 49 19 ROW -2 3 18 Source: Simulation results. SECTION III BASELINE AND POLICY SCENARIOS 10 NOVEMBER 2005 GROWTH AND TRADE HORIZONS FOR ASIA: LONG-TERM FORECASTS FOR REGIONAL INTEGRATION DAVID ROLAND-HOLST, JEAN-PIERRE VERBIEST, AND FAN ZHAI B. Alternative Integration Scenarios To appraise Asia’s prospects for improved growth through regional integration, we have implemented the model with respect to a series of alternative trade scenarios, including global trade liberalization and Asian regional liberalization, and contrasted these under varying regional conditions of further economic integration. In this section we present the results of these preliminary scenarios, intended to bracket the aggregate growth possibilities for the region to give an indication of the potential for deeper regional integration to accelerate growth and promote convergence toward higher living standards across Asia. Table 3 summarizes the scenarios, where trade liberalization refers to removal of all tariff and tariff-equivalent import and export barriers in the GTAP VI database. In addition to reforming trade-distorting policies, we also examine the implications of increased trade efficiency, as this might arise from institutional reforms and/or public and private investments in distribution and communication infrastructure. To capture this in a general way, we make use of the so-called “iceberg” specification of trade to represent trade efficiency. This acts as a proxy for measures that would facilitate regional integration. Formally, trade, transport, and transit costs are interpreted in commodity content terms, discounting deliverable quantity in terms of real or virtual perishability during transit. In other words, there is a scalar relationship between the world price of an export and its corresponding import price that takes the form λ ijk Wijk WM ijk WE p p =≥1 where W denotes the world price system, i and j are trading partners, and k is the tradeable commodity or service in question. When seen from this very general perspective, it is convenient to think of the iceberg parameter λ as a transactions cost without offsetting income to any service provider. From the exporter perspective, this corresponds to a discount 1/λ and from the importer a premium (λ-1), respectively. These distortions are the ultimate targets of investments designed to improve trade efficiency, and we examine the effects of reducing them in a series of dynamic simulations. It is worth emphasizing that trade costs over and above any administrative agency are generally very large in the global economy. These costs mainly arise from transportation, distribution, and border-related barriers such as information, language, currency conversion, etc. Some empirical studies based on gravity models have concluded that the tax equivalent of international trade barriers are in the range of 40–80%, substantially larger than global average tariff levels (Anderson and van Wincoop 2004). 11ERD WORKING PAPER SERIES NO. 74 TABLE 3 INITIAL SIMULATION EXPERIMENTS 0. Baseline scenario (BaU) a. including the admission of the PRC in the WTO b. removal of textile quotas to the EU and the US 1. Global Trade Liberalization (GBL) a. removal of all import tariffs and tariff-equivalent nontariff barriers within Asia b. removal of all export subsidies within Asia 2. Asia Trade Liberalization (ATL) a. removal of all import tariffs and tariff-equivalent nontariff barriers within Asia b. removal of all export subsidies within Asia 3. Broad Reform - Asia Trade Liberalization with Trade Facilitation (ATL2) a. AFT1 with trade-facilitating policies simulated by 3 percent annual reduction in intra-Asian trade costs Tables 4–6 and Figures 7–9 present the major aggregate simulation results at the national level. Two salient features are worth emphasizing here. First, when trading efficiency can be improved in the Asian region, internal trade emerges to play a dominant role in long-term GDP growth. By comparison to universal tariff abolition, either regionally or globally (ATL and GBL), an Asian free trade agreement with moderate trade facilitation (ATL2) would achieve much greater gains for most of its members. Moreover, every country would be better off pursuing Asian free trade and trade facilitation than waiting for a global regime of free trade, even if this were to occur over the same time horizon. The key to real income gains from this approach is a combination of export expansion and improving terms of trade (Figure 9) that are facilitated by lower regional distribution margins. Terms of trade improve because of the classical double-edged benefit of reducing distribution margins: higher producer prices and lower purchaser prices. These results clearly suggest the effectiveness of Asian regional trade intensification as a hedging strategy against lack of WTO progress. Second, it is apparent from these results that the ASEAN economies have the most to gain from Asian economic integration, provided that regional liberalization proceeds in a relatively uniform way. Comparing the ATL scenario to GBL, it appears that most ASEAN economies would be worse off under global free trade than under Asian free trade, reflecting possible trade diversion toward ASEAN following the formation of an Asian free trade bloc. This highlights the importance of intra- Asia trade to Southeast Asian countries. For the PRC, Republic of Korea (henceforth Korea), and South Asia, globalism would be significantly better than Asian trade liberalization alone because these are economies with above-average, prior levels of extraregional trade dependence. Among all Asian countries, ASEAN and Hong Kong, China have the most to gain from an ATL arrangement, especially Malaysia, Singapore, Thailand, and Viet Nam. SECTION III BASELINE AND POLICY SCENARIOS 12 NOVEMBER 2005 GROWTH AND TRADE HORIZONS FOR ASIA: LONG-TERM FORECASTS FOR REGIONAL INTEGRATION DAVID ROLAND-HOLST, JEAN-PIERRE VERBIEST, AND FAN ZHAI TABLE 4 REAL AGGREGATE INCOME (PERCENTAGE CHANGE FROM BASELINE IN 2025) SCENARIO 123 REGION ECONOMY GBL ATL ATL2 Japan 0.9 0.9 8.1 PRC 4.1 1.2 19.8 East Asia Korea 5.3 1.8 24.6 Hong Kong, China 4.4 2.9 53.8 Taipei,China 1.4 1.9 25.9 Indonesia 1.6 2.1 35.5 Malaysia 5.0 6.6 116.6 Southeast Asia Philippines 1.8 1.9 33.4 Singapore 3.9 4.6 81.1 Thailand 5.0 5.3 61.6 Viet Nam 7.2 6.5 59.1 Bangladesh 1.0 0.6 11.5 South Asia India 2.1 0.3 10.4 Sri Lanka 2.4 0.6 22.4 Source: Simulation results. TABLE 5 REAL EXPORTS (PERCENTAGE CHANGE FROM BASELINE IN 2025) SCENARIO 123 REGION ECONOMY GBL ATL ATL2 Japan 13.2 9.0 72.8 PRC 44.7 18.6 107.8 East Asia Korea 23.2 15.5 75.1 Hong Kong, China 2.5 3.7 31.2 Taipei,China 9.3 7.6 55.2 Indonesia 13.8 9.3 69.1 Malaysia 9.4 8.6 71.0 Southeast Asia Philippines 6.0 0.9 72.6 Singapore 0.8 4.3 109.3 Thailand 24.4 18.2 104.8 Viet Nam 56.8 46.1 136.5 Bangladesh 50.7 39.7 101.8 South Asia India 67.2 30.0 105.4 Sri Lanka 14.0 7.9 40.5 Source: Simulation results. 13ERD WORKING PAPER SERIES NO. 74 Japan PRC Korea Hong Kong, China Taipei,China Indonesia Malaysia Philippines Singapore Thailand Viet Nam Bangladesh India Sri Lanka 0 20 40 60 80 100 120 140 GBL ATL ATL2 F IGURE 7 R EAL A GGREGATE I NCOME (P ERCENTAGE C HANGE FROM B ASELINE IN 2025) SECTION III BASELINE AND POLICY SCENARIOS TABLE 6 AGGREGATE TERMS OF TRADE (PERCENTAGE CHANGE FROM BASELINE IN 2025) SCENARIO 123 REGION ECONOMY GBL ATL ATL2 Japan 1.3 2.7 52.9 PRC -5.4 0.7 33.7 East Asia Korea -0.3 -0.3 43.4 Hong Kong, China 3.9 1.8 48.8 Taipei,China 1.6 2.5 45.8 Indonesia 2.6 3.7 52.2 Malaysia 0.6 1.5 44.7 Southeast Asia Philippines 2.8 6.2 54.8 Singapore 2.5 1.9 29.6 Thailand 1.9 3.9 43.2 Viet Nam -3.8 -1.5 31.3 Bangladesh -2.8 -2.4 30.0 Asia India -5.2 0.4 43.9 Sri Lanka 4.5 0.9 38.8 Source: Simulation results. 14 NOVEMBER 2005 GROWTH AND TRADE HORIZONS FOR ASIA: LONG-TERM FORECASTS FOR REGIONAL INTEGRATION DAVID ROLAND-HOLST, JEAN-PIERRE VERBIEST, AND FAN ZHAI Japan PRC Korea Hong Kong, China Taipei,China Indonesia Malaysia Philippines Singapore Thailand Viet Nam Bangladesh India Sri Lanka F IGURE 8 T OTAL E XPORTS (P ERCENTAGE C HANGE FROM B ASELINE IN 2025) 0 20 40 60 80 100 120 140 160 GBL ATL ATL2 Japan PRC Korea Hong Kong, China Taipei,China Indonesia Malaysia Philippines Singapore Thailand Viet Nam Bangladesh India Sri Lanka 0 10 20 30 40 50 60 -10 F IGURE 9 T ERMS OF T RADE (P ERCENTAGE C HANGE FROM B ASELINE IN 2025) GBL ATL ATL2 15ERD WORKING PAPER SERIES NO. 74 To get a better sense of the relative contributions of different policy regimes to national income, consider the real income effects by regional grouping, beginning with East Asia. Here there are two distinct types of economies, the first being those with large stakes in markets outside Asia that face and/or present high protection levels. These three namely, PRC, Japan, and Korea, would gain relatively less, but still significantly from ATL arrangements, particularly with trade facilitation. The second group consists of economies more dependent on intra-Asian trade, with low initial trade shares, facing and/or presenting low prior protection levels. These two economies namely Hong Kong, China and Taipei,China both have much more to gain from trade facilitation than from regional tariff reductions, so they have a greater stake in reducing structural trade barriers in their own region. The case of Southeast Asia is more like the second category of East Asian economies, but the growth effects can be much more dramatic. In all the ASEAN cases considered, much greater income gains are obtained by regional trade facilitation than by tariff removal, whether trade liberalization is regional or global. Incidentally, this fact should not be interpreted as a license to promote margin reduction instead of tariff reform. For the region, the gains of removing structural barriers to trade can only be fully realized in a liberal trade environment. In any case, ASEAN achieves very substantial growth dividends from trade from both types of trade facilitation (tariff removal and increased trade efficiency), with 2025 real income increases of between 33 and 116 percent. Removal of structural barriers by achieving greater trade efficiency appears to offer the vast majority of this growth potential, again pointing to the importance of regional trade facilitation and integration as a means to accelerate, broaden, and sustain Asia’s growth. This consideration will become particularly significant as other OECD economies continue to mature and their growth trajectories flatten. Note also the indirect growth dividends that arise from regional linkages, particularly to the more dynamic Asian economies. Such linkages are only discernible with detailed bilateral and sectoral analysis, but intuition makes it plain that, with ATL, the higher-growth regions will confer more demand stimulus on their neighbors. Most advantaged in this context are the geocentric regional economies namely, Malaysia, Singapore, Thailand, and Viet Nam. For all these countries, the combination of regional trade facilitation by tariff removal and improved efficiency far outweighs the gains from global free trade. The case of South Asia is more mixed, mainly because of higher prior protection levels (presented and faced) and greater economic isolation from East and Southeast Asia. The degree of economic isolation is measured in the model by trade shares. Since South Asia has much greater dependence on extra-Asian markets, global tariff reductions will confer a larger benefit on them in relative terms. Despite these facts, ATL tariff reform and a 3 percent annual reduction in average regional trade costs provide much larger real income benefits to all the three South Asian economies considered. Percentage real income gains are generally smaller than for Southeast or East Asia, but this again is consistent with the low Asian trade shares for South Asian economies. As we shall see next, however, trade shares increase dramatically within the region under these scenarios, particularly ATL2. The role of ASEAN here is central, and greater policy attention to its bridging role from East to South Asia is needed if regional benefits are to spread more effectively. SECTION III BASELINE AND POLICY SCENARIOS 16 NOVEMBER 2005 GROWTH AND TRADE HORIZONS FOR ASIA: LONG-TERM FORECASTS FOR REGIONAL INTEGRATION DAVID ROLAND-HOLST, JEAN-PIERRE VERBIEST, AND FAN ZHAI C. Regional and Subregional Growth Poles Which economies will provide the most internal dynamism as the Asian region integrates? The PRC is unusual in being a large and very fast-growing economy, yet growth rates are projected to be relatively high in many other regional economies. Ultimately, growth linkage will depend on detailed expenditure and supply chains within sectors and across webs of multinational commercial networks. Still, it is useful to examine the main sources of regional and subregional growth from the demand side. In terms of import absorption, Figure 10 describes regional and national import S OUTHEAST A SIA D ISAGGREGATION (2025, ATL2) F IGURE 10 A SIAN I MPORT D EMAND C OMPOSITION E AST A SIA D ISAGGREGATION (2025, ATL2) Southeast Asia South Asia Japan PRC Hong Kong, China Taipei,China Korea South Asia East Asia Indonesia Malaysia Philippines Singapore Thailand Viet Nam East Asia Southeast Asia Bangladesh India Sri lanka S OUTH A SIA D ISAGGREGATION (2025, ATL2) 17ERD WORKING PAPER SERIES NO. 74 demand composition, all in shares of total Asian imports. It is clear from this evidence that the PRC’s absorption will be a primary regional growth driver. Subregionally, Malaysia, Singapore, and Thailand will share leadership as growth poles, while India will be the dominant source of import demand in the South Asian subregion. To summarize the results thus far, a few observations are in order: (i) Long-run growth prospects for the Asian region remain quite positive and trade can play a central role. (ii) Combining an Asian free trade agreement with modest but sustained improvements in regional trade efficiency realizes substantial positive real income growth for every Asian economy. (iii) As a corollary, it needs to be more generally recognized around the region that structural and institutional commitments to regional trade efficiency are much more important than simple tariff reductions. (iv) Southeast Asia is the biggest percentage winner from the ATL2 scenario, which combines regional liberalization with trade facilitation. (v) Between the large dynamic economies of the PRC and India, the role of ASEAN is central for two reasons: (a) Because of geographic factors, it can act as a “growth bridge” between South and East Asia, increasing regional trade and value-added capture. (b) ASEAN includes some of the lowest-income economies, and these are among the best situated for infrastructure to promote regional integration. Cambodia, Laos, Myanmar, and Viet Nam could all be “pillars” of the Asian growth bridge. IV. AN AGENDA FOR ASIAN REGIONAL INTEGRATION We have already seen that regional integration can be a potent aggregate growth stimulus for Asia. Although country-specific outcomes vary, combined regional tariff reductions and extensive improvements in trade efficiency can achieve substantial improvements in real incomes. Moreover, this trade and income growth represents diversification and new market development that can promote wider regional benefits and greater sustainability. Despite these obvious advantages, however, the classical theory of customs unions tells us that the expansionary benefits of regionalism can be at least partially offset by diversion of trade from existing partners and markets. For example, we have seen (Figure 7) that the baseline scenario calls for increased trade between all regions. Now we need to examine Asian regionalism more closely to see how it might shift trade patterns away from established markets/relationships and possibly limit the potential gains from institutional and real investments in trade facilitation. Before proceeding with detailed inspection of Asian regional trade patterns, we want to review conceptual principles of international trade and regionalism. Until relatively recently, dynamic Asian development has been driven mainly by demand outside the region. This orientation was a product of colonial history and traditional thinking about comparative advantage, where international trade is supposed to be driven primarily by structural differences between countries, leading to patterns of specialization that even reinforced these differences. According to these received ideas, north– SECTION IV AN AGENDA FOR ASIAN REGIONAL INTEGRATION 18 NOVEMBER 2005 GROWTH AND TRADE HORIZONS FOR ASIA: LONG-TERM FORECASTS FOR REGIONAL INTEGRATION DAVID ROLAND-HOLST, JEAN-PIERRE VERBIEST, AND FAN ZHAI south trade was driven by, and indeed could be expected to reinforce, northern comparative advantage in capital and skill-intensive products while the south specialized in primary resource and unskilled labor-intensive exports. This trend had obvious implications for global income distribution, since value-added was much higher in the former activities than in the latter, and world trade was long dominated by these two directions of trade (as opposed to south–south or north–north), which further reinforced global economic divergence. The advent of increased north–north trade in the post-War era began to change economists’ understanding about the underlying drivers of trade, however. Increasingly, world trade began to be dominated by exchange among modern, high-income economies with more national commonality than differentiation. As an obvious symptom of this, two-way trade (imports and exports in the same product categories) became the fastest-growing category of trade. With increased European integration in particular, it became apparent that, as economies advance and diversify internally, trade is increasingly driven by shared characteristics. Table 7 makes this trend clear, indicating that since 1948, a majority of world trade has been between similar country categories rather than along more traditional Ricardian lines of comparative advantage based on large-scale national differentiation. TABLE 7 TRADE BY DEVELOPMENT STATUS 1948 1998 2001 Developed to Developed 46 53 40 Developed to Emerging 22 18 22 Emerging to Developed 22 18 26 Emerging to Emerging 10 11 12 100 100 100 Source: Direction of Trade Statistics (IMF 2005). Three of the similarity-based drivers of international trade are of special significance: (i) economies of scale, (ii) multinational marketing, and (iii) supply chains and production networks. In today’s global economy, the main impetus for modern integration is to expand commercial networks and capture value-added through domestic and international diversification. This is well-established in western markets, between Japan and its advanced trading partners, and is now becoming a robust and pervasive feature of Asian trade. Moreover, Asia presents a special attraction for these strategies because of its superior domestic growth rates and low initial trade shares. Taken together, these two characteristics promise the kind of superior returns already identified in emerging market investment patterns. For the same reason, private stakeholders have already recognized this shift in Asian trade fundamentals. To serve both public and private long-term interests in this context then, a new generation of policies is needed to facilitate growth-oriented Asian economic integration. Before discussing policy fundamentals, however, we want to review evidence from the SAGE model about how trade reform and structural trade facilitation can contribute to more extensive and intensive regional trade ties. We do this by decomposing the bilateral subregional trade links under our three counterfactual scenarios. 25ERD WORKING PAPER SERIES NO. 74 SECTION VI CONCLUSIONS To more fully realize the vast human potential of this region, for domestic income growth arising from both wages and investments at home and elsewhere, a more coherent approach to fostering labor productivity growth would be valuable. For all countries in the region, this is the most important long-term commitment to sustained and equitable growth, but it remains beyond the fiscal reach of many. To advance this regional agenda, private capital can do more of the work in an enabling investment climate. Employment-based education and skills development could be a direct result of greater inbound FDI, in turn a result of expanded trade, if commitments to integration are determined enough. VI. CONCLUSIONS Economic dynamism is well established in Asia and continues to spread, yet regional growth rates and living standards remain uneven and many areas have yet to enjoy significant benefits. Historically, this process has relied heavily on demand outside the region, from the early days of global exploration down to the modern north–south orientation of trade with western OECD economies. The research reported here looks to the future of the region, projecting long-term trade and growth scenarios for Asia over the next decade using a global forecasting model. Our results clearly indicate that regional integration is the way forward for rapid and sustainable growth in Asia. By diversifying its traditional trade patterns toward emergent demand within the region, the Asian economies can leverage superior domestic growth rates, accelerate economic diversification, and broaden the basis for regional development. Integration will not only secure a more reliable basis for established growth patterns, it will also confer substantial growth leverage on many of the region’s poorest economies. In this way, historic growth can be sustained while greater convergence is achieved in the region. More specifically, our work compares the potential regional growth effects of alternative regional trade scenarios. Contrasting progress toward WTO-style global trade liberalization with more focused Asian regionalism, we find that most of the gains from the former can be achieved for Asia by a regional FTA arrangement. Moreover, we find that modest progress toward improving regional trade efficiency would have a much greater impact on Asian growth than either global or regional tariff removal alone. Indeed, one important conclusion of this work is that structural barriers to trade are a much greater constraint on growth than residual protection alone. This finding reaffirms the importance of policies to reduce regional trade margins, including administrative reforms, standards promotion, and public and private infrastructure commitments. The same family of policies is of course central to any agenda for regional economic integration. It should be emphasized, however, that our results show the benefits of structural policies, those governing hard infrastructure (trade, transport, transit, and telecommunications) as well as soft infrastructure (standards, administrative efficiency and transparency, etc.). These characteristics represent a policy coherence approach to economic integration, broadly similar to OECD initiatives. This can be contrasted with the more rigorous (monetary, fiscal, etc.) policy harmonization approach to integration represented by EU-type arrangements. Structural coherence and harmonization are not incompatible, but the former is much less binding on domestic policy institutions and constituencies. The right model of Asia will evolve over time, but our results indicate that the gains from the structural coherence approach to integration could be very substantial. 26 NOVEMBER 2005 GROWTH AND TRADE HORIZONS FOR ASIA: LONG-TERM FORECASTS FOR REGIONAL INTEGRATION DAVID ROLAND-HOLST, JEAN-PIERRE VERBIEST, AND FAN ZHAI In this paper, we sketched out some of the overall characteristics of more integrated regional growth, including general indications about policy initiatives that will be needed to facilitate this. Building the institutional basis for regional integration is the work of governments, however, not economists. An Asian OECD would provide a convenient venue for this work, but the initiative must be animated by a clear understanding of the potential benefits. Our results indicate that regional integration has more to offer Asia than the WTO itself, although the two should not be seen as substitutes. Whichever path Asia chooses, rich opportunities are there for stimulating growth through trade diversification. Our results indicate that the volume of trade with traditional partners can continue to grow, but that superior growth in Asia can sustain and indeed be sustained by policies that promote faster trade growth within the region. As the region transits from historical patterns of north–south specialization to a family of more modern, diversified, and integrated consumer societies, the vestiges of head-to-head export competition will give way to a more collaborative basis for growth. This approach represents the best strategy to fulfil the immense economic promise of Asia for all of its people, over half of humanity. 27ERD WORKING PAPER SERIES NO. 74 APPENDIX APPENDIX OVERVIEW OF THE SAGE MODEL AND DATA The complexities of today’s global economy make it very unlikely that policymakers relying on intuition or rule- of-thumb will achieve anything approaching optimality in either the domestic or international arenas. Market interactions are so pervasive in determining economic outcomes that more sophisticated empirical research tools are needed to improve visibility for both public and private sector decisionmakers. The preferred tool for detailed empirical analysis of economic policy is now the calibrated general equilibrium (CGE) model.4 It is well suited to trade analysis because it can detail structural adjustments within national economies and elucidate their interactions in international markets. The model is more extensively discussed below and the underlying methodology is fully documented elsewhere, but a few general comments will facilitate discussion and interpretation of the scenario results that follow. Technically, a CGE model is a system of simultaneous equations that simulate price-directed interactions between firms and households in commodity and factor markets. The role of government, capital markets, and other trading partners are also specified, with varying degrees of detail and passivity, to close the model and account for economywide resource allocation, production, and income determination. The role of markets is to mediate exchange, usually with a flexible system of prices, the most important endogenous variables in a typical CGE model. As in a real market economy, commodity and factor price changes induce changes in the level and composition of supply and demand, production and income, and the remaining endogenous variables in the system. In CGE models, an equation system is solved for prices that correspond to equilibrium in markets and satisfy the accounting identities governing economic behavior. If such a system is precisely specified, equilibrium always exists and such a consistent model can be calibrated to a base period data set. The resulting calibrated general equilibrium model is then used to simulate the economywide (and regional) effects of alternative policies or external events. The distinguishing feature of a general equilibrium model, applied or theoretical, is its closed form specification of all activities in the economic system under study. This can be contrasted with more traditional partial equilibrium analysis, where linkages to other domestic markets and agents are deliberately excluded from consideration. A large and growing body of evidence suggests that indirect effects (e.g., upstream and downstream production linkages) arising from policy changes are not only substantial, but may in some cases even outweigh direct effects. Only a model that consistently specifies economywide interactions can fully assess the implications of economic policies or business strategies. In a multi-country model like the one used in this study, indirect effects include the trade linkages between countries and regions which themselves can have policy implications. The Structural ADB General Equilibrium (SAGE) model is a version of the LINKAGE 5 model developed at the World Bank by van der Mensbrugghe (2005), implemented in the GAMS programming language, and calibrated to the GTAP (version 6) global database.5 The result is a 16-country/region, 12-sector global CGE model, calibrated over a 24-year time path from 2001 to 2025. Apart from its traditional neoclassical roots, an important feature of this model is product differentiation, where we specify that imports is differentiated by country of origin and exports are differentiated by country of destination (Armington 1969, de Melo and Robinson 1989). This feature allows the model to capture the pervasive phenomenon of intra-industry trade, where a country is both an importer and exporter of similar commodities, and avoids tendencies toward extreme specialization. 4See for example, Dervis, de Melo, and Robinson (1982); Francois and Reinert (1997). 5The original model is fully documented in van der Mensbrugghe (2005). 28 NOVEMBER 2005 GROWTH AND TRADE HORIZONS FOR ASIA: LONG-TERM FORECASTS FOR REGIONAL INTEGRATION DAVID ROLAND-HOLST, JEAN-PIERRE VERBIEST, AND FAN ZHAI REFERENCES Anderson, J. E., and E. van Wincoop. 2004. “Trade Costs.” Journal of Economic Literature 42(3):691-751. Armington, P. 1969. A Theory of Demand for Products Distinguished by Place of Production. IMF Staff Papers No. 16, International Monetary Fund, Washington, DC. de Melo, J., and S. Robinson. 1989. “Product Differentiation and the Treatment of Foreign Trade in Computable General Equilibrium Models of Small Economies.” Journal of International Economics 27:47-67. Dervis, K., J. de Melo, and S. Robinson. 1982. General Equilibrium Models for Development Policy. New York: Cambridge University Press for the World Bank. Francois, J., and K. Reinert. 1997. Applied Methods for Trade Policy Analysis: A Handbook. New York: Cambridge University Press. Hertel, T. W., ed. 1997. Global Trade Analysis: Modeling and Applications. New York: Cambridge University Press. International Monetary Fund. 2005. Direction of Trade Statistics (CD-ROM). Washington, DC. OECD. 2005. International Development Statistics (IDS) Online Databases. Organisation for Economic Co-operation and Development, Paris, France. Available: http://www.oecd.org/dac/stats/idsonline. UNCTAD. 2005. Foreign Direct Investment Online Database. United Nations Conference on Trade and Development, Geneva, Switzerland. Available: http://stats.unctad.org/fdi/eng/ReportFolders/Rfview/ explorerp.asp?IF_Mode=0&IF_ViewShared=1. United Nations. 2005. “World Population Prospects: The 2004 Revision.” Available: http://esa.un.org/unpp/ van der Mensbrugghe, D. 2005. “LINKAGE Technical Reference Document.” Economic Policy and Prospects Group, The World Bank. Processed. 29 PUBLICATIONS FROM THE ECONOMICS AND RESEARCH DEPARTMENT ERD WORKING PAPER SERIES (WPS) (Published in-house; Available through ADB Office of External Relations; Free of Charge) No. 1 Capitalizing on Globalization —Barry Eichengreen, January 2002 No. 2 Policy-based Lending and Poverty Reduction: An Overview of Processes, Assessment and Options —Richard Bolt and Manabu Fujimura, January 2002 No. 3 The Automotive Supply Chain: Global Trends and Asian Perspectives —Francisco Veloso and Rajiv Kumar, January 2002 No. 4 International Competitiveness of Asian Firms: An Analytical Framework —Rajiv Kumar and Doren Chadee, February 2002 No. 5 The International Competitiveness of Asian Economies in the Apparel Commodity Chain —Gary Gereffi, February 2002 No. 6 Monetary and Financial Cooperation in East Asia—The Chiang Mai Initiative and Beyond —Pradumna B. Rana, February 2002 No. 7 Probing Beneath Cross-national Averages: Poverty, Inequality, and Growth in the Philippines —Arsenio M. 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Karlan, and Wesley Yin, November 2003 No. 9 Setting User Charges for Public Services: Policies and Practice at the Asian Development Bank —David Dole, December 2003 No. 10 Beyond Cost Recovery: Setting User Charges for Financial, Economic, and Social Goals —David Dole and Ian Bartlett, January 2004 No. 11 Shadow Exchange Rates for Project Economic Analysis: Toward Improving Practice at the Asian Development Bank —Anneli Lagman-Martin, February 2004 No. 12 Improving the Relevance and Feasibility of Agriculture and Rural Development Operational Designs: How Economic Analyses Can Help —Richard Bolt, September 2005 No. 13 Assessing the Use of Project Distribution and Poverty Impact Analyses at the Asian Development Bank —Franklin D. 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The Philippines ERD TECHNICAL NOTE SERIES (TNS) (Published in-house; Available through ADB Office of External Relations; Free of Charge) No. 1 Contingency Calculations for Environmental Impacts with Unknown Monetary Values —David Dole, February 2002 No. 2 Integrating Risk into ADB’s Economic Analysis of Projects —Nigel Rayner, Anneli Lagman-Martin, and Keith Ward, June 2002 No. 3 Measuring Willingness to Pay for Electricity —Peter Choynowski, July 2002 No. 4 Economic Issues in the Design and Analysis of a Wastewater Treatment Project —David Dole, July 2002 No. 5 An Analysis and Case Study of the Role of Environmental Economics at the Asian Development Bank —David Dole and Piya Abeygunawardena, September 2002 No. 6 Economic Analysis of Health Projects: A Case Study in Cambodia —Erik Bloom and Peter Choynowski, May 2003 No. 7 Strengthening the Economic Analysis of Natural Resource Management Projects —Keith Ward, September 2003 No. 8 Testing Savings Product Innovations Using an Experimental Methodology —E. 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Brooks, David Roland-Holst, and Fan Zhai, September 2005 No. 39 Competition Policy and Development —Douglas H. Brooks, October 2005 No. 40 Highlighting Poverty as Vulnerability: The 2005 Earthquake in Pakistan —Rana Hasan and Ajay Tandon, October 2005 No. 41 Conceptualizing and Measuring Poverty as Vulnerability: Does It Make a Difference? —Ajay Tandon and Rana Hasan, October 2005 No. 42 Potential Economic Impact of an Avian Flu Pandemic on Asia —Erik Bloom, Vincent de Wit, and Mary Jane Carangal-San Jose, November 2005 1. Improving Domestic Resource Mobilization Through Financial Development: Overview September 1985 2. Improving Domestic Resource Mobilization Through Financial Development: Bangladesh July 1986 3. Improving Domestic Resource Mobilization Through Financial Development: Sri Lanka April 1987 4. Improving Domestic Resource Mobilization Through Financial Development: India December 1987 5. Financing Public Sector Development Expenditure in Selected Countries: Overview January 1988 6. Study of Selected Industries: A Brief Report April 1988 7. Financing Public Sector Development Expenditure in Selected Countries: Bangladesh June 1988 8. Financing Public Sector Development Expenditure in Selected Countries: India June 1988 9. Financing Public Sector Development Expenditure in Selected Countries: Indonesia June 1988 10. Financing Public Sector Development Expenditure in Selected Countries: Nepal June 1988 11. Financing Public Sector Development Expenditure in Selected Countries: Pakistan June 1988 12. Financing Public Sector Development Expenditure in Selected Countries: Philippines June 1988 13. Financing Public Sector Development Expenditure in Selected Countries: Thailand June 1988 14. Towards Regional Cooperation in South Asia: ADB/EWC Symposium on Regional Cooperation in South Asia February 1988 15. Evaluating Rice Market Intervention Policies: Some Asian Examples April 1988 16. Improving Domestic Resource Mobilization Through Financial Development: Nepal November 1988 17. Foreign Trade Barriers and Export Growth September 1988 18. The Role of Small and Medium-Scale Industries in the Industrial Development of the Philippines April 1989 19. The Role of Small and Medium-Scale Manufacturing Industries in Industrial Development: The Experience of Selected Asian Countries January 1990 20. National Accounts of Vanuatu, 1983-1987 January 1990 21. National Accounts of Western Samoa, 1984-1986 February 1990 22. Human Resource Policy and Economic Development: Selected Country Studies July 1990 23. Export Finance: Some Asian Examples September 1990 24. National Accounts of the Cook Islands, 1982-1986 September 1990 25. Framework for the Economic and Financial Appraisal of Urban Development Sector Projects January 1994 26. Framework and Criteria for the Appraisal and Socioeconomic Justification of Education Projects January 1994 27. Investing in Asia 1997 (Co-published with OECD) 28. The Future of Asia in the World Economy 1998 (Copublished with OECD) 29. Financial Liberalisation in Asia: Analysis and Prospects 1999 (Co-published with OECD) 30. Sustainable Recovery in Asia: Mobilizing Resources for Development 2000 (Co-published with OECD) 31. Technology and Poverty Reduction in Asia and the Pacific 2001 (Co-published with OECD) 32. Asia and Europe 2002 (Co-published with OECD) 33. Economic Analysis: Retrospective 2003 34. Economic Analysis: Retrospective: 2003 Update 2004 35. Development Indicators Reference Manual: Concepts and Definitions 2004 SPECIAL STUDIES, COMPLIMENTARY (Available through ADB Office of External Relations) 33 OLD MONOGRAPH SERIES (Available through ADB Office of External Relations; Free of charge) EDRC REPORT SERIES (ER) No. 1 ASEAN and the Asian Development Bank —Seiji Naya, April 1982 No. 2 Development Issues for the Developing East and Southeast Asian Countries and International Cooperation —Seiji Naya and Graham Abbott, April 1982 No. 3 Aid, Savings, and Growth in the Asian Region —J. Malcolm Dowling and Ulrich Hiemenz, April 1982 No. 4 Development-oriented Foreign Investment and the Role of ADB —Kiyoshi Kojima, April 1982 No. 5 The Multilateral Development Banks and the International Economy’s Missing Public Sector —John Lewis, June 1982 No. 6 Notes on External Debt of DMCs —Evelyn Go, July 1982 No. 7 Grant Element in Bank Loans —Dal Hyun Kim, July 1982 No. 8 Shadow Exchange Rates and Standard Conversion Factors in Project Evaluation —Peter Warr, September 1982 No. 9 Small and Medium-Scale Manufacturing Establishments in ASEAN Countries: Perspectives and Policy Issues —Mathias Bruch and Ulrich Hiemenz, January 1983 No. 10 A Note on the Third Ministerial Meeting of GATT —Jungsoo Lee, January 1983 No. 11 Macroeconomic Forecasts for the Republic of China, Hong Kong, and Republic of Korea —J.M. 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Castillo, June 1983 No. 19 Relative External Debt Situation of Asian Developing Countries: An Application of Ranking Method —Jungsoo Lee, June 1983 No. 20 New Evidence on Yields, Fertilizer Application, and Prices in Asian Rice Production —William James and Teresita Ramirez, July 1983 No. 21 Inflationary Effects of Exchange Rate Changes in Nine Asian LDCs —Pradumna B. Rana and J. 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Desai, April 1986 No. 35 Impact of Appreciation of the Yen on Developing Member Countries of the Bank —Jungsoo Lee, Pradumna Rana, and Ifzal Ali, May 1986 No. 36 Smuggling and Domestic Economic Policies in Developing Countries —A.H.M.N. Chowdhury, October 1986 No. 37 Public Investment Criteria: Economic Internal Rate of Return and Equalizing Discount Rate —Ifzal Ali, November 1986 No. 38 Review of the Theory of Neoclassical Political Economy: An Application to Trade Policies —M.G. Quibria, December 1986 No. 39 Factors Influencing the Choice of Location: Local and Foreign Firms in the Philippines —E.M. Pernia and A.N. Herrin, February 1987 No. 40 A Demographic Perspective on Developing Asia and Its Relevance to the Bank —E.M. Pernia, May 1987 No. 41 Emerging Issues in Asia and Social Cost Benefit Analysis —I. Ali, September 1988 No. 42 Shifting Revealed Comparative Advantage: Experiences of Asian and Pacific Developing 34 No. 1 International Reserves: Factors Determining Needs and Adequacy —Evelyn Go, May 1981 No. 2 Domestic Savings in Selected Developing Asian Countries —Basil Moore, assisted by A.H.M. Nuruddin Chowdhury, September 1981 No. 3 Changes in Consumption, Imports and Exports of Oil Since 1973: A Preliminary Survey of the Developing Member Countries of the Asian Development Bank —Dal Hyun Kim and Graham Abbott, September 1981 No. 4 By-Passed Areas, Regional Inequalities, and Development Policies in Selected Southeast Asian Countries —William James, October 1981 No. 5 Asian Agriculture and Economic Development —William James, March 1982 No. 6 Inflation in Developing Member Countries: An Analysis of Recent Trends —A.H.M. Nuruddin Chowdhury and J. Malcolm Dowling, March 1982 No. 7 Industrial Growth and Employment in Developing Asian Countries: Issues and Perspectives for the Coming Decade ECONOMIC STAFF PAPERS (ES) Countries —P.B. Rana, November 1988 No. 43 Agricultural Price Policy in Asia: Issues and Areas of Reforms —I. Ali, November 1988 No. 44 Service Trade and Asian Developing Economies —M.G. Quibria, October 1989 No. 45 A Review of the Economic Analysis of Power Projects in Asia and Identification of Areas of Improvement —I. Ali, November 1989 No. 46 Growth Perspective and Challenges for Asia: Areas for Policy Review and Research —I. Ali, November 1989 No. 47 An Approach to Estimating the Poverty Alleviation Impact of an Agricultural Project —I. Ali, January 1990 No. 48 Economic Growth Performance of Indonesia, the Philippines, and Thailand: The Human Resource Dimension —E.M. Pernia, January 1990 No. 49 Foreign Exchange and Fiscal Impact of a Project: A Methodological Framework for Estimation —I. Ali, February 1990 No. 50 Public Investment Criteria: Financial and Economic Internal Rates of Return —I. Ali, April 1990 No. 51 Evaluation of Water Supply Projects: An Economic Framework —Arlene M. Tadle, June 1990 No. 52 Interrelationship Between Shadow Prices, Project Investment, and Policy Reforms: An Analytical Framework —I. Ali, November 1990 No. 53 Issues in Assessing the Impact of Project and Sector Adjustment Lending —I. Ali, December 1990 No. 54 Some Aspects of Urbanization and the Environment in Southeast Asia —Ernesto M. Pernia, January 1991 No. 55 Financial Sector and Economic Development: A Survey —Jungsoo Lee, September 1991 No. 56 A Framework for Justifying Bank-Assisted Education Projects in Asia: A Review of the Socioeconomic Analysis and Identification of Areas of Improvement —Etienne Van De Walle, February 1992 No. 57 Medium-term Growth-Stabilization Relationship in Asian Developing Countries and Some Policy Considerations —Yun-Hwan Kim, February 1993 No. 58 Urbanization, Population Distribution, and Economic Development in Asia —Ernesto M. Pernia, February 1993 No. 59 The Need for Fiscal Consolidation in Nepal: The Results of a Simulation —Filippo di Mauro and Ronald Antonio Butiong, July 1993 No. 60 A Computable General Equilibrium Model of Nepal —Timothy Buehrer and Filippo di Mauro, October 1993 No. 61 The Role of Government in Export Expansion in the Republic of Korea: A Revisit —Yun-Hwan Kim, February 1994 No. 62 Rural Reforms, Structural Change, and Agricultural Growth in the People’s Republic of China —Bo Lin, August 1994 No. 63 Incentives and Regulation for Pollution Abatement with an Application to Waste Water Treatment —Sudipto Mundle, U. Shankar, and Shekhar Mehta, October 1995 No. 64 Saving Transitions in Southeast Asia —Frank Harrigan, February 1996 No. 65 Total Factor Productivity Growth in East Asia: A Critical Survey —Jesus Felipe, September 1997 No. 66 Foreign Direct Investment in Pakistan: Policy Issues and Operational Implications —Ashfaque H. Khan and Yun-Hwan Kim, July 1999 No. 67 Fiscal Policy, Income Distribution and Growth —Sailesh K. Jha, November 1999 —Ulrich Hiemenz, March 1982 No. 8 Petrodollar Recycling 1973-1980. Part 1: Regional Adjustments and the World Economy —Burnham Campbell, April 1982 No. 9 Developing Asia: The Importance of Domestic Policies —Economics Office Staff under the direction of Seiji Naya, May 1982 No. 10 Financial Development and Household Savings: Issues in Domestic Resource Mobilization in Asian Developing Countries —Wan-Soon Kim, July 1982 No. 11 Industrial Development: Role of Specialized Financial Institutions —Kedar N. Kohli, August 1982 No. 12 Petrodollar Recycling 1973-1980. Part II: Debt Problems and an Evaluation of Suggested Remedies —Burnham Campbell, September 1982 No. 13 Credit Rationing, Rural Savings, and Financial Policy in Developing Countries —William James, September 1982 No. 14 Small and Medium-Scale Manufacturing Establishments in ASEAN Countries: Perspectives and Policy Issues