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p. 17 of 77 BACK | NEXT Foreword, Acknowledgments, Acronyms and Abbreviations, Definitions I. Developing Asia and the world Overview of economic highlights and prospects Export or domestic demand-led growth in developing Asia? Introduction Export-led growth strategy Definition of domestic demand- and export-led growth strategies Demand-side growth-accounting exercise Decomposition analysis of stances in the private, government, and trade sectors Comparison of expenditure shares of open European countries and selected countries in the Asia-Pacific region Summary and conclusions Endnotes and references II. Economic trends and prospects in developing Asia III. Promoting competition for long-term development Statistical appendix

Asian Development Outlook 2005 : I. Developing Asia and the world

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Endnotes

¹ See, for example, Patrick Smith. 2002. "From Exports to Domestic Demand-Led Growth: A New Model of Economic Growth?" International Herald Tribune. 8 November; and articles in The Economist (5-11 February 2005), "Heading back" (p. 9) and "Thaksin's way" (pp. 22-24).

² In fact, this is part of a very ambitious agenda (stimulus package) laid out by the prime minister, which includes lowering the cost of medical care; debt relief and microcredits for farmers; and the "local enterprise initiative" e.g., the encouragement of the production of wine out of exotic fruits.

³ What the literature discusses is the import-substitution strategy, often presented as the "opposite" of the export-led growth strategy (Felipe 2003).

⁴ The term "Washington consensus" was coined by Williamson (1990). In its original formulation, the idea encompassed fiscal discipline, reorientation of public expenditures, tax reform, interest rate liberalization, unified and competitive exchange rates, trade liberalization, openness to FDI, privatization, deregulation, and securing of property rights.

⁵ Palley certainly acknowledges that developing countries need to export. What he argues is that "the global trading system must be made the servant of domestic development, and domestic development must not be forgone for the sake of international competitive advantage" (Palley 2002, p. 4). For him, domestic demand growth rests on four pillars: improved income distribution, good governance, financial stability, and a fairly priced supply of development finance. The policies needed to put these pillars in place are labor and democratic rights; financial reform; and a combination of debt relief, increased foreign aid, and increased development assistance through the expansion of special drawing rights.

⁶ Another important point is that domestic demand is made up of consumption and investments. Growth dominated by consumption may have a very different impact and implications from growth led by investments. This topic is not tackled in this discussion.

⁷ Actually, the PRC's net exports turned positive in 1990. The negative net exports position in 1993 was an aberration, since it was the only year in the 1990s when the country registered a trade deficit.

⁸ In fact, Thailand's net exports improved in the second half of the 1980s, as will be shown in the next section, but deteriorated again in the 1990s.

⁹ It must be added that high GDCF growth also provides a strong force in expanding aggregate demand in the PRC, despite a nonexpansionary private sector stance.

¹⁰ Available: http://www.worldbank.org/data/countrydata/countrydata.html.

¹¹ The four UA economies are Hong Kong, China; Korea; Malaysia; and Taipei,China (Singapore was not included since it did not have separate data for exports and imports in the national income accounts). MA countries comprise People's Republic of China, Fiji Islands, Kazakhstan, Philippines, Sri Lanka, Thailand, and Vanuatu (Maldives was not included because it was such an outlier in some of the indicators that it distorted the averages). LA countries are Azerbaijan, Bangladesh, Bhutan, Cambodia, India, Indonesia, Kyrgyz Republic, Lao People's Democratic Republic (Lao PDR), Mongolia, Nepal, Pakistan, Papua New Guinea, Tajikistan, and Viet Nam. The World Bank categorizes the countries according to 2002 gross national income (GNI) per capita using the World Bank Atlas method. LA countries have GNI per capita of $735 or less; MA countries have GNI per capita of $736-2,935; and UA economies have more than $2,935 GNI per capita. All the selected European countries fall into the World Bank's category of high-income countries, with $9,076 GNI per capita or more. For the following countries, 2002 data were used due to lack of 2003 data: Bhutan, Fiji Islands, India, Lao PDR, Papua New Guinea, Tajikistan, and Vanuatu. Sources of data were ADB Key Indicators, IMF International Financial Statistics, United Nations Statistics Division, and World Bank country profiles.

¹² The breakdown of trade talks in Cancun, Mexico at the end of 2003 also points to the strong need to push for trade reforms in industrial countries to allow more agriculture, industry, and services sector imports from the developing world.

References

Blecker, Robert. 2002. "The Balance-of-Payments-Constrained Growth Model and the Limits to Export-Led Growth." In A Post Keynesian Perspective on Twenty-First Century Economic Problems, edited by Paul Davidson, pp. 69-88. Northampton, MA: Edward Elgar.

------. 2003. "The Diminishing Returns to Export-Led Growth." In The Bridge to a Global Middle Class: Development, Trade, and International Finance in the 21st Century, edited by Walter Russell Mead and Sherle R. Schwenninger. Norwell, MA: Kluwer Academic Publishers for the Milken Institute.

Erturk, Korkut. Winter 2001-2002. "Overcapacity and the East Asian Crisis." Journal of Post Keynesian Economics 24(2): 253-276.

Felipe, Jesus. 2003. "Is Export-Led Growth Passé? Implications for Developing Asia." Economics and Research Department Working Paper Series No. 48. December. Asian Development Bank, Manila.

Felipe, Jesus and Joseph Lim. Forthcoming. "Export or Domestic Demand-Led Growth in Asia." Economics and Research Department Working Paper Series. Asian Development Bank, Manila.

Jomo, K. S. (ed.) 1998. Tigers in Trouble: Financial Governance, Liberalisation and Crises in East Asia. London and New York: Zed Books.

Kaplinsky, Raphael. 2000. "If you want to get somewhere else, you must run at least twice as fast as that! The Roots of the East Asian Crisis." Competition & Change: The Journal of Global Business and Political Economy 4(1): 1-30.

Lian, Daniel. 2004. "Mr. Thaksin has a Plan." Morgan Stanley. Equity Research Asia/Pacific. 21 September, available: http://www.thairakthai.or.th/trtp/PDF/ThaksinHasAplan.pdf.

Lim, Joseph. 2004. "Macroeconomic Fundamentals and Animal Spirits in the East Asian Crises." In After the Storm: Crisis, Recovery and Sustaining Development in Four Asian Economies, edited by K.S. Jomo. Singapore: Singapore University Press.

McCombie, J.S.L. and A.P. Thirlwall. 1994. Economic Growth and the Balance of Payments Constraint. New York: St. Martin's Press.

Palley, Thomas I. 2002. "A New Development Paradigm: Domestic Demand-Led Growth." FPIF Discussion Paper. Available: http://www.fpif.org/papers/development_body.html.

Seguino, Stephanie. 2000. "The Roots of the Asian Financial Crisis. A Story of Export-Led Growth and Liberalized Capital Flows." In Political Economy and Contemporary Capitalism, edited by Ron Baiman, Heather Boushey, and Dawn Saunders, pp. 225-235. Armonk, NY: M.E. Sharpe.

Stiglitz, Joseph. 2002. Globalization and Its Discontents. New York and London: W.W. Norton.

Taylor, Lance. 1993. "A Three-Gap Analysis of Foreign Resource Flows and Developing Country Growth." In The Rocky Road to Reform: Adjustments, Income Distribution and Growth in the Developing World, edited by L. Taylor. Cambridge, MA: MIT Press.

Williamson, John. 1990. "What Washington Means by Policy Reform." In Latin American Adjustment: How Much Has Happened?, edited by J. Williamson. Washington, DC: Institute for International Economics.

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