Oecd amro s2 13 japan mr tadashi ito
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2nd OECD-AMRO Asian Regional Roundtable

2nd OECD-AMRO Asian Regional Roundtable

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Oecd amro s2 13 japan mr tadashi ito Oecd amro s2 13 japan mr tadashi ito Presentation Transcript

  • Middle income trap Discussion by Tadashi Ito, Institute of Developing Economies, JETRO 1
  • Should middle income countries pursue the same development strategies of Korea or Japan? My answer is NO! Why? 2
  • Because of 2nd unbundling due to ICT revolution from the end of 1980s. Up the 1970s, industrialization meant building the whole supply chain at home, but in the 21st century globalization, nations could industrialize by joining a supply chain. (Richard E. Baldwin (2010)) 3
  • Intra-industry trade (IIT) index Factory Asia and Factory Europe increased IIT. 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Argentina Chile China Czech Republic Hungary Indonesia Korea Mexico Malaysia Philippines Poland Thailand Vietnam 4
  • But is it enough? My answer is no. Evidence of product quality upgrading in the Eastern European countries, while no such evidence in Asia. 5
  • Evolution of GDP per capita 0 5000 10000 15000 20000 25000 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 China Malaysia Thailand Czech Republic Hungary Poland 6
  • Unit value difference in IIT (Data of Germany) -0.4 -0.2 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Czech Rep. Poland Hungary Slovakia Romania Slovenia Bulgaria 7
  • Unit value difference in IIT (Data of Japan) -1.2 -1 -0.8 -0.6 -0.4 -0.2 0 0.2 0.4 0.6 0.8 1 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 China Germany France Indonesia Korea Malaysia Philippines Thailand USA 8
  • So, better to go to higher technology stages. (as Porametee from Thailand has argued) But is it always better to go to more “high-tech” stages? My guess is “probably no”. Need some concentration to some stages in order to benefit from agglomeration effect and also to have market power. 9
  • No need to be Apple computer, but be GIANT of bicycles or Chimei of ABS resins in Taiwan. So, the government needs to provide a business friendly environment. (as Allauddin from Malaysia have argued) 10
  • Up to here, the global supply chain. Another thing which I think is important is service trade liberalization. Evidence from Czech Republic: Service sector trade is associated with productivity increase of related manufacturing sector. (Arnold, Javorcik and Matto (2011)) Service trade is very small in Asia (Baldwin and Lopez-Gonzales (2012)) 11