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Flashcards in Economic Development Deck (21):
1

State 2 examples that prove capitalist countries focused on their area of comparative advantage

Indonesia - Bimas, a state agricultural programme, increased rice production by 50% between 1960 and 1980

Philippines - 42% of GDP was from agriculture in the 1950s

Thailand: government increased tractors, fertilisers, improved roads and new crop varieties, irrigation land increased from 600,000 to 2.2 million from 1947 to 1969

2

Why was ISI necessary?

1) less unpredictable and risky - agrarian production influenced by uncontrollable factors (eg weather)

2) necessary for substantial economic growth

3) chose import substitution bc market already exists

3

State 2 examples proving the industrialization of key enterprises.

State another 2 that prove they kicked foreigners out to do so.

Indonesia - Pertamina (oil)

Malaysia - Petronas (oil), Proton (cars)

Philippines: Philippine National Bank

Burma - DSI kicked the East Asiatic Company (rice mills) and Steel Brothers (rice, oil, shipping, timber) out. also, Law to Invest Powers to Construct the Socialist Economy 1965

Philippines - Retail Trade Nationalisation Act 1954 was used to kick the Chinese out of key industries eg rice and corn

Indonesia expropriated Dutch property (eg Pertamina was originally Dutch)

4

Numbers proving a shift towards industrialization

Philippines - manufacturing 8% -> 20% of GDP, industry 14% -> 28% (1950-1960)

Thailand - manufacturing -> 12.5% -> 17.5% of GDP, industry 19% -> 25.7%

Philippines government engaged in import-substituted industrialization by implementing import controls and foreign exchange controls in the 1950s, allowing domestic industries to grow. This eventually resulted in the growth of the manufacturing sector from 8% of the GDP in 1950 to 20% of the GDP in 1960.

In Thailand, the government promoted ISI through the provision of infrastructure and credit systems, resulting in the emergence of a strong industrial sector, which was 19% of the GDP in 1971.

5

Protectionism

Malaysia - Proton received heavy subsidies from the state, allowing it to compete with international firms and capture 47% of the market in 1986

Singapore - EDB provided financial, managerial, and technical support to developing industrial estates

Indonesia: Tariffs and barriers to the most lucrative markets (Eg tariffs of 100%-300% on automobile industry)

Philippines: import controls and foreign exchange controls in the 1950s

6

EOI - why was it important? how to achieve?

Necessary to overcome the smol size of the domestic market, stimulating efficiency and expanding the industry

government had to take a step back, end protectionism, encourage export-oriented growth

7

[EOI] reduced government participation?

Thailand - 1988, National Economic and Social Development Board (NESDB) relieved of its role as supervisor for all major government investment projects

Philippines - privatization of inefficient state industries by Ramos eg air transport

Malaysia privatised 13 state industries by 1992

8

[EOI] down with protectionism

Philippines - reduced industrial protection by reducing tariffs to a max of 50% over a 5 year period (81-85)

Thailand abolished several export taxes in 1985

9

[EOI] encouragement to export

Thailand - abolition of several export taxes in 1985, overseas firms encouraged to have 100% foreign ownership as long as they exported all/most of their output

In Singapore, lower tax rates were given to export enterprises, resulted in the foreign investment in Singapore increasing by 24 times from 1965 to 1970.

10

[EOI] cmon investments :------)

Thailand - freed investors from reliance on domestic state or commercial banks, easing funds available for investment

SG - established EDB and FDI increased by 21x

11

failure @ EOI - causes

often caused by

1) over/inability to stop protectionism
2) unnecessary governmental intervention

both of this led to a general lack of incentive to become competitive. government intervention later became necessary for continued functionality due to years of inefficiency and over protectionism

12

super brilliant overprotectionism/cronyism examples

Indonesia - Bulog, the state planning agency, declared a soymeal monopoly for Tommy Suharto even though that is the Least Efficient Thing Possible

Philippines - Roberto Benedicto's Philippine Sugar Commission was 14 billion pesos in debt when the world sugar price collapsed but the government bailed him out

13

equity?¿?

Malaysia - NEP (New Economic Policy) 1971 established to improve financial situation of Malays since 75% of households below poverty line were Malay and only 2% of owners of corporate wealth were, despite being 58% of population

Burma - Tenancy Law 1965 collectivization, giving land to the poorest

Vietnam - New Management System 1978

14

extreme socialist nationalisation

Burma - DSI

Vietnam - first Five-Year Plan all major private enterprises under state control in March 1978

15

Doi Moi

1986

reduced government ministries and size of bureaucracy
subsidies were abolished, allowing market forces to determine price
economic growth doubled from 3% to 6%, private sector increased 10% to 25%, international trade doubled from 1 to 2 billion

after doi moi GDP growth rate averaged 8.2%, industrial output by nearly 15%

16

GDP growth rates 1961-2001

SG - 8.3%
M - 6.7%
T - 6.8%
P - 3.9%
I - 5.7%
B - 4.3%

17

what were the 3Ps of government intervention?

Planning
Participation
Policy

18

Diversification

Singapore: Techonology, Services in the 1980s: shift towards economic development in technology and services, emphasis towards services sector

Malaysia: Industrial deepening and widening in late 80s and 1990s – developed skilled human capital

19

Socialist failures

Burma tin ore production fell from 1600 tons in 1951 to 0 in 1965

Vietnam manufacturing growth was 17.3% but target was 50%

20

Benefits of government intervention

Addressed challenge of lack of economic planner, was able to bring about short term economic success

Provided an overarching economic direction and laid the foundations for economic growth, filling the socio-economic vacuum created by the departure of the colonial powers.

Economic nationalism and nationalization allowed government to control strategic industries nationalized wealth and boosted economy

Government intervention aided the transition from different economic strategies

Governments intervened to pursue economic development in response to social problems – income inequality, foreign-dominated economy

21

Government intervention bad

Led to development of overprotected industries – uncompetitive

Resulted in cronyism and unequal distribution of wealth

Government interventions in socialist economies based on ideology have tended to lead to poverty and social unrest. Subsequent interventions on sound economic grounds have tended to reverse such effects.

Socialist governments have tended to be a force for economic and political instability in their countries through the imposition of ideologically-guided economic interventions. Subsequent government interventions to engineer more outward-looking economies were necessary to bring about stability.