Economic development capitalizing on brand agriculture : turning development strategy on its head

This paper explores the possibilities of two unique Japanese concepts - the One Village One Product Movement (OVOP) and Michino Eki (or Roadside Stations) - as potential tools for bridging the gap between cities and rural areas through community-driven development. From the viewpoint of spatial economics and endogenous growth theory, this paper considers both OVOP and Michino Eki as rural development strategies of a broader nature based on "brand agriculture." Here, brand agriculture represents a general strategy for community-based rural development that identifies, cultivates and fully utilizes local resources for the development of products or services unique to a certain "village." Selected examples of OVOP and Michino Eki from Japan and developing countries are introduced.

East Asia's Economic Development cum Trade "Divergence"

This paper addresses some salient features of how some of "successful" East Asian economies have been faring in terms of enhancing their export competitiveness. That export becomes more divergent in terms of its unit price as more technology-enhancing economic activity is undertaken within an economy, is the primary message that this study conveys. This is indeed what Schumpeter had addressed in conjunction with his "creative destruction" thesis. From this perspective, East Asia's export-led industrialization has been attained through a particular policy focus upon high "trade divergence" sectors underpinned by a generally high level of manufacturing flexibility. The experience of Malaysia's development serves as the strong case in point. As an East Asia-wide FTA is expected to facilitate "divergent" export-led industrialization through enhanced knowledge interaction, this dynamic or "divergent" impact that knowledge creation could exert should come to the fore of relevant policy arguments, together with static consideration of trade creation and diversion. A formal statistical test of the "divergence hypothesis" above is called for with a view to building upon this preliminary study.

Thailand's Economic Cooperation with Neighboring Countries and Its Effects on Economic Development within Thailand

Thailand's economic cooperation with neighboring countries, including not only trade and investment but also economic assistance, is tied inseparably to regional development within Thailand. Assistance to develop infrastructure along economic corridors, for example, promotes Thai regional development. This study examines the trade and investment relationships between Thailand and its neighboring countries, as well as related economic policies of Thailand. The study also examines the type of economic assistance being extended, and the resulting regional development taking place. And lastly, the study considers policies for further cooperation by Thailand and the implications this has for Japanese economic cooperation.

Trade, Foreign Investment and Myanmar's Economic Development during the Transition to an Open Economy

Throughout the 1990s and up to 2005, the adoption of an open-door policy substantially increased the volume of Myanmar's external trade. Imports grew more rapidly than exports in the 1990s owing to the release of pent-up consumer demand during the transition to a market economy. Accordingly, trade deficits expanded. Confronted by a shortage of foreign currency, the government after the late 1990s resorted to rigid controls over the private sector's trade activities. Despite this tightening of policy, Myanmar's external sector has improved since 2000 largely because of the emergence of new export commodities, namely garments and natural gas. Foreign direct investments in Myanmar significantly contributed to the exploration and development of new gas fields. As trade volume grew, Myanmar strengthened its trade relations with neighboring countries such as China, Thailand and India. Although the development of external trade and foreign investment inflows exerted a considerable impact on the Myanmar economy, the external sector has not yet begun to function as a vigorous engine for broad-based and sustainable development.

Post-Crisis Economic Reform in Indonesia:Policy for Intervening in Ownership in Historical Perspective

Introduction : Economic reform in Indonesia after the Asian currency crisis is often discussed in parallel with Thailand and South Korea, which were alike hit by the crisis. It should however be noted that what happened in Indonesia was a change of political regime from authoritarianism to democracy, not just a change of government as seen in Thailand and South Korea. Indonesia’s post-crisis reform should be understood in the context of dismantling of the Soeharto regime to seek a new democratic state system. 　　　In the political sphere, dramatic institutional changes have occurred since the downfall of the Soeharto government in May 1998. In comparison, changes in the economic sphere are more complex than the political changes, as the former involve at least three aspects. The first is the continuity in the basic framework of capitalist system with policy orientation toward economic liberalization. In this framework, the policies to overcome the crisis are continued from the last period of the Soeharto rule, under the support system of IMF and CGI (Consultative Group on Indonesia). The second aspect is the impact of the political regime change on the economic structure. It is considered that the structure of economic vested interests of the Soeharto regime is being disintegrated as the regime breaks down. The third aspect is the impact of the political regime change on economic policy-making process. The process of formulating and implementing policies has changed drastically from the Soeharto time. With these three aspects simultaneously at work, it is not so easy to identify which of them is the main cause for a given specific economic phenomenon emerging in Indonesia today. 　　　Keeping this difficulty in mind, this paper attempts to situate the post-crisis economic reform in the broader context of the historical development of Indonesian economic policies and their achievements. We focus in particular on the reform policies for banking and corporate sectors and resulting structural changes in these sectors. This paper aims at understanding the significance of the changes in the economic ownership structure that are occurring in the post-Soeharto Indonesia. Economic policies here do not mean macro economic policies, such as fiscal, financial and trade policies, but refer to micro economic policies whereby the government intervenes in the economic ownership structure. In Section 1, we clarify why economic policies for intervening in the ownership structure are important in understanding Indonesia. Section 2 follows the historical development of Indonesia’s economic policies as specified above, throughout the four successive periods since Indonesia’s independence, namely, the parliamentary democracy period, the Guided Democracy period under Soekarno, the Soeharto-regime consolidation period, and the Soeharto-regime transfiguration period2. Then we observe what economic ownership structure was at work in the pre-crisis last days of the Soeharto rule as an outcome of the economic policies. In Section 3, we examine what structural changes have taken place in the banking and corporate sectors due to the reform policies in the post-crisis and post-Soeharto Indonesia. Lastly in Section 4, we interpret the current reorganization of the economic ownership in the context of the historical transition of the ownership structure, taking account of the changes in the policy-making processes under democratization.

Institutional Development of Capital Markets in Nine Asian Economies

This paper is conducting a comparative analysis of the development of securities markets in nine Asian economies: Korea, Taiwan, Hong Kong, Singapore, Malaysia, Thailand, Indonesia, the Philippines, and China. This study focuses on two aspects: the history and institutional development of securities market, such as legal systems, payment systems, etc. From the analyses, this paper reveals several common features of the development of securities markets in nine Asian economies. First, most economies had an informal capital market in the early period of their history. Second, the background of the foundation of their official markets was influenced by experiences of colonization. Third, most governments recognized the importance of the capital market for economic development and had a positive attitude in promoting the market. Fourth, statistics clearly showed that most economies experienced several booms in their capital market from the late 1980s.

Industrialization in Indonesia since the 1970s

Introduction: During the period from the latter half of the 1980s until just before the Asian currency crisis in 1997, Indonesia’s economic development had drawn expectations and attention from various quarters, along with Malaysia and Thailand within the same Association of Southeast Asian Nations (ASEAN). In fact, the 1993 report by the World Bank, entitled “East Asian Miracle: Economic Growth and Public Policy,” recognized Indonesia as one of the East Asian economies with the strong economic performance, i.e. sustained economic growth (World Bank [1993]). And it was the manufacturing industry that had been the driving force behind Indonesia’s economic growth during that period. Since the 1997 outbreak of the Asian currency crisis, however, the manufacturing sector in Indonesia has been mired in a situation that rules out the kind of bright prospects it had emanated previously. The Indonesian economy is still in the developing stage, and in accordance with the history of industrial structural changes in other countries, Indonesia’s manufacturing industry can still be expected to serve as the engine of the country’s economic development. But is it really possible in an environment where economic liberalization and globalization are forging ahead? And, what sort of problems have to be dealt with to make it possible? To answer these questions, it is necessary to know the current conditions of Indonesia’s manufacturing sector, and to do that, it becomes important to think back on the history of the country’s industrialization. Thus, this paper is intended to retrace and unlock the track of Indonesia’s industrialization up until the establishment of the manufacturing sector in its present form, with the ultimate goal being to give answers to the above-mentioned questions. Subject to an analysis in this paper is the period from the installment of President Soeharto’s administration onward when industrialization of the modern industrial sector2 moved into high gear. 　　　The composition of this paper is outlined below. Section 1 first shows why it is important to examine import substitution and export orientation, both of which are used as the measures of the analysis in this paper, in tracking the history of the industrialization, and then discuss indicators of import substitution and export orientation as well as statistical data and resources needed to develop those indicators. Section 2 clarifies the status of the manufacturing industry among all industries by looking at the composition ratio of the manufacturing industry in terms of value added, imports and exports. Section 3 to 5 cover three periods between 1971 and 1995 and make an analysis of import substitution, export orientation and changes in the industrial structure for each period. Section 3 analyzes the period from 1971 through 1985, when Indonesia pursued the import substitution policy amid the oil boom. Section 4 covers the period from 1985 through 1990, when the packages of deregulatory measures were announced successively under structural adjustment policies made necessary by the fall in oil prices. Section 5 examines the period from 1990 through 1995, which saw the alternate shifts between the overheating of the economy by sharply rising investment by both domestic and foreign investors in the wake of the liberalization of investment, trade and financial services, and polices to cool down the economy. Section 6, which covers the 1995-1999 period straddling the economic crisis, is designed for an analysis of the changes in production trends before and after the economic crisis as well as the changes in the industrial structure. Section 7, after summing up the history of Indonesia’s industrialization examined in the previous sections, discusses problems found in respective sectors and attempts to present future prospects for the country’s manufacturing industry.

Transformation of the Financial Sector in Indonesia

Introduction : The source and deployment of finance are central issues in economic development. Since 1966, when the Soeharto Administration was inaugurated, Indonesian economic development has relied on funds in the form of aid from international organizations and foreign countries. After the 1990s, a further abundant inflow of capital sustained a rapid economic development. Foreign funding was the basis of Indonesian economic growth. This paper will describe the mechanism for allocating funds in the Indonesian economy. It will identify the problems this mechanism generated in the Indonesian experience, and it will attempt to explain why there was a collapse of the financial system in the wake of the Asian Currency Crisis of 1997. History of the Indonesian Financial system The year 1966 saw the emergence of commercial banks in Indonesia. It can be said that before 1966 a financial system hardly existed, a fact commonly attributed to economic disruptions like the consecutive runs of fiscal deficit and hyperinflation under the Soekarno Administration. After 1996, with the inauguration of Soeharto, a regulatory system of financial legislation, e.g. central banking law and banking regulation, was introduced and implemented, and the banking sector that is the basis of the current financial system in Indonesia was built up. 　　　The Indonesian financial structure was significantly altered at the first financial reform of 1983. Between 1966 and 1982, the banking sector consisted of Bank Indonesia (the Central Bank) and the state-owned banks. There was also a system for distributing the abundant public revenue derived from the soaring oil price of the 1970s. The public finance distribution function, incorporated in Indonesian financial system, changed after the successive financial reforms of 1983 and 1988, when there was a move away from the monopoly-market style dominated by state-owned banks (which was a system of public finance distribution that operated at the discretion of the government) towards a modern market mechanism. The five phases of development The Indonesian financial system developed in five phases between 1966 and the present time. The first period (1966-72) was its formative period, the second (1973-82) its policy based finance period under soaring oil prices, the third (1983-91) its financial-reform period, the fourth (1992-97) its period of expansion, and the fifth (1998-) its period of financial restructuring. The first section of this paper summarizes the financial policies operative during each of the periods identified above. In the second section changes to the financial sector in response to policies are examined, and an analysis of these changes shows that an important development of the financial sector occurred during the financial reform period. In the third section the focus of analysis shifts from the general financial sector to particular commercial banks’ performances. In the third section changes in commercial banks’ lending and fund-raising behaviour after the 1990s are analysed by comparing several banking groups in terms of their ownership and foundation time. The last section summarizes the foregoing analyses and examines the problems that remain in the Indonesian financial sector, which is still undergoing restructuring.

Related Lending and Bank Performance: Evidence from Indonesia

After the Asian financial crisis of 1997, it was confirmed that banks lend to their related parties in many countries. The question examined in this article is whether related lending functions to alleviate the problems of asymmetric information or transfers profits from depositors and minority shareholders to related parties. The effects of related lending on the profitability and risk of banks in Indonesia are examined using panel data from 1994 to 2007 comprising a total of 74 Indonesian banks. The effects on return on asset (ROA) varied at different periods. Before and right after the crisis, a higher credit allocation to related parties increased ROA. In middle of the crisis, it turned to negative; and this has also been the case in the most recent period as the Indonesian economy has normalized. Effects of related lending on bank risk measured by the Z-score and non-performing loan is not clear. After undergoing bank restructuring, related lending has decreased and the profit structure of banks has changed.

Infrastructure development and economic growth in China

China is the fastest growing country in the world for last few decades and one of the defining features of China's growth has been investment-led growth. China's sustained high economic growth and increased competitiveness in manufacturing has been underpinned by a massive development of physical infrastructure. In this context, we investigate the role of infrastructure in promoting economic growth in China for the period 1975 to 2007. Overall, the results reveal that infrastructure stock, labour force, public and private investments have played an important role in economic growth in China. More importantly, we find that Infrastructure development in China has significant positive contribution to growth than both private and public investment. Further, there is unidirectional causality from infrastructure development to output growth justifying China's high spending on infrastructure development since the early nineties. The experience from China suggests that it is necessary to design an economic policy that improves the physical infrastructure as well as human capital formation for sustainable economic growth in developing countries.

Bank restructuring and financial institution reform in Indonesia

The banking sector underwent drastic reform in post-crisis Indonesia. Bank restructuring, driven by IMF conditionalities, resulted in the exit of insolvent banks and ownership changes of major private banks. Through recapitalization and sales of government-held shares, foreign-owned banks emerged as leading actors in the place of business-group-affiliated banks. As part of the restructuring process, an exit rule was created. The central bank, which up to that time had been given only partial authority under the jurisdiction of the Minister of Finance, now gained a full range of authority over banks. The central bank's supervision system on banks, risk management systems at individual banks, and their efforts to build risk management capacities, began to function. This is totally different from the old financial institution under the Soeharto regime, where banks had no incentive to control risks, as the regime tacitly ensured their survival.