Will income inequality cause a middle-income trap in Asia? Bruegel Working Paper 2013/06, 10 October 2013

The Asian economy is expected to realise favourable growth during the first half of this century, but there is no guarantee. There is a discussion about a ‘middle-income trap’, which refers to a country that has realised rapid growth to become a middle-income country but is unable to grow further. A middle-income trap could occur not only if there is a delay in shifting the economy toward a productivity-driven structure, but also if there is a worsening of income distribution.We consider this in line with the theories of development economics and through a quantitative analysis. The relationship between income inequality and the trap can be explained by the Kuznets hypothesis and the basic-needs approach. Our quantitative analysis supports the Kuznets hypothesis, and indicates that,although a low-income country can accelerate its economic growth with the worsening of income distribution as an engine, a middle income country would experience a decreasing growth rate if it fails to narrow the income gap between the top and bottom income groups. The results also show that the basic-needs approach is also applicable in practice, and imply that the improvement of access to secondary education is important. A sensitivity analysis for three Asian upper-middle-income countries(China, Malaysia and Thailand) also shows that the situation related to a middle-income trap is worse than average in China and Malaysia. These two countries, according to the result of the sensitivity analysis, should urgently improve access to secondary education and should implement income redistribution measures to develop high-tech industries, before their demographic dividends expire. Income redistribution includes the narrowing of rural urban income disparities, benefits to low-income individuals, direct income transfers, vouchers or free provision of education and health-care, and so on, but none of these are simple to implement.

Global and regional financial safety nets: lessons from Europe and Asia. Bruegel Working Paper 2013/06 [07?], November 2013

The Asian financial crisis (1997) and the European crisis (2009) have both contributed to the development and deepening of regional safety net arrangements. This paper analyses the relationships between global and regional financial safety nets, and uncovers the potential tensions and operational challenges associated with the involvement of several institutional players with potentially different interests, analytical biases and governance. The G20 has acknowledged the importance of these new players for the international monetary system, but the principles for cooperation between the IMF and regional financing arrangements are far too broad and ad hoc to contribute to a coherent and effective architecture. This paper tries to establish some lessons learned from the Asian financial crisis in 1997 and the current European crisis in order to enhance the effectiveness, efficiency, equity and governance of these arrangements. In particular, it proposes changes to the IMF articles of agreement to allow for lending or guarantees to regional arrangements directly and it establishes some key desirable features and practices of regional mechanisms that should be adopted everywhere to ensure some global consistency, particularly in the field of macroeconomic surveillance, programme design and conditionality.

50 years of the ‘twin engine’. Franco-German reconciliation, European integration and reflections for Asia. EU Centre Singapore Background Brief No. 8, March 2013

On 22 January 2013, French President François Hollande and German Chancellor Angela Merkel gathered in Berlin to celebrate the 50th anniversary of the signing of the Élysée Treaty, the document that ended centuries of rivalry and warfare between their two countries. It is all too easy to forget the importance of Franco-German reconciliation. The 1950 Schuman Declaration, which led to the creation of the European Union’s (EU) predecessor, the European Coal and Steel Community (ECSC), sought to render the prospect of war between France and Germany ‘not only unthinkable but materially impossible’. Over 60 years later, when the EU was awarded the Nobel Peace Prize, the Norwegian Nobel Committee noted that indeed, ‘war between Germany and France is unthinkable’. Halfway around the world in Asia, the other theatre of World War II, tensions between China and Japan have arisen, with Taiwan and South Korea also in the fray. Nationalist movements in these countries have grown. This background brief lays out the issues for a timely reappraisal of the applicability, or otherwise, of the European integration and reconciliation processes to East Asia. The brief seeks to outline the contours of the historic act of Franco-German reconciliation, and its consequences ever since. Starting from a brief look at the history of rivalry and war between the two countries, the brief examines the events leading to the signing of the Élysée Treaty in 1963, and the development of Franco-German exchanges that have cemented the relationship. Difficulties between the countries are also raised. A timescale analysis of the opinion of the two publics is considered, as a measure of the success of Franco-German reconciliation.

Towards a Dynamic Asia-Europe Meeting (ASEM)? EU Centre Singapore Working Paper No. 14, May 2013

The Asia-Europe Meeting (ASEM) launched in 1996 is into its 17th year, and has expanded from a membership of  26 to 51. ASEM membership is made up of 10 ASEAN countries, the ASEAN Secretariat, China, Japan, South Korea,  Mongolia,  Bangladesh,  India,  Pakistan, Australia, New  Zealand  and  Russia  on the Asian side,  and the  27  EU  member states,  the  European  Commission,  Norway  and  Switzerland  on  the  European side.  Yet,  with such  impressive and diverse membership accounting for around 60% of the world’s population, 50% of global GDP,  and up to 60% of world trade, it remains relatively unknown in the public domain. There is also a palpable sense  that not all is well as interest in ASEM (particularly among the leaders) may wane without adequate follow‐up  actions, concrete deliverables and improved visibility.    The  challenges faced by ASEM were discussed in a recent Symposium in Yangzhou organised by the Chinese  government and co‐sponsored by Laos, India, Poland and the Asia‐Europe Foundation (ASEF).    Into its 17th year, ASEM remains essentially a forum for dialogue. After an initial euphoria following the launch   of the inaugural summit in Bangkok in 1996, symbolising Asia’s and Europe’s commitment to step up engagement  with each other, ASEM has since been plagued by the perennial questions of its lack of effectiveness, efficacy and  visibility, and doubts about sustained interest by its political leaders in light of the lack of concrete deliverables.   This paper drawn in part from an earlier article on The Asia‐Europe Meeting (ASEM) in the Palgrave Handbook on  EU‐Asia Relations (2013), and from the discussions at the above ASEM Symposium, will begin with an examination  of the on‐going debates with regards to the challenges faced by ASEM and the various suggestions to address  some  of these  challenges.  The  paper will  conclude with some  observations  on the real  issues  behind these  debates and a prognosis on the future development of ASEM.   

Care for the old rather than sleepwalk into war in East Asia. CEPS Commentary, 23 June 2014

In view of the demographic dynamics of East Asia, in this commentary Wolfgang Pape makes a plea for a kind of ‘geriatric peace’ in the region rather than further territorial disputes and expensive military build-up.