Table Of ContentAsian Economy and Finance
Innovations in Financial Markets
and Institutions
Editor:
MarkFlannery
UniversityofFlorida
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Asian Economy and Finance
A Post-Crisis Perspective
Dilip K. Das
DilipK.Das
2869BattlefordRoad
Mississauga
OntarioL5N2S6
Canada
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ToVasanti,
mytruenorth.
Thereisatimeforbeingahead,
atimeforbeingbehind;
atimeforbeinginmotion,
atimeforbeinginrest;
atimeforbeingvigorous,
atimeforbeingexhausted;
atimeforbeingsafe,
atimefortakingrisk.
TheMasterseesthingsastheyare,
withouttryingtocontrolthem.
Sheletsthemgotheirownway,
andresidesatthecenterofthecircle.
—fromTaoTeChing
CONTENTS
Preface xiii
Acknowledgments xxi
AbouttheAuthor xxiii
1. ASIANECONOMY:THEHERITAGE 1
1.1 PastisPreludetotheFuture 1
1.2 AlternativeHistoricalPerspectiveonAsianEconomy 2
1.3 EconomicLinkagesandInteractionsintheSecondMillennium 4
1.3.1 FirstHalf 4
1.3.2 SecondHalf 7
1.4 QuantitativeDimensionsofGrowth 8
1.5 PastTrendsinTrade 12
1.5.1 Intra-RegionalTrade 13
1.5.2 GlobalTrade 16
1.6 IndustrialRevolutionandItsAftermath 18
1.7 AsianEconomic“Miracle”ofthePost-WarIIEra 21
1.8 SummaryandConclusion 23
2. ECONOMICDIVERSITYINASIA 27
2.1 Heterogeneity 27
2.2 High-PerformingEconomicSub-Groups 28
2.3 RegionalEconomiesandEconomicGroupings 33
2.4 Japan—theDomineeringRegionalEconomy 36
2.5 ContrastingtheTwoPopulousGiants 43
2.5.1 China 44
2.5.2 India 52
2.5.3 WhyIndiaLaggedBehindChina? 59
2.6 NewlyIndustrializedAsianEconomies 60
2.7 SoutheastAsianEconomies 65
2.8 Post-CrisisPerformance 68
2.9 SummaryandConclusions 71
x Contents
3. MARKET-DRIVENREGIONALIZATIONINASIA 77
3.1 Introduction 77
3.2 TrendsinIntra-RegionalTradeandInvestment 79
3.2.1 Market-DrivenRegionalization 80
3.2.2 Intra-RegionalTrade 82
3.2.3 IsTradeGrowingMoreIntra-Regional? 84
3.2.4 Intra-RegionalProductionNetworks 86
3.3 ImpactofOtherRIAsontheAsia-PacificEconomies 89
3.4 NeedforRegionalCo-operationintheAftermathoftheCrisis 93
3.5 ImpedimentstoRegionalization 94
3.6 ConclusionsandSummary 95
4. CONTEMPORARYINITIATIVESININSTITUTIONALIZED
REGIONALINTEGRATION 101
4.1 RegionalIntegrationandtheGlobalEconomy 101
4.2 AgglomerationorClusteringEffect 105
4.2.1 IndustrialandSectoralSpecializationinanRIA 107
4.2.2 ForeignDirectInvestmentandRIAs 108
4.2.3 WelfareImplications 110
4.3 InstitutionalizedRegionalEconomicIntegration 116
4.3.1 FormationofASEAN 117
4.3.2 FormationofASEANFreeTradeArea 119
4.3.3 CommonEffectivePreferentialTariffFramework 121
4.3.4 ImpactofCommonEffectivePreferentialTariff 123
4.3.5 ASEAN’sContributiontoRegionalIntegration 124
4.3.6 ASEANEconomicCommunity2020 126
4.4 ASEAN-Plus-ThreeGrouping 127
4.4.1 ExploringtheFuturePotential 130
4.5 Asia-PacificEconomicCo-operationForum 131
4.5.1 ConsequencesofTradeandInvestmentLiberalization 134
4.5.2 EconomicandTechnicalCo-operation 136
4.5.3 APEC’sContributiontoRegionalIntegration 137
4.6 BilateralTradeAgreements 139
4.7 SummaryandConclusion 141
5. TRADE,COMPETITIVENESSANDFOREIGNINVESTMENT
ANDTHELINKAGESAMONGTHEM 147
5.1 Outer-Orientation:TheStrategicStance 147
5.1.1 AdoptingOuter-Orientation 148
5.1.2 GlobalCapitalFlows 150
5.1.3 RolePlayedbyTNCs 153
5.1.4 InteractionbetweenTradeandFDI 154
Contents xi
5.2 TradePerformance 155
5.2.1 TradeandEconomicGrowthNexus 156
5.2.2 ExportDecelerationandtheAsianCrisis 158
5.2.3 EmergingTradeTriangle 160
5.3 GrowingCohesioninTradingPattern 162
5.4 CompetitivenessinGlobalMarketPlace 165
5.4.1 QuantifyingCompetitiveness 166
5.4.2 StrengtheningCompetitiveness 168
5.4.3 LiberalizedPolicyStanceandCompetitiveness 170
5.5 RegionalTrendsinFDI 172
5.5.1 Medium-TermProspects 175
5.5.2 OutwardFDIFlows 176
5.5.3 CentripetalForcesinChina 178
5.5.4 IsChinaEatingASEAN’sLunch? 180
5.6 IntegratedProductionNetworksandRefinementof
ComparativeAdvantage 182
5.6.1 NeedforIntegratedProductionNetworks 183
5.6.2 SplittingtheValueChain 184
5.6.3 ExpandingOpportunities 184
5.7 OutsourcinginICTandBusiness-ProcessServices 186
5.7.1 IgnitingProtectionism:SquaringtheCircle 188
5.8 China’sWTOAccessionanditsRegionalRamifications 189
5.9 SummaryandConclusion 192
6. FINANCIALSECTORDEVELOPMENT:STRUCTURE,
INSTITUTIONSANDMARKETS 201
6.1 FinancialSector:ChinkintheAsianArmor 201
6.2 TheQualityContinuum 203
6.3 FinancialMarketStructureandCountryClassification 205
6.4 CarryingoutFinancialMarketDevelopment 207
6.5 BankingSector 208
6.5.1 AscertainingtheDominance 210
6.5.2 ForeignBanks 211
6.5.3 Non-PerformingLoans 212
6.6 IntermediateFinancialStructure 214
6.7 BondMarkets 215
6.7.1 BondMarketDevelopmentsinthePre-CrisisPeriod 216
6.7.2 BondMarketDevelopmentsinthePost-CrisisPeriod 218
6.7.3 MarketLimitations 220
6.7.4 MarketandInstitutionalUpgrading 221
6.8 RegionalBondMarket 223
6.8.1 FacilitatingMarketGrowth 225
