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Growth and Change in ASEAN

Economies which grow do so by moving from being based on agriculture to reliance upon manufacturing, services and, increasingly, the knowledge-based economy. No economy in the world that has achieved extensive economic growth has not followed this route.

Further, successful economies have the shared quality that they are able constantly to adapt to changing circumstances, learning how to perform new kinds of activities and deriving the benefits along the way in an incremental fashion.

Newly-published research from the Asian Development Bank (ADB) explores these issues and provides an empirical basis for the beliefs in the need for constant adaptation and change. More, authors

Jesus Felipe and Frank Harrigan demonstrate the presence of some specific features about developing Asian economies that mark them out from most of the rest of the world:
• over an extended range of incomes, successful industrialization has been associated with greater output diversity rather than specialization (as the theory of comparative advantage would suggest);
• sustained fast growth has been closely identified with increasing sophistication and complexity of a country’s export basket.
• successful industrialization has been married to vigorous services growth, and complementarities between the two have become more important with the successive refinement of tasks.

There is still a long way to go before these economies can catch up with those of the OECD, for example, although there are grounds for thinking that this ground can be made up to a large extent. One reason for this is the presence in many countries (e.g. Philippines, Thailand and Cambodia) of large sections of the population still primarily involved in agriculture who could in future be redeployed to industries which do more to support industrialization. The authors note the crucial role of governments in promoting further economic development: “Government can—indeed must—play an instrumental role in providing the hardware and software that businesses require if they are to create incomes, jobs, and wealth. Without decent physical infrastructure, business costs may be insurmountable or it may be impossible to produce on an efficient scale. Industry in particular suffers when infrastructure is poor. And if laws and courts fail to adequately protect property or uphold contracts, or if bureaucrats prey on businesses, or workers lack the basic competencies and skills needed to be productive, investors will be less likely to take the bets that are needed if an economy is to move ahead. Successful imitation, an important pathway for learning, is more likely in economies that are open to trade and investment than those that are closed.”

Governments should also be active in promote active labour market policies (e.g. increasing skills to match supply of jobs, creating employment directly, job-matching) so as to stimulate the economy to be continuously innovative in seeking out new opportunities and exploiting them. There will, certainly, be mistakes made along the way but this is the best way forward currently available. AseanAffairs
The report, Growth and Change in Developing Asia, is available for download from the ADB’s website, located at:

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