Asia Pacific Business Issues - Assignment Example

Name: Tutor: Course: Date: Asia Pacific Business Exam Questions Question 1 The outstanding happening of the late 20th and 21st century is the emergence of India and China as leading players within the world. India is outperforming the other emerging nations, especially China. India overtook China in 2016 as the world’s fastest growing main economy. India is projected to rise its population explosion into becoming the third-largest economy across the world by 2030 (Justin & Erick, 2016). India huge domestic market and growing population plays an important role in its growth. However, China is anticipated to surpass the United States by the same year. The growth of India is limited by absence of investment in infrastructure while China has the superficial appearance of growth through building infrastructure as well as cities with no economic agenda. China was based its economic predominance on ‘non-interference approach in the internal affairs of its trading partners’. The rise of China to global power commenced in 1949 with the removal of entire parasitic financial, speculative and compradore classes who had served as intermediaries for Japanese, European and US imperialist making away with great wealth of China (Justin & Erick, 2016). The state of China focused its huge massive public subsidies in promotion of high capitalist growth by dismantling the national system of free health care and public education. They brought to an end the subsidized public housing serving hundreds of millions of urban factory workers and peasants and offered money to real estate speculators for construction of office skyscrapers and private luxury apartments. The take off of the private sector in China was based on the huge public outlays constructed since 1949 (Nobrega, 2008). The sustained growth of China in its manufacturing sector was as an outcome of highly concentrated public investments, technological innovations, high profits as well as a protected domestic market. Whereas foreign capital profited, it was always under the framework of regulations and priorities of the Chinese state. The rise of China was based on its huge productive capacity. China and India population will play an important role in their future (Nobrega, 2008). Infrastructural development is important to China and political direction plays an important role in India’s case. Politics and international relations will determine the direction of Chinese and Indian economies in the 21st century. Question 2 The Association of South East Asian Nation (ASEAN) is a regional organization made up of tan Southeast Asian States that target to promote intergovernmental corporation, Pan-Asianism, and facilitates political and economic integration among the members as well as Asian states. Regional economic integration has made it possible for countries to emphasize issues that are relevant to their own stage of development and enhance trade amongst neighbors (Chia, 2013). The goals of the creation of ASEAN were the desire for an external environment that is stable so that the governing elites could focus on nation-building. The governing elites wanted to have the free space for implementation of independent policies with the knowledge that their neighbours would restrain from interfering within their domestic affairs. Small members like Brunei and Singapore were fearful conscious of force as well as coercive measures from bigger neighbors like Malaysia and Indonesia (Chia, 2013). Consequently, consensus, non-interference, non-confrontation and non-use of force became the guiding principles of the organization. However, the ASEAN process has had its management conducted through close interpersonal contacts between the top leaders who share institutionalize as well as legalize cooperation which is able to undermine the control of the regime over the conduct of the entire regional cooperation. Features such as informality, non-interference, consensus and consultation, minimal institutionalization, non-confrontation and non-use of force constitute what is known as ASEAN Way (Chia, 2013). The organization grew slowly in its first decade of existence owing to contrasting interests in economy, different historical experience, and the fragile political relationships among the original five members. The Vietnamese invasion of Cambodia was a stimulus for collaboration. The ASEAN member nations successfully passed UN resolutions condemning the state of Vietnam and sponsored the 1981 Conference on Kampuchea (Soesastro, 2003). Whereas the organization was formed basically for social and economic goals, the diversity in economic interests as well as the degree of development has constrained growth of cooperation in other economic activities (Soesastro, 2003). ASEAN has achieved great steps in reduction of internal trade barriers as well as putting in place joint industrial projects. Question 3 The flying geese model way of development was first named by Kaname Akamatsu in 1930. The flying geese model attempts to explain the process of catching-up of industrialization within latecomer economies that consist of basic pattern, a variant pattern in the manner industries are developed and the changing from consumer goods to capital goods (Kimura & Ayako, 2016). The accumulation of human and physical capital enhances the economy diversifying to more capital-intensive major industries and then rationalization for the purpose of achieving production methods that are efficient. According to the perspective of Akamatsu, the flying geese model explores development that happens when a less advanced country has an economic relationship with other advanced countries. This theory has been accused of not paying adequate attention to factors underlying economic development of North East Asia from the 1950s to the 1980s and focusing on Japan (Lin, 2012). The coming up or rise of East Asia within the later of 20th century offers an exception to the flying geese pattern. The growth of nations in East Asian region shows a range of institutions, from the non-interventionist to the ultra-competitive planning in Singapore and the communist-cum-capitalist growth in China (Kimura & Ayako, 2016). The East Asian countries have pivoted efficient institutions as well as policy that have been supported by their economic success as opposed to being derailed by it. In North Korea the geographic location was not the sole determinant. Most of the nations in this region adopted the adaptive industrial strategies that emphasized on the creation of coming up with comparative advantage within the export industries known as Export Oriented Industrialization. Some developing countries like China in the mid-1970s within East Asia resorted to open economy in order to realize fast growth (Kimura & Ayako, 2016). Usually excessive dependency on enterprise as well as foreign capital can be dangerous. Indigenous development can capture the spillovers of FDI. Question 4 The financial crisis happened in the Asia region in the mid-1997. As part of the bailout, IMF-supported programs were designed to help Thailand, South Korea and Indonesia to recover. The IMF had to offer financial support for the most affected countries which comprise of the three mentioned above. US$85 Billion for financing was committed from bilateral and multilateral sources (Valentina & Hyun, 2014). The monetary policy was tightened for the purpose of avoiding the collapse of the exchange rates of the countries and currency depreciation. Structural reforms addressed weaknesses in corporate and financial sectors. South Korea GDP dropped by 7% in 1998 (Valentina & Hyun, 2014). The countries went through huge current account adjustments attributed to sharp drops in imports. The financial markets became stable in the early part of 1998 in South Korea and Thailand and later in Indonesia. The economic activity began to turn around especially in Korea in the mid-1998 and was followed by other countries. The recoveries were very robust particularly in Korea where the economic growth rate reached 10.75 throughout 1999 (Fritz and Daniela, 2014). The budget policy had to be in line with the financial program. The recovery showed resurgence in private domestic demand that had witnessed a recession. The Asian crisis experience as well as the outcome of the policy strategy elicited new thinking about international financial system and the suitable policy response to any financial crisis. The structural interventions by the IMF played an important role in improving the health of the South Korean economy (Fritz and Daniela, 2014). The South Korean economy stabilized after the introduction of the structural policies before it grew tremendously with a resurgent home market demand. Question 5 The economic performance of Japan since the early 1990s has been nothing but disappointing with regard to history as well as relative to other major industrial countries. The GDP has averaged to close to 1 percept yearly over a period of ten years while other OECD countries have performed tremendously. The events commenced in September 1985 when some delegates from G5 countries congregated in Plaza Hotel in New York announced that the U.S. dollar was overvalued and declared a plan to correct the situation (Amiti & Weinstein, 2011). This agreement was a beginning of a major change in policy regime. The Federal Reserve shows signs that after fighting inflation for a long time; it was ready to ease policies. It purposed to allow the dollar to decline and then focus more on growth. This was followed by coordinated currency market intervention as well as steady reduction in the United States short-term rates. These actions led to huge appreciation of the yen totaling to 46% of the dollar. Consequently, the export and GDP growth of Japan halted within the first quarter of 1986. Following the Japanese economy being in recession as well as the exchange rate appreciating quickly, the authorities were under immense pressure to respond. Macroeconomic stimulus programs were initiated. The policy interest rates were decreased by 3 percentage points and it was sustained to 1989. By 1987 the output of Japan was booming but this was also followed by credit growth as well as asset prices, with urban land and stock prices tripling from 1985 to 1989 (Duncan, 2011). The stock price bubble burst occurred in January of 1990. Share prices lost their value and it was followed by dismal economic performance. Currently, nominal stock as well as land prices are back to where they were in 1980s which is only a third of what they were before. Seemingly the appreciation compelled Japan to start a stimulus for sustenance of growth hence triggering the bubble that caused the Lost Decades upon its collapsing. Studies show that monetary policy easing was excessive. The dependency of Japan on foreign capital was dangerous to its economic sustainability. References Amiti, Mary, and Weinstein, David E.. "Exports and financial shocks." The Quarterly Journal of Economics 126.4 (2011): 1841-1877. Chia, Siowyue. "The ASEAN economic community: Progress, challenges, and prospects." (2013). Duncan, Richard. The dollar crisis: Causes, consequences, cures. John Wiley & Sons, 2011. Fritz, Barbara, and Daniela Prates. "The new IMF approach to capital account management and its blind spots: lessons from Brazil and South Korea." International Review of Applied Economics 28.2 (2014): 210-239. Justin, Paul and Erick Mas. "The emergence of China and India in the global market." Journal of East-West Business 22.1 (2016): 28-50. Kimura, Fukunari, and Ayako Obashi. "Production networks in East Asia: What we know so far." Production Networks and Enterprises in East Asia. Springer Japan, 2016. 33-64. Lin, Justin Yifu. "From Flying Geese To Leading Dragons: New Opportunities and Strategies for Structural Transformation in Developing Countries1." Global Policy 3.4 (2012): 397-409. Nobrega, W., “Why India will beat China”, Business Week, July, 2008. Soesastro, H. (2003), An ASEAN Economic Community and ASEAN+3: How do they fit together?, Australia-Japan Research Centre at the Asia Pacific School of Economics and Government, Pacific Economic Paper, No. 338. Valentina, Bruno, and Hyun Song Shin. "Assessing macro-prudential policies: case of South Korea." The Scandinavian Journal of Economics 116.1 (2014): 128-157. Read More