Economic Development of ROC and the Pacific Rim in the 1990s and Beyond

The following sections are included:

• CONTENTS

• PREFACE

• WELCOMING REMARKS

• OPENING ADDRESS

• CLOSING ADDRESS

The Republic of China on Taiwan has achieved one of the world's highest rates of economic growth over the past four decades. At the same time, it has attained price stability, full employment, and an equitable distribution of income. The purpose of this paper is to discuss how that growth came about, and to show what natural factors and government policies contributed to the nation's economic success. This paper is divided into a review of the past performance of the Taiwan economy, an evaluation of the main government policies contributing to its success, an examination of its current issues, and a discussion of future prospects in terms of its Six-year National Development Plan.

Professor Tsiang, Dr. Kuo, ladies and gentlemen:

I am delighted to participate in this very interesting and stimulating conference. It is an honor and deep pleasure to be a discussant of the paper by Dr. Shirley Kuo — a long-term colleague and friend…

The following sections are included:

• Introduction

• Economic Development in the Pacific Rim

• Factors Shaping the Future

• Abbreviations

• References

• Endnotes

Professor Anthony Koo has, as usual, presented a paper full of insights. I do not have any major disagreements with Professor Koo. So, instead of commenting on his paper directly, allow me to follow up and amplify a few strands of his basic argument…

The following sections are included:

• Pacific Rim Economic Outlook

• Prospects for Taiwan's Economy
  • Positive Factors
    • Superior education base
    • Strong technology base
    • Sound economic policy
    • Strength of small- and medium-sized business firms
  • Negative Factors
    • Surprisingly weak domestic private investment during the second half of the 1980s
    • Inadequate infrastructure development
    • Quality of life

It is widely noted that the Asia-Pacific area, especially the developing economies in this region, have made an extremely favorable impression on the world scene but are possibly fading a bit at this time. The fading could well be cyclical but no area (or single country) maintains a blistering pace of development forever, and there is likely to be some relaxation of performance characteristics whether they be inflation or growth or current account surpluses, or many other indicators of well being, either economic or more broadly social…

Professor Lawrence Klein has provided us a very useful overview of the macroeconomic performance, prospects, and problem areas for the five advanced industrial economies of the Pacific Rim — Australia, Canada, Japan, New Zealand, and the United States. He distinguishes between the current cyclical slowdown and the longer-run secular growth prospects. And, explicitly or implicitly, he raises a number of topics and issues to be dealt with in subsequent sessions in this conference…

The aggregate meta-production function approach is applied to a sample of nine countries — the Group-of-Five countries (France, West Germany, Japan, the United Kingdom and the United States) and the East Asian Newly Industrialized Countries (Hong Kong, Singapore, South Korea and Taiwan). It is found that the hypothesis of a single meta-production function applying to all nine countries cannot be rejected. However, it is also clear that the two groups of countries operate on very different parts of the same production function. The estimated values of the production elasticities of capital for the Newly Industrialized Countries are much higher and those of the production elasticities of labor much lower than the corresponding elasticities of the Group-of-Five countries. The local degrees of returns to scale are approximately constant for the Newly Industrialized Countries but significantly decreasing for the Group-of-Five countries for most of the postwar period.

The results reaffirm the Boskin and Lau (1990) finding that technical progress can be represented as purely capital-augmenting. However, the hypothesis that there has been no technical progress (or increase in efficiency) in the Newly Industrialized Countries during the postwar period cannot be rejected. By far the most important source of economic growth of the Newly Industrialized Countries is capital accumulation, accounting for more than 80 percent of their economic growth, in contrast to the case of the industrialized Group-of-Five countries, in which technical progress has played the most important role, accounting for between 45 to 70 percent of their economic growth.

An international comparison of the productive efficiencies of the Group-of-Five countries and the Newly Industrialized Countries indicates that the technologies of the two groups of countries are not converging, in the sense of producing increasingly similar quantities of measured real outputs given the same quantities of measured inputs. It is conjectured that in order for the Newly Industrialized Countries to catch up with the Group-of-Five countries in terms of productive efficiency, a great deal more investment in Research and Development is needed.

In this paper Mr. Kim and Professor Lau used an aggregate meta-production function to study the source of economic growth of the four Newly Industrialized Countries and compared them to that of five highly industrialized countries. The economic growth rates in these countries were decomposed and attributed to three factors: growth in capital, growth in labor and technical progress. The paper consisted of the three parts: first was the theoretical framework of meta production functions, second was the description of handling data, and the third part was the empirical work and results.

The following sections are included:

• Economies of the Member Countries
  • Indonesia
  • Malaysia
  • The Philippines
  • Singapore
  • Brunei

• Asean Countries in General

• Readiness of the Asean Countries

• Possibility of Drawbacks in Cooperation

• Results from Cooperation

The following sections are included:

• The Economies in Transition of Southeast Asia and China: New Frontiers on the Pacific Rim
  • Introduction
  • Socio-economic indicators and recent economic developments
  • Cambodia, Laos PDR, Vietnam and China: Towards new economic frontiers on the Pacific Rim

• Special Problems of the Pacific Islands Countries
  • General characteristics
  • Development challenges

The following sections are included:

• Today's Trade Problems in East Asia

• The Impact of the Uruguay Round

• The –1992– Process

• The Contribution of General Equilibrium Models to the Understanding of those Events

• PCMMs and ICMMs, A Comparison of the Approaches

• The Properties of ICMMs

• The Three Models Invoked for Study of the Impact of Trade Policy and of the “1992” Process on East Asia

• PCMM Estimates of the Impact of Full Agricultural Trade Liberalization for Agriculture

• PCMM Estimates of the Impact of Trade Liberalization in the Textiles and Clothing Industry

• Impact of the “1992” Process

• References

The following sections are included:

• Introduction

• Demographic Features of Two Societies
  • Dependency ratio
  • Families and individuals

• Demography and Savings
  • A theoretical basis: A simple case
  • The Japanese case
    • Cross section and Japanese family composition
    • Young workers
    • Older persons
    • Middle age families
    • Aggregation
  • Case of the U.S.: Some preliminary observations

• References

This is a highly interesting paper on a very important subject, i.e., it endeavors to explore the perennial mystery of the high Japanese saving rate, as compared to the US saving rate. What distinguishes it from other analyses on this subject, which has persistently puzzled scholars and policy makers, is that it is carried out at the micro level, linking demographic phenomena and saving behavior. Professor Ando digs below the surface of the Modigliani life cycle analysis to trace the impact of a complex set of cultural and institutional factors on the changing composition and behavior of families over their life cycle, for an explanation of the particular savings patterns we observe. This constitutes an unusually rich analysis and the author is a master craftsman with strong credentials in this particular field of endeavor…

The following sections are included:

• Introduction

• Policy Changes: As a Prima Facie Factor for Economic Contacts

• Economic Relations Between China and Taiwan — Recent Developments

• China's Investments in Hong Kong

• Taiwan's Investments in Hong Kong

• Taiwanese Investments in Mainland China

• Economic Implications for Hong Kong and Taiwanese Economies

• References

• Appendix

The following sections are included:

• Deepening Economic Interrelationships in the Pacific Economies

• Heterogeneity and Geographical Vastness of the Pacific Basin

• Burgeoning Sub-Regional Economic Integration

This comment supplements the paper by representing the basic economic factors concerning regional economic integration. The effects of integration on welfare are examined from the points of view of freer commodity trade and of freer capital movements between countries.

The following sections are included:

• Introduction

• The Method of Estimation and the Data Used

• Estimated Results — Total Factor Productivity

• Estimated Results — Price Elasticities of Factor Demands

• Concluding Remarks

• Acknowledgment

• References

• Appendix A

• Appendix B

• Appendix C

Mr. Chairman, distinguished guests, ladies and gentlemen:

It is a great honor and pleasure for me to be invited to discuss the paper by Professors Saito and Tokutsu. First of all, I must say that I enjoyed reading the paper very much. This paper is at least the authors' third study that applies a four-factor production function to estimate the technical change rate and the rate of factor substitution among the economies of both developed and developing countries. This time Taiwan was added to their studies. It is certainly a worthwhile attempt, which deserves our attention and appreciation. I would now like to make some general comments, then raise some suggestions and questions…

The following sections are included:

• Introduction

• Overview on Production of Primary Commodities
  • Mineral Commodities
    • Energy resources
    • Ferrous metal commodities
    • Nonferrous metal commodities
    • Nonmetallic minerals
  • Agricultural commodities
    • Grains
    • Livestock and poultry
    • Oilseeds
    • Fibers
    • Natural rubber
    • Prices and stocks
  • Fishery products
  • Forest products

• Trade of Primary Products
  • Trade of mineral commodities
    • Energy resources
    • Ferrous mineral commodities
    • Nonferrous mineral commodities
    • Nonmetallic minerals
  • Trade of agricultural commodities
    • Grains
    • Meat
    • Oilseeds
    • Natural rubber
  • Trade of fishery products
  • Trade of forest products
    • Lumber
    • Logs

• Trending and Projecting Methods
  • Trending methods
    • IRPRI equations
    • USDA equations
    • Pacific basin trends
  • Projecting models
    • IRPRI models
    • USDA model
    • The model of the Pacific Basin

• Concluding Remarks

• Acknowledgment

• Notes

• References

The following sections are included:

• What Model Next?
  • Fast integrating “natural” growth strategy
  • Government-led growth strategy
  • Interventionist, meddled market, without clear separation of roles of state and private enterprise

• Relations with the West and the East

• Costs or Benefits
  • How much does all this transformation cost us in cash on a net basis?
  • How much is our possible gain in new export markets?

The following sections are included:

• Cold War Structure Change and Market Economy Victory in Asia
  • Three types of systems after the war
  • Recent moves to introduce market economy in socialist countries
  • Economic development and political systems

• Future of Asian Economies
  • Spread of growth
  • Expansion of trade
  • Investment means more within the region

• America and Asia

• Japan in Asia
  • Japan will maintain its high growth
  • Japan's large current balance surplus will continue, and investment and government assistance will increase
  • Japan's dependence on trade in Asia will increase

• Asia in the Multipolar World

I am happy to have this opportunity to comment on the excellent paper by Prof. Kanamori: The relatedness of political and economic changes in Asia over the post-war period…

The following sections are included:

• Standard Theoretical Approach

• U.S. and Japan
  • Long-run expected dividend growth
    • Direct effect
    • Indirect effect
  • Country-specific factors

• The Four Pacific NICs
  • Common worldwide influences
  • Country-specific influences

• Conclusion

• Appendix: Country Results

The following sections are included:

• Introduction

• Economic and Financial Situation of the Pacific Basin Countries

• The Financial Market Reform Process in the Pacific Basin Region: Background, Current Status and Problems Encountered

• Experiences and Challenges of Financial Reform in the Pacific Basin Region as a Whole

• Conclusion

• References

I am deeply honored to be invited to comment on Governor Shieh's very comprehensive and stimulating paper on “Financial Markets in the Pacific Basin: An Inside View.” The countries in the Pacific Rim are classified into three groups. The paper discusses chronologically in detail the background, current status, problems encountered, and major financial reforms carried out in these countries. The paper also discusses the controversial issues of the appropriate pace and sequence in the process of liberalization, operational problems concerned with universal banking, and problems related to deregulation and supervision. I am sure that the readers can learn a great deal from the paper…