5 - International Trade and the Natural Resource ‘Curse’ in Southeast Asia: Does China's Growth Threaten Regional Development?

Summary

INTRODUCTION

The ‘natural resource curse’ is one of the more colourful phrases to be coined about a major subject in development economics, alongside the ill-fated ‘East Asian miracle’. The ‘curse’ is that of slow growth due to a failure to sustain efficient factor use, especially in industrial sectors where the potential for productivity gain is highest. According to Sachs and Warner (2001: 828):

there is virtually no overlap between the set of countries with large natural resource

endowments – and the set of countries that have high levels of GDP … resource

intensity tends to correlate with slow economic growth.

Predictions derived from these apparent empirical regularities raise two puzzles for students of Southeast Asian economic development. First, are resource-abundant Southeast Asian economies that have experienced sustained high rates of economic growth different in some way from the group of countries from whose data the Sachs–Warner statement is derived? Second, is there anything in current market and policy trends that might predispose Southeast Asia's resource-abundant economies to lower growth in the future?

Two concurrent phenomena challenge the continued economic success of Southeast Asia's resource-rich economies. First, the growth and structural transformation of China, along with its increasing integration in world markets through actions such as accession to the World Trade Organization (WTO), abolition of the Multi-fibre Arrangement (MFA) garment export quotas, and reduced trade barriers with Japan, East Asia and ASEAN, is expected to have significant effects on the structure of Southeast Asian production and trade.