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Economic Progress in Southeast Asia

Published online by Cambridge University Press:  23 March 2011

Douglas S. Paauw
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Since the end of World War II, Southeast Asian economies have grown at widely diverging rates. Consistent and relatively rapid growth has occurred only in the Philippines; in that country rehabilitation from World War II was completed relatively early and the economy has gone on to provide gains in per capita real income, though at a falling rate. In Thailand and Malaya, rehabilitation and growth have occurred, but progress has been unsteady. In Burma, Indonesia, and the Indo-Chinese countries of Laos, Cambodia, and Viet Nam progress has taken die form primarily of restoring prewar levels of per capita production; it is unlikely that gains above prewar levels have been achieved.

Type
Research Article
Information
The Journal of Asian Studies , Volume 23 , Issue 1 , November 1963 , pp. 69 - 92
Copyright
Copyright © The Association for Asian Studies, Inc. 1963

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References

1 Deane, Phyllis, “The Long Term Trends in World Economic Growth,” The Malayan Economic Review, VI (10 1961)Google Scholar, Table I, 17.

2 United Nations, Patterns of Industrial Growth, 1938–1958 (New York, 1960), Table 12, p. 116 Google Scholar. All data show value added in 1948 U. S. dollars.

3 Patterns. Calculated from Table 15, p. 126.Google Scholar

4 ECAFE, “Foreign Trade of ECAFE Primary Exporting Countries,” Economic Survey of Asia and the Far East, 1959, p. 55 and pp. 58–65.Google Scholar

5 Higgins, Benjamin, Economie Development: Problems, Principles and Policies (New York, 1959), pp. 648–652.Google Scholar

6 See Appendix I.

7 International Bank for Reconstruction and Development, The Economic Development of Malaya (Baltimore, 1955), Chapter 2, especially pp. 20–22.Google Scholar

8 Goodstein, Marvin E., The Pace and Pattern of Philippine Economic Growth, 1938, 1948 and 1956 (Ithaca, 1962), Table I-1, p. 8.Google Scholar

9 Data are taken from Ministry of National Planning and Religious Affairs, The National income of Burma (Rangoon, 08, 1954), p. 16.Google Scholar

10 U Nu attributes this record to “insurrection.” See “Premier Reports to the People,” Appendix I in Walinsky, Louis J., Economic Development in Burma, 1951–1960 (New York, 1962), p. 613.Google Scholar

11 Official Burmese Statistics show per capita real income in 1959–1960 16 per cent below the immediate prewar level.

12 1951–1953 only, Muljatno's data.

13 Federation of Malaya and Singapore.

14 Federation of Malaya only.

15 Population growth rates are based on terminal census data for the Philippines (1948 and 1960) and Thailand (1947 and 1960); on United Nations estimates and the 1961 census for Indonesia and on United Nations and ECAFE estimates for Burma and Malaya. A comparison of Burmese and United Nations population estimates for Burma is given in Wickmann, Arthur A., Review of Economics and Statistics, XLIV (08 1962), 327.Google Scholar

16 Kuznets, Simon, “Quantitative Aspects of the Growth of Nations, Part V, Capital Formation Proportions: International Comparisons for Recent Years,” Economic Development and Cultural Change, VIII, Part II, (07 1960), 86.Google Scholar

17 United Nations, Yearbook of Nation Accounts Statistics 1960 (New York, 1961), pp. 265–269.Google Scholar

18 ECAFE, Economic Survey of Asia and the Far East, 1961 (Bangkok, 1962)Google Scholar, Part I.

19 ECAFE, Economic Survey, p. 12.Google Scholar

20 South Viet Nam also appears to have been slow to restore output to prewar levels although real product estimates are not available to support this presumption. Evidence based on the behavior of other economic indicators may be found in Ton That Thien, “Economic Development in South Vietnam, 1954–1960,” The Malayan Economic Review, VI (04 1961), 55–80 Google Scholar; see also McCall, Davy H., The Effects of Independence on the Economy of Vietnam, unpublished Ph.D. Thesis, Harvard University, 1961 Google Scholar, passim especially p. 119 and pp. 277–281.

21 All averages are geometric means of annual rates of change in real product from the sources given in Appendix II.

22 Gross fixed capital formation rates show the ratio of fixed capital formation to gross domestic product; depreciation is not deducted from the total and changes in inventories are excluded. Gross capital formation rates are used since Southeast Asian countries do not employ uniform and reliable methods of estimating capital consumption allowances to obtain net capital formation.

23 The Economic Commission for Asia and the Far East suggests that the Burmese fixed capital formation rate may in fact have been in the neighborhood of n per cent while “a more valid appraisal for the ‘Philippine’ rate would put it over 10 per cent.” Economic Survey of Asta and the Far East, 1961, p. 24 Google Scholar. Both Filipino and foreign observers concur with the ECAFE viewpoint on the Philippine rate. Reuben F. Trinidad, after studying Filipino capital formation for 1956–57, concludes that official estimates are 40 per cent too low. Trinidad, Reuben F., “The Measurement of Gross Domestic Investment in Underdeveloped Countries with Special Reference to the Philippines,” Economic Research Journal (Manila), VII (06 1960), 37–44 Google Scholar. For foreign evaluations see Higgins, Benjamin, Economic Development: Principles, Problems and Policies (New York, 1959), p. 650 Google Scholar, and “Economic Growth in the Philippines: A Preliminary Report prepared by the Staff of die IBRD,” 01, 1962 Google Scholar, published as Appendix II to the Five-Year Integrated Socio-Economic Program of the Philippines, p. 9.Google Scholar

24 Averages computed from annual data in “Saving in the Philippine Economy,” Economic Bulletin for Asia ana the Far East, XIII (09 1962)Google Scholar, Table 17, 21.

25 Imported capital goods and hence the estimate for Indonesian capital formation are valued at the overvalued official rupiah rate, while gross product estimates reflect higher rupiah prices for imported goods generally and continuous price inflation for the domestic component.

26 This would roughly place Southeast Asian gross fixed capital formation rates in the range found by Kuznets for underdeveloped countries in comparable per capita income groups. Kuznets' data covering the years 1951–57 yield an average gross fixed capital formation rate of 13.1 for countries in his groups VI and VII: Kuznets, Simon, “Quantitative Aspects of the Economic Growth of Nations, Part V, Capital Formation Proportions: International Comparisons for Recent Years,” Economic Development and Cultural Change, VIII, Part II, (07 1960)Google Scholar, Appendix, Table I, 77–79. Although Kuznets' data do not correct for biases, it is likely that his sample is large enough to reduce the effect of opposite biases. For example, the arithmetic average of the uncorrected data for Southeast Asian countries would yield an average gross fixed capital formation rate of 11 per cent.

27 The following values for crude incremental capital-output ratios are given for Southeast Asian countries, 1950–59: Burma, 3.4; Indonesia, 1.7; Philippines, 1.2; Thailand, 2.6. ECAFE, Economic Survey of Asia and the Far East, 1961, Table 1–14, p. 24.Google Scholar

28 ECAFE, Economic Survey of Asia and the Far East, 1961, p. 23 Google Scholar. As pointed out in this paragraph, there is a fairly high probability that trends are more accurately reflected in capital formation estimates than in the ratio of capital formation to gross product.

29 Walinsky, Louis J., Economic Development in Burma, 1951–1960 (New York, 1962)Google Scholar, passim.

30 Walinsky, , pp. 299–317, 336–349, 380–381.Google Scholar

31 Golay, Frank H., The Philippines: Public Policy and National Economic Development (Ithaca, 1961), pp. 242–265.Google Scholar

32 Golay, , pp. 243–245.Google Scholar

33 Lovasy, Gertrud, “Inflation and Exports in Primary Producing Countries,” International Monetary Fund Staff Papers, IX (03 1962), 38.Google Scholar

34 Average percentages of foreign saving to gross national product for the decade were: Burma, 0.1; Indonesia, 0.4; Philippines, 1.6; Thailand, 1.8; Federation of Malaya (1955–59), —10.2. Significant changes were those in Burma from —7.0 in the early 1950's to 4.0 in 1957–59, m the Philippines from 0.7 to 1.9 and in Thailand from 2.1 to 2.9. ECAFE, Economic Survey of Asia and the Far East, 1961, pp. 43–48.Google Scholar

35 “Filipinos have been vocal in deploring their colonial-type specialization in primary production for exports. On the other hand, recent years have brought home the fact that lack of foreign exchange is the principal restraint on economic growth. It is not unlikely that the groping for a foreign investment policy will ultimately lead to more, rather than less, functional specialization of foreign investment in primary production for export. Such a policy would recognize the relationship between foreign investment and die strong demand conditions of industrial countries. It would be ironical if the much depreciated colonial specialization should emerge as conscious Philippine policy after a brief period of independence.” Golay, , The Philippines, pp. 264–265.Google Scholar

36 Ratios of exports to total product in 1938 were: Burma, 33; Indochina, 29; Indonesia, 24; Philippines, 20; and Thailand, 19. See Table VI.

37 Maizels, A., “The Effects of Industrialization on Exports of Primary Producing Countries,” Kyklos, XIV (Fasc, 1, 1961), 18–46.CrossRefGoogle Scholar

38 It should be noted that the Malayan data in Table VI refer to Singapore and the Federation for the period 1947–49 and to the Federation only for 1957–59. The high Malayan ratio is partly explained by the large entrepôt component in Malayan exports, approximately one-half of the total during the period 1949–53. This estimate is based on data from International Bank for Reconstruction and Development, The Economic Development of Malaya, pp. 676 and 690.Google Scholar

39 The prewar Philippine product estimate has serious downward biases compared to later estimates, thus overstating the prewar export ratio. The prewar product bias is discussed in ECAFE, “Analysis of National Income in Selected Asian Countries,” Economic Bulletin for Asia and the Far East, III (01–06 1952), 16.Google Scholar

40 This result assumes the more realistic export rate of 3 pesos to U. S. $1.00 (rather than 2 pesos to U. S. $1.00) for Philippines, and the effective export rate of 30.4 rupiah to U. S. $1.00 (rather than the official 11.4 rupiah to U. S. $1.00) for Indonesia.

41 There is evidence that foreign trade ratios are higher in dependent than sovereign countries. See Deutsch, Karl W. et al. , “Population, Sovereignty and the Share of Foreign Trade,” Economic Development and Cultural Change, X (07 1962), 363.Google Scholar

42 Between 1950–52 and 1958–60 the volume of exports increased 10 per cent in Burma, 9 per cent in Malaya, 3 per cent in Indonesia, and 4 per cent in Thailand, compared to 49 per cent in the Philippines. See Table VII for basic data.

43 Conditions affecting petroleum exports are predominantly external to the Indonesian economy; foreign factors of production continue to be dominant in this unique sector of the economy and under a combination of high profit rates, strong market demand, and partial exemption from Indonesian foreign exchange controls, expansion of foreign investment, output, and exports have continued. Behavior of non-petroleum export volumes, therefore, appears to be more indicative of the internal dynamics affecting growth of real product. The 1957–59 unweighted average of non-petroleum exports was 45 per cent of the 1938 volume, while the average for the decade 1950–59 was 52 per cent. Percentages are computed from export volume data published in annual editions of the Report of the Bank of Indonesia.

44 Indonesian export volume indexes published by the International Monetary Fund include only four major products which have contributed a growing share of total exports. Among these products, petroleum exports have grown most rapidly and these are relatively unaffected by internal economic conditions (see above footnote).

45 Chenery, Hollis B., “Patterns of Industrial Growth,” American Economic Review, I (09 1960), 635.Google Scholar

46 Kuznets, Simon, “Quantitative Aspects of the Growth of Nations, Part V,” Economic Development and Cultural Change, VIII, Part II (07 1960), 8.Google Scholar

47 Kuznets, , Table 2, p. 9.Google Scholar

48 Kuznets, Simon, “Quantitative Aspects of the Economic Growth of Nations: II. Industrial Distribution of National Product and Labor Force,” Economic Development and Cultural Change, Supplement to Vol. V (07 1957), 54.CrossRefGoogle Scholar

49 Paauw, Douglas S., Financing Economic Development: The Indonesian Case (Glencoe, Illinois: 1960), p. 209.Google Scholar

50 All data are taken from Goodstein, Marvin E., The Pace and Patterns of Philippine Economic Growth, 1938, 1948, 1956 (Ithaca, 1962)Google Scholar, especially Table I–1, pp. 8–22 and Table I–2, p. 26. The results are approximately the same in Goodstein's calculations using 1938, 1948, and 1956 prices alternatively.

51 Relative shares reported by Goodstein were as follows: Agriculture, 1938: 29.3%, 1956: 30.5%; Manufacturing, 1938: 16.7%, 1956: 17.4%; Services, 1938: 15.6%, 1956: 17.5%; Commerce, 1938: 15.5%, 1956: 15.5%. The share of commerce was assumed constant because “lack of data permits no alternative.” Goodstein believes that it probably declined in fact. Using Kuznets' M+ sector, a calculation from Goodstein's results suggest a slight decline from 31.1 per cent in 1938 to 29.3 per cent in 1956. Goodstein, Table I–2, p. 26.

52 Data for Malaya are available for the latter half of the decade only, and that country is excluded from this comparison.

53 The term “industry” is used to denote roughly the capital-intensive sector as a whole. It is used here in a sense close to that used by Chenery, op. cit., and Kuznets' concept of the M+ sector. In the standard United Nations account, industrial origin of net product (which is used here) industry includes mining, manufacturing, construction, electricity, gas and water, and transportation, storage, and communication.

54 A comparison of sector shares relative to total product in constant and current prices for the Philippines and Thailand suggests that the current price series tends to show greater changes in sector shares than the constant price series. This result raises die danger that measurement of structural change from sector contributions to total product in current prices may overstate the growth of manufacturing and industry. Relative price changes occur as development proceeds and where tariff and exchange policies are tightened to protect domestic industry, prices of manufactures and related outputs tend to rise relative to agricultural prices. In general, this appears to have occurred during the 1950's in all Southeast Asian countries. Hence, it is likely that die data for all Southeast Asian countries are subject to the same bias, and comparisons in constant prices would probably not show significant differences by country, in the relative rates of changes in sector shares from those exhibited in Figure II.

55 Indonesian domestic product series show a slight tendency toward a decline of agriculture's share and rising industrial shares during the mid-1950's. Reversal of these trends during the last few years of the decade, suggested by domestic product estimates, might be explained by a series of external shocks to the economy after 1957.

56 In Burma, where public investment is estimated to have represented 47 per cent of total fixed investment during die late 1950's (compared to 28 per cent in the Philippines and 24 per cent in Thailand), the capital-intensive sector received much higher allocation percentages than in other Southeast Asian countries. ECAFE, Economic Survey of Asia and the Far East, 1961, p. 27 and p. 36 Google Scholar. The ECAFE Survey criticizes this emphasis in Burma: “In the eight-year (1953–1960) plan of Burma, for instance, transport, communications and power were to have absorbed 43 per cent of total government expenditures or 77 per cent of public investment. This has been considered excessive in an economy which has barely recovered prewar levels of production especially in agriculture, and where more attention needs to be given to augmenting direct production.” p. 27.

57 Walinsky, p. 44 and p. 45, estimates the prewar contribution of mining at 5.5 per cent of total product, of manufacturing at 11–12 per cent. During the late 1950's, their combined contribution averaged about 15 per cent of total product, compared to the Walinsky estimate that would result in a combined prewar contribution of about 17 per cent. It should be emphasized, however, that this phenomenon in Burma's case is partly explained by the decline in petroleum mining caused by approaching exhaustion of known oil reserves.

58 Burma is unique among Southeast Asian countries for which data are published in not having restored prewar agricultural output levels by the mid-fifties. In 1954–55, Burma's index of production of all agricultural commodities (on a 1934–38 base equal to 100) was 88, compared to 122 for Indonesia, 131 for Malaya, 137 for the Philippines, and 152 for Thailand. Data are taken from ECAFE, Economic Survey of Asia and the far East, 1955, p. 195 Google Scholar. It should be noted, however, that there is general agreement that the value of agricultural output is underestimated in Burmese national accounts.

59 It is difficult to demonstrate this conclusion statistically because Burmese domestic product accounts by industrial origin lump together manufacturing and other industries with services, and contributions from these sectors have not been separated for the prewar period. Employing the Walinsky estimate of manufacturing's share for the prewar period, however, a comparison between 1939 and the late fifties would show a rise in services from roughly 25 per cent of gross domestic product in 1939 to about 38 per cent, with government services (public administration and defense) growing from 7 to 11 per cent. Sector shares are based on official Burmese domestic product data published in Ministry of National Planning, The National income of Burma, annual editions and the refined breakdown published in the United Nations, Yearbook, of National Accounts Statistics for the postwar period.

60 This point is made in Mehta, Surinder K., “A Comparative Analysis of the Urban Labor Force of Burma and the United States,” Economic Development and Cultural Change, IX (01 1961), 164–179.CrossRefGoogle Scholar

61 This view of the developing and underdeveloped states has been put forth by Minsky, Hyman P. in “Indicators of the Development Status of an Economy,” Economic Development and Cultural Change, VII (01 1959), 151–172.CrossRefGoogle Scholar