Emerging States at Crossroads (Emerging-Economy State and International Policy Studies)

This book is open access under a CC BY-NC-ND license. This volume analyzes the economic, social, and political challenges that emerging states confront today. Notwithstanding the growing importance of the 'emerging states' in global affairs and governance, many problems requiring immediate solutions have emerged at home largely as a consequence of the rapid economic development and associated sociopolitical changes. The middle-income trap is a major economic challenge faced by emerging states. This volume regards interest coordination for technological upgrading as crucial to avoid the trap and examines how various emerging states are grappling with this challenge by fostering public-private cooperation, voluntary associations of market players, and/or social networks. Social disparity is another serious problem. It is deeply rooted in history in the emerging states such as South Africa and many Latin American countries. However, income distribution is recently deteriorating even in East Asia that was once praised for its high economic growth with equity. Increasing pressure for political opening is another challenge for emerging states. This volume argues that the economic, social, and political problems are interwoven in the sense that the emerging states need to build political consensus in order to tackle the economic and social difficulties. Democratic institutions have not always been successful in this respect. Keiichi Tsunekawa is Visiting Professor of the National Graduate Institute for Policy Studies (GRIPS) and Yasuyuki Todo is Professor of Economics, Waseda University Preface 6 Contents 7 Contributors 9 Abbreviations 11 1 Emerging Challenges for Emerging States 14 1.1 Middle-Income Trap? 15 1.1.1 Early Debate Concerning Development and Underdevelopment 15 1.1.2 Globalization and Issues Concerning Emerging States 16 1.1.3 How to Cope with the Middle-Income Trap? 20 1.2 How to Cope with Social Disparity 23 1.2.1 Early Views on Social Disparity in the Developing Countries 23 1.2.2 Financial Crisis and Reformulation of Welfare Mechanisms 25 1.2.3 Sustainability of the New Social Welfare Schemes 27 1.3 Pressures for Political Opening 28 1.3.1 Early Debate Concerning Democratization in the Developing Countries 28 1.3.2 The Third Wave and Its Demise 29 1.3.3 Toward a Greater Political Uncertainty 30 1.4 Can Politics Manage Economic and Social Difficulties? 32 References 34 Middle-Income Trap and Beyond 37 2 Responses to the Middle-Income Trap in China, Malaysia, and Thailand 38 2.1 Rethinking the Middle-Income Trap 38 2.1.1 Studies on the “Middle-Income Trap” 38 2.1.2 Several Questions About the Discussion of the Middle-Income Trap 40 2.1.3 From “the East Asian Miracle” to “Innovative East Asia” 40 2.2 Higher Wages and Lower Labor Productivity 41 2.2.1 End of the Low-Cost Advantage Era 41 2.2.2 Labor Productivity in East Asia 42 2.3 Innovation and R&D in East Asia 44 2.3.1 R&D Activities in Asian NIES, ASEAN Countries, and China 44 2.3.2 Strategies to Avoid the Middle-Income Trap 46 2.4 Cases of China, Malaysia, and Thailand 47 2.4.1 China: ADB Policy Options 47 2.4.2 Malaysia: From “National Vision Plan” to a “New Economic Model” 49 2.4.3 Thailand: Pursuing Thai-ness and Next-Generation Industries 51 2.5 The Role of the State in New Challenges 54 References 56 3 The Middle-Income Trap in the ASEAN-4 Countries from the Trade Structure Viewpoint 59 3.1 Middle-Income Trap and the ASEAN-4 60 3.1.1 Arguments of MIT for East Asia 60 3.1.2 How Slow Is the Rate of the Trap Threshold? 61 3.1.3 Historical Growth of the ASEAN-4 61 3.2 The Flying Geese Pattern from the NXR 64 3.2.1 Explanation of the FGP 64 3.2.2 FGP in Trade Structure 65 3.3 Export Structure of the ASEAN-4 69 3.3.1 Malaysia 69 3.3.2 Thailand 71 3.3.3 Indonesia 71 3.3.4 The Philippines 71 3.4 Why Has Industrial Upgrading in the ASEAN-4 Stalled? 72 3.4.1 Resource Curse Hypothesis 72 3.4.2 Lack of Homegrown MNCs in the Manufacturing Sector 74 3.4.3 Two Alternative Approaches to Industrialization 76 3.5 Conclusion 77 References 78 4 Emerging States in Latin America: How and Why They Differ from Their Asian Counterparts 80 4.1 Different Economic Performance 81 4.2 First-Order Causes: Competitiveness of Manufacturing Industries 81 4.3 Second-Order Causes: Political Economy 88 4.3.1 R&D and Education 89 4.3.2 Fixed Capital Formation 90 4.3.3 Capacity to Coordinate 91 4.3.4 Intraregional Transaction 95 4.3.5 Effectiveness of Public Administration 96 4.4 Root Causes: Historical Legacies 98 4.4.1 High Inequality and Weak Trust 99 4.4.2 Weak Intraregional Business Networks 100 4.4.3 Public Administration of Average Quality 101 4.4.4 High Consumption, Low Investment 102 4.5 Conclusion 103 References 103 5 Economic and Political Networks and Firm Openness: Evidence from Indonesia 106 5.1 Hypotheses and Estimation Methods 109 5.1.1 Benefits of Globalization 109 5.1.2 Linkages Between Protectionism, Business and Political Networks, and Trust 109 5.1.3 Estimation Method 110 5.2 Data 111 5.2.1 Survey 111 5.2.2 Variables 112 5.2.3 Summary Statistics 114 5.3 Estimation Results 115 5.3.1 Benchmark Results 115 5.3.2 Alternative Measure of Political Ties 120 5.3.3 Discussion 120 5.4 Conclusion 123 References 124 6 Industrial Technology Upgrading and Innovation Policies: A Comparison of Taiwan and Thailand 127 6.1 Evolution of Manufacturing Industries in Taiwan and Thailand 128 6.1.1 Taiwan 128 6.1.2 Thailand 132 6.2 A Comparison of Taiwanese and Thai Policy Instruments Supporting Technology Upgrading and Innovation 135 6.2.1 Tax Incentives 135 6.2.2 Grants 137 6.2.3 Loans 139 6.2.4 Equity Financing 140 6.2.5 Capital Market Funding 142 6.3 Institutions Affecting Policy Formulation and Implementation 144 6.3.1 Unity and Capability of Government Bureaucracy 144 6.3.2 Perception of the Role of Government in Strengthening Private Firms 146 6.3.3 Corruption and Attitudes Toward Corruption 146 6.3.4 Laws, Regulations and Norms 147 6.3.5 Entrepreneurship 147 6.3.6 Trust 148 6.4 Conclusion 148 References 149 7 Changing Resource-Based Manufacturing Industry: The Case of the Rubber Industry in Malaysia and Thailand 152 7.1 Outlook of the Rubber Industry in Malaysia and Thailand 154 7.2 Development of the Rubber Industry in Malaysia 155 7.2.1 Upstream Segment 156 7.2.2 Midstream Segment 158 7.2.3 Downstream Segment 159 7.3 The Development of the Rubber Industry in Thailand 161 7.3.1 Upstream Segment 161 7.3.2 Midstream Segment 163 7.3.3 Downstream Segment 163 7.4 Discussion and Implications 165 References 167 8 Marketing Risks and Standards Compliance: Challenges in Accessing the Global Market for High-Value Agricultural and Aquacultural Industries 170 8.1 Marketing Risks: Pineapple Exporting Industry in Ghana and Thailand 171 8.1.1 Pineapple Industry in Ghana 172 8.1.2 Pineapple Industry in Thailand 177 8.2 Standards Compliance: Export Shrimp Aquaculture in Vietnam and Thailand 179 8.2.1 Shrimp Industry in Vietnam 180 8.2.2 Shrimp Industry in Thailand 182 8.3 Conclusion 188 References 189 Social and Political Dimensions 192 9 How Nations Resurge: Overcoming Historical Inequality in South Africa 193 9.1 South Africa as an African Middle-Income State 195 9.2 The Land Question and the History of Inequality 197 9.3 The Rise of the “Black Middle Class” 202 9.4 Reform Deferred 206 9.5 Conclusion: Addressing Both Pressing Issues and Root Causes 210 References 211 10 Education, Development, and Politics in South Korea 215 10.1 The Park Chung-Hee Framework for Human-Capital Development 218 10.1.1 Initial Stage: Expansion of Middle-School Education 218 10.1.2 Heavy and Chemical Industry: Expansion of Upper Secondary Education 220 10.1.3 Higher-Education Zeal and the Demand for Technical Experts in the Late 1970s 221 10.2 Science and Technology Development and Human Capital in Higher Education 222 10.2.1 Advancement to Science and Technology Development 222 10.2.2 Corporations’ Demands and Students’ Responses in the 1980s 223 10.3 Democratization and Bloated Higher Education 224 10.3.1 Transition to Democracy and Economic Liberalization 224 10.3.2 Transformation of University Policy and Swelling Higher-Education Enrollment 224 10.4 Enterprises and University Students in the Globalized Economy 226 10.4.1 Changes in the Economic Structure After the Asian Financial Crisis 226 10.4.2 The Dual Labor Markets and the Oversupply of University Graduates 228 10.5 The Government’s Limited Response to Imbalanced Human Resources 230 10.5.1 Successive Governments’ Responses to Economic Disparity 230 10.5.2 Development and the Institutionalization of the Political System 231 10.6 Conclusion 232 References 234 11 Politics of Inequality in Indonesia: Does Democracy Matter? 236 11.1 Poverty and Inequality in Indonesia 237 11.2 Social Policies in Indonesia 241 11.3 Budget Allocations to Social Sectors 244 11.4 Budgetary Politics Under Indonesia’s Democracy 248 11.5 Politics of Fuel-Subsidy Cuts Under the Yudhoyono Presidency 252 11.6 The Rise of Populist President and Redistribution 255 11.7 Conclusion 256 References 256 12 Civil-Military Relations in an Emerging State: A Perspective from Indonesia’s Democratic Consolidation 259 12.1 Military Politics Under Democratic Consolidation 260 12.1.1 Yudhoyono’s Military Management 261 12.1.2 Preservation of the TNI’s Vested Interests 263 12.1.3 MOOTW and the War on Terrorism 264 12.2 Civil-Military Relations Under the Jokowi Presidency 268 12.2.1 Jokowi’s Military 268 12.2.2 Politics of Gatot 269 12.3 Conclusion 272 References 273 13 Democratization and the Military in Thailand 275 13.1 Bhumibol Regime at Bay 276 13.1.1 Birth of a Regime 276 13.1.2 Decline of the Regime 277 13.2 The 2006 Coup and the Rise of the “Tigers of the East” 278 13.2.1 Thai Military in Politics 278 13.3 A Coup on September 19, 2006 280 13.4 Rise of the 2nd Infantry Division and the 2014 Coup 281 13.4.1 Rise of the 2nd Infantry Division 281 13.4.2 The 2014 Coup and “Transition” 283 13.5 Political Prospects 285 13.5.1 Assertive Monarch 285 13.5.2 Fighting Against Democracy for the Monarchy 286 References 287 Index 290 Front Matter ....Pages i-xiii Emerging Challenges for Emerging States (Keiichi Tsunekawa, Yasuyuki Todo)....Pages 1-23 Front Matter ....Pages 25-25 Responses to the Middle-Income Trap in China, Malaysia, and Thailand (Akira Suehiro)....Pages 27-47 The Middle-Income Trap in the ASEAN-4 Countries from the Trade Structure Viewpoint (Satoru Kumagai)....Pages 49-69 Emerging States in Latin America: How and Why They Differ from Their Asian Counterparts (Keiichi Tsunekawa)....Pages 71-96 Economic and Political Networks and Firm Openness: Evidence from Indonesia (Yasuyuki Todo, Daichi Shimamoto)....Pages 97-117 Industrial Technology Upgrading and Innovation Policies: A Comparison of Taiwan and Thailand (Patarapong Intarakumnerd, Meng-Chun Liu)....Pages 119-143 Changing Resource-Based Manufacturing Industry: The Case of the Rubber Industry in Malaysia and Thailand (Motoko Kawano)....Pages 145-162 Marketing Risks and Standards Compliance: Challenges in Accessing the Global Market for High-Value Agricultural and Aquacultural Industries (Aya Suzuki, Vu Hoang Nam)....Pages 163-184 Front Matter ....Pages 185-185 How Nations Resurge: Overcoming Historical Inequality in South Africa (Yoichi Mine)....Pages 187-208 Education, Development, and Politics in South Korea (Noriyo Isozaki)....Pages 209-229 Politics of Inequality in Indonesia: Does Democracy Matter? (Koichi Kawamura)....Pages 231-253 Civil-Military Relations in an Emerging State: A Perspective from Indonesia’s Democratic Consolidation (Jun Honna)....Pages 255-270 Democratization and the Military in Thailand (Yoshifumi Tamada)....Pages 271-285 Back Matter ....Pages 287-293