Trends in trade and investment: global outlook and implications for ASEAN countries

Abstract

The Asian "economic miracle" is by now widely recognized, if not yet completely understood.¹ Since 1965, East Asia has grown much faster than all other regions of the world. This success is due mostly to the performance of Hong Kong, Japan, Korea, Taiwan and four ASEAN economies -- Indonesia, Malaysia, Singapore and Thailand. As a result, the center of gravity of the world economy has shifted significantly towards Asia. The growth of these economies has been closely linked to evolving patterns of global trade and investment, with causality working in both directions -- from growth to trade and investment, and vice versa. Opportunities for world trade, and domestic policies to take advantage of them have been a major factor in the success of these economies. At the same time, the changing balance of economic power has lead to significant changes in patterns of world trade and investment. 11 One of the most interesting things about the East Asian miracle has been the ease with which these economies have adapted to change. Production patterns, trade and investment have evolved in a highly complementary manner as these economies have passed, very rapidly, through various stages of industrial development. The widely used image of the "flying geese" captures the process whereby the countries, led first by Japan, were followed by the four Asian NIES, and now by the second tier NIES of ASEAN.2 An important question for ASEAN is whether this flock will continue in its orderly pattern, and what policy measures will be required to ensure that ASEA maintains its position as the group continues to grow. Although this question is broader than the scope of our paper, it is really what lies behind it.