This chapter first deals with general issues such as a proper delineation of 1992, a bench-mark definition of “internal market” and the basic principles employed in the 1992 exercise. This prepares the ground for the achievements to date, major issues today, and achievements expected by 1993.

What Is 1992?

The following attempts to pin down how 1992 can be given substance and where the demarcation lines may be drawn. However, this approach should avoid a too rigid and static view as the dynamism in the 1992 process is forceful and has not yet petered out.

Three Meanings of the Common Market

The colloquial English name for the European Community (EC) is the “common market”. Indeed, that is what the Treaty of Rome sets out to construct as one of the two means to achieve the four economic aims as well as the political aim of Article 2. Since the common market is the very core of the EC enterprise, we must assume that Member States, public opinion, and decision-makers have a fairly good notion of what it is they are striving for. Even a cursory inspection shows that this is unfortunately far from being the case.

The common market before the White Paper: The Treaty of Rome does not define the common market. Lawyers have made up for this by employing the operational formula of the four freedoms, the free movement of products, services, labour, and capital. There can be no doubt that the idea of the four freedoms is echoed in the Treaty of Rome to a considerable extent. However, since Europe has mixed economies, with governments regulating some markets while intervening in others, the necessary condition of the four freedoms is not a sufficient one for a common market to come into being. On the sufficient conditions as specified in the Treaty of Rome, reputable lawyers have expressed different views.

Though Malaysia's general election was not due until August 1991, rumours of the impending elections had circulated since 1989. The Malaysian public had expected the elections to be called after the euphoria over the country's medal haul at the Southeast Asia games in mid-1989, and later after the successful hosting of the Commonwealth Heads of Government Meeting in Kuala Lumpur, during which the Prime Minister was given a great deal of exposure in the Malaysian media, receiving the leaders of the Commonwealth and being projected as a leader of world standing. Dr Mahathir himself constantly exhorted his party members and the component parties in the ruling coalition to be ready for the polls. However, 1989 went by without the elections.

Mahathir had not seen 1989 to be opportune, probably due to his assessment that his party might not have got the support that would be needed for a strong showing to take the wind out of the sail of his political rivals. This time around, he had to face an opponent of creditable standing in Tengku Razaleigh Hamzah, an ex-colleague who had challenged him for the presidency of UMNO (United Malays National Organization). The acrimonious struggle for power in UMNO in 1987, from which Mahathir emerged the victor by a very slim majority of 43 votes out of the 1,479 votes cast in the UMNO elections, eventually led to a split in the party. When UMNO was declared an illegal organization under Malaysian law (in a court case mounted to challenge the validity of the 1987 UMNO elections and subsequently deregistered), Mahathir formed a new party, UMNO Baru, as a successor. Razaleigh, who was excluded, accused Mahathir of deliberately killing off the old UMNO out of political expediency to eliminate his rivals in the party. Razaleigh subsequently formed a rival party, Semangat '46 (The Spirit of '46), harking back to the year 1946 when the old UMNO was formed to “protect the survival” of the Malay race in the face of the “threat” arising from the British proposal to liberalize citizenship requirements for the non-Malay communities under the Malayan Union.

Analysing trade in services between ASEAN countries and the Netherlands is affected by a number of shortcomings which impede the compatibility of results with those gained for West Germany and France.

First, there is a problem of disclosure. The Dutch Central Bank when releasing data on bilateral trade flows between ASEAN countries and the Netherlands for the purpose of this study asked for confidentiality. The author has tried to abide by this request by publishing only aggregate information for ASEAN exports and imports in total (Tables A25 and A26) so that the absolute figures for individual ASEAN countries remain anonymous. In addition, the shares of individual service sectors in total service exports and imports of ASEAN countries are displayed (Table A27).

Second, the aggregation level is very high. The Dutch Central Bank keeps records on four service sectors only. Another problem is that, due to the Dutch accounting framework, payments and receipts in the transport sector are sometimes netted so that negative figures for exports can appear. This turned out to be the case mainly with Malaysian exports, with the result that these figures could not be interpreted.

Thirdly, merchandise and service trade had to be compiled from two different sources as the Central Bank released service data only. While this may bias the share of services in total trade and may therefore impede a comparative view on service shares in trade of the three EC members with ASEAN countries, the comparison between ASEAN countries' trade performance in the Dutch market is not affected.

Bearing these qualifications in mind, the following observations can be made.

First, ASEAN countries in total had a deficit in trade with non-factor services with the Netherlands during the late seventies and the eighties while they shared a clear surplus in merchandise trade (Tables A25 and A26). However, the trend clearly points towards reducing the deficit in trade with services as receipts from Dutch residents rose much faster than payments to them.

Since 1969, when the opposition parties won a total of 57 out of the 144 seats to the Parliament, they had never been able to prevent the Barisan from getting a two-third or higher majority. The opposition saw this election as the best opportunity it would have, not only in denying the ruling coalition the two-third majority, but in wresting power from it. In the words of the DAP leader, this was “an unprecedented historic opportunity to effect far-reaching meaningful changes to the political order in the country”. The opposition estimated that a 12 per cent swing away from the Barisan would have the effect of preventing the government from getting the two-third majority and if the swing was to be more substantial, to the amount of 20 per cent, then the opposition coalitions would have been able to get enough seats in Parliament to form a new government. The optimism of the opposition was boosted by the fact that in this election, its votes would not be split as happened in past elections. In the state elections, the opposition felt that its best chances of winning control of the state legislatures were in Penang and the east coast states. Though the opposition as a whole made substantial gains, the results of the elections did not live up to expectations. However, an examination of the parties' performance showed significant differences in their gains and losses.

The DAP : Maintaining Its Ground

In the 1990 election, the DAP fielded fewer candidates than it did in 1986, primarily to give way to its ally, Semangat '46. This was particularly so in areas where the party was weak. Only 57 candidates were put up for the parliamentary election compared with 64 previously. On the whole, the party was able to repeat its good performance of the previous election. In the parliamentary election, it won 20 seats, four less than it did in 1986.

This volume is compiled as a tribute to Professor Shinichi Ichimura who has contributed so much to creating a better understanding of development issues and problems in Asia. As shown by the biographical information on the pages following the preface, his active involvement in joint projects and various institutions has enhanced our knowledge of development issues; but his accomplishments go beyond this. Through his active participation in academics and the development of institutions that are dedicated to studying development issues of the region, Professor Ichimura has also contributed to the welfare and development of young scholars who are interested in Asian economic development. Professor Ichimura's accomplishments are numerous and impressive. It is only fitting, therefore, to dedicate this volume to a man who has contributed so much and who continues to share his -wealth of knowledge and insights.

The articles that are collected in this volume span a wide range of topics. As is befitting for a book dedicated to Professor Ichimura, all of the articles examine and discuss development issues and problems that have faced or are being faced by the countries of East and Southeast Asia. Both of the editors and all of the authors in this book have had the pleasure and honor of working with Professor Ichimura at one time or another; and each of us has gained from Professor Ichimura's knowledge and experience. Our heartfelt appreciation goes out to Shinichi Ichimura for his dedication to the economics and academic profession, and for his many contributions to creating a better understanding of the development issues faced by the countries of the region.

This volume represents the combined efforts and dedication of many persons. We would like to thank Professor Mitsuo Ezaki of Kyoto University for his generous support throughout this project. Special thanks go to Janis Togashi for her untiring efforts and outstanding support in preparing the volume for publication. We also acknowledge David Puhlick and Audrey Shono for their editorial assistance, and Cynthia Nakachi for the secretarial help in preparing the manuscript. Without the support, dedication and hard work of these people, this project would never have been completed.

Tables 2.1 and 2.2 provide some background information on the Malaysian and Thai economies. In the context of this study, the information on the manufacturing sector would be of particular interest.

Malaysia

The Malaysian gross domestic product (GDP) growth rate has been reasonably high, as shown in Table 2.1. It was in the region of 6–7 per cent until the recession of 1985 when a negative growth rate of −1 per cent was recorded. Subsequently, there was a marginal improvement in growth in 1986 as the impact of the recession continued to be felt. However, the economy has begun to recover since mid-1987 as a result of improvements in external demand for manufactured exports and increased prices for commodities. The 1987 GDP growth rate improved significantly over the 1986 figure to record an impressive 5.2 per cent. The following year, 1988, proved to be even better. With the buoyant external demand for manufactured goods and stable and high prices for commodities, particularly rubber and oil palm, the Malaysian GDP growth rate climbed back to its pre-1985 levels by turning in a growth achievement of 7.4 per cent.

It will be noticed that growth rates in the manufacturing sector were higher than the overall GDP growth rates. Prior to 1985, manufacturing growth had increased steadily to peak at 12.3 per cent in 1984. However, the recession in 19 85 affected the sector adversely and resulted in a negative growth rate of −3.8 per cent, but it rebounded quite rapidly and has been growing impressively since then. Growth has been particularly encouraging after 1986: in 1987 a growth of 12.8 per cent was recorded, and in 1988 the rate was even higher at 15.5 per cent. As a recent Wall Street Journal (1 August 1988) article put it “manufacturing has been the big story of the (Malaysian) recovery. Spurred by overseas demand, the manufacturing sector accounted for 22 per cent of Malaysia's inflation-adjusted GDP in 1987, narrowly surpassing agriculture for the first time”.

From the perspective of what it does to earn a living, Singapore is made up of six main sectors. There is a sector with much government participation that produces goods and services for local consumption, a traditional entrepôt, a petroleum centre, an export platform for MNCs with some local participation, a business service centre which includes tourism, and an international financial centre. Singapore is highly industrialized in both manufacturing and services, and because of its remarkable international involvement, is deservedly called a global city. According to estimates made by Lloyd and Sandilands, 75% of Singapore's GDP was exported in 1982, and using similar methodology, the figure for 1985 was 71% (Lloyd and Sandilands 1986).

This characterization of Singapore's output makes imminent sense, given its comparative advantage. Singapore's strengths come from its location, its favourable business environment, its people's skill as traders, and its infrastructure investment. Singapore's weaknesses come from its small size, its relatively high wages, its relative under-investment in education, the underdevelopment of its domestic entrepreneurs, and the aging of its population.

Singapore's Strengths

Singapore's strategic location was discussed in Chapter 1, and nothing more need be added here — except to note that as Singapore's neighbours prosper, the positive spillover to Singapore also expands, making location a dynamic force for growth.

The favourable business environment was not provided by nature, but rather was an explicit policy decision, and resulted from strenuous efforts to bring it about. Fundamentally, it arose from, and was made possible by, the political stability of Singapore. Political stability has been purchased at considerable costs, including devoting resources to the armed forces. The extended tenure of the People's Action Party (PAP) has allowed policy formation with long horizons.

The business environment is made up of a number of factors. Singapore has achieved macro-economic stability, with an absence of high and variable inflation.

Within a period of about two decades Peninsular Malaysia's fisheries had moved from a situation of stable equilibrium to one which exhibits all the classic symptoms of overfishing — declining catch trends, declines in marginal landings per unit of fishing effort, decreases in the percentage of the commercial catch accompanied by increases in the percentage of trash fish in total landings, overcapacity in the fishing fleet, resulting in what appears to be a complete dissipation of the economic rent in the case of the trawl fisheries of the West Coast. Indeed, by 1977 it was estimated that it required four times as much time and capital to land each ton offish than was needed in 1968 (Elliston 1980).

Management of the resource consequently has now to be directed towards regulating fishing effort so as to conserve stocks and optimize their utilization, as provided for in the Fisheries Licensing Policy of 1981, rather than to promote their exploitation, as in the previous two decades.

In so far as the modern trawl-based sector is concerned, the Malaysian situation provides empirical support for Gordon's (1954) prediction, based on economic theory, that an open-access uncontrolled fishery will have the following pattern of activity. Initially, as the fishery develops, fishermen exploiting the untapped resources will reap higher profits, which will attract others into the industry. As the rate of exploitation among the fishermen increases, fish stocks are reduced and competition for them intensifies. Catch rates then fall, eventually reducing profits to a level where the economic rent is completly dissipated, that is, where the value of the catch is merely equal to the costs of catching and delivering the fish.

Gordon (1954, p. 134) blames the inefficiency of fisheries production on “the common property nature of the resources of the sea”. In the case of the artisanal fishermen, the resources of the sea are not those stretching from the coastline to the boundaries of the Malaysian EEZ, but a narrow coastal belt to which they are confined by their traditional inherited technology, lack of capital, and their custom of daily return to their fishing villages.

Singapore has often been described as a high-savings, highinvestment society. As a country with the highest savings rate in the world, a natural question that arises relates to what is the optimum savings rate that is compatible with its development strategy, and has Singapore surpassed it? Behind this high savings scenario is the issue of forced private saving which has taken up an increasing share of private-sector saving. Can forced savings be a sustainable feature for the future? Until the recent liberalization in the use of CPF (Central Provident Fund) funds, much of privatesector savings were either channelled into housing or shipped abroad for investment in foreign assets. How should one characterize the merits and demerits of this pattern of fund utilization? Is the efficiency of fund utilization somehow improved with the liberalization of the CPF? What are the costs and benefits of investing Singapore's assets abroad?

While Singapore may be a high-savings, high-investment society, it is not generally noted to be a society characterized by a bountiful supply of private local entrepreneurs, quite unlike one's impression of Hong Kong or South Korea, for example. If anything, the general impression of Singapore is that of a society characterized by two features: firstly, domination by foreign entrepreneurs, often credited for the transformation of the economy from that of an entrepôt outpost to a manufacturing centre, and secondly, pervasive presence of government in economic activities. Given this, some important questions need to be asked. Are private local entrepreneurs being “crowded out” by foreigners? Should they be encouraged and if so, how? Is there a case for the infant industry argument in the strive to help develop indigenous entrepreneurship? To what extent should Singapore continue to rely on foreign investment? What would the cost-benefit score-sheet of continued dependence look like and how can this ratio be minimized? What is the effect on local business of government encroachment into economic activities?

In adopting the above agenda, no attempt is made to relate the subject of saving to that of entrepreneurship.

Ethnic and religious issues have, in the last few decades, confounded many social analysts by refusing to disappear. The “liberal expectancy” among social analysts used to be that modernization would blur ethnic distinctions, achievement would replace ascription and particularistic criteria, and wide-ranging communication and education systems would homogenize populations. The “radical expectancy” was that differences in religions, languages, and culture would be swallowed up, perhaps even across national boundaries by emergent class consciousness. Instead, religion and ethnicity continue to cut across and envelop almost every facet of Southeast Asian life. Indeed, if anything, such divisions in many societies have become sharper, ethnic and religious interest groups more insistent, and opposition more politicized and strident. Much of this activity seems to be increasingly played on the urban stage—and this at a time when the pace of urbanization in Southeast Asia is increasing rapidly, to the extent that by the turn of the century, cities such as Manila, Bangkok, and Jakarta could have populations of more than ten million each. In these settings, Southeast Asian ethnic, religious, and linguistic complexities are likely to be even more challenging than in the past.

It was therefore only natural that among other aspects of the Southeast Asian social and cultural scene, the Institute should identify the study of contemporary religion as one of its key areas of interest. Southeast Asia is after all not only home to all the major religions of the world — Islam, Buddhism, Christianity, and Hinduism — but the geographical spread of these is such that the bonds that bind their adherents at one and the same time defy and accentuate political and territorial divides and boundaries. The case of Islam is especially striking in this respect, as its followers are present in significant numbers in almost every Southeast Asian country, and in several of these across constraining political borders.

Quantitative Record and Evaluation

Growth in real income, 1952-87

From 1952 to 1987, Taiwan's real per capita income grew at a cumulative rate of 6.4 percent per annum. This rate of growth, which is also one of the highest in the world, implies that Taiwan's per capita income increased more than eightfold during the period. This is in contrast to the annual growth rate of about 2 percent in per capita income of the present Western industrial nations (Kuznets 1966). In other words, it took about 36 years for per capita income to double in these advanced economies, and it can be said that Taiwan grew 3 times as fast as the present industrial countries during the process of their industrialization. Another -way of looking at it is that Taiwan achieved in 36 years what it took an average of 108 years for the present developed industrial economies to achieve in their time. Against this historical perspective, Taiwan's post-war industrialization and development can be considered an economic miracle.

Taiwan's population increased from 8.1 million to 19.7 million between 1952 and 1987, an average increase of 2.6 percent per annum. In light of the discussion above, this means that Taiwan's productive capacity in terms of real GNP, as distinct from per capita GNP, must have grown much faster, averaging 8.9 percent per annum. This is one of the best economic performances in the world.

Structural transformation

Following the Second World War, the economic structure of Taiwan underwent dramatic changes with the predominantly agricultural economy giving way to a predominantly industrial economy. This economic metamorphosis is evidenced by the changing industrial composition of the working population. In 1952, 56 percent of the working population was in the primary sector, predominantly in agricultural activities. By 1987, the share of the working population in the primary sector had declined, and 43 percent of the working population was employed in the secondary sector, largely in manufacturing (Council for Economic Planning and Development 1988).

The economic transformation is also shown by the changing contribution of various economic activities to net domestic product (NDP). In 1952, the agricultural sector contributed 36 percent to NDP. This predominant position has been taken over by the manufacturing sector, which in 1987 made up 39 percent of NDP (Council for Economic Planning and Development 1988).

Introduction

In the communique adopted at the Toronto Summit in June last year, the Group of Seven (G-7) observed that, in sharp contrast to the 1970s when growth in the major industrial countries was weak and inflation high, the 1980s have seen the longest period of economic growth in post-war history. The G-7 also noted that sustained noninflationary growth has been accompanied by the emergence of large structural imbalances in the major industrial countries, exchange rate volatility, and debt-servicing difficulties in many developing countries. As at previous summits, the G-7 countries at Toronto declared their willingness to cooperate and to institute policies to solve global economic problems. They vowed to strengthen cooperative efforts to reduce spending growth in countries with large external deficits and to keep up the momentum of domestic demand in nations with large external surpluses; introduce structural reforms by removing barriers, unnecessary controls and regulations, and increasing competition; support the Uruguay Round of GATT negotiations for freer trade in manufactures, services, and farm products; adopt a case-by-case approach to debt rescheduling; and take action to protect the environment.

The Toronto communiqué, however, did not include any specific plans to deal with global economic problems. It announced no agreement on ways to settle the contentious issue of agricultural subsidies. Nor did the meeting provide a strong signal for urgent action to the crucial midterm GATT review at the end of 1988 in Montreal. But it did manage to reach a consensus on rescheduling the official debt of the world's poorest countries.

Though it did not come up with bold and imaginative approaches to deal with global economic problems, the Toronto meeting was significant from the perspective of the Asia-Pacific region. It was the first summit at which Japan had sought to play an important and visible role befitting its status as the world's second largest economy and perhaps its greatest financial power. The Prime Minister of Japan, Noboru Takeshita, reminded the leaders of the other six major industrial countries that Japan was the only Asian country at the Summit, and urged that attention be paid to the concerns of the Asian newly industrializing economies (NIEs) of Korea, Taiwan, Hong Kong and Singapore. He also put forth proposals on Third World debt and aid.

The emphasis on industrialization and urbanization has developed Japan into one of the leading nations of the world. By raising the nutrition level of its people, improving its health environment (including water and sewage), and expanding its health facilities, it has either greatly reduced the incidence of contagious diseases or completely controlled them. It has also greatly reduced the infant mortality rate and extended the average life expectancy of its people to one of the longest in the world.

Meanwhile, amid changes in life-style triggered by acute social and economic changes, the uncertainties and frustrations of the Japanese have increased greatly. This has served to heighten their physical and mental stress. However, if this is considered from the opposite point of view, it can be argued that the Japanese have been more or less able to cope with these life changes that constitute severe stressors.

What are the factors that have enabled the Japanese, despite being under such stressful conditions, to cope with their severe stress rather successfully and build such a highly developed industrial society?

When people are bombarded by many stressors, they become vulnerable to stress-induced diseases. Moreover, in their attempt to reduce these stressors, a growing number of people lead unhealthy lives engaging in negative coping behaviours such as smoking, overdrinking, or eating to forget their troubles. As a result they suffer from such chronic diseases as high blood pressure, apoplexy, heart disease, mental disorder, liver disease, and diabetes — and there are no signs that the incidence of these diseases is declining (Figure 4.1)

It used to be that one could be cured of most diseases if one enlisted the help of a medical facility, but with the rise in the incidence of chronic diseases, this is no longer the case. Even though the number of medical facilities has increased, the number of patients has also continued to increase. This is because in the case of chronic patients not only are many of them never completely cured; but what is worse is that an increasing number are afflicted with drug-induced iatrogenic diseases (health disorders resulting from treatment).

Introduction

A country's industrial structure changes continuously with the environment within which each industry survives. Changes in the social, economic, and cultural conditions will influence industrial structure. Sometimes a country's industrial structure is formed autonomously and at other times on the basis of policy guidance. Some forces that shape the various conditions of each industry include: (1) The domestic and international demand, which reflects the national needs, the market conditions, and the country's relations with the international economy; (2) The conditions of production factors, including labor, capital, natural resources, etc.; (3) The level of technology or the input structure; (4) The emergence of substitute products; and (5) The competition among incumbents and the threat of new entrants.

The dynamic changes in the conditions require each industry to adjust properly. Influenced by these forces, new industries are born, earn above-average returns on investment, and absorb more labor; at the same time, once-prosperous industries decline and thousands of workers are laid off. The transformation of a nation's industrial structure stimulates its economic development and determines the nature of the economy. The adjustment process, however, brings social conflicts and costs, especially when it benefits one sector of the society at the expense of others.

Especially in newly industrializing economies (NIEs) like Korea, the emergence of declining industries may be an unwelcome effect of rapid growth. However, declining industries are to be expected as changes in the environment — i.e., increases in real wages — take place. Tb date, most of the adjustment in Korea has taken place with relatively little direct government involvement as rapid growth created new job opportunities and absorbed those who were out of work in declining industries.

However, in the mid-1980s, Korea appeared to be approaching a new stage of economic development. It is a fundamental principle that the optimum reallocation of resources in an economy be pursued through the market mechanism. However, when rational decision making by the private sector cannot achieve the optimal solution, government industrial policy towards declining industries can be very significant. For declining industries, the Korean government is confronted with a dilemma of two conflicting policies — withdrawal or addition of resources.

In some declining industries, government policy is needed to aid the withdrawal of resources. Government intervention can be vital in the presence of market imperfections, particularly exit barriers, economies of scale, externalities, and the incentive-distorting effects of government policies.

This paper concerns Yao in two villages. Residents of both proclaim Pan Hu to be the progenitor of their ethnic group and their epics about ancestors celebrate the same culture heroes (for example, Lemoine 1987). Thousands of miles and several international borders separate these communities and there is no evidence that intercommunication has ever occurred.

Youling is in northwestern Guangdong near the junction of that province's boundaries with Hunan and Guangxi (southeastern China). Agriculturally, the Pai Yao inhabitants are lowlanders but there is good reason for their usual identification as “mountain people”: their settlement crowns the pinnacle of a massive limestone monolith which rises more than 200 metres from the surrounding waters of their irrigated fields. Their community was the subject of a social survey by a team from Lingnan (now Zhongshan) University fifty years ago (in 1938). The researchers included C.B. Lee, K.K. Lee, K.Y. Lin, and W.C. Wang. Their reports appeared in English with an introduction by Professor Reo Fortune the following year (Fortune 1939).

My puipose is to illustrate the value of that publication for analysis of information about the Yao or Iu Mien whom I studied with Dr Chob Kachananda (now Deputy Director of the Tribal Research Institute, Chiangmai) thirty years later (in 1966–68). These Iu Mien of northern Thailand were not only mountain dwellers but also highland farmers who required land at high altitudes (more than 1,000 metres) to grow opium poppy. They cultivated this and other crops in dry fields and by techniques of shifting cultivation. One of their villages was Pulangka on a ridge near the point where the boundary between Nan and Chiangrai provinces meets the international border with Laos.

The theoretical problem to which I shall relate these introductory comments concerns the development of Yao kin groups into patrilineal or bilateral descent units and arises from further observations which indicate the influence which commerce may exercise on such variance where land rather than labour is the scarce component of agricultural production or vice versa.