Exports have been one of the key foci throughout the Southeast Asian countries, but exports have declined steadily since the second quarter of 2008, and as this decline continued, the exporter countries in Southeast Asia have suffered adversely.
It is also believed that with the evolution of the global crisis, the Southeast Asian countries would be vastly influenced and their dependence on exports too would be affected, overtly exposing the Southeast Asian countries’ immense dependence on exports. Once the global economy turned gloomy, the prospect of these countries too became tarnished.
The reasons behind Southeast Asia’s dependence on exports need to be understood in order to justify the above mentioned argument. Once the conventional import substitution policy of the Southeast Asian countries got replaced by long-term policies centering on exports, a huge change was initiated. The change in that policy contributed directly and immensely on the growth of export and therefore the dependency on it. These policies and the role they played helped to achieve competitiveness in exports and strengthen it.
In 1961, the military takeover in Korea resulted in export promotion with the help of the ‘Neutral Export Promotion Policy’. Both the GNP and exports grew commendably. Initially, the growth in manufacturing exports was derived from the industries which had an abundance of domestic resources available like labor and domestic capabilities. As a result labor intensive products, such as garments, footwear, wood articles and light engineering products were increasingly being manufactured for export, which eventually raised Korea’s GNP .
Once Taiwan accomplished a unified exchange rate, following the devaluation in its exchange rate, export became the focus for Taiwan as well. Small manufacturing industries helped in booming exports. Both exports as well as GNP grew simultaneously.
With the introduction of the Investment Incentives Act in 1968, Malaysia experienced the birth of an industrialization period which was export-oriented. The exporting industries benefited from tax and tariff concessions. In order to attract foreign investors, Free Trade Zones or FTZ FTZ FTZ s were established. The domestic manufacturing sector got an impetus and began to function efficiently in order to satisfy and strengthen exports. Thailand, too, had undertaken strategies that promoted export.
All these countries; South Korea, Taiwan and Malaysia, followed various export promotion policies, which had certain essential features in common.
With the coming of 2010, the bleak picture of Southeast Asian countries and their over dependence on exports has begun to change towards a more positive angle. Demands have risen in the markets of the United States, prompting a subsequent surge of positive vibes in the Southeast Asian countries. With a rise in demands from potential importers like the US , Southeast Asia has got the boost it needed. However, in order to reap the benefits from exports, these countries need to augment their indigenous consumption. China happens to be the largest exporter of all the East Asian countries. However, the dependence on export of other Developing and Emerging Economies (DEE s) is no less.
The enlightened discussions addressed by cardinal members of the ASEAN highlight that a dip in the demands generated by the United States had a direct impact on the destiny of the exporting nations. To worsen the situation, the collapse of Lehman Brothers hit the economy of Southeast Asia with a bang. Thailand’s gross domestic product demands shot up to 50-60 percent when it came to exports. As statistics show, the GSR of Thailand dropped 7.1 percent and 4 percent in the first and second quarters respectively. The growth of Thailand’s economy in 2010 has been predicted at around 2 to 3 percent, backed by the strong stimulating measures initiated by the government.
With Singapore, the total volume of trade is as much as four times its GDP. When the global crisis began to sink, the government extended its help in order to ease the recovery of Singapore’s economy too. In Taiwan, Thailand, Indonesia and South Korea exports have contributed over 60 percent to growth. The dependence on export for countries like Indonesia and Malaysia is even greater.
It is believed that post recession, the dependence on exports in the Southeast Asian countries will gain prominence once again.
The export drive of the Southeast Asian countries can continue to relentlessly provide a stable macroeconomic environment if developed. The development of this macroeconomic environment is determined by four areas: inflation, fiscal regulation, savings and investment, and last, but not least, exchange rate.
In the case of the Southeast Asian countries, a low and stable inflation has been witnessed during their periods of export growth and economic development. This is a crucial feature of a sustained macroeconomic environment. Malaysia, Taiwan, Singapore and Thailand too have shown excellent stability of a macroeconomic environment. Inflationary upheavals have hardly been present in these countries, with the exception of one or two instances like the oil price hikes. The export markets of these countries have achieved price competitiveness on the basis of their low inflation.
The potent factor that leads to a low level of inflation in Southeast Asian countries is the potential of governments to maintain a manageable level of fiscal limits. These countries have performed excellently in keeping their budgets low; Thailand and Singapore need a special mention. Even at times, certain countries have had a surplus in their fiscal limits. This fiscal balance has helped to develop a macroeconomic environment.
It is often said that the excellent investments and savings of Southeast Asia’s GNP GNP GNP ratios would highlight its macroeconomic performance. Savings and investment ratios are seen to have a strong impact on growth rates. As the rates of savings have been increasing with time, the GNP GNP GNP of the Southeast Asian countries has also eventually increased. Increased economic growth and competitiveness is always associated with high investments. It has been noted that investment, as a share of GNP , has risen remarkably in the Southeast Asian countries, even if it is compared to the developed nations. The governments of these Southeast Asian countries have throughout provided different policy incentives which have made a huge inflow of FDI in these countries.
Southeast Asian countries are known for following various policies on exchange rates. These policies have varied in such a way that one can find fixed rate regulations in Hong Kong, variable rates in Malaysia, Indonesia and Thailand and floating exchange rates prevailing in Singapore. But notably, all the Southeast Asian countries have used the exchange rate to guard the tradable sector. This has helped to maintain a macroeconomic environment in these countries.
Thus, it can be said that business competitiveness and economic growth in Southeast Asia were the inevitable results of a stable macroeconomic environment. Thus these countries have successfully followed their export policies and will continue along the same lines once again, after the global recession has ended.
Export has always been and shall always be an important part of Southeast Asia’s economic base. Although, under various circumstances and due to various factors, there has been sharp decline in exports, but with the coming of the year 2010, the situation has again taken a positive turn.
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