AFTA,Income Growth,and Income Convergence in ASEAN

The rapid economic growth experienced by the core ASEAN members (comprised of Singapore, Malaysia, Thailand, the Philippines, and Indonesia) since the 70s was generally attributed to openness policies adopted by the respective governments. Despite this contention, however, there is little evidence to suggest that greater openness will eventually lead to a convergence of the member countries, particularly with the present of external shocks. The introduction of ASEAN Free Trade Area (AFTA) in 1992 was also partly an attempt to hedge the region from external shock, while possibly further promoting economic development in the region. This study, therefore, is an attempt at examining in greater detail the impact of AFTA and openness on ASEAN economic growth, in the present of external shock. The results indicate that convergence in ASEAN is conditional upon several control variables taking place, in addition to openness. Additionally, while AFTA has a positive effect on economic growth, its impact on convergence is somewhat ambiguous in the presence of external shocks.     

Private capital flows,stock market and economic growth in developed and developing countries: A comparative analysis

Empirically we investigate how three types of private capital flows could promote economic growth in recipient developed and developing countries. Our focus is on the role of stock markets as a channel through which foreign capital flows could promote growth. The findings reveal that FDI exhibits a positive impact on growth, while both foreign debt and portfolio investment have a negative impact on growth in all sample countries. However, our results indicate that stock markets might be a significant channel or leading institutional factor through which capital flows affect economic growth. The findings provide clear implications that the negative impact of private capital flows can be transformed into a positive one if the stock market development has attained a certain threshold level, regardless of whether it is in developed or developing countries.     

Competitiveness of the Malaysian Food Processing Industry

Competitiveness is the goal sought after by governments and private sectors of many developing countries, including Malaysia. The study used net social profits (NSP) at the production level and the Porter diamond approach at the firms’ level to evaluate the competitiveness of 16 food-processing sectors from 2000 to 2008. The results indicate that processed-food industries have a comparative advantage but at a different magnitude. A time trend was fitted to track the dynamic NSP indices where positive trends indicate improvement in competitiveness. The range of NSP indices is quite wide, from RM 1,707.70 for snacks to RM 35.36 for vegetable and animal oils and fats, reflecting the need to improve resource allocation from low to high comparative advantage sectors. The NSP trend and Porter diamond conditions (demand condition, factor inputs, firm strategy and rivalry, and related supporting industries) suggested that the food processing cluster is gaining competitiveness.     

Impacts of trade liberalisation on aggregate import in Bangladesh: An ARDL Bounds test approach

Bangladesh has been liberalising its trade regime extensively since 1992 in order to achieve higher trade performance and GDP growth. However, despite the long period of liberalisation, imports are still growing faster than exports, increasing the trade deficit. Trade liberalisation is considered a crucial contributory factor. The paper examines the impact of trade liberalisation on the aggregate import in Bangladesh, using the ARDL Bounds Test approach with annual time series data from 1972–1973 to 2004–2005. Empirical results suggest that trade liberalisation through reduction of the import duty rate increases the aggregate import substantially in the short run, but insignificantly in the long run. Trade liberalisation using simplification of non-tariff measures shows a significant but low positive impact on the aggregate import in the long run. Liberalisation interaction with price decreases imports slightly hence improves the trade balance, while interaction with income increases imports slightly hence worsens the trade balance. An increase in imports is mainly stimulated by an increase in income. Moreover, higher income elasticity compared to price elasticity indicates that an effort to maintain imports at the desired level by increasing import duty could be counter balanced and ineffective. Therefore, a consistent policy to promote not only consumption of domestically produced products, but investment, production, and backward linkage industries is essential in order to improve the trade balance and GDP growth in Bangladesh.     

The ASEAN investment area,other FDI initiatives,and intra‐ASEAN foreign direct investment

The idea of establishing ASEAN as a single market and production base that will make ASEAN a dynamic and competitive location requires, among others, the free flow of investment. As part of the effort to promote regional investment, particularly intra‐ASEAN investment, several schemes have been implemented such as the 1998 Framework Agreement on the ASEAN Investment Area (AIA). This study investigated the impact of the AIA and other foreign direct investment (FDI) initiatives on intra‐ASEAN FDI. The findings on the impact of the AIA, measured via several proxies, do not provide strong evidence of benefits from the AIA, or from other investment‐promoting initiatives. With equal treatment given to non‐ASEAN investors, ASEAN members may have to provide separate incentives to enhance local entrepreneurs' competitiveness, which should in the long run be translated into higher FDI from ASEAN—either to other ASEAN members or to non‐ASEAN countries. Overall, the results do not argue wholly against the idea of the AIA, given that some of the AIA proxies have a significant impact. Moreover, it is early days yet, and a larger impact may come with time.