WP02: ASEAN at 50: Achievements in Regional Integration and the Agenda for Future Regional Economic-Financial Architecture

by: Chia Siow Yue, and Wing Thye Woo

Despite large differences on almost every dimension, ASEAN can claim to be one of the most successful regional groupings in the world. ASEAN has largely achieved regional peace and security, despite being caught in the US-China power rivalry in recent years. The ASEAN region has also become one of the largest economies in the world, with a combined GDP that ranks behind only the EU, US, China, Japan, India and South Korea and growth rates well above the world average. ASEAN economic integration has proceeded simultaneously via market-driven regional production networks and global value chains as well as via government-driven trade and investment agreements. The objective of creating an ASEAN Economic Community (AEC) was adopted in 2015; and the next phase of integration, AEC 2025, is under implementation. ASEAN has also entered into regional integration agreements (known as ASEAN+1) with China, Japan, India, South Korea, Australia, and New Zealand, and is in the process of negotiating a mega Regional Comprehensive Economic Partnership (RCEP) agreement with these six partners.

One often-mentioned vision about the future of the financial architecture of ASEAN –that was popular in the period after the Asian Financial Crisis — was an Asian Economic Union (AEU), where there was comprehensive, deep regional economic integration. The basic question is whether the final realized form of the Asian Economic Union (AEU) would be closer to the European Union (EU) or to the North America Free Trade Area (NAFTA). The return of China as a major global economic power also means that the Renminbi (RMB) could, in the future, attain an international status that is parallel to the USD. The emergence of the RMB as a key international currency, however, does not in any way imply that it would also emerge to be the common currency for East Asia. China in the future would most probably have the same individualistic attitude on China’s monetary policy as the United States has at the present toward other countries that have dollarised their economies, which is that the primary concern of US monetary policy is US welfare. Given (1) the NAFTA-like disparity in economic power in AEU in the future, and (2) the absence of policy-induced integration of national labor markets mean that the only stable configuration is the survival of individual East Asian currencies with limited coordination among them in normal times. It therefore appears to us that the many present efforts to promote closer exchange rate cooperation will not succeed in the long-run.

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WP01: Explaining Malaysia’s Past Economic Growth and Future Prospects

by: Dwight Heald Perkins, Rajah Rasiah, and Wing Thye Woo

Malaysia has witnessed growth even before independence in 1957 but per capita income has risen much faster since independence. In 2014, per capita GDP was 7.5 times what it was immediately after independence. But why didn’t Malaysia grow as rapidly as its Northeast Asian neighbors? Had Malaysia been held back by specific government policies? And if government policies inhibited growth, how was it that Malaysia’s economy still performed far better than the economies of most of Latin America and Sub-Saharan Africa?

The aim of this paper is to decipher the reasons behind these variations in Malaysia’s comparative economic growth with other countries. This essay then seeks to attempt to answer the question of whether Malaysia will eventually catch up with the high income countries of the world or whether it will be caught in the ‘middle-income trap’.

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