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ODA in Flying Geese Pattern: Thailand’s Experience
Chuta ChinruksaGraduate School of Economics, Kyoto University
日本国際経済学会第45回関西支部総会 2003 June 7
Objective
To study about the role of Japanese yen loan as a policy tool to promote
Flying Geese Pattern formationin the context of bilateral economic relations
between Thailand and Japan
Questions of the paper
What is the pattern of Japanese ODA in Asia and Thailand? motives and objectivesIs there relationship between ODA-Trade-Investment? How have J-ODA contributed to the performance of the Thai economy? How can the relation pattern be explained by Flying Geese Model?
Main Argument
Regional economic relations in form of Flying Geese pattern shiftODA-led trade and investment originated from JapanDiversion from original model, particularly in domestic industrialization
Presentation Outline
Part I: Flying Geese Pattern: Japan for Asia and Asia for Japan
Part II: Thailand and Japan: Partners for Growth
Part I: Flying Geese Pattern: Japan for Asia and Asia for Japan
1. FG pattern: a discussion2. Japan in wild geese flying3. Asian economy under Japanese leadership:
benign or malign guidance?4. Conclusion
Flying Geese Pattern: a discussion
Leading nations
Newly rising nations
Followers
Technological advanceDynamic hierarchical relationship
Accumulation of capital and technology to more technological sophistication
International trade and Investment as means of transfer
Creation of International Division of Labor
Industrial transformation of the FG Pattern
Source: M. Ezaki (1995). “Growth and structural changes in Asian countries,” Asian Economic Journal 9, No.2, pp.113-115
Part I: Flying Geese Pattern: Japan for Asia and Asia for Japan
1. FG pattern: a discussion2. Japan in wild geese flying3. Asian economy under Japanese leadership:
benign or malign guidance?4. Conclusion
Asia enjoys the largest share of J-ODA
ODA to the World
0%
20%
40%
60%
80%
100%
1978-79
1988-89
1998-99
Year
Shar
e (%)
Oceania
Far East Asia
S. and C. Asia
Middle East
South America
N. and C. America
South of Sahara
North of Sahara
Europe
Economic needs is not the main criteria for J-ODA giveaway.
Investment to Asia increases as Asia becomes Japanese overseas production base.
Investment to Asia
0
5
10
15
20
1985 1986 1987 1988 1989 1990 1991 1992
Year
Share
(%) China
Asean
Asian NIEs
Source: Ministry of Finance, Japan
Regional division of labor is created by J-FDI.
Trade with Asia increases over years
Japan's trade w ith Asia
05
10152025303540
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
Year
Shar
e (%
of T
otal
trad
e )
Export Share
Import Share
…..but with increasing export share
Widening trade gapJapan's Trade with Asia
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
Year
Val
ue (
mill
ionU
SD
)
Export Import
Technological Dependence
Increasing FDI creates a Japan-dependent trade structure.More sophisticated production structure leads to wider trade gap.
Unit: Percentage of total license fees
Supplier Korea Thailand
Japan 47.9 53.0 USA 28.2 19.8 UK 3.8 5.0 Germany 5.7 2.7
Part I: Flying Geese Pattern: Japan for Asia and Asia for Japan
1. FG pattern: a discussion2. Japan in wild geese flying3. Asian economy under Japanese leadership:
benign or malign guidance?4. Conclusion
FG Pattern in AsiaTypical sequence of Asian industrial production
Source: C.H. Kwan (2002), The Rise of China and Asia’s Flying Geese Pattern of Economic Development: An Empirical Analysis Based on US Import Statistics.
FG pattern in AsiaShift of FG pattern production in Asia
In line with FG hierarchy ….but relying on Japanese Capital and Technology
Part I: Conclusion
1. Hierarchical Relations originated from Japan2. ODA as facilitator in doing business3. Over-reliance on J-capital and technology:
Ignorance of self-reliant domestic industrialization Fundamental weakness
4. Difference btw model and actual shift5. Successful FG development requires HOST
country’s effort to be independent from Japanese dominance
Comparative FG models on Asian economic development pattern
Prof. Akamatsu model:Import Domestic production (self-reliance) Export
Prof. Kojima model:Import Pro-trade FDI (inflow) Domestic production
Export FDI (outflow)
Proposed model: Import FDI (inflow) Imported-domestic production
Export [as (Japanese) overseas production base]
Part II: Thailand and Japan: Partners for Growth
1. Thailand in Int’l Economy2. Path of Development3. Japan as the Economic Partner4. Case Study: the Eastern Seaboard Project5. Conclusion
National Economic and Social Development Plans
Government for public investment “Free Hand Policy”Industrialization and exports for development More reliant on int’l economy: Import > Export
Openness to TradeExports/Imports 1962 1972 1978 1983 1985Exports/GDP (%) 14.6 13.5 17.5 15.8 18Imports/GDP (%) 17.1 18.9 23.4 26.1 24.2(EX+IM)/GDP (%) 31.7 32.4 40.9 41.9 42.2Source: Wisarn Pubbawesa, (1989) "Review of Economic Development in Thailand"
Part II: Thailand and Japan: Partners for Growth
1. Thailand in Int’l Economy2. Path of Development3. Japan as the Economic Partner4. Case Study: the Eastern Seaboard Project5. Conclusion
From agriculture to industrial-based economy
Structure of Production of Thailand
44
32
28
23
12.6
10.3
18
24
27
30
38.740.5
0
5
10
15
20
25
30
35
40
45
50
1960 1970 1980 1985 1991 2000
Year
% o
f G
DP
Agriculture Industry
Thailand: Food Textiles MetalManufacturing exports of Thailand
1970-1997
-5
0
5
10
15
20
25
30
35
40
45
50
1970
Year
Perc
enta
ge o
f to
tal va
lue
Food/Bev./tabacco
Textiles
Wood&woodproduct
Paper&products
Chemical
Non metalmineral
Basic metalindustry
Metalmanufacturing
Othermanafacturing
Originally, Thai exports were food processed. Then, textile starts torise in 1970s until 1990. Meanwhile, in 1980s metal productionincreases significantly and takes the lead from ’90~.
As Thailand is more industrialized….trade gap is widening
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1986 1987 1988 1989 1990
Year
Thou
sand
s U
SD
Export Import
Imports are mostly intermediate and capital goods.
• Capital goods and intermediate goods=70-80%• Imported industrialization• production fundamental weakness
Foreign Capital Flows as the growth engine ….with large share of ODACapital flows to Thailand, 1960-1984
0%
20%
40%
60%
80%
100%
1960 1965 1970 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984
Year
perc
enta
ge
ODA Non-ODA Grant Private investment
Increase of FDI
1988~ FDI boom, mainly dominated by JapanAfter 1997: Return of American and European investors
Part II: Thailand and Japan: Partners for Growth
1. Thailand in Int’l Economy2. Path of Development3. Japan as the Economic Partner4. Case Study: the Eastern Seaboard Project5. Conclusion
Bilateral Interdependence
1960s 1970s 1980s 1990sJAPAN ODA Export boom FDI Export Mkt
THAI Infrastructure Import Export BoomDevelopment Substitution PromotionFlying Geese
ODA: Japan as the largest donor
Source of aid flows to Thailand, 1960-1984
-200.00
0.00
200.00
400.00
600.00
800.00
1,000.00
1,200.00
1,400.00
1960 1965 1970 1975 1980 1984
Year
Val
ue, m
illio
ns
USD
France Germany Japan UK US World Bank ADB
ODA
Political economic relationship: strategic relations/trade compensation/ domestic policyJapan as endless ODA resort: favorable condition and Non-interference freedomInfluence over other economic activities
Yen Loan for basic infrastructure
Yen Loan to Thailand classified by Sector
Electric power and Gas, 46
Transportation, 65
Telecommunications, 13
Irrigation and Flood control, 13
Agriculture, Forestry andFisheries, 8
Mining and Manufacturing, 10
Social services, 26
Financial-Intermediary Loans,25
Others, 1
Electric power and Gas Transportation Telecommunications
Irrigation and Flood control Agriculture, Forestry and Fisheries Mining and Manufacturing
Social services Financial-Intermediary Loans Others
-1,000
0
1,000
2,000
3,000
4,000
5,000
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 p
Year
Value (M
illio
n U
S D
olla
rs)
Japanese FDI USA EU ASEAN Hong Kong Taiwan
J-FDI outnumbers other countries’ investment
J-FDI jumps 1987-88 and reaches peak in 1990
Industry: the main destination of J-FDIInflow of FDI from Japan
0.0
500.0
1,000.0
1,500.0
2,000.0
2,500.0
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Year
Mill
ions
$U
S
1. Financial Institutions
2. Trade
3. Construction
4. Mining & Quarrying
5. Agriculture
6. Industry
7. Services
8. Investment
9. Real estate
10. Others
Total
Industrial FDI is close to 70% of total J-FDI.
Inflow of Japanese Industrial FDI
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
900.0
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Year
Mill
ions
US$
Food
Textiles
Metal base & non-metallic
Electricalappliances
Machinery&transport equipment
Chemicals
Petroliumproducts
Constructionmaterials
Other industry
After 1987, increase in J-FDI resulted in a boom in Thai
manufacturing sector, particularly electrical appliance.
Trade: Unbalanced trade structure
Thai Export: primary products Import from Japan: Intermediate and capital goods
FDI Trade gap
Bilateral Trade with Japan
0.0
2,000.0
4,000.0
6,000.0
8,000.0
10,000.0
12,000.0
14,000.0
16,000.0
18,000.0
1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
Year
Mill
ion
BH
T
Exports Imports
Close link between FDI and Trade
More intermediate goods imports have followed the increase of FDI in late 1980s.
Part II: Thailand and Japan: Partners for Growth
1. Thailand in Int’l Economy2. Path of Development3. Japan as the Economic Partner4. Case Study: the Eastern Seaboard Project5. Conclusion
JDA
PAILIN
BONGKOT
SONGKHLA
♦♦
♦
SBK
YALA
SRC
UDONTHANI
CHAIYAPOOM
ESB IESB IESB I
J-ODA= US$1.5 Billion (as of 1997, =10% of accumulative Yen Loan)
Thailand new industrial baseJapan overseas investment base, esp. for SMEs
Natural gas locationNatural gas locationNatural gas location
MaptaputMaptaputMaptaput
SattahipSattahip
Gulf of ThailandGulf of Thailand
RayongRayong
ChonburiChonburi
BangkokBangkokBangkokChachoengsaoChachoengsao
PatumthaniPatumthaniNakonnayokNakonnayok
SaraburiSaraburi
PracheenburiPracheenburi
LopburiLopburi
304
34
3331
344
36
3
3
317
304
305305
1
3232
11 22
3333
304304
Eastern Seaboard (I)Eastern Seaboard (I)Eastern Seaboard (I)
New Economic &industrial baseNew Economic New Economic
&industrial base&industrial base
Initiated 1981Initiated 1981Completed 1995Completed 1995
Two Development poles: Two Development poles: 1. 1. LaemLaem ChabangChabang2. 2. MaptaphutMaptaphut
Total areaTotal area 13,26613,266 KmKm22
LCBLCB
MTPMTP
ChanthaburiChanthaburi
Major indicators
220,000 bahtRayong ranked country’s 1st
4. Average Annual Per Capita Income3.8 times3. Economic expansion700,0002.2. Indirect employment318,9112.1. Direct employment
1,018,9112. Employment
1,220,121 (92.26%)632,000 (52.7% of total)
1.2. Private sectorJapanese private investment
102,414 (7.74%)63,520 (62% of Govt investment)
1.1. Government sectorJ-ODA
1,322,535 1. Total Investment (million baht)
Contribution to Thai economy
Three core industries to be ASIAN industrial base1. Petro-chemical industry = 44%, concentrated in MTP2. Electronics and electrical appliance = 10%, with growing
investment value after 1997.3. Transportation & auto mobile equipment = 9%, 71% of
total automobile investment in Thailand
Contribution of ESB to Thai economyYear 1981 1988 1995 1999% of GDP 5.60% 9% 9.80% 10.40%
Part II: Conclusion
Close bilateral economic relationsLinkage between ODA-Trade-InvestmentInterdependence within Flying Geese formationThe mission piece: inadequate role of Thai business weak domestic industrialization
Japanese Business
Thailand
Japanese Govt.
Conclusion
Regional economic relations in form of Flying Geese pattern shift, including Thai economic development patternODA-led trade and investment originated from JapanDiversion from original model, particularly in domestic industrialization which could lead to over-external dependence, evident in trade balance.
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