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  • Author: J. Bradford Jensen
  • Publication Date: 11-2012
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: This paper argues that developing Asia is overlooking an opportunity for increased growth and development through trade in business services. Developing Asia would benefit from liberalizing services trade as it has benefited from liberalizing goods trade. This argument rests on these key findings: business services are important for growth, developing Asia is relatively under-endowed with business services, many business services are tradable, and developing Asia has relatively high barriers to services trade.
  • Topic: Economics, Emerging Markets, International Trade and Finance, Markets, Monetary Policy
  • Political Geography: Israel, Asia
  • Author: Donghyun Park, Kwanho Shin
  • Publication Date: 10-2012
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: There is a widespread perception that Korea's services sector lags behind its dynamic world-class manufacturing sector. This paper empirically analyzes the past performance of Korea's services sector in order to assess its prospects as an engine of growth. The analysis resoundingly confirms the conventional wisdom of an underperforming service sector. In light of Korea's high income and development level, the poor performance of modern services is of particular concern. The authors identify a number of factors underlying the poor performance and set forth policy recommendations for addressing them. Overall, Korea faces a challenging but navigable road ahead in developing a high value-added services sector.
  • Topic: Development, Economics, Emerging Markets, Industrial Policy, International Trade and Finance
  • Political Geography: Israel, Korea
  • Author: Jacob Funk Kirkegaard
  • Publication Date: 10-2012
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: In this paper Kirkegaard presents new micro-level data consisting of individual greenfield investment projects and mergers and acquisitions as a source for detailed analysis of services sector cross-border investment flows among the Asian Development Bank (ADB) regional membership in Asia. The new transactional foreign direct investment (FDI) data are methodologically distinct from traditional BPM5-compliant FDI data but found to yield generally comparable aggregates, when compared with the latest available International Monetary Fund (IMF) data from the Comprehensive Direct Investment Survey for the ADB regional membership. The services sectors are found to receive considerably larger amounts of foreign investment, when compared with the Asian region's manufacturing and raw materials sectors. OECD countries account for roughly three-quarters of total recorded inward services sector FDI of about $2 trillion, relatively evenly split between the United States, the EU-27, and regional OECD-level-income countries. The presence of sizable regional "upward flowing" services sector investments into OECD-level-income economies is verified. Kirkegaard draws preliminary policy conclusions based on the new transactional FDI data results concerning prospects for regional services sector liberalization, threshold income levels for inward services sector FDI, upward-flowing regional services FDI, and preferred modes of services sector investments.
  • Topic: Economics, Emerging Markets, International Trade and Finance, Foreign Direct Investment
  • Political Geography: United States, Israel, Asia
  • Author: Stephan Haggard, Marcus Noland
  • Publication Date: 06-2012
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: This paper uses a survey of 300 North Korean refugees to examine the experience of women in North Korea's fitful economic transition. Like other socialist states, North Korea has maintained a de jure commitment to women's rights. However, the authors find that women have been disproportionately shed from state-affiliated employment and thrust into a market environment characterized by weak institutions and corruption. As a result, the state and its affiliated institutions are increasingly populated by males, and the market, particularly in its retail aspects, is dominated by women. Among the most recent cohort of refugees to leave North Korea, more than one-third of male respondents indicate that criminality and corruption is the best way to make money, and 95 percent of female traders report paying bribes to avoid the penal system. In short, the increasingly male-dominated state preys on the increasingly female-dominated market. These results paint a picture of a vulnerable group that has been disadvantaged in North Korea's transition. Energies are directed toward survival, mass civil disobedience is reactive, and as a group, this population appears to lack the tools or social capital to act collectively to improve their status.
  • Topic: Corruption, Economics, Gender Issues
  • Political Geography: Israel, North Korea
  • Author: Stephan Haggard, Marcus Noland
  • Publication Date: 05-2012
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: A central hope of engagement with North Korea is that increased cross-border exchange will encourage the strengthening of institutions, and eventually, a moderation of the country's foreign policy. An unprecedented survey of Chinese enterprises operating in North Korea reveals that trade is largely dominated by state entities on the North Korean side, although the authors cannot rule out de facto privatization of exchange. Little trust is evident beyond the relationships among Chinese and North Korean state-owned enterprises. Formal networks and dispute settlement mechanisms are weak and do not appear to have consequences for relational contracting. Rather, firms rely on personal ties for identifying counterparties and resolving disputes. The weakness of formal institutions implies that the growth in exchange does not conform with the expectations of the engagement model and may prove self-limiting. The results also cast doubt that integration between China and North Korea, at least as it is currently proceeding, will foster reform and opening.
  • Topic: Foreign Policy, Economics, International Trade and Finance, Bilateral Relations
  • Political Geography: China, Israel, North Korea
  • Author: Jennifer Lee, Stephan Haggard, Marcus Noland
  • Publication Date: 08-2011
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: Theory tells us that weak rule of law and institutions deter cross-border integration, deter investment relative to trade, and inhibit trade finance. Drawing on a survey of more than 300 Chinese enterprises that are doing or have done business in North Korea, the authors consider how informal institutions have addressed these problems in a setting in which rule of law and institutions are particularly weak. Given the apparent reliance on hedging strategies, the rapid growth in exchange witnessed in recent years may prove self-limiting, as the effectiveness of informal institutions erodes and the risk premium rises. Institutional improvement could have significant welfare implications, affecting the volume, composition, and financial terms of cross-border exchange.
  • Topic: Economics, International Trade and Finance, Foreign Direct Investment
  • Political Geography: Israel
  • Author: Theodore H. Moran
  • Publication Date: 04-2011
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: What is the relationship between foreign manufacturing multinational corporations (MNCs) and the expansion of indigenous technological and managerial technological capabilities among Chinese firms? China has been remarkably successful in designing industrial policies, joint venture requirements, and technology transfer pressures to use FDI to create indigenous national champions in a handful of prominent sectors: high speed rail transport, information technology, auto assembly, and an emerging civil aviation sector. But what is striking in the aggregate data is how relatively thin the layer of horizontal and vertical spillovers from foreign manufacturing multinationals to indigenous Chinese firms has proven to be. Despite the large size of manufacturing FDI inflows, the impact of multinational corporate investment in China has been largely confined to building plants that incorporate capital, technology, and managerial expertise controlled by the foreigner. As the skill-intensity of exports increases, the percentage of the value of the final product that derives from imported components rises sharply. China has remained a low value-added assembler of more sophisticated inputs imported from abroad—a “workbench” economy. Where do the gains from FDI in China end up? While manufacturing MNCs may build plants in China, the largest impact from deployment of worldwide earnings is to bolster production, employment, R, and local purchases in their home markets. For the United States the most recent data show that US-headquartered MNCs have 70 percent of their operations, make 89 percent of their purchases, spend 87 percent of their R dollars, and locate more than half of their workforce within the US economy—this is where most of the earnings from FDI in China are delivered.
  • Topic: Economics, Industrial Policy, International Trade and Finance, Science and Technology
  • Political Geography: United States, China, Israel
  • Author: Arvind Subramanian, Aaditya Mattoo
  • Publication Date: 12-2011
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: Until recently, the World Trade Organization (WTO) has been an effective framework for cooperation because it has continually adapted to changing economic realities. The current Doha Agenda is an aberration because it does not reflect one of the biggest shifts in the international economic and trading system: the rise of China. Even though China will have a stake in maintaining trade openness, an initiative that builds on but redefines the Doha Agenda would anchor China more fully in the multilateral trading system. Such an initiative would have two pillars. First, a new negotiating agenda that would include the major issues of interest to China and its trading partners, and thus unleash the powerful reciprocal liberalization mechanism that has driven the WTO process to previous successes. Second, new restraints on bilateralism and regionalism that would help preserve incentives for maintaining the current broad non-discriminatory trading order.
  • Topic: Economics, Globalization, International Trade and Finance, Markets
  • Political Geography: China, Israel
  • Author: C. Randall Henning, Mohsin S. Khan
  • Publication Date: 10-2011
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: Currently, Asia's influence in global financial governance is not consistent with its weight in the world economy. This paper examines the role of Asia in the International Monetary Fund (IMF) and the Group of Twenty (G-20). It looks in particular at how the relationship between East Asian countries and the IMF has evolved since the Asian financial crisis of 1997–98 and outlines how Asian regional arrangements for crisis financing and economic surveillance could constructively interact with the IMF in the future. It also considers ways to enhance the effectiveness of Asian countries in the G-20 process.
  • Topic: Development, Economics, Emerging Markets, Globalization, International Trade and Finance, Monetary Policy
  • Political Geography: Israel, Asia
  • Author: Edwin M. Truman
  • Publication Date: 09-2010
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: This paper addresses the agenda for the Group of Twenty (G-20) leaders' meeting in Seoul, Korea in November 2010. This is an opportunity and challenge for Asian leaders in particular. Their test will be, first, to demonstrate that they can responsibly advance economic recovery. They must also deliver on institutional reform, in particular of the International Monetary Fund (IMF). I advocate a substantial expansion of the IMF's role as lender of last resort that is integrated with the surveillance role of the IMF in the form of comprehensive prequalification for IMF assistance and policy advice and a substantial increase in the IMF's financial resources. I also propose an approach to meaningful reform of the distribution of IMF quotas along with limiting European seats on the IMF executive board.
  • Topic: Economics, Emerging Markets, Global Recession, Financial Crisis, Governance
  • Political Geography: China, Israel, Asia, Korea