Reviews of national policies for education: South Eastern Europe. Volume 2, FYROM, Moldova, Montenegro, Romania, Serbia

148 Pages·2003·1.23 MB·English

by  OECD

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(cid:211) OECD, 1999.
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OECD PROCEEDINGS
ASIA AND THE GLOBAL CRISIS
The Industrial Dimension
PUBLISHER’S NOTE
The following texts are published in their original form to permit faster distribution at a lower cost.
The views expressed are those of the authors,
and do not necessarily reflect those of the Organisation or of its Member countries.
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
ORGANISATION FOR ECONOMIC CO-OPERATION
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(cid:211) OECD 1999
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FOREWORD
On 2 July 1997, the Thai government abandoned its efforts to defend the country’s currency. What had
been a steady inflow of private capital had suddenly turned into a financial tidal wave fleeing the
country. It followed on a range of mounting pressures – in the form of declining asset prices, slowing
construction, reduced export growth, a sharp cyclical downturn in world semiconductor demand, a
relatively high current account deficit, declining foreign reserves and appreciation of the dollar-tied
baht vis-à-vis the yen. Investors initially cheered the move, reversing a long slide in share prices. But
their enthusiasm was short-lived. Instead of floating, the baht sank. By January 1998, when it
bottomed out, it had lost more than 50% of its former value. Nor was the crisis limited to Thailand.
The story did not end there. Indonesia, Korea, Malaysia and the Philippines were to go down the same
road, causing similar damage to their currencies and economies. To a lesser, yet still significant,
extent, Chinese Taipei, Singapore and Hong Kong, China (hereinafter referred to as Hong Kong), were
also affected. While the first two economies experienced a sizeable devaluation of their currencies,
Hong Kong defended its currency peg to the US dollar, albeit at the price of very high interest rates,
reduced short- to medium-term growth prospects and a tarnishing of its image as a non-interventionist
economy. Having succeeded in defending the value of its currency, the yuan, in the midst of the crisis,
China, a major factor in the wider regional economy, struggled to combat slowing growth. The risk of
“contagion”, spreading to an ever-widening number of countries, gave rise to growing concerns at the
regional and global level. These concerns intensified as Korea succumbed in late 1997, followed by
Russia in August 1998 and Brazil in January 1999.
The financial aspects of the crisis have received a great deal of attention at the global level. Indeed,
much discussion has taken place on reforming the international financial system so as to deal more
effectively with issues related to volatile short-term capital flows. On closer examination, however, it
is apparent that the crisis was far more than a financial, or even macroeconomic, phenomenon. There
is growing recognition that key structural weaknesses in industry existed in a number of Asian
economies, and that these weaknesses were the underlying cause of the crisis. The strong economic
performance achieved by these countries during periods of high growth tended to conceal these
weaknesses, although the signs were there prior to mid-1997.
Government, industry and trade union officials discussed these and related industry issues at a special
session of the OECD’s Industry Committee, on 23 February 1999. It was concluded that the
economies struck by the crisis need to complement actions on the financial front with a series of
industry-related policy reforms. Other countries in the region, including China, are confronted with
similar challenges. Without these reforms, recovery will be slower and the risk of future backlashes
will be imminent. For the OECD area, the discussion indicated that the crisis had already had a
number of effects on industry, with the possibility that these could become more pronounced,
particularly if economic growth in Europe and North America were to slow. At the same time, the
ultimate outcome will crucially hinge on the structural policy responses, in Asia as well as elsewhere.
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This book has been prepared by the OECD Secretariat based on the proceedings of that meeting.
Principal speakers included Dr. Nariman Behravesh, Chief International Economist and Research
Director at Standard & Poor’s DRI, and Mr. Peter Unterweger, Head of the Automotive and
Mechanical Engineering Department of the International Metalworkers Federation. Their
contributions, reproduced on the responsibility of the authors, are included as Annexes 2 and 3. As
was the case for the main body of the text, the analysis was initially prepared in January 1999. Updates
through May 1999 have been undertaken where appropriate. Substantive contributions were made by
Thomas Andersson, Peter Avery, Adrian Connolly and Risaburo Nezu of the OECD Secretariat, and
by Dr. Zhang Gang, research fellow at the Stockholm School of Economics. The book is published on
the responsibility of the Secretary-General of the OECD. The content draws on and extends the
background material as well as the discussions which took place at the meeting, and does not
necessarily reflect the views of the OECD or its Member governments. Mention of companies, trade
names or commercial products does not constitute an endorsement or recommendation by the OECD
or the various bodies mentioned above.
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TABLE OF CONTENTS
Chapter 1 OVERVIEW, SUMMARY AND CONCLUSIONS...................................................9
Introduction................................................................................................................................9
The origins of the crisis...........................................................................................................11
The effects of the crisis on industry.........................................................................................12
Policy implications..................................................................................................................14
The challenge for policy design and implementation..............................................................16
Chapter 2 THE ORIGINS OF THE CRISIS..............................................................................19
Introduction..............................................................................................................................19
Country profiles.......................................................................................................................19
Structural weaknesses..............................................................................................................24
Conclusions..............................................................................................................................30
Chapter 3 THE EFFECTS OF THE CRISIS ON INDUSTRY.................................................31
Crisis economies......................................................................................................................31
OECD countries.......................................................................................................................35
Sectoral effects.........................................................................................................................38
Chapter 4 THE POLICY CHALLENGE...................................................................................43
The challenge for the crisis economies....................................................................................43
Challenges faced by individual countries................................................................................44
Specific areas of reform...........................................................................................................48
Implications for policy in the OECD countries.......................................................................51
Chapter 5 THE STRUCTURAL CHALLENGE FACING CHINA..........................................53
Introduction..............................................................................................................................53
The Chinese economy..............................................................................................................53
China’s industrial development since 1978.............................................................................55
Immediate outlook...................................................................................................................61
Structural issues.......................................................................................................................63
Conclusion...............................................................................................................................67
Chapter 6 CORPORATE FACTORS IN THE CRISIS: THE KOREAN SITUATION...........69
Corporate factors......................................................................................................................69
The Korean case.......................................................................................................................69
The role of corporate governance............................................................................................71
The process of corporate reform..............................................................................................72
Overcoming barriers to corporate reform................................................................................76
Conclusions..............................................................................................................................78
REFERENCES............................................................................................................................80
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Annex 1. Statistical Tables...........................................................................................................85
Annex 2. Industrial Aspects of the Global Financial Crisis.........................................................95
Annex 3. Trade Union Policies for Economic Restructuring and Crises...................................103
Annex 4. Effects of the Crisis on Industry: Country Assessments............................................119
Australia and the Asian Economic Crisis........................................................................121
The Impact of the Global Financial Crisis on Canadian Industry...................................133
Implications of the Global Financial Crisis for Czech Industry......................................139
Impacts of the Global Crisis: Turkey..............................................................................141
Figures:
1. Growth of real world GDP, 1970-2003.................................................................................10
2. Growth of real GDP in Indonesia, Korea, Malaysia, the Philippines
and Thailand, 1970-98..........................................................................................................11
3. Annual growth in manufacturing in selected Asian countries, 1990-98...............................33
4. Number of listed domestic companies, selected Asian economies, 1991-96........................54
5. China’s industrial output by ownership categories, 1978-97................................................56
6. China’s fixed asset investment by ownership, 1990-97........................................................56
7. China’s changing export structure, 1978-93..........................................................................58
8. China’s investment growth, January 1997 - December 1998................................................59
9. China’s industrial output growth, January 1997 - December 1998.......................................60
10. China’s trade development, January 1997 - December 1998...............................................60
11. China’s industry capacity utilisation ration, 1995................................................................63
Tables:
1. GDP and domestic demand growth in selected countries, 1997-99...................................... 9
2. Industrialisation plans in selected Asian countries................................................................25
3. Summary of major structural weaknesses.............................................................................29
4. Manufacturing indices in selected Asian countries, by period, 1997 and 1998....................32
5. Change in the dollar value of merchandise exports and imports...........................................33
6. Foreign direct investment in Indonesia, Korea, Malaysia, the Philippines
and Thailand, 1995-97..........................................................................................................34
7. GDP growth in OECD countries...........................................................................................35
8. Trade growth in manufactured goods....................................................................................36
9. Prices for selected metals, June 1997 and December 1998...................................................41
10. Trade to GDP ratio, 1980-96................................................................................................55
11. Foreign direct investment in China, 1979-97.......................................................................57
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Boxes:
1. Early signs of structural weakness......................................................................................... 12
2. Industrial restructuring in Malaysia (1991-95)...................................................................... 21
3. Industry-related factors in the Asian crisis economies.......................................................... 29
4. The case of Toyota and Honda in Thailand........................................................................... 37
5. The case of Seagate Technology........................................................................................... 37
6. Industrial restructuring in Thailand (1998-2002).................................................................. 47
7. China’s shipbuilding industry: facing international competition........................................... 62
8. China’s textile industry: over-capacity, redundancy and restructuring.................................. 64
9. Financial reform: a remaining major challenge for China..................................................... 65
10. China’s steel industry: the need for technological upgrading............................................... 66
11. Corporate factors in other Asian economies......................................................................... 73
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