Economic geography

Centre for international economics and shipping – is a joint centre for The Norwegian School of Economics and Business Administration (NHH) and The Foundation for Research in Economics and Busi ness Administration (SNF). The centre is responsible for research and teaching within the fields of international trade and shipping. International Trade The centre works with all types of issues related to international trade and shipping, and has part icular expertise in the areas of international real economics (trade, factor mobility, economic integration and industrial policy), international macroeconomics and international tax policy.

Research at the centre has in general been dominated by projects aiming to provide increased insight into global, structural issues and the effect of regional economic integration. However, the researchers at the centre also participate actively in projects relating to public economics, industrial policy and competiti on policy. International Transport International transport is another central area of research at the centre. Within this field, studies of the competition between different modes of transport in Europe and the possibilities of increasing sea transport w ith a view to easing the pressure on the land based transport network on the Continent have been central.

Maritime Research One of the main tasks of the centre is to act as a link between the maritime industry and the research environment at SNF and NHH. A series of projects that are financed by the Norwegian Shipowners Association and aimed directly at shipowning firms and other maritime companies have been conducted at the centre.

These projects include studies of Norwegian shipowners’ multinational ac tivities, shipbuilding in Northern Europe and the competition in the ferry markets. Human Resources The centre’s human resources include researchers at SNF and affiliated professors at NHH as well as leading international economists who are affiliated to the centre through long – term relations. During the last few years the centre has produced five PhDs within international economics and shipping. Networks The centre is involved in several major EU projects and collaborates with central research and educa tional institutions all over Europe.

There is particularly close contact with London School of Economics, University of Glasgow, The Graduate Institute of International Studies in Geneva and The Research Institute of Industrial Economics (IUI) in Stockhol m. The staff members participate in international research networks, including Centre for Economic Policy Research (CEPR), London and International Association of Maritime Economists (IAME). The Philippines – The Sick Man of Asia? Economic development in the Philippines after 1946 by Hans Jarle Kind Norwegian Research Centre in Organization and Management/ Norwegian School of Economics and Business Administration.

Rosenbergsgate 39, N – 5015 Bergen, Norway Hans. [email protected] no Abstract The Philippines has been labelled the Sick Man of Asia. In the early 1950s the Philippines was among the richest and most advanced countries in Asia, but has been surpassed by many of its neighbours over the last decades. In this paper we argue that though the political and economical system of the Philippines has been highly inefficient, it is not entirely correct to use the Sick Man label. The Philippine performance has not been much worse than that of other poor middle – income developing countries.

Some of its neighbours ha ve, however, departed from import substitution policies at a time that has allowed them to take advantage of the growing demand for manufacturing goods and the spread of industry in Asia. iv Non – technical summary Measured on a GNP per capita basis, the Phi lippines has been among the poorer half of developing countries in the entire post World – War II area. The average growth rate in the period 1960 – 1997 was 0. 9%, which is marginally better than the average for lower middle – income countries. In this respect t he Philippines has neither done particularly well nor particularly poorly the last decades.

However, the Philippines had the second highest GDP per capita and the most ‘modern’ production structure of all Asian countries in the early 1950s, only beaten by Japan. During the following decades the picture changed completely, however, and in this respect something has gone terribly wrong for the country. In this paper we review the industrial and political climate in the Philippines after 1946, and compares th e development in the Philippines with that of Hong Kong, Singapore, South Korea and Taiwan (the first generation of Asian tigers) and Indonesia, Malaysia and Thailand (the second generation of Asian tigers).

We then use the new economic geography literatur e to give a possible explanation of why the Philippines has developed so unfavourably compared to its successful neighbours. Our main argument is that the latter economies departed from import substitution at a time that allowed them to take advantage of t he spread of industry in Asia. The increasingly higher cost level in Japan made the relatively open economies Hong Kong, Singapore, South Korea and Taiwan favourable locations from the early 1960s.

As these countries experienced higher cost levels along wi th their rapid industrialization, the industry in the 1980s spread further to Indonesia, Malaysia and Thailand, who had just adopted a more outward oriented trade policy. In this sense it may partly be a coincidence that their trade liberalization policies were so successful. We further argue that since the second generation of tigers still have capacity for more industrial activity, it is not obvious that the Philippines will gain very much by liberalizing trade today. Some Asian economies have been very successful in attracting foreign direct

investments (FDI), and in this paper we also provides a comparison between FDI inflows to the Philippines and the second generation of Asian Tigers. There have been four major waves of FDI flows to the Asian countrie s in the post – war period. The first wave was motivated by the import substitution policies that most Asian countries followed in the late 1960s, and by the first major revaluation of the yen. During this period FDI inflows to the Philippines were greater t han to Thailand, with Malaysia as the largest recipient of the ASEAN – 4 countries and Indonesia the second largest.

The second wave, which occurred in the 1970s, was mainly caused by the apparently good economic prospects for the region and the availability of cheap v capital. This wave included both import substituting and export – oriented production by American firms, with significant increases in FDI inflows to most of the East and Southeast Asian countries. The third wave started in the mid 1980s, and was c aused by a need for firms in Japan and some of the NICs to relocate to countries with lower wage levels.

The fourth and ongoing phase is characterized by massive FDI inflows to China. The Philippines was relatively successful in attracting FDI inflows dur ing the first wave, because it offered foreign investors access to a highly protected domestic market. However, the low income growth in the Philippines implied that the country was not particularly attractive for import substituting foreign direct investm ents on a large scale. An inefficient and corrupt bureaucracy, together with high tariff barriers, has further made it cumbersome and expensive for firms in the Philippines to participate in international trade.

The Philippines therefore missed out on both the second and third waves of FDI to the Asian countries. Despite several attempts to liberalize trade and improve the bureaucracy, the country has been only moderately successful in attracting FDI also in the recent years. A main reason for this may be t hat the country does not seem to have any clear locational advantages, and is plagued by a very poor infrastructure and a bureaucracy that still has a poor reputation.