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Accumulated savings become investments. And these in turn
expand economic output and create new jobs, or expand the productivity of
those who already have jobs. Such is the
beauty of continued investments and savings accumulation.
In many recent social literatures though, including those
coming from the multilateral institutions and foreign aid bodies, there is
growing disapproval if not outright
contempt, of rising inequality within and among nations as they
grow faster, as they attract more
investments and expand economic production. Thus, the repeated call for
“inclusive growth”, previously called as “growth with equity” or “broad-based
growth”.
To improve social equality within countries, some
governments have erected various
restrictions to foreign direct investments
(FDIs). The Philippines for instance has that restriction in the 1986
Constitution itself, where in some sectors, foreign investments is totally
prohibited while in some sectors, it is allowed up to 40 percent.
Such restrictions make some foreign investors find other
ways to come in and do business. Like having local dummies, so foreign money is
able to penetrate even in sectors that
is explicitly reserved for the local investors. But many foreign investors do
not like that arrangement as it lacks transparency, and they cannot report to
their shareholders and regulators in both home and host countries that they
have invested in companies that are supposed to be 100 percent locally-owned.
The next route for foreign investors is via the stock
market. Not all of such market capitalization is foreign-owned of course, there
are also many local investors in each country. Here are the figures for major
Asian economies.
Source: WB, World Development Indicators 2014, http://wdi.worldbank.org/table/5.4
North East Asia except N. Korea is generally developed. The
economies there are able to attract plenty of domestic and foreign investments
that create plenty of higher productivity jobs.
South East Asia generally are emerging economies, except
Singapore which is already a developed economy, and the three catching up
economies of Laos, Cambodia and Myanmar.
South Asia though remains not so friendly to the stock
market system, except India. Nepal in particular is the least friendly or least
attractive to investors in the stock market.
In terms of FDIs in South Asia, the levels remain very
low on average, except for Maldives.
Figure 2. Average
FDI Inflows to South Asia, 2000-2011, Percent of GDP
Source: World Bank, Trends
and Determinants of Foreign Direct Investment in South Asia, June 16, 2013
There is a need to encourage more investments, local and
foreign, in stock market and FDIs, to Asian economies. Investments not only
refer to money. They also include tools and machineries, technology and processes,
research and development, managerial skills and marketing initiatives.
Social and economic
inequality is inevitable as people have different goals and ambitions in
life, different network and exposure in business, use different technology and
managerial styles.
What is important is that opportunities should be
available for the people so they can manage their lives and career. The
business climate in Asian economies should become more friendly, more
accommodating to investors, local and foreign. People can decide to be
hardworking or lazy, be ambitious or complacent, if different jobs have become
more available in their countries and communities.
The important subjects of growth and investments, inequality and justice, will be discussed for two days this coming November 6-7, 2014, during the Economic Freedom Network (EFN) Asia Conference 2014 to be held in Hong Kong. The event will be jointly-sponsored by the Friedrich Naumann Foundation for Freedom (FNF) and the Lion Rock Institute (LRI). FNF is a German political foundation spreading the ideas of (classical) liberalism, free market, human rights and rule of law while LRI is Hong Kong’s first free market think tank.
This writer will attend this important conference. It is
hoped that more participants from Nepal and South Asian nations will be able to
come and hear the healthy and productive exchange of ideas and experiences
among other participants from North- and South-East Asia, as well as their
friends and network from the US, Canada and
Germany.
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See also:
Business 360 15: How to Improve Economic Freedom in Asia, January 22, 2014
Business 360 15: How to Improve Economic Freedom in Asia, January 22, 2014
Business 360 16: ASEAN Economic Community 2016, March 21, 2014
Business 360 17: Electricity and GDP Growth, April 15, 2014
Business 360 18: Innovation, Inequality and Inclusive Growth, August 25, 2014
EFN Asia 40: Liberalism, Growth and Reducing Inequality, August 19, 2014
EFN 41: Program of Conference 2014, Hong Kong, September 30, 2014
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