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Economic
Liberalization and GDP Expansion
Economic liberalization, such as having freer trade in
goods, freer mobility of people and
services, a better flow of investments and capital across countries and
continents, almost always unleashes human potentials and talents. Where there
used to be “impossible” mindset, slowly they become possible as economic,
social and cultural changes unfold.
South Asia has huge potential, mainly because of its huge
population and diverse geography -- from world-class beach resorts of Maldives to the
scenic mountains of Bhutan and India, up to the sky-hugging Himalayas of Nepal.
What land-locked countries lack in terms of access to the ocean, they make up with
mountains that can easily attract visitors and investors from around the world.
The infrastructure to make this happen, such airline liberalization and
competition, airport modernization and electricity supply stabilization, should
be put in place.
The International Monetary Fund (IMF) released its annual
World Economic Outlook report in mid-April this year. It points out some
interesting points, such as the fact that in the Purchasing Power Parity (PPP)
valuation of Gross Domestic Product (GDP),
China has overtaken the US in 2014 as the world’s largest economy. In
terms of nominal values though, the US is still number one.
Below are the numbers for South Asian economies.
Table 1.South Asia
GDP Sizes at PPP Valuation, in Billions of Current International Dollars
The column on Multiple is not part of the IMF report, it was added in this paper.
A number of South Asian economies are not liberalizing
fast enough. That is displayed by rather
low expansion of their GDP size, only 3-4 times of expansion after two decades.
Bhutan, India and Maldives have displayed good and impressive economic
expansion.
In comparison, four South East Asian economies that
liberalized only over the past two decades, and liberalized fast enough, have experienced
GDP expansion of 5-6 times. These are Cambodia, Laos, Myanmar and Vietnam
(CLMV). Indonesia is added in this table because it is the biggest economy and has
the biggest population in the respective region.
Table 2.Selected South
East Asia GDP Size at PPP Valuation, Billions Current International Dollars
* 1998, earliest data for Myanmar.
The agreement among the 10-members Association of South
East Asian Nations (ASEAN) was faster and accelerated liberalization in trade
and investments. So these four economies that emerged from big political
instabilities and even civil wars until the 70s started with protectionist
mindsets. Their membership in the ASEAN slowly changed their mindsets to
embrace faster economic liberalization, at least among their neighbors in the
region. So far, the results for them have been generally positive.
Faster economic liberalization allows quicker
reallocation of resources – people, capital, technology, land – to sectors
where they are most needed. Price inflation signals people where they will be
compensated higher, as workers, managers or entrepreneurs.
A free market gives individuals the chance to decide on
prices and run a business independently, while all individuals are producers
and consumers at the same time. Thus, a free market for people means they are
free to sell their products or their labor to other people who can compensate
them higher. It also means freedom of people to reject goods and services that
are of inferior value, thus forcing people to continuously improve their
products and services, improve their skills, talents and human relations.
In the end, a free market can help the poor, give them
jobs, or allowthem to become start up entrepreneurs.
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See also:
Business 360 21: Cheap Oil and Nepal, February 20, 2015
Business 360 22: Nepal's Tourism Potential, February 23, 2015
Business 360 23: Electricity and Development, March 07, 2015
Business 360 24: Reducing Construction and Electricity Permits, April 08, 2015
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