BWorld 214, Disruption in global economic power

* This is my article in BusinessWorld last Monday, May 21, 2018.

The past three decades showed major disruptions in global politics and economics. These include the fall of European socialism with the collapse of the Berlin Wall in 1989, the creation of many new countries from the former USSR, the move towards freer trade with the creation of the World Trade Organization (WTO) in 1995, and the transition from heavy central planning to the market economy of two big socialist economies in the world, China and Vietnam.

Disruption in macro economy and business is a result of endless innovation by new players both in business and politics. What used to be dirt-poor economies have transformed to middle-income, Internet-savvy ones.

Let us review global economic performance over the past 25 years. We use 1992 as base year because there was no WTO at that time so many economies were still grappling with trade restrictions and by extension, investment constraints. The then top 10 East Asian economies are covered here (see table).

These numbers show the following disruptions over the past quarter of a century.

One, China’s communist central planning until the ’80s has resulted in a very poor economy. Its transition to some principles of the market economy resulted in massive turn-around towards more prosperity: GDP size has expanded 24x in current prices and nearly 16x in PPP values.

Two, India has similar economic policies with China until the ’80s, very nationalistic, socialist, and restrictive. Its transition to some market reforms allowed it to expand its GDP size nearly 9x.

Three, seven to eight ASEAN economies have experienced GDP size expansion of at least 5x in just 25 years, whether in current prices or PPP values. Only Thailand and Brunei failed to expand 5x because they have a relatively high economic base in 1992 or earlier.

Four, traditional rich economies of Europe, Japan, and US were only able to expand three times at most. This is because they already have a high economic base in 1992, and they have become more regulated and more bureaucratic recently owing to very high labor, energy, environment, and other standards.

Going to the micro and enterprise level, many previously domestic and nation-limited companies in East Asia have become regional players and multinationals initially, then became global players.

The Philippines for instance has produced a number of big regional players: San Miguel, SM, Jollibee, Unilab, Zuellig, Max’s, and Pilmico/Aboitiz.

There are many new players that experienced disruptive ascent in just a few years of existence, like Udenna/Phoenix/Chelsea, Voyager, Mobext, AdoboMall. Their CEOs and presidents were among the speakers in the BusinessWorld Economic Forum 2018.

Endless innovation has brought new players to the top and they are the disruptors of the corporate status quo. But their ascent to the top is not guaranteed because new breed of disruptors are being born and created every year.

The market economy has an inherent disruptive, innovative, and subversive nature. Corporate expansion and bankruptcy, boom and bust, are 100% part of its DNA. This uncertainty and several other disruptions may be bad for existing players but they will always be good for consumers. Satisfying consumers is the single biggest challenge to all players, old and new.

The Philippine and Asian governments should ride the wave of disruptions and allow more market reforms, more deregulation, de-bureaucratization and less taxation of the business environment. Governments’ goal of more welfare, less inflation to the people can be better provided by a competitive and dynamic economy. Plenty of private players can create more jobs and produce newer products and services at lesser cost, better quality, and more variety.

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See also:

BWorld 211, Intellectual property, innovation, and prosperity, May 20, 2018 

BWorld 212, Commodities competition and the mining debate, May 21, 2018 

BWorld 213, Disruption, inflation and taxation, May 23, 2018

BWorld 143, Coal power and economic development

* This is my article in BusinessWorld on July 12, 2017.

Cheaper and stable energy means cheaper production costs for the industrial, agricultural, and services sectors of the economy. Cheaper energy also results in increased convenience for consumers too as many activities now are impossible without stable electricity supply.

In the modern history of Asian economies’ rapid growth, the use of coal power is an important contributor for their economic expansion.

These numbers show three important things:

(1) Countries that have high and fast coal consumption are also those that experienced faster economic expansion (at least three times expansion of GDP size). Most especially China, India, South Korea, Indonesia, Vietnam, Malaysia, and Philippines.

(2) Countries with declining coal use are also those with slow economic expansion (below three times expansion of GDP size). Most notable are the US, Russia, Germany, and UK.

(3) Philippines’ coal use is actually small compared to its neighbors; its 2016 use is just nearly 1/2 of Malaysia and Vietnam’s consumption, just 1/3 of Taiwan’s and almost 1/5 of Indonesia’s. South Korea, Japan, India, and China’s consumption are many times bigger than the Philippines’.

Recently, groups have suddenly scored seven coal power plants that entered into power supply agreements (PSA) with Meralco last year. These coal projects are (1) Atimonan One Energy (A1E) 1,200 MW, (2) Global Luzon (GLEDC) 600 MW, (3) Central Luzon Premiere (CLPPC) 528 MW, (4) Mariveles Power (MPGC) 528 MW, (5) St. Raphael Power (SRPGC) 400 MW, (6) Redondo Peninsula (RPE) 225 MW, and (7) Panay Energy (PEDC) 70 MW.

This covers a total of 3,550 MW of stable and affordable energy that can lead to cheaper and reliable electricity supply for more than 20 million people in Metro Manila, Bulacan, Rizal, Cavite, Laguna, and parts of Batangas and Quezon provinces.

These groups -- Center for Energy, Ecology, and Development (CEED), Philippine Movement for Climate Justice (PMCJ), Sanlakas, Freedom from Debt Coalition (FDC), Koalisyong Pabahay ng Pilipinas (KPP), Power for People (P4P) member organizations, others -- argue that coal plants are detrimental for the people’s health and livelihood as well as bad for the environment.

They are wrong.

What is bad for the people’s health and livelihood are more candles and noisy gensets running on diesel when there are frequent brownouts coming from intermittent, unreliable renewables like solar and wind. Candles are among the major causes of fires in houses and communities.

What is bad for people’s health and security are dark streets at night that contribute to more road accidents, more street robberies, abduction and rapes, murders and other crimes. Many LGUs reduce costs of street lighting when electricity prices are high (ever-rising feed-in-tariff or FiT for renewables, more expensive oil peaking plants are used during peak hours, etc.). Expensive and unstable electricity can kill people today, not 100 years from now.

Seeking to disenfranchise some 3,550 MW of stable and cheaper energy supply from seven coal plants is suspicious. There are no big hydro, geothermal, and biomass plants coming in. Wind and solar are limited by their intermittent nature, have low capacity factors, high capital expenditures, and often are located far away from the main grid. The only beneficiaries of disenfranchising big capacity coal plants then would be the owners of new natural gas plants.

Are natural gas cheaper than coal power? From the recent experience of Mindanao where many big coal plants were commissioned almost simultaneously, the answer seems to be No. The generation price in Mindanao has gone down to below P3/kWh, on certain days even below P2.50/kWh. Which means coal power has big leeway for lower price if competition becomes tighter. This cannot be said of natural gas plants here.

Consumer groups and NGOs should bat for cheaper, stable electricity. If they fight for something else like intermittent and expensive renewables, or more expensive gas plants, then they abdicate their role as representatives of consumer interests. Pathetic.

Bienvenido S. Oplas, Jr. is the head of Minimal Government Thinkers and a Fellow of SEANET, both are members of Economic Freedom Network (EFN) Asia.

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See also:
BWorld 128, The quest for more stable and cheaper electricity in the ASEAN, May 08, 2017 
BWorld 140, Mineral rent and taxation, June 23, 2017 
BWorld 141, Reducing system loss, Part 2, June 30, 2017 
BWorld 142, PPP vs ODA, Part 3, August 08, 2017

BWorld 106, Top 10 projections for Asian economies

* This is my article in BusinessWorld last January 12, 2017.

Taking off from the paper by a friend and fellow columnist Romy Bernardo’s “Wishes for the economy in 2017” last Monday, this paper will make some raw projections of GDP size until 2026.

The base document is the IMF’s World Economic Outlook (WEO), October 2016 database. In the table below, GDP size is based on purchasing power parity (PPP) values, not nominal or current values. Actual data for 2006, 2016, and 2021 are IMF projections.

Now this paper will take a longer but very raw view by projecting potential GDP size by 2026. Here is the raw and crude methodology.

(a) Take the GDP multiple or expansion from 2026 to 2021 per country, call it Y.

(b) Assume that the same degree of expansion will occur from 2021 to 2026.

(c) GDP 2026 = GDP 2021 x (1 x Y).

Readers with more advanced data and econometric tools will scoff at this raw methodology but please understand that this is just an attempt and the limitations of the assumption have been stated. So here is what we can project in the next few years.

From this table, we can summarize important projections for selected Asian economies.

1. In 2016, four Asian countries would remain in the 10 largest economies in the world: China, India, Japan, and Indonesia.

2. Six of the 10 ASEAN countries would belong to the Top 40 largest economies in the world in 2016: Indonesia, Thailand, Malaysia, Philippines, Vietnam and Singapore.

3. By 2021, Indonesia will overtake Brazil in the seventh spot and will be in a striking distance to dislodge Russia in the sixth spot.

4. Also by 2021, the Philippines will rise to the 26th spot and Malaysia will rise to the 27th spot, overtaking Argentina and Netherlands. Malaysia and the Philippines will also belong to the club of trillion-dollar economies by around 2018 or 2019.

5. Vietnam will rise from its 36th spot in 2016 to 33rd or 32nd in 2021, overtaking UA Emirates, Algeria, and Iraq, and possibly South Africa.

6. By 2026, assuming that the raw projections will somehow hold, the combined size of China and India will be larger than the combined economies of US, Japan, Germany, Russia, Brazil, UK, France, Mexico, and Italy.

7. Also by 2026, Indonesia will become the 5th largest economy in the world, overtaking Japan, Germany, Russia, and Brazil.

8. And the Philippines will rise to the 22nd spot, further overtaking Taiwan, Nigeria, and Poland. It will also be in a striking distance to overtake Thailand and Australia by then.

9. Pakistan and Vietnam, also having big and young population like India, Indonesia, and Philippines, will also significantly expand their economic sizes and improve their ranking.

10. While Japan is expanding marginally, South Korea will sustain its growth. Now, a collapse of North Korea (possible within the next six to eight years) and unification of the two Koreas will possibly make them overtake France in the #10 spot.

Many things will happen in the coming years so those IMF projections for 2021 and the assumptions made in this paper for 2026 can be considered as suggestions with some material basis. We still take actual numbers as they become available as basis for policy reforms.

Other Asian governments should take lessons from the experience of Europe and Japan: an ageing population will be a drag in further economic expansion. Policies that control population or heavily restrict migration are wrong, as wrong as trade protectionism, heavy taxation, and stifling business regulations. Governments should avoid these policies.
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See also:

BWorld 102, Top 10 news of 2016, January 10, 2017

BWorld 103, How to improve the RORO system, January 11, 2017

BWorld 104, Top 10 positive news in Asian trade, January 14, 2017

BWorld 80, Declining share of agriculture in GDP

* This is my article in BusinessWorld last August 18, 2016.

A declining share of agriculture gross value added (GVA) in GDP (gross domestic product) is often viewed negatively by many sectors because it implies that a country is not prioritizing rural development and job creation. Is this a valid observation? Let us review some agriculture data of the Philippines and compare them to its neighbors in the ASEAN and then we tackle that question in the latter part of the paper (see Table 1).

The numbers above tell us the following.

1. In terms of land area devoted to agricultural crops, Thailand and the Philippines are the most agriculture-oriented in the ASEAN. Singapore is obviously the least agriculture-oriented.

2. In land area devoted to forest, the Philippines and Singapore have the smallest forests in square kilometers. This is despite the increase in the Philippines from 22% in 1990 to 25.4% in 2013. Laos, Brunei, and Malaysia lead in this category.

3. In terms of deforestation (conversion from forest to non-forest land uses), the highest or fastest rate from 1990 to 2013 was experienced in Cambodia, which declined by 18%; Indonesia and Myanmar, which both declined by 14%. Still, their respective forest covers remain high.

4. Those that experienced an increase in both agriculture and forest as percent of land area from 1990 to 2013 are Thailand, Vietnam, and the Philippines. Laos too, though at low rate. One possible explanation for this would be a double counting in the case of agro-forestry plantations. The Department or Ministry of Agriculture would count them as agricultural lands while the Department or Ministry of Environment/Forestry would count them as forest lands.

5. Those that have big potential for more agriculture land expansion are Laos (only 10% in 2013) and Myanmar. Becoming big rice exporters like Thailand and Vietnam will be a big possibility for these two countries (see Table 2).

The above numbers tell us the following.

1. In terms of agriculture GVA per worker, Brunei and Singapore are the highest, their huge wealth allows them to employ high technology farming per hectare of land in the region. The Philippines is on a similar level as Indonesia and Thailand while the lowest, surprisingly, is not Laos or Cambodia but Vietnam.

2. Agriculture GVA as percent of GDP, Cambodia, Laos and Vietnam are the highest and the Philippines is again on similar level as Thailand and Indonesia.

3. Notice how the Philippines has reduced this ratio for more than two decades by one half, from 22% in 1990 to only 11.3% in 2013. Laos and Vietnam also made this fast transition of reducing the share of agriculture to GDP.

So, is a declining share of Agriculture/GDP bad for the economy in general and rural folks in particular?

No. The cases of our more developed neighbors Singapore, Malaysia and Thailand, as well as other rich East Asians like Japan, South Korea, Hong Kong, and Taiwan show that this is the trend that they exactly experienced.

This means that while agriculture is growing, the industry and services sectors are growing much faster and hence the denominator, overall GDP size, is growing faster too.

The services sector is important because it is the forward linkage of both agriculture and industry. Producing lots of vegetables, fruits, chicken, rice, fishery, and cattle products will be limited and compromised if there are not many restaurants, supermarkets, public markets, talipapa, carinderia, litson manok and related outlets -- all of which are in the services sector.

Proposals therefore to pour more public resources and tax money to the farmers like free or highly subsidized tractors, machine harvesters, seeds, irrigation, rice subsidy via the NFA, etc. to “correct past negligence” of agriculture may not be always correct.

Important players in the industry and services sectors like big food manufacturers, big supermarket chains, big restaurant chains, rice traders, etc. extend various technological, financial, and market assistance to their contract growing partner farmers to ensure high output and lower post-harvest losses.

Government support to agriculture should be limited therefore to basic infrastructure like modern farm to market roads and bridges, seaports for quicker delivery of bulk produce from big islands like Mindanao, Panay, and Mindoro. And more dams and big water impounding projects mainly for (a) controlling fast flood during heavy rains, impound the water, and (b) irrigation when the rainy season has subsided or ended.

Bienvenido S. Oplas, Jr. is the head of Minimal Government Thinkers and a SEANET Fellow.

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See also:
BWorld 76, Solar can never power the PH and Asia, August 06. 2016 
BWorld 78, If the US becomes protectionist, who loses? August 11, 2016 
BWorld 79, Brownouts, coal power and the electricity market, August 21, 2016

B360-36, GDP expansion in South Asia, 1995 - 2015

* This is my article in the business magazine in Kathmandu, May 2016 issue.

GDP expansion in South Asia from 1995 to 2015

Anywhere in the planet, the pursuit for faster and quicker economic growth by countries and economies is being sought and tested. This is because no amount of income and property redistribution will be successful if the economic pie remains small. The pie must expand first so that the share of various sectors and stakeholders will rise in absolute amount, even if their percentage share remains the same or small.

Let us review the economic expansion of South Asian economies over the past two decades, from 1995 to 2015, and draw some lessons from them.

In nominal prices, India’s GDP has expanded 5.7x; Pakistan’s GDP by 3.4x; Bangladesh’s by 4.5x; Sri Lanka’s by 6.3x; and Nepal’s by 4.2x.

In PPP values for the same period, India’s GDP has expanded by 5.6x; Pakistan’s by 3.3x; Bangladesh’s by 4.5x; Sri Lanka’s by 4.4x; and Nepal’s by 3.3x. These are modest growth and may be fine, although certain sectors in these countries would be unhappy with such expansion of their economy after 20 years. They would wish to copy many South East Asian economies that expand their GDP by 6-10x after two decades. 

 Notice Japan’s economy: in nominal prices, its GDP has stunted while in PPP values, the economy expanded less than 2x after two decades. Whereas economic expansion in China was buzzing at a fast rate.

In per capita GDP at current or nominal prices from 1995 to 2015, South Asian economies’ per capita income has expanded between 2.2x (Pakistan’s) to 5.3x (Sri Lanka’s). In PPP values, the per capita income expansion was between 2.1x (Pakistan’s) to 4.2x (Maldives’).

Compared to the levels enjoyed by developed Asian economies like Singapore, Brunei, Hong Kong and Japan, their per capita GDP are really huge. 

If we review again the growth trajectory of many Asian tiger economies aside from Japan – S. Korea, Taiwan, Singapore and Hong Kong – they managed to grow fast because of (a) market- and outward-oriented economic policies, (b) technological advances and competition, and (c) prevalence of the rule of law. So while their governments started with cronyism and state-sponsored industrialization, the main contribution of their governments was the promulgation and respect for the rule of law. Laws that generally apply to everyone, little or no exception.

Doing business in this kind of environment is stable and relatively easier. Entrepreneurs can put their huge savings and borrowings to long-term business projects knowing that rules and policies remain for many years and not changed midway to favor certain business interests that are close to the President or Prime Minister of the country.

It is good that a number of South Asian economies are slowly realizing this. More trade liberalization, whether via regional, bilateral or unilateral liberalization, any of such move will produce net gains (advantages are larger than disadvantages) because people trade only if they realize there is net gain for them.

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See also:

Business 360-33, Cheap energy now and in the future, January 28, 2016

Business 360-34, Hydropower in Asia, March 17, 2016 

Business 360-35, Economic expansion in South Asia, May 28, 2016

Macro Econ Update

My sister's accounting and auditing firm, Alas Oplas and Co., CPAs (AOC) has produced a new monthly publication, the Business and Economic Update. Issue no. 1 for this month was released last week. I helped in producing that paper.

In the coming months, the publication will tackle sectoral issues like energy, trade and investment, healthcare, agriculture, public finance, and so on.

AOC has many local clients, and some multinationals, doing business in different sectors of the PH economy. The firm is also affiliated with BKR International, a global network of accounting and auditing firms with about 500 partner firms worldwide. AOC is the only partner firm in the PH.

So issue #1 introduces the readers to the macroeconomic view of the PH economy in relation to  its neighbors in the ASEAN, North Asia and South Pacific, Europe and North America. Multinational companies and partner firms of BKR International will find the data useful.

Here are the macro data.

The size of countries' GDP now is getting more and more related to the size of their population, unlike before. This is because with increasing globalization and global mobility of goods and services across countries and continents, more people have more access to various economic opportunities. Thus, the economic size of countries with bigger population tend  to expand larger than countries with smaller population.

And unemployment data. Underemployment data is not included as there seems to be no internationally-comparable definitions and data.

Check it out guys, thank you.
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See also:
Ipagbawal ang GDP Growth, Part 3, April 06, 2015 
BWorld 1, PH Economy and Politics, Is there a Disconnection?, April 24, 2015 
Demography 23: The UN, Depopulation and Climate, May 03, 2015 
Why are Interest Rates so Low?, May 05, 2015
Market Reforms in the 2016 Elections, May 25, 2015

Energy Econ 25: Coal Use and GDP Expansion, Is There a Correlation?

* This is my article in thelobbyist.biz last Friday.
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Energy is development. The more energy and electricity that an economy can provide for its citizens and private enterprises at low price and stable supply, the bigger is the growth and development potential of the economy.

There is growing public interest for renewable energy like solar and wind and this is fine. But when there is also corresponding high opposition to coal, petroleum and even natural gas, then public policy is distorted, like more taxation of conventional sources, royalties for Malampaya natural gas. While the renewables are guaranteed of high electricity prices that will be passed on to the consumers, via feed in tariff (FIT) for wind, solar, biomass and run-of-river hydro. People do not recognize and appreciate the value that conventional energy sources have played in alleviating poverty and underdevelopment in the developing world.

For instance, there are claims like “more coal energy = more climate crime”, or “more coal power plants are anti-developmental.” How true or untrue are these and similar claims?

Let us check some regional and global energy and economic data. In particular, global coal consumption as this is among the pet peeves of those pushing for more environmental regulations, energy rationing and carbon taxation.

In 2010, the latest comparative energy data of Asian Development Bank’s (ADB) Key Indicators, slightly more than one-third of the Philippines’ total energy production came from coal. For Indonesia, it is 40 percent. Those that are highly dependent on natural gas are Brunei, Singapore, Thailand, Malaysia and Vietnam.

Table 1. Energy Mix in the ASEAN, 1990 vs. 2010, Percent of Total Energy Production

Source: ADB, Key Indicators for Asia and the Pacific 2013

Here now is the global data for coal consumption.

Table 2. Top Coal Consumers Around the World, 1985 to 2013

(in Million Tons of Oil Equivalent,MTOE))

Source: http://www.bp.com/en/global/corporate/about-bp/energy-economics/statistical-review-of-world-energy.html

The last column is not part of the original data, added and created only in this paper.

The above numbers show the following:

First, China consumes half of all coal power in the entire planet as of 2013, and the level is almost 5x that of their 1985 consumption level. Its appetite for more coal power seems to remain the same in the coming years.

Second, India and Indonesia join China as among the world’s biggest consumers of coal. India’s 2013 consumption was 4.7x larger than its 1985 consumption. Indonesia’s is 60x much larger. This is because Indonesia has become a major coal producer and exporter in recent years.

Third, by continent and economic group, Asia-Pacific countries consume nearly three-fourth of the total coal output of the planet. Coal however, is least preferred in Africa as well as South and Central America. And it is in the Asia-Pacific where substantial economic growth and poverty alleviation has been happening for the past three decades or more.

Now,  let us review global economic growth over the same period.  The figures for 1995, 2005, 2011 and 2012 are also given for additional information that some readers may wish to see. Data from the International Monetary Fund (IMF).

Table 3. GDP Size Based on Purchasing Power Parity (PPP) Valuation, 1985 to 2013

(in Billions of international dollars)

Source: IMF, World Economic Outlook April 2014 Database, www.imf.org

The last column is not part of the original data, added and created only in this paper.

Notice that countries highlighted in bold in Table 2 are generally the same as those highlighted in Table 3. Meaning those that consumed coal energy faster also grew economically faster. Of course this is not to say that coal power consumption is the primary or sole important contributor to faster economic growth.

We now lay down the major players in both coal consumption and GDP growth over nearly three decades. Is there any correlation?

Table 4. Ten Fast Coal Consumers and their GDP Expansion, 1985-2013

Sources: Tables 2 and 3 above.

This summary table shows the following:

* Of the 10 countries that were fast coal consumers over the past 28 years, meaning their 2013 coal consumption were at least 4.5x their 1985 level (in contrast to many other countries with coal consumption multiples of only around 2.5x),   eight have high GDP expansion over the same period. For instance, China and India GDP levels have multipled by 25x; S. Korea and Malaysia GDP levels multipled by nearly 10x, in just 28 years.

* Only Mexico and the Philippines in the above table, fast coal consumers, whose  GDP expansion were the not-so-fast of less than 6x.

*  Singapore and Vietnam economy expanded by 11 - 12x, also very fast compared to many other countries, even though they are not major or fast coal consumers. They are largely dependent on natural gas, as shown in Table 1.  

* This crude comparison has established  a general correlation between coal consumption and GDP expansion. Of course other studies would use more sophisticated econometric models to make any categorical statement. But such finding is easy to explain.

Coal is relatively cheap and a stable energy source. A 100 MW coal power plant can deliver 100 MW 24 hours day, not 80 or 60 MW or lower. In contrast, a wind or solar power plant with rated cap of 100 MW will be very lucky if it can deliver 40 MW sustained for 24 hours. Usually their average dependable capacity is only around 20 percent, or just 20 MW only. So how can an economy develop fast if there is frequent brown out, because the power plant can deliver only 10 or 20 or 25% of its rated capacity? Industries and factories, malls and offices depending on wind and solar must have back up generator sets running on expensive fuel, that must run any hours daily, and this will raise their cost of production and operation.

The WWF yearly campaign of "celebrate darkness" even for one hour is idiotic.  WWF gets lots of money from donations and UN or government funding, by promoting irrationality in energy policy.

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See also:

Energy Econ 21: Joint Statement on EPIRA Implementation, May 27, 2014

Energy Econ 22: FEF on FIT for Solar Power Plants, June 13, 2014

Energy Econ 23: Death of Australia's Carbon Tax, July 17, 2014

Energy Econ 24: NPC Debt, PSALM and Universal Charges, August 02, 2014

Fat Free Econ 54: WEF and East Asia Growth Story

* This is my article yesterday in interaksyon.com.
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MANILA - The World Economic Forum (WEF) is among the unique inventions in promoting global economic and social dialogue among many sectors of different countries around the world.

While the United Nations and its many affiliate organizations (WHO, ILO, IMO, WMO, FCCC, etc.), WB, IMF, WTO, OECD, APEC and other multilateral institutions are all government clubs, or composed of governments only, WEF and similar international fora are private sector-initiated, invite participants from governments, multilaterals, corporations, civil society and academe, and are able to attract many high-profile participants from these sectors even if they have to pay hefty registration fees.

The WEF on East Asia forum 2014 will be held this week in Manila. Several heads of state, cabinet officials, CEOs of big corporations (national and multinational), heads of civil society and other organizations are attending.

Since high and sustainable economic growth – which expands businesses and material wealth, creates jobs, lifts many people from poverty – is often the key concern of WEF and other international fora, the best region to hold it is in East Asia. Growth here is generally much faster and has been sustained for decades more than in other regions.

I dug up the IMF World Economic Outlook Database, April 2014 for GDP size of the biggest economies in the world for the past two decades. I used data for 1993, 2003 and 2013, particularly the purchasing power parity (PPP) valuation of GDP as it has a more comparable pricing of goods and services produced in the economy.

A decade after 1993, there have been some changes like China replaced Japan in the #2 spot, India jumped from #9 to #5 (see tables 1 and 2 below).

Table 1. Top 40 economies in 1993, GDP based on PPP, in billion US dollars

Table 2. Top 40 Economies in 2003, GDP based on PPP, in billion US dollars

The World Trade Organization (WTO) was created in 1995 and it heralded the start of fast growth in many economies, especially some emerging markets like China, India and Indonesia. This is because protectionism limits a country’s growth through (a) limited size of consumers and (b) limited source of raw materials, intermediate products and capital goods that can further expand the economy’s productive capacity. Free trade, or even reduced protectionism allows private enterprises to address these two limitations somehow.

After another decade – and despite the various international financial turmoil (housing bubble burst in the US 2008-2009, European debt upheavals 2010-2012, among others), many economies in Asia were able to withstand the uncertainties. Early this decade, three of the four biggest economies in the world were in Asia. And two Asian economies that were outside the top 40 in the last two decades – Singapore and Vietnam -- were able to barge in.

Other emerging economies which joined the top 40 were Nigeria, Venezuela and Peru. And a number of European economies were dislodged from the top 40, like Austria, Greece, Ukraine, Portugal and Norway (see table 3 below).

Table 3. Top 40 Economies in 2013, GDP based on PPP, in billion US dollars

That is what increasing globalization and mobility of people, their products and services, technology and capital, can do. To reallocate resources to areas where they are needed more, or priced better. Notice also that many of the top 40 economies are also countries with big populations. People are the planet’s most important resource.

Let’s analyze some Asian economies closer. Many of them were able to expand their economies by four times or more in just two decades. That’s a short period of time compared to a century or more for the industrial countries during an earlier period.

Ironically too, two socialist economies -- China and Vietnam -- were able to optimize the opportunities of global capitalism and the generally free trade policy that dominate globalization. The Philippines was among the modest benefactors of globalization (see table 4 below).

Table 4. Biggest economies in East and South Asia, GDP based on PPP, in billion US dollars

In comparison, not a single economy from North America and Europe was able to grow three times their size two decades ago. Germany and Italy failed even to double their GDP size within that period.

Of course, these economies can brag that they were already on a high base, so that incremental growth was not fast anymore. This may not be a good explanation because of their ageing populations, tens of millions of their people need to be supported by more economic activities, especially in healthcare.

Table 5. Biggest economies in America, Europe and Australia, GDP based on PPP, in billion US dollars

The WEF is roosting on the region which has proven to be among the important engines of global growth. And it’s a region that will sustain the growth momentum and pace the rest of the world. This region has the world’s biggest populations, meaning the biggest number of entrepreneurs and workers, of producers and consumers.

Asia needs to learn from Europe and North America. That heavy welfarism and bureaucratism are anathema to more growth and prosperity. Business and entrepreneurship is most dynamic when it is left alone to innovate and become more creative, more competitive.

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See also: 

Fat Free Econ 50: Growth, Bubbles and the PH Economy, December 19, 2013 

Fat Free Econ 51: Ten Things About the Meralco Rate Hike, December 28, 2013 

Fat Free Econ 52: Optimism in 2014, January 02, 2014

Fat Free Econ 53: WESM, Myths and Realities, January 22, 2014

Are Markets Moral?, January 06, 2014 

Globalization, Mobility and Inequality, February 18, 2014

Demography 21: China Overtaking the US' GDP Size in 2014?

The IMF's World Economic Outlook (WEO) came out last month. I checked some numbers, particularly GDP size via Purchasing Power Parity (PPP) valuation. The top 4 are still the US, China, India, Japan, in that order. China will overtake the US by 2019, with a projected GDP size of $22.41 trillion for China and $22.09 trillion for the US.

Then there was an article from The Economist that was well-circulated yesterday. Here is the short article and the chart.

Crowning the dragon

April 30th 2014

UNTIL 1890 China was the world’s largest economy, before America surpassed it. By the end of 2014 China is on track to reclaim its crown. Comparing economic output is tricky: exchange rates get in the way. Simply converting GDP from renminbi to dollars at market rates may not reflect the true cost of living. Bread and beer may be cheaper in one country than another, for example. To account for these differences, economists make adjustments based on a comparable basket of goods and services across the globe, so-called purchasing-power parity (PPP). New data released on April 30th from the International Comparison Programme, a part of the UN, calculated the cost of living in 199 countries in 2011. On this basis, China’s PPP exchange rate is now higher than economists had previously estimated using data from the previous survey in 2005: a whopping 20% higher. So China, which had been forecast to overtake America in 2019 by the IMF, will be crowned the world's pre-eminent country by the end of this year according to The Economist’s calculations. The American Century ends, and the Pacific Century begins.

Perhaps an important lesson for the US - and Japan, Germany, UK, etc. -- is that big population is an asset, not a liability. More workers and entrepreneurs; more producers and consumers. Human talent and creativity is the single most important resource in this planet. So if countries or economies cannot raise their population the natural way, then they must allow more migrants to come in. Simplify and relax the migration procedures. Meanwhile, a Bloomberg article argued that the above data may be right, but it does not mean that China and its people are generally rich. On a per-capita basis, the highest-income country in the world in 2011 was the oil-soaked and lightly populated Gulf monarchy of Qatar, at $146,000 per person. The U.S., as this chart shows, was No. 12, at just under $50,000. China? China was No. 101, at a little less than $10,000 per capita. It’s not labeled on the chart, but if it were, it would appear between Serbia and Dominica.

Yes, it is not possible for China to have a per capita GDP size as big as those in the US, UK, Germany, Japan, etc. anytime soon. Maybe several decades from now, especially when the command-and-control economy is replaced by a generally free enterprise, the system that allowed the US, UK, Japan, etc. to develop more than a century ago.

But the sheer size of the population and consumers make China, along with India, Indonesia, Brazil, Pakistan, Nigeria, Philippines, etc. become a magnet for local and foreign enterpreneurs to invest in those big population countries.

That is why government-sponsored population control policies are wrong. People are assets, not liabilities. The real liabilities -- thieves (private and public), murderers, other criminals -- government should get them. That is the main reason why government was invented in the first place.
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See also:
Population Control 17: China's Depopulation and RH Law, March 03, 2013 
Population Control 18: Billions of RH Services Even Without an RH law, July 28, 2013 
Demography 19: Top 30 Countries in Population by 2050, August 05, 2013 
Demography 20: Presentation at ILS, DOLE, on Population and Growth, November 19, 2013

China Watch 8: World's Largest Economies in 2010

China will be the 2nd biggest economy in the world starting this year. It overtook Japan's economy by 2nd quarter of this year. This was reported today here, China Passes Japan as Second-Largest Economy

I checked the IMF's World Economic Outlook (WEO) recent database to see the actual numbers, and also the ranking of other countries. Below is what I got.

Country Gross Domestic Product (GDP), current prices, 2000 (1st column) and 2010 (2nd column)
in US$ billion

1. United States, 9,951.5 / 14,799.6
2. China, 1,198.5 / 5,364.9
3. Japan, 4,667.4 / 5,272.9
4. Germany, 1,905.8 / 3,332.8
5. France, 1,333.4 / 2,668.8
6. United Kingdom, 1,480.5 / 2,222.6
7. Italy, 1,100.6 / 2,121.1
8. Brazil, 644.3 / 1,910.5
9. Canada, 724.9 / 1,556.0
10. Russia, 259.7 / 1,507.6
11. Spain, 582.4 / 1,424.7
12. India, 461.9 / 1,367.2
13. Australia, 400.7 / 1,193.0
14. Mexico, 628.9 / 995.9
15. Korea, 533.4 / 991.1
16. Netherlands, 386.2 / 797.4
17. Turkey, 266.4 / 710.7
18. Indonesia, 165.5 / 670.4
19. Switzerland, 249.9 / 512.1
20. Poland, 171.3 / 479.0

21. Belgium, 233.0 / 471.8
22. Sweden, 245.6 / 443.7
23. Saudi Arabia, 188.7 / 438.0
24. Norway, 168.3 / 433.3
25. Taiwan, 326.2 / 418.2
26. Austria, 191.8 / 391.6
27. Iran, 96.4 / 360.0
28. Argentina, 284.3 / 344.1
29. South Africa, 133.0 / 329.5
30. Greece, 127.6 / 325.1
31. Denmark, 160.1 / 313.8
32. Venezuela, 117.2 / 301.0
33. Thailand, 122.7 / 297.9
34. Colombia, 94.1 / 268.1
35. United Arab Emirates, 70.2 / 252.7
36. Finland, 122.1 / 240.1
37. Portugal, 113.0 / 226.0
38. Hong Kong, 169.1 / 223.7
39. Ireland, 96.9 / 216.1
40. Egypt, 99.2 / 215.8

41. Nigeria, 46.4 / 214.0
42. Malaysia, 93.8 / 213.1
43. Israel, 124.7 / 199.5
44. Czech Republic, 56.7 / 199.0
45. Chile, 75.2 / 196.5
46. Singapore, 92.7 / 194.9
47. Philippines, 75.9 / 181.5
48. Pakistan, 74.1 / 177.9
49. Romania, 37.3 / 168.6
50. Algeria, 54.7 / 156.8
51. Peru, 53.3 / 146.3
52. Hungary, 47.3 / 145.6
53. New Zealand, 53.0 / 135.7
54. Kuwait, 37.7 / 135.1
55. Ukraine, 31.3 / 127.1
56. Kazakhstan, 18.3 / 126.3
57. Qatar, 17.8 / 110.8
58. Bangladesh, 47.0 / 104.6
59. Vietnam, 31.2 / 103.1
60. Morocco, 37.0 / 94.0

source: International Monetary Fund (IMF), World Economic Outlook April 2010 Database,
http://bit.ly/aJc7EX

Notice how China's economy jumped from only $1.2 trillion 10 years ago to the projected $5.36 trillion this year, or a 348 percent increase. Compare that with Japan's 13 percent jump from 2000 to this year's GDP level, the US's 49 percent increase, Germany's 75 percent increase, and France's 100 percent increase.

Other countries that produced huge increase in GDP size in just 10 years are (1) Russia 480 percent increase, (2) Indonesia 305 percent increase, and (3-5) Brazil, India and Australia which registered 200 percent increase in GDP size.

The Philippines with 94 million people this year has a lower GDP size than Singapore with less than 5 million people. The country is ranked 47th in GDP size this year, higher than Pakistan.

China should continue its fast growth rate. A rich China means a rich billion plus consumers just a few hours from Manila by plane. A rich China also means market diversification opportunity for many other poorer countries that used to rely on exporting their goods and services to the US, Japan and Europe.

And more importantly, a rich China means that freeing markets towards more capitalist competition will unleash more entrepreneurial spirit from tens of millions of big and small entrepreneurs and investors.
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World's Biggest Trade Surplus/Deficit Economies

While Germany was enjoying a trade surplus of $577 million per day in the last 12 months ending June 2010, the United States was draining by $1.62 billion per day in trade deficit also in the last 12 months ending in June 2010.

China's trade surplus is more than 2x that of Japan's. India and Hong Kong are the only Asian countries in the top 10 biggest trade deficit countries.

Below is a list of the world's biggest trade surplus and biggest trade deficit countries.

A. Biggest Trade Surplus (exports larger than imports) latest 12 months, in $ billion

1. Germany, 210.8 (June)
2. China, 174.7 (July)
3. Russia, 152.6 (June)
4. Saudi Arabia, 104.4 (2009)
5. Japan, 81.7 (June)
6. Norway, 55.6 (June)
7. Ireland, 54.1 (May)
8. Netherlands, 53.3 (May)
9. S. Korea, 40.1 (July)
10. Malaysia, 36.6 (May)

B. Biggest Trade Deficit ( exports smaller than imports) latest 12 months, in $ billion

1. US, 592.4 (June)
2. Britain, 135.0 (June)
3. India, 110.2 (June)
4. Spain, 69.5 (May)
5. France, 62.4 (June)
6. Turkey, 52.6 (June)
7. Greece, 43.5 (May)
8. Hong Kong, 41.7 (June)
9. Portugal, 27.6 (June)
10. Egypt, 24.2 (Q1)

source: The Economist, August 12, 2010, http://www.economist.com/node/16793552?story_id=16793552

* See also China Watch 7: Rising Yuan, Economic Bubbles, April 07, 2010

China Watch 1: World's Largest Economies, Population, 2005

The International Monetary Fund (IMF) has released today the full text of its World Economic Outlook (WEO), April 2006 issue (www.imf.org). I immediately checked the database, created my own table and arranged countries based on size of their economies represented by their Gross Domestic Product (GDP). To adjust for cost of living in each country, economists use the Purchasing Power Parity (PPP) valuation. I have a ranking of more than 180 countries, will show here only the top 25.

Its interesting to note that out of the 25 largest economies in the world in 2005, 9 are Asians (including Iran); and more interesting is that 3 Asian countries (China, Japan and India) are in the top 4 and have economies much larger than any of the European countries.

I also checked the ranking of countries in 1980, to see how countries fared 25 years ago, when the pace of globalization was slower (next table after the 2005 ranking). Back then, China and India ranked #s 8 and 9.

Over the last 25 years, China's GDP has increased by 21x, Korea's GDP has increased by 10.8x, Taiwan's by 9.4x, Thailand's by 8.6x, India's by 8.4x.

In contrast, over the last 25 years, the US's GDP has increased by 4.5x, Canada's by 4.2x, Mexico's by 3.8x, Brazil's by 3.5x. For the European countries, Spain's by 4.2x, UK's by 3.8x, France's by 3.4x, Germany's by 3.3x, Italy's by 3.1x.

Indeed, faster globalization has benefitted the Asians more than the North and South Americans, and the Europeans. No wonder anti-globalization sentiment is much stronger among Europeans and Americans than Asians.

Below are the 2 tables for 2005 and 1980 figures.

GDP based on PPP valuation of country GDP, US$ Billion, 2005

1. United States 12,277.6
2. China 9,412.4
3. Japan 3,910.7
4. India 3,633.4
5. Germany 2,521.7
6. United Kingdom 1,832.8
7. France 1,830.1
8. Italy 1,668.2
9. Brazil 1,576.7
10. Russia 1,575.6
11. Canada 1,104.7
12. Spain 1,089.1
13. Mexico 1,072.6
14. Korea 994.4
15. Indonesia 977.4
16. Taiwan 631.2
17. Australia 630.1
18. South Africa 570.2
19. Turkey 569.2
20. Iran 554.8
21. Thailand 544.8
22. Argentina 533.7
23. Netherlands 503.4
24. Poland 495.9
25. Philippines 414.7

GDP based on PPP valuation of country GDP, US$ Billion, 1980

1. United States 2,750.4
2. Japan 1,053.0
3. Germany 768.3
4. France 540.0
5. Italy 535.5
6. United Kingdom 475.7
7. Brazil 447.1
8. China 445.1
9. India 431.1
10. Mexico 278.5
11. Canada 267.6
12. Spain 257.5
13. Argentina 176.8
14. South Africa 167.3
15. Indonesia 148.5
16. Poland 147.3
17. Netherlands 141.0
18. Australia 131.7
19. Saudi Arabia 106.2
20. Philippines 103.4
21. Iran 98.8
22. Belgium 96.8
23. Turkey 96.6
24. Korea 92.4
25. Switzerland 80.3


World's Most Populous Countries, 2005

In the world's largest economies by GDP, PPP valuation, 9 of top 25 are Asians.
Of the world's 25 most populous countries, nearly half or 11 are Asians. The top 2 are occupied of course, by China and India, the only billion-plus population countries.

Mid-2005 Population estimates:

1. China 1,306.3
2. India 1,080.3
3. US 295.7
4. Indonesia 242.0
5. Brazil 186.1
6. Pakistan 162.4
7. Bangladesh 144.3
8. Russia 143.4
9. Nigeria 128.8
10. Japan 127.4
11. Mexico 106.2
12. Philippines 87.9
13. Vietnam 83.5
14. Germany 82.4
15. Egypt 77.5
16. Ethiopia 73.1
17. Turkey 69.7
18. Iran 68.0
19. Thailand 65.4
20. France 60.7
21. UK 60.4
22. Congo Dem. Rep. 60.1
23. Italy 58.1
24. S. Korea 48.4
25. Ukraine 47.4

(source: http://www.infoplease.com/ipa/A0004379.html)