EFN Asia 65, EFN panel at Jeju Forum 2017

The Economic Freedom Network (EFN) Asia participated once more at the annual Jeju Forum for Peace and Prosperity, a big international conference held at Jeju Island, S. Korea. I am reposting this report submitted to the organizers within an hour after the panel discussion. Originally posted at the EFN website.

I add two photos here, taken from EFN's fb page. From left: Wan, John, Razeen, Young-Han.

This is 3,200+ words, 7 pages, enjoy.
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Session Outline

Name of Session: Asia’s Contribution to the Global Open Market

Session Organizer: Friedrich Naumann Foundation for Freedom

Date: 1 June 2017, 14.50-16.20

Moderator: Dr. John Delury, Associate Professor, Graduate School of International Studies,

Yonsei University

Welcoming Remarks: Dr. Lars-André Richter, Head

Friedrich Naumann Foundation for Freedom Korea Office

Discussant(s)

Dr. Razeen Sally, Associate Professor,

Lee Kuan Yew School of Public Policy, National University of Singapore

Wan Saiful Wan Jan, Chief Executive

Institute for Democracy and Economic Affairs, Malaysia

Dr. Kim Young-Han, Professor,

Department of Economics, Sungkyunkwan University

Summary of Presenters & Discussants’ Remarks

Dr. Lars-Andre Richter

Friedrich Naumann Foundation (FNF) is a German non-profit organization, founded in 1958 post-war West Germany. The main goal at the time was to help re-establish democracy in West Germany. Shortly after, FNF opened offices abroad, including in Tunisia, India and Indonesia. The office in Korea was opened in 1987. We promote liberty in Korea through a variety of programs including democracy building, projects with market economy, human rights, rule of law and also the re-unification issue, bringing in the unique German experience of re-unification. In fact, FNF has projects in both Koreas. The North Korea program started in 2004, focusing on economic policy. The session today at the Jeju Forum is hosted by both FNF and Economic Freedom Network Asia (EFN Asia), FNF support’s network of liberal minded think tanks and individuals.

Dr. Kim Young-Han

Threat of the Protectionism by the US Trump Presidency

- Why Protectionism by the Billionaire US President?

Trump thinks that the current format of ‘the Global Open Market System’is unbearable and unsustainable for the US blue collar workers. Are US blue collar workers simply irrational? No, they are absolutely rational.

- The US blue collar workers know that there is not and will not be an effective trade adjustment assistance system in the US. Winners get everything with no room for losers in global open market according to the US experiences. (The same with the Brexit case.)

- How much of a threat caused by the Trumpian Protectionism?

Very threatening and disastrous. If Trumpian Protectionism is spilled over to major trading countries, the global trade war is the next stage, just like the experience before the two World War. The current one-sided protective measures of the US are highly likely to provoke retaliatory measures from trading partners.

- Is Trumpian Protectionism Sustainable?

Not really, since it’s self-defeating. Why? The source of gains from free trade: Efficiency Gains via Reallocation of economic resource from inefficient sectors to efficient sectors. In the US, without the effective trade adjustment assistance mechanism, resources in the inefficient sectors became laid-off instead of being reallocated. What Trump tries to do is to keep inefficient sectors protected as inefficient, which is self-defeating and unsustainable. He suspects Trump will realize this after 3-4 years.

- Can other powers fill in the US role?

The Share in the Global Trade: EU takes roughly 40% of the world trade, followed by Asia which takes 33%, and North America (17%). If the US goes back to protective regime, it is bad, while the other players can keep the remaining 83% under free trade regime. The EU might play a more meaningful role in leading the global free trade regime and also Asian powers like China. But he does not think so.

- The requirements for the leadership the global free trade regime: Leader has to prepare itself and operate on a rule-based trade policy and National Treatment for all players (treat all players as domestic players). The EU is more prepared, but not China. Furthermore, Big Players with market power are likely to resort to bilateral arrangements based on one-sided bargaining power. Therefore, relying on a multilateral platform is better than relying on a big guy leading power. Rebuilding the Multilateral Free Trade Regime via WTO is the solution.

The Role of Asia in Rebuilding the Global Free Trade Regime

- Datawise, Asia takes significant market power, i.e. 33% of the global trade. Historically speaking, all Asian countries’ economies, such as Japan and South Korea, have emerged via the global free trade regime with no regret against the multilateral free trade regime, WTO. A multilateral free trade regime as WTO is welfare dominant to a single country leadership (by whether the US or China). Asia has kept the spirit of multilateral or plurilateral free trade regime via ASEAN and ASEAN+3, and even ASEAN +6. Asian economy with her complexity in terms of diverse stages of economic development and asymmetry of economic size and power works as a miniature of the global economy with gradual and sustainable unit of economic integration.

- Condition for “Sustainable Global Open Market System”

i) Effective Trade Adjustment Assistance Mechanism: Losers (i.e., workers in the importing competing sectors with comparative disadvantages) should be reallocated to Winners’ sectors (jobs in the export sectors with comparative advantages) via Effective Trade Adjustment Assistance Mechanism.

ii) Multilateral Free Trade Regime with strong surveillance and reputation building mechanism with respect to the Big Guys with market power.

Dr. Razeen Sally

He has three main points to make. First, where we are in the global economy, particularly on trade. Second is on protectionist threat. Third is on what can be done in and by Asia to keep the market open.

- Where are we in the global economy?

Economic globalization has not been reversed, since the global financial crisis, but it has stalled. There has been a global growth slowdown. Trade to GDP worldwide has not increased, since about 2006. Foreign direct investment flow has decreased, since the crisis Cross-border flow of finance has Decreased considerably, as expect from the global financial crisis.

- But particularly on trade, something unusual is going on. Since the beginning of 19^th century until 2008, world trade grew faster than world output, which is the indication that trade is the engine of growth. But since 2012 until the end of 2016, trade growth barely kept pace with world GDP growth at about 3 percent or less. This is highly unusual and tends not to happen except in war and deep recession. This is particularly worrisome for Asian nations, whom depend on exports. But still too early to tell if this is a new trend.

EFN Asia 57, Conference 2014 in Hong Kong, part 2

Continuation of notes made by Karthik Chandra during Conference 2014. The full 25-pages notes are posted in http://efnasia.org/wp-content/uploads/2015/10/EFN-Asia-2014-Conference-Report.pdf

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Day 1, November 6, 2014

Opening Key Note Address: “Economic Growth and Income Inequality”

Dr. Razeen Sally

The National University of Singapore (NUS)

• As liberals, we always face this rather fundamental issue of why at all should we bother to address the issue of income inequality.

• Such inequality has two facets: inequality of outcomes (a “collectivist approach” of typical socialists, communists, or do-gooders) and the inequality of procedures/treatment (eg. rule of law, equality, etc.). We need to clearly distinguish between the two.

• There is also a need to go back to the basics (abstract approach) of Schumpeterian capitalism:

 * Capitalism is always dynamic. Schumpeter said that ‘capitalism is a perennial gale of creative destruction’. Enormous progress takes place due to this creative destruction. This is not just an economic cycle but the story of our civilization itself.

 * At the heart of this powerful engine of capitalism is the entrepreneur, who is not necessarily a rational, objective person. Several impulses and incentives guide him. This engine thrives on inequality.

• Capitalism and Asia & the Global Financial Crisis (GFC):

 * Originally, economic freedom and capitalism was primarily a European idea. Subsequently, it became an Atlantic idea. Later, Asia too has witnessed greater economic freedom and increase in prosperity.

 * However, after the GFC, we saw assaults on economic freedoms and increase in restrictions. Capitalism is currently under assault and therefore pessimism is back. GFC saw a shift in policies and approaches: now there is much greater state intervention in both macroeconomic policy (debt, interest rates, deficits, etc.) and microeconomic policies (in the form of governments intervening in the smaller

details of markets like car standards, energy, pollution, etc).

 * Note: we need to understand the contrasting takes of Schumpeter and Keynes on capitalism.

 * More importantly, what unites such macroeconomic and microeconomic anti-capitalist intervention is the ‘social engineering’ mindset among a small group of high-minded, smart people who think that they can intervene in the micro- and macro-economic and the institutions.

 * But such interventions are inevitably counterproductive and harmful because the assumption that these individuals are fully knowledgeable is incorrect because 100% of information is never at their fingertips (much of the real information is tacit and non-formal).

* Rarely are the individuals themselves disinterested in the outcomes. Such interventions (even if beneficial) are deeply offensive to the very concept of freedoms and individuals.

• Given the above, the classical liberal take on inequality runs somewhat like this:

 * Globalization has improved incomes but also has driven inequality upwards. Yes, there is currently greater income inequality.

 * New technologies (3D printing, automated data storage, management and analysis systems, etc.) are destroying jobs – not just the blue collar ones - but also middle class white collar jobs (accountants, analysts, etc.)

 * And, what about the solutions to inequality? The classic interventionists (typically, social democrats) talk about greater taxation, etc. to “fix this problem of greater inequality”

• However, we need to look at the issue of inequality from a different perspective:

 * Usually, when we talk about inequality, we usually talk about income inequality within a country and not between countries. While economic liberalization has increased inequality within a country (E.g.: China, city states like HK, Singapore, etc.) it has actually reduced global income inequality (see Surjit Bhalla’s article saying that global inequality is at its lowest since 1850) i.e. between countries.

 * Increase in consumption, arising from greater liberalization of economies, has depressed incomes in some areas/countries but has greatly reduced overall inequality both within a country and between countries.

 * Education (see S. Bhalla’s article/ppt) actually is a great improver of averages.

 * However, a major challenge is the lack of big innovation. Yes, innovation is taking place at a big level but in narrow sectors and benefitting a narrower group of people. The IT sector serves as a good example where companies are getting easy money from globalized markets, and are getting great profits, and therefore are not seeing incentives to invest in innovation in other sectors. For instance,

Apple spends more on lawyers than on innovation of new products. At the same time, even though some people say that innovation results in job destruction, in the long run, innovation actually creates new and better jobs.

• In summary, the current state of affairs, post GFC is as follows:

 * at a macroeconomic policy level:

 Greater state intervention

 Redistributive approach (taxes)

 Debt/deficit financing with the threat of inflation always hanging over the head

 Central banks interfering in fiscal policies

 * Similar state of affairs at a micro-economic policy level also.

 * But, such interventionist approach is wrong on a more fundamental, constitutional basis and is based on several false assumptions, etc.

• Therefore, the unfinished business and important pending items to be done to liberalize product and factor markets: Making systems inclusive. (See reformulation by Daren Acemoglu and team on inclusive vs. exclusive systems.) In exclusive systems, esp. in Asian countries, the political and economic freedoms are closely intertwined. One cannot happen without other. Even the city states of HK and Singapore are lacking in innovations. This is because their systems are still bureaucrat-dominated.

• Finally, there is good news and bad news:

 * Compared to the past century (1914 to 2014), we have a more prosperous world: we are enjoying greater incomes, better health and better lifestyle overall. While today’s interest groups are still a problem they certainly are not as big a problem as interventionists of World War I.

 * But in the short run, post GFC, the pendulum has swung in the wrong direction i.e. towards greater state intervention. However, we should have greater liberalism and lesser state interventions in both micro and macroeconomic policies.

Free Trade 46: Debate on TPPA and Liberalization in Malaysia

Last Saturday, the Institute for Democracy and Economic Affairs (IDEAS) and the South East Asia Network for Development (SEANET) co-sponsored a debate in Kuala Lumpur.

I am reposting the Event Report: TPPA and Economic Liberalisation –Good or bad for Malaysia 

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IDEAS and the Southeast Asia Network for Development (SEANET) organised a public debate on the TPPA and Economic Liberalisation on Saturday, 28 March 2015. The TPPA, Trans-Pacific Partnership Agreement, is a free trade agreement that Malaysia is currently negotiating with eleven countries including the United States of America, Mexico, Chile, Brunei Darussalam, Singapore, Vietnam, Japan.

The debate featured Dr Razeen Sally, IDEAS Chair in Political Economy and Governance, who argued for positive impacts of the trade agreement and YB Charles Santiago, Member of Parliament from Klang, who argued the opposite. Sharaad Kuttan of BFM moderated the debate.

The impact of trade agreement on the provision of health care including the price of medicine and state’s sovereignty and ability to protect its interest against companies is among topics that were hotly debated on the forum.

YB Charles Santiago who argued against the TPPA maintained his position that the trade agreement will impact negatively on the price of medicine and the ability of the state to protect itself against corporation. He mentioned cases of dispute between a tobacco company and Australian government.

Dr Sally on the other hand, while having reservation on some parts of TPP, argued that the trade agreement can help in inculcating domestic culture of good governance through competition. Coupled with domestic liberalisation and reform, the TPP can make Malaysia become more economically competitive. On the impact of trade agreement on state sovereignty, he argued that instead of assault to sovereignty, trade agreements are way for countries to mutually agree to improve their economies and trade. Cases of dispute between some countries with companies should not be used to make general points. On concerns on the price of medicine, Dr Sally said that some of the problems in medicine prices are related to domestic issues.

While the speakers differed in their evaluation of TPPA benefits, both were concerned about the dismal state of Malaysia’s judiciary.

The questions posed by the audience touched not only technical issues of the agreement, but also touched on some philosophical questions such as who is more tyrannical: government or company?

In addition to posing questions to the speakers, the audience also participated in the debate through casting their votes on whether the TPPA and Economic Liberalisation is good or bad for Malaysia. The initial votes before the debate resulted in 53% votes for good, 19% for bad, and 28% are unsure. The second round of voting, after the debate, resulted in 68% voted Good, 26% voted bad and the remaining 6% voted unsure.

Around 80 people attended the debate. Among them are prominent individuals such as Tan Sri Yong Poh Kon, Former President or Federation of Malaysian Manufacturers, Dato’ Satinah Syed Salleh, Former Director of Private Education Division at the Ministry of Education and Dato’ R. Thillainathan, Former CEO of Genting Berhad.

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See also:

Free Trade 42: ASEAN Trade and Unilateral Liberalization Challenge, January 23, 2015 
Free Trade 43: On PH-Germany or PH-EU FTA, February 16, 2015 

Free Trade 44: The Gravity Model, March 06, 2015 

Free Trade 45: Protectionism in Services, Peering at the ASEAN, March 12, 2015 

AEC 5: Aviation, Telecom, Mobile Money and Retail in the ASEAN, March 23, 2015

Free Trade 42: ASEAN Trade and Unilateral Liberalization Challenge

Yesterday, I was a guest lecturer to an undergraduate class of graduating management engineering students of Ateneo. The class is handled by my long time friend and classmate from UP PDE, Joey Sescon.

About 20 students, nice. Joey mentioned that I just came from Nepal, so I made a brief intro about Nepal  and why a communist government in power cannot be responsive to the rising need for economic freedom by its citizens.

My outline:

I. Trade Theory: Comparative Advantage, CPE,

Consumer Surplus

II. ASEAN Tariff and Trade

III. Trade Bureaucratism

IV. Unilateral Liberalization

V. Concluding Notes

People do not have to produce everything they need or want, even if they have the skills and resources to make them. Specialization and trade will make people from across borders and countries better off and attain wealthier outcome.

The above is just a micro and modern example of David Ricardo's theory of comparative advantage, that a country that trades for products it can get at lower cost from another country is better off than if it had made the products at home.

A fraternal concept of CPE is factor price equalization (FPE). Replace commodities with factors of production  like labor,  capital and technology, and allow free mobility of such services across borders and soon, wages across certain skills levels will generally equalize across countries, all other things being equal. The low global and regional interest rates is also one proof  of FPE. What differentiates for interest rates is allowance for risk premium of  certain countries.

Protectionism and trade restrictions is trade dictatorship and hence, wrong. The government and its ally domestic special interest groups are telling the people, "you can only buy from us but not from them abroad. If you buy from them, you must pay high, or in limited quantities."

Tariff among ASEAN countries is almost zero, which  is a good thing. What really causes more smuggling is not the import tariff which are generally small, but the VAT, 12 percent.

Socialist economies that optimize their integration with the global economy, like China and Vietnam, were able to export and sell a lot to  more countries.

Part 4 of the outline is trade bureaucratism. I showed a table from the "Doing Business" annual reports of the WB-IFC, section on international  trade. And see this report, WTO was created in 1995 and it was only in 2014 or after 19 years, that the thousands of trade officials and negotiators have achieved something  significant -- trade facilitation, reduction of customs and trade bureaucracies. Which shows that many governments still pay lip service to  free trade and multilateral negotiations.

Thus, aside from multilateral negotiations  and agreements, there are regional and bilateral trade agreements  and liberalization. But the best, fastest, scheme towards free trade  is via unilateral liberalization. A good article from Dr. Razeen Sally, Chairman of  IDEAS Political Economy and Governance Program, also  of the National University of Singapore.

Another good article arguing why free trade is good for the domestic economy and the people.

I ended my presentation  with these concluding  notes.

Free trade means free individuals, free enterprises. Restrictions to trade is restricting potential economic development. Governments should reduce restrictions on people and goods mobility.

Free mobility of people and services across countries and continents will result in commodity and factor price equalization (CPE and  FPE) over the long term, all other things being equal.

Countries with expensive labor due to low population will experience decline in labor cost once additional and competing labor of similar skills from abroad come in.

Unilateral trade liberalization is pro-development. No prohibitions/regulations except bringing in or out of guns, bombs, poisonous substances, other products that are threat to public health.

The full 20-slides presentation is available in slideshare.

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See also:
Free Trade 38: Liberalize Rice Imports and Demonopolize NFA, September 28, 2014
Free Trade 39: Advantages of Unilateral Trade Liberalization, October 12, 2014 
Free Trade 40: Razeen Sally Joins IDEAS, to Campaign for More Liberalization, November 25, 2014 
Free Trade 41: David Ricardo, CPE, FPE and Consumer Surplus, December 06, 2014

Free Trade 40: Razeen Sally Joins IDEAS, to Campaign for More Liberalization

Good news for the ASEAN here. Today, IDEAS announced this:

Kuala Lumpur, 24 November 2014 – The Institute for Democracy and Economic Affairs (IDEAS) announces today the appointment of Dr. Razeen Sally as the first holder of IDEAS Chair of Political Economy and Governance Programme.

Dr. Sally is a globally renowned expert on international trade policy. He is Director and Co-founder of the European Centre for International Political Economy (ECIPE) and a Visiting Associate Professor at the Lee Kuan Yew School of Public Policy. He was a faculty member and PhD graduate of the London School of Economics (LSE). He has published numerous works on global trade policies, global economic crises and the Asian economy including the ASEAN and Chinese economy.

Dr. Razeen Sally is a world-known scholar advocating free trade. In 2008, he  produced this book, published by Cato Institute in the US.

He is currently a Professor at the Lee Kuan Yew School, in Singapore. He used to  teach at the London School of Economics where he also received his PhD. He is also the Director of the European Centre for International Political Economy (ECIPE), a global-economy think tank in Brussels, which he co-founded in 2006. He has held research, teaching and advisory positions at institutes and think tanks in Europe, the USA, Asia and South Africa. He is an Adjunct Scholar at the Cato Institute in Washington DC, Chair of the Global Agenda Council on Competitiveness of the World Economic Forum, 

Also in 2008, he produced this e-book, "Trade Policy, New Century: The WTO, FTAs and Asia Rising" , published by the Institute of Economic Affairs (IEA), London, 2008.

The book summary enumerated these major arguments why free trade is good. Photo below was taken during the EFN Asia Conference 2014 in Hong Kong. 

• Ideas about free trade started in the West and were originally exported to the rest of the world. But, today, the major challenges for trade policy come from Asia.

• Trade is still the engine of prosperity and the handmaiden of peace. The ‘New Globalisers’ that have been freeing trade have seen rapid economic growth, reductions in poverty and improvements in welfare.

• The authentic case for free trade should be set in the context of classical liberal political economy and, as such, Western political opinion needs to move on from considering the promotion of free trade as a top-down process driven by supranational institutions. Instead it should see free trade as an integral part of a domestic liberal political agenda.

• Supranational organisations, including the World Trade Organization (WTO), have become too unwieldy to be effective in promoting radical trade reform; they should focus on ensuring that their rules are implemented effectively rather than on seeking radical liberalisation.

• Protectionist interests are alive and well and have influence both within individual countries, such as the USA, and within supranational organisations.

• The relatively liberal Western democracies should focus their trade policy on removing remaining explicit protectionist barriers but, perhaps more importantly, also on simplifying and making more transparent inhibitions to trade such as rules of origin and anti-dumping provisions. It is also important that a ‘culture of evaluation’ develops in the West so that implicit barriers to trade are properly scrutinised – especially within the EU.

• Slower reformers, generally lower-income countries, should focus on lowering tariff barriers and quotas – they generally lack the governance capacity to implement more complex reforms. Less developed countries need to lower their tariff barriers between themselves.

• There are over 180 Preferential Trade Agreements (PTAs) in force. PTAs are spreading like wildfire throughout Asia. In practice, many tend to be ‘trade light’ tools of foreign policy and diplomacy.

• Those Asian countries that have successfully integrated into the world economy have done so through unilateral liberalisation. China has reduced its tariffs from an average of 65 per cent twenty years ago to 10 per cent today. This process of unilateral liberalisation must continue, but the USA and the EU need to ensure that the right background for liberalisation exists by eliminating protectionist rhetoric and actions, such as so-called ‘anti-dumping’ measures.

• A classical liberal, ‘small-government’ domestic culture, which includes the promotion of unilateral free trade, will help ensure that the development of free trade is not knocked off course by vested interests. Dangerous vested interests include those promoting protectionism in the name of environmentalism, protecting strategic industries or promoting domestic security.

• The USA is an indispensable anchor for maintaining global peace. Its leadership is currently unchallenged. It has a particularly important role in engaging constructively with Asian countries to ensure that the best political climate exists for the continued development of free trade and internal

liberal reform in Asia.

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See also:
Free Trade 36: Taxation, Regulations, Trade and Rule of Law in ASEAN, August 05, 2014
Free Trade 37: Multiple Concerns and Regulations in the ASEAN, September 11, 2014
Free Trade 38: Liberalize Rice Imports and Demonopolize NFA, September 28, 2014
Free Trade 39: Advantages of Unilateral Trade Liberalization, October 12, 2014

EFN Asia 43: Day 1 of Conference 2014

The Economic Freedom Network (EFN) Asia 2014 Conference started today at the Harbour Grand Hong Kong. Nice venue, great forum with great speakers, and many participants from Asian countries, from the US, Canada and Germany. The event is jointly sponsored by the Lion Rock Institute (LRI) in HK, EFN Asia in Bangkok, and the Friedrich Naumann Foundation for Freedom (FNF) in Berlin Potsdam, Germany.

Opening and Welcome Addresses were given by Bill Stacey, Chairman of LRI, and Siegfried "Siggi" Herzog, the new FNF Regional Director for East and Southeast Asia. Below, Siggi giving the welcome message.

The MC for the day was Wan Saiful Wan Jan of IDEAS Malaysia. From the Philippines, there are five of us here -- Dr. Vic Abola of  the Philippine Economic Society (PES), Tony Abad and Rhea Lyn Dealca of the Foundation  for Economic Freedom (FEF), Narwin Espiritu of FNF Manila, and me. FNF Philippines Country Director Jules Maaten arrived late today as there are a number of FNF activities in Manila until yesterday.

Dr. Razeen Sally delivered the Keynote Address, "Capitalism in Asia: Economic Growth and Inequality". Very articulate and clear defense of capitalism or market economy, innovation, competition, mass production and rising standard of living of the people in many parts of the planet. He concluded his speech with good and bad news.

The good news is that the world and its people today are much wealthier, healthier, higher economic freedom, mature institutions, compared to the people a century or many decades ago. The bad news is that governments almost anywhere are getting more interventionist and bureaucratic, often with no distinction between macro and micro, meaning even micro (community, firm, household and individual) levels are being monitored and regulated (micro-management).

Two distinguished reactors followed. Parth Shah of the Center for Civil Society (India) and Choi Byung-il of Ewha Woman's University (S. Korea) gave their thoughts on the subject of growth and inequality, while LRI Chairman Bill Stacey (middle in this photo) was the moderator.

I met a number of old friends whom I met last time about four or five years ago. Like Neena Moorjani, now with the Asian Trade Center in Singapore, andArpita Nepal of Samriddhi-Prosperity Foundation  in Kathmandu. Below, a group photo of participants from South Asia (India, Pakistan, Bangladesh, Sri Lanka,...)

The next round was the "Asian Cafe". Participants moved around in 5 groups representing 5 Asian economies and a resource speaker from each country gives a brief discussion about their country and the state of growth and inequality there. Here, Peter Wong (right, facing the audience), Exec. Director of LRI, spoke about HK. Many of the questions were about the protests by the "Umbrella Movement" or "Occupy Central" movement.

The last panel in the afternoon was about "Property Rights and Equality". Below, Lorenzo Montanari of the Property Rights Alliance (PRA) and Americans for Tax Reforms (ATR) in Washington DC, briefly discussed about the result of the International Property Rights Index (IPRI) 2014 Report.

The panel moderator and speakers in that session were, from left: Ken Schooland of Hawaii Pacific University, Andrew Work, co-founder of LRI and currendly editor-in-chief of the Harbour Times, Barun Mitra of Liberty Institute in  India, Michael Feng of CASS/Unirule Insitute in China, and Thitinan Prongsudhirak of the Institute of Security and International Studies in Thailand.

Many insightful ideas from the four speakers. We adjourned about 4pm, and we go back at 6pm for the cocktails and later, dinner program. Fred McMahon of Fraser Institute (Canada) will discuss the result of the Economic Freedom  of the World (EFW) 2014 Report. Then HK's Finance Secretary John Tsang will give a Keynote Address during dinner.

An after dinner program will be held in  honor of LRI's 10th Anniversary.
Photo credits -- from Jadranko Brkic, FNF S and SE Asia, Olaf Kellerhoff, Lorenzo. Thanks.

To be continued later...
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See also: 

EFN Asia 39: Rainer Adam's Farewell Letter, June 17, 2014

EFN Asia 40: Liberalism, Growth and Reducing Inequality, August 19, 2014

EFN 41: Program of Conference 2014, Hong Kong, September 30, 2014

EFN 42: Other Speakers in Conference 2014, November 04, 2014

Business 360 14: Middle Income Trap and Economic Freedom

* This is my article for the December issue of this magazine, published in Kathmandu, Nepal.

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Economic freedom is a major factor for an economy and its people to move from a low income country (LIC) to middle income country (MIC), and ultimately to a high income country (HIC).

People need to be given enough leeway to be creative and innovative in introducing new products and services to their consumers, resulting in continuous and endless process of innovation and healthy competition among the various players in the economy.

This fact is among the lessons drawn from the two-days Economic Freedom Network (EFN) Asia  conference in Bangkok, Thailand in October.

Among the prominent speakers of the conference was Dr. Razeen Sally of the European Center for International Political Economy, also a vising faculty at the National University of Singapore (NUS). He said that  a poor country or LIC must “get the basics rights” to catch up with growth. Among such “basics” are 1^st generation reforms, “product market liberalization.” This includes the following:  macroeconomic stability in fiscal and monetary policy, rule of law and property rights, free international trade, and good skills and education of the people.

The next generation reforms are more structural and more complicated.  They are the “factor market liberalization” reforms.  Increasing globalization and free market does increase income inequality among the people. While this is a natural economic result, this is also a political challenge how to face this reality and find ways to address it.

Penalizing more efficient, hard working people via higher taxation, more business regulations and restrictions is not the way to do it. Rather, it is encouraging those in the lower end of society to keep working. They may feel “poor” when in fact, their economic status is already comparable to the upper middle class of a LIC or even a MIC.

In the last session, I was one of four rapporteurs for the four discussion groups on other issues raised during the conference. Among the issues raised in our group was shared by Dr. Chung-ho Kim of Freedom Factory Ltd. in Seoul, that many  people in HICs like S. Korea  feel and complain that they are poor, despite the high standard of living they enjoy compared to what the poor in low income and middle income countries experience.

I made this chart in my report on stage that day.

Middle income is broadly defined as having a per capita GDP income at purchasing power parity (PPP) valuation of between $3,000 to $16,000  per year. Thus, an economy with per capita GDP of only $3,000 or less for many years is said to be caught in a low income trap shown by growth path AB. Economies which have been stuck at $16,000 or less per capita GDP for several years is said to be caught in a middle income trap, shown by growth path AC.

There are several factors why an economy can be stuck at AB or AC path. Foremost of which are: lack of economic freedom of the people -- where a big portion of the economy is held by a few oligarchs or business cronies of high political leaders or monarchy. Another reason is the lack of the rule of law, where rules are applied differently to different people due to arbitrary powers of lawmakers.

These two factor can also contribute to a retrogression of an economy from a lower  middle income to an LIC and go back to low income country. Or for an HIC to become an MIC.

The way some member- economies of the European Union are being managed, it is possible that they might plunge into growth path A’E someday, meaning may fall back to MIC status. When entrepreneurs are shacked by too many taxes and regulations, either they will experience production shrinkage or quit altogether, migrating to another country where their economic freedom is more respected. Heavily regulated country will experience more debt and fiscal constraints as the number of net tax payers will flatline if not decline.

Whether aspiring to move a status, ensuring the economic freedom of the citizens and limiting the role of government to enforcing the rule of law and protecting property rights, are the basic ingredients of success.

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See also:
Business 360 10: Foreign Aid as Band Aid Solution, August 11, 2013 
Business 360 11: Avoiding Middle Income Trap, September 19, 2013 
Business 360 12: Optimum Size of Government, October 13, 2013 
Business 360 13: US Government Shutdown and Lessons for Asia, November 28, 2013

EFN Asia 30: Conference 2013, Day 1, October 23, 2013 

EFN Asia 31. Friends in the Asian Free Market Movement, November 07, 2013 

EFN Asia 32: Day 2 of Conference 2013 in Bangkok, November 09, 2013

EFN Asia 25: The ASEAN Economic Community in 2015

The Economic Freedom Network (EFN) Asia http://efnasia.org/ posted today a new report on scooping of the ASEAN Economic Community (AEC) future, less than two years from now.

I already like the current set up, especially the visa-free entry to visit any of the nine other members of the 10 member-countries of the Association of South East Asia Nations (ASEAN) for visits less than 30 days, or less than 15 days in some countries. Thus, it is very convenient for me and other Filipinos to visit Singapore, Kuala Lumpur, Jakarta, Hanoi, Bangkok and other cities in the region.

Once the AEC materializes, the flow of economic activities and movement of people among residents of the 10 countries will become even easier and simpler.

Economic freedom, people mobility across countries. To a certain extent, they are "ends" by themselves in terms of public policy. The challenge to advocates of free market and economic freedom is how to further expand this to cover not only our region but also to the whole Asian continent and later on, to the rest of the world.

Here are two new articles from EFN website.

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Asia Driving the World: How leading ASEAN CEOs see the future of the fastest-growing region and beyond

Tuesday, 23 July 2013 13:16

Bangkok, Thailand

The event is full with top ASEAN business leaders. They discussed broadly about the future of Asia, especially ASEAN, with the 2015 launch of the ASEAN Economic Community (AEC) expected to present huge economic opportunities for businesses both within the group's 10 member countries and beyond.

These top business figures include Kyoichi Tanada, president of Toyota Motor Thailand, Chartsiri Sophonpanich, president of Bangkok Bank, Timothy Ong Teck Mong, chairman of Asia Inc Forum of Brunei, Ngo Thanh Tung, chairman of Vietnam International Law Firm, Paul Blanche-Horgan, chief executive officer at Ezecom Corp from Cambodia, U Zaw Zaw, chairman of Max Myanmar Group, and many others, with  Suthichai Yoon, Nation Multimedia Group chairman, the host of the event and also the moderator in the discussion.

"Business Visions 2020" was the main idea of the discussion. These high-profile executives from all over the region shared their ideas on business perspectives, trends and the opportunities that lie ahead once the AEC starts in 2015. Nevertheless, several issues still have to be addressed.  With so diverse cultures, rules and regulations, a number of obstacles will have to be overcome if the region's economies are to be integrated into a single market. In particular, social inequality, local administration, governance and a number of other key issues will have to be tackled.

Timothy Ong Teck Mong from Brunei made several good arguments about the difference of ASEAN countries, yet the potential after better integration is huge.

For example, getting construction permits in Singapore took about 26 days; 110 days in Vietnam; and 652 days in Cambodia. In addition, applications for business start-ups in Singapore took three days; 47 days in Jakarta; and 101 days in Brunei and Indonesia.

More importantly, he said, the gap between Asean's poorest and its wealthiest citizens, measured in terms of per-capita GDP, was huge - a factor of almost 16, compared to a factor of just two in the European Union.

Business leaders agreed that other key factors for continued growth include good governance in both the corporate and state sectors, and social responsibility among Asian entrepreneurs to ensure that all members of society benefit.

Asia’s Story of Growing Economic Freedom

Friday, 12 July 2013 14:05

By Razeen Sally

Policy Analysis No. 725 from Cato Institute

The global financial crisis reinforced a sense that the world is "shifting East"—to Asia. The essential story of modern Asia is its unprecedented expansion of economic freedom, enabled by market liberalization. Economic freedom, however, remains substantially repressed across the region.

There are three key policy challenges to expanding economic freedom in Asia today. The first is to open up financial markets, which remain backward and repressed by command economy controls. The second is to renew trade and foreign-investment liberalization, which has stalled since the Asian crisis of the late 1990s. And the third is to open up energy markets, which, even more than financial markets, are throttled by government interventions.

Increasing Asian consumption of fossil fuels will increase carbon emissions. Mainstream advocacy of carbon reduction in Asia should be met with skepticism, given its potential to lower growth substantially. A far better approach is one based on adaptation to global warming through market-based efficiency measures.

Asia’s poorer economies should concentrate on "getting the basics right" for "catch-up" growth. These are "first-generation" reforms of macroeconomic stabilization and market liberalization. Asia’s middle- and high-income economies need to focus also on "second-generation" reforms—more complex structural and institutional reforms to boost competition and innovation. Diverse political systems can deliver catch up growth. But autocracies are badly fitted to deliver second-generation reforms for productivity- led growth. The latter demands a tighter link between political and economic freedoms.

The Asian miracle is not the product of superior technocratic minds who concocted successful industrial policies. Rather, freedom and prosperity bloomed on Asian soil because government interventions were curtailed and markets unleashed. Classical liberalism, however partially implemented, has worked in Asia. It is a system to which Asians should aspire.

  

Please see original website for full analysis: 

http://www.cato.org/publications/policy-analysis/asias-story-growing-economic-freedom 

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See also:

EFN Asia 21: On Think Tank Independence, Jeju Forum, May 31, 2013 

EFN Asia 22: Dealing with Economic Nationalism, Jeju Forum, June 03, 2013 

EFN Asia 23: More Photos at Jeju Forum, June 06, 2013 

EFN Asia 24: Jim Rogers talk at Jeju Forum, June 10, 2013