East Asia Forum http://www.eastasiaforum.org Economics, Politics and Public Policy in East Asia and the Pacific Mon, 31 Aug 2015 12:00:44 +0000 en-US hourly 1 Credit where credit’s due for China’s economic authorities http://www.eastasiaforum.org/2015/08/31/credit-where-credits-due-for-chinas-economic-authorities/ http://www.eastasiaforum.org/2015/08/31/credit-where-credits-due-for-chinas-economic-authorities/#comments Mon, 31 Aug 2015 12:00:44 +0000 http://www.eastasiaforum.org/?p=47500 Author: James Laurenceson, ACRI

Nobel prize winning economist Paul Krugman recently said with reference to China’s President Xi Jinping: ‘Are you starting to have the feeling that when it comes to economic policy Xi-who-must-be-obeyed has no idea what he’s doing?’

Krugman’s comment came after the Chinese authorities had decided to allow the renminbi to fall modestly in value, as opposed to a more ambitious reset or cutting it loose entirely. Other commentators have spent the past couple months chiding the government for its response to the stock market collapse, or accusing it of stalling on market-orientated reform more broadly. If China is making a habit of getting economic policy wrong, countries with a deep trade and investment exposure such as Australia will pay a higher price than most.

But wait. The main job of macroeconomic policy in the short run is to keep demand ticking over at close to the capacity of the economy to supply goods and services. Faster than that and there will be inflation; any slower and there will be above natural unemployment. Former senior economist at the Bank of International Settlements, Guonan Ma, also argues that unless there is an overall balance between demand and supply, it becomes that much harder for China to implement much-needed structural reforms.

So where does the level of demand in China currently stand? According to an IMF report released in August 2015, it stands almost exactly where it should. This policy success is easily missed amid all the hyperventilation about the ongoing gyrations in the Shanghai Composite Index.

Yet how is this possible when growth in 2015 will almost certainly be the lowest in 25 years? The IMF emphasises that it is not the level of demand that is slowing the growth rate but the capacity of the economy to produce output.

At first blush this supply side slowdown may appear worrying. But it’s also what you would expect to see in an economy that the World Bank now regards as having reached upper middle-income status. China can only benefit from a rapid ‘catching up’ to OECD economies for so long.

At the same time, the Chinese authorities have had and will need to continue to manage an orderly slowing in the overall growth rate, they’ve needed to engineer a shift in productive capacity away from manufacturing and construction towards services. The sectors that once drove the economy have become victims of overinvestment and excess capacity. An IMF report released in April 2015 said that a glut of residential property would likely take until 2020 to clear.

But since Xi and his team came to power at the end of 2012, the services share of GDP has risen from 45 to 48 per cent of GDP. There’s still a long way to go: in the United States the services share is 78 per cent. Still, the transition is clearly underway. The Caixin/Markit Services Purchasing Manager’s Index (PMI) soared in July to an 11 month high.

On the demand side, the big task has been to rebalance the structure of spending towards domestic consumption and away from investment and exports. In the first half of 2015, consumption spending in China accounted for 60 per cent of GDP growth. This compares with 54.4 per cent at the same time in 2014 and 45.2 per cent midway through 2013. Despite the trouble in the stock market, the Westpac MNI China Consumer Sentiment Index has increased for three straight months since June 2015 and is now higher than it was a year ago.

Companies on the ground are also not reporting any collapse in consumer spending. On ‘China’s Black Monday’, in response to a plunge in Apple’s stock price on the back of fears about China, CEO Tim Cook reassured investors: ‘I get updates on our performance in China every day … and I can tell you that we have continued to experience strong growth for our business in China through July and August’.

The challenges for China won’t stop coming. Former Morgan Stanley Asia boss, Stephen Roach, observed that the country’s leaders are grappling with enormous complexity as ‘[t]ectonic shifts are occurring simultaneously on several fronts — the economy, financial markets, geopolitical strategy, and social policy’.

In that context, it’s easy to pan some interventions as having been clumsy, and there’s nothing wrong with being impatient for more reform. But it shouldn’t be missed that China’s authorities appear to know their economy a good deal better than many give them credit for.

James Laurenceson is the deputy director of the Australia China Relations Institute (ACRI) at the University of Technology, Sydney.

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Asia’s strategic weight http://www.eastasiaforum.org/2015/08/31/asias-strategic-weight/ http://www.eastasiaforum.org/2015/08/31/asias-strategic-weight/#comments Mon, 31 Aug 2015 02:00:24 +0000 http://www.eastasiaforum.org/?p=47495 Author: Peter Drysdale, East Asia Forum

Their sheer size and growth potential mean that China and India will be at the centre of the Asian economic powerhouse over the coming decades, however well it performs. Over the past two decades, the two countries have already more than tripled their share of the global economy. Adjusted for purchasing power parity (PPP), the Indian economy is now roughly the size of Japan’s. In PPP terms, China’s economy is already nudging that of the United States. One Goldman Sachs estimate suggests that India’s economy will surpass the US economy within the next three decades. For long the world’s second largest in population, the dynamics of India’s population growth will push it ahead of China’s in less than two decades.

Indian Prime Minister Narendra Modi speaks at the India-China Business Forum in Shanghai, China, 16 May 2015. (Photo: AAP)

India still has the world’s largest concentration of poor people, with more than 840 million living on less than US$2 a day and 400 million on less than US$1.25 a day. By 2050, with the world’s largest population, India will face multiple challenges around urbanisation, infrastructure, jobs, drinking water, and food for its citizens. Its size and rising middle-class power has led many to highlight its role in powering the Asian century. It is also embraced, in Washington, Tokyo and Canberra, as a strategic hedge against China’s growing power.

Unless its poor can be included in the process of growth, India’s transition through the middle-income trap will remain a dream. If India is to emerge from lower-income country status and catch up with its BRICS counterparts, it will have to throw off the shackles of outdated development strategies and a culture of bureaucratic inertia.

Located in the right place and at the right time, how can India thrive, alongside its giant Asian neighbour? What opportunities does China offer India and what opportunities will the rise of India offer China? India is bound to a low per capita growth trajectory unless it can lift its annual growth rate by at least 2 to 3 percentage points. Is China a threat to India’s regaining its growth momentum, or does it offer a way out of continuing economic fragility?

The marked slowdown of growth in both China and India in the past few years does not qualify the outlook for China’s and India’s dominance of Asia’s economic and strategic weight. Yet, as Alok Sheel argues, their current growth trajectories suggest both need new strategies for cushioning the impact of the global slowdown. Their current strategies are unsustainable if the drop in demand in advanced economies is permanent, and that might well be the case.

‘Both economies need rebalancing’, says Sheel. ‘China needs to reduce its reliance on foreign demand and domestic investment while increasing domestic consumption. This is what it seems to be consciously seeking to do’, he continues, ‘unlike China, the Indian economy needs to invest more,especially in infrastructure, while also improving the ease of doing business … This would involve shifting public expenditure away from consumption towards plugging growing infrastructure gaps and improving the environment for private investment’. To do this also involves following Prime Minister Modi’s leadership in engaging more deeply internationally.

Re-calibrating China’s and India’s development strategies in this way will, of course, drive their two economies more closely together, not put political or economic distance between them. China needs to invest outwards, and is positioned to be a significant source of investment funding and infrastructure for countries in its neighbourhood, such as India. India needs to lift its competitiveness across manufacturing and other sectors by opening to international trade and investment, and position itself to play a much larger role in regional value chain production networks.

The force and potential of the growing weight in the India–China partnership continues to befuddle analysts in Washington, Tokyo and Canberra. The pace and scale of bilateral trade and investment growth between China and India has been impressive and it is bound to more than match that of India’s other Asian partnerships in the decades immediately ahead given their proximity and economic complementarity.

The inexorable force of India’s and China’s demographic dynamics and growing market size will drive these changes and India’s deeper integration into Asia with China. It will do this by leveraging the two countries’ divergent demographics and their trade and geographic proximity.

In this week’s lead essay, Hugh White examines an alternative conception of China’s and India’s strategic interaction, through the prism of a wider ‘Indo-Pacific’ strategic system, posing the question of how India might play into that to limit China’s strategic weight.

White observes that Prime Minister Modi has encouraged leaders in Washington, Tokyo and Canberra to believe that he shares and wants to help promote their vision of Asia’s strategic trajectory through that prism. ‘But it is equally probable that India will play little role in the power politics of East Asia’, he argues. And if it does, it will pursue Indian interests, which may differ substantially from America’s, Japan’s or Australia’s.

There is little doubt, White argues, that India will acquire the strategic weight to function as a great power in an Indo-Pacific strategic system alongside China, America and Japan. Demographics alone assures its place among the world’s big three economies. India will also remain the preeminent great power in the sub-continental strategic system of which it is the natural centre. But will it function as a great power in a broader strategic system that also encompasses East Asia?

‘Those who assert the existence of a functioning “Indo-Pacific” region think so. But promoting the region as a policy concept risks assuming what needs to be proved’, White concludes.

If India stands aloof from East Asian power politics, and China does not challenge India west of Sumatra, then these two regions could continue, as they long have, to function as separate strategic systems. And proponents of the Indo-Pacific idea, which has gained fashion around the notion that India will be compliant in playing an assigned role in the Western Pacific as well as the Indian Ocean, might need to reconsider what is going on on the ground across Asia, not only in the oceans that surround it.

Peter Drysdale is Editor of the East Asia Forum.

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India’s role in Asia may not fit ‘Indo-Pacific’ agenda http://www.eastasiaforum.org/2015/08/30/indias-role-in-asia-may-not-fit-indo-pacific-agenda/ http://www.eastasiaforum.org/2015/08/30/indias-role-in-asia-may-not-fit-indo-pacific-agenda/#comments Sun, 30 Aug 2015 12:00:50 +0000 http://www.eastasiaforum.org/?p=47489 Author: Hugh White, ANU

Many observers tend to assume that India will play a large and growing part as a great power in a wider ‘Indo-Pacific’ strategic system, that it will use its growing power to balance and limit China’s regional weight. But some caution is called for — although this outcome is possible, it is far from inevitable.

 India's Prime Minister Narendra Modi (L) and China's President Xi Jinping wave to the press before their meeting in Xian, the capital of the Chinese Shaanxi Province, on 14 May 2015. (Photo: AAP)

Prime Minister Modi has encouraged leaders in Washington, Tokyo and Canberra to believe that he shares and wants to help promote their vision of Asia’s strategic trajectory. But it is equally probable that India will play little role in the power politics of East Asia. And if it does, it will pursue Indian interests, which may differ substantially from America’s, Japan’s or Australia’s.

There is little doubt that India will acquire the strategic weight to function as a great power in an Indo-Pacific strategic system alongside China, America and Japan. Demographics alone assures its place among the world’s big three economies. India will also remain the preeminent great power in the sub-continental strategic system of which it is the natural centre. But will it function as a great power in a broader strategic system that also encompasses East Asia?

Those who assert the existence of a functioning ‘Indo-Pacific’ region think so. But promoting the region as a policy concept risks assuming what needs to be proved. If India does play a big role in the Western Pacific then that region and the Indian Ocean will indeed function as a single Indo-Pacific strategic system. But if India stands aloof from East Asian power politics, and China does not challenge India west of Sumatra, then these two regions could continue, as they long have, to function as separate strategic systems.

To believe that India simply has no choice but to engage strategically with China because they are such close neighbours is a misreading of the map. They share a long land border, but it is remote and utterly impassable to large land forces. The two relate primarily as maritime powers — and as such they are quite a long way from one another. Each side has choices about how far they intrude into one another’s strategic space. China can choose whether to contest the Indian Ocean, and India can choose whether to contest the Western Pacific.

Each would respond very negatively if the other made such a choice. If either does so then they will become strategic rivals, shaping strategic affairs in both regions profoundly. But the arguments against this are great. Both stand to lose much more than gain. Why then would China challenge India west of Sumatra, or India challenge China to its east?

The US-led order has certainly served India’s interests, and it has every reason to prefer that it be sustained. But India could probably live with an East Asia in which China wielded much more power — even hegemony — as long as it did not try to extend its authority west of Sumatra.

Where India chooses to accept or oppose China’s growing power and influence will be shaped by the costs and risks of opposing China and by anxieties about Beijing’s increasing strength and reach. Delhi has immense stakes of its own in good relations with China. It will not sacrifice them simply to serve Washington’s objective of preserving the old US-led status quo in East Asia.

It is often said that China has no choice but to stake a strong strategic presence the Indian Ocean because it depends so heavily on sea-borne trade across it. But what is the evidence that China must defend its sea-borne trade in the Indian Ocean?

Strategic policymakers and commentators routinely exaggerate threats to maritime trade. Non-state threats are easily managed and economically trivial. Threats from other states almost never happen. No major power has mounted a sustained and economically significant campaign to interdict the maritime trade of another major power since the 18th century — except in a general war. Everyone is equally vulnerable to attacks on trade, and everyone’s economy suffers if anyone’s trade is attacked.

This doesn’t mean such attacks could never happen. It means they would be the result — not the cause — of strategic rivalry. China doesn’t need to challenge India in the Indian Ocean to protect its trade.

The nature of contemporary maritime operations also makes intruding into one another’s sphere of influence hard. Power projection by sea is becoming extremely difficult. The carriers and ships needed for maritime power projection are becoming increasingly vulnerable to a whole range of systems able to find and sink them.

The impressive Chinese ‘anti-access and area denial’ forces that are limiting US strategic power in the Western Pacific could easily prevent India’s navy projecting power east of Sumatra. These same capabilities will also help India prevent China projecting power by sea. This preponderance of maritime defence over offence will tend to keep each power out of the other’s maritime approaches. Their respective nuclear forces will also reinforce a cautious assessment of the costs and benefits of rivalry.

If, despite the lack of motive or means, India did choose to become a major player in a wider Indo-Pacific strategic system, it is far from clear that it would use its power to support Washington’s, Tokyo’s or Canberra’s interests. The four might be united in trying to prevent Chinese hegemony, but they may have different ideas about their desired alternative. India’s aims are much broader than simply promoting US primacy. History shows that a shared desire to resist a potential hegemon is no guarantee of long-term strategic alignment among great powers.

Hugh White is Professor of Strategic Studies at The Australian National University.


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Ms Park goes to Beijing, but will Xi cooperate on North Korea? http://www.eastasiaforum.org/2015/08/29/ms-park-goes-to-beijing-but-will-xi-cooperate-on-north-korea/ http://www.eastasiaforum.org/2015/08/29/ms-park-goes-to-beijing-but-will-xi-cooperate-on-north-korea/#comments Sat, 29 Aug 2015 12:00:03 +0000 http://www.eastasiaforum.org/?p=47479 Author: Zhiqun Zhu, Bucknell University

South Korean President Park Geun-hye will visit China from September 2–4 to attend Beijing’s official activities to mark the 70th anniversary of the end of World War II, including a military parade on 3 September. Her visit comes fresh off the heels of inter-Korean tensions triggered by a North Korean landmine which maimed two South Korean soldiers. Though the situation is calming, North Korea remains a security challenge for both China and South Korea and is likely to dominate talks between Park and Chinese President Xi Jinping. But achieving a long-lasting peace on the Korean peninsula will require nothing short of joint efforts by all major players in Northeast Asia, especially China and the United States.

South Korean President Park Geun-hye speaks during a luncheon meeting with members of charity groups at presidential house in Seoul, South Korea, Thursday, Aug. 20, 2015. Park Geun-hye will travel to China next month to attend a ceremony marking the anniversary of victory over Japan in World War II, her office said Thursday. (Cheon Jin-hwan/Newsis via AP) KOREA OUT

President Park’s planned visit speaks volumes of how far the Sino–ROK relationship has come since the two countries normalised relations in 1992. For China, South Korea is a good neighbour and reliable friend. Park’s visit demonstrates the warm relationship between the two countries as well as the close personal ties between her and Xi. This is in contrast to relations with North Korea, which while traditionally described as close as ‘lips and teeth’, have deteriorated in recent years given North Korea’s nuclear testing and the execution of Kim Jong-un’s uncle and China point-man Jang Song-thaek.

The China visit makes economic and political sense for South Korea. China has been South Korea’s largest trading partner for over a decade. South Korea trades more with China than with the US and Japan combined. Both South Korea and China are critical of what they see as Japanese historical revisionism: in particular, they are disappointed with Prime Minster Shinzo Abe’s 14 August statement. Their common interest is in peacebuilding in East Asia, a peace built on truthful reflection on the painful past.

For China, Park’s visit also shows that South Korean foreign policy, in contrast to Japan’s, is more independent from Washington. The Japanese media reported that the United States had pressured Park to cancel her upcoming trip to Beijing. Despite denying this, the US government’s concerns are understandable. First of all, the United States does not want to send a signal in favour of China’s sabre-rattling military parade in Beijing. It wants its allies to follow its lead and not attend the parade. And it does not want to encourage China’s potential military adventurism, especially when China is embroiled in territorial disputes in the South China Sea and East China Sea.

Washington is especially concerned about the timing of the parade. The Chinese government has stated that the military parade, part of the 70th anniversary celebration, is not aimed at any particular country. Yet given the delicate state of Sino–Japanese relations today, it may unnecessarily raise tensions in the region. The United States does not have any problem with South Korea developing robust economic and even political relations with China. But it feels deeply uncomfortable when South Korea moves closer to China while Japan–South Korea relations remain frosty. The United States ‘rebalance’ toward Asia is significantly complicated if two of its key allies there are not getting along.

During the upcoming Park–Xi summit, President Park is likely to urge China to play a more active role in persuading North Korea to return to the Six-Party Talks. But China–DPRK relations have been weakening and Pyongyang does not take Beijing’s advice seriously these days. Kim Jong-un will not go to Beijing for the commemoration event, either because he did not receive the invitation from China or because he rejected it. In the midst of the current tensions, North Korea has reportedly claimed that it will not heed Beijing’s call for restraint since such a strategy does not work anymore.

South Korea needs to be realistic and patient. As many have argued, China’s leverage over North Korea may have been overrated. It really will take concerted efforts by all major players, including efforts to revive the China–Japan–South Korea trilateral summit later this year as well as strong US–China cooperation, to resolve the deadlock on the Korean peninsula. Unfortunately, Beijing and Washington seem to have outsourced their responsibilities to each other regarding the North Korea issue. They seem powerless or uninterested in dealing with North Korea and its young leader now.

Two events in 2015 have both raised hopes and created frustrations for observers of the Korean peninsula. The first was the international agreement reached by the United States, China and other major powers with Iran over the latter’s nuclear program; the other was the resumption of diplomatic ties between the United States and Cuba after decades of hostility. When can a solution to the North Korea problem be found? The latest tensions on the peninsula highlight the urgency of this issue.

With the presidential election season gearing up in the United States, North Korea is unlikely to become a priority issue for the departing Obama administration. China, on the other hand, is suffering from a deteriorating relationship with North Korea and its influence over Pyongyang has drastically declined. In this regard, President Park’s diplomatic activism comes at a critical time and hopefully will lead to positive results on the Korean peninsula in the years ahead.

Zhiqun Zhu is a professor of political science and international relations at Bucknell University.

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New measures are needed to understand gender and poverty http://www.eastasiaforum.org/2015/08/29/new-measures-are-needed-to-understand-gender-and-poverty/ http://www.eastasiaforum.org/2015/08/29/new-measures-are-needed-to-understand-gender-and-poverty/#comments Sat, 29 Aug 2015 00:00:50 +0000 http://www.eastasiaforum.org/?p=47466 Author: Priya Chattier, ANU

The World Bank’s International Poverty Line (IPL) is the benchmark for tracking progress in the reduction of global poverty. But the US$2 a day guideline has drawn criticism among academics and policy circles for subsuming all those below the IPL under the ‘poverty’ category, and for its unidimensional focus on monetary poverty. A new, better measure is out there — and policymakers should use it.

A woman living under the poverty line cleans rice, which she purchased from a fair-price shop in the Public Distribution System in the Indian state of Orissa. (Photo: AAP)

The Millennium Development Goals — when aiming to eliminate poverty and extreme poverty — set the benchmark at the IPL, currently estimated at US$2 per day for poverty and US$1.25 per day for extreme poverty. But this fails to distinguish among groups — women, men, children, elderly, the vulnerable — and marginalised groups and also excludes multi-dimensional deprivations.

When it comes to debates about poverty measurement, feminists in development have much to bring to the table. Longstanding feminist contributions to the analysis of poverty have always been about critiquing the household as the unit of analysis — it is oblivious to personal identities of gender, age and position in the household. It ignores the different and often conflicting preferences, needs and interests of different members in a given household.

The Multidimensional Poverty Index (MPI) comes somewhat closer in offering an alternative to income-based measures, as it is underpinned by Amartya Sen’s capabilities approach, which emphasises the capability of individuals to live what they would consider to be a ‘good life’. The MPI is an index of multidimensional poverty measured at the household level. It uses ten indicators, including health, education and standard of living. Still, the MPI does not go far enough when it comes to gender sensitivity in poverty measurements. The MPI is gender-blind. It fails to accurately capture both the prevalence of poverty among women as compared to men, and the complex lived realities of women and men who experience poverty beyond household-level averages.

The Individual Deprivation Measure (IDM), a feminist research project at the Australian National University, was made to address these challenges. It is the first to measure poverty of individuals rather than households, and is based on how poor women and men define poverty. So why use the IDM? And how will it assist development policymakers and planners in the Asia Pacific region?

The usefulness of the IDM as a measure of poverty depends on the quality of the data upon which it is built, the transparency with which it was developed, and its ability to better inform policy. For a start, the IDM uses both qualitative and quantitative assessments of poverty. It uses participatory research by talking to and with people in poor communities in 18 sites across six countries: Fiji, Indonesia, the Philippines, Angola, Malawi and Mozambique.

By talking to individual women and men who experience and live with poverty, the IDM methodology immediately departs from existing household-level measures of poverty. For the first time, academics are actually learning from poor people how they define poverty and how they assess if someone is poor. The IDM reveals individual experiences of poverty and inequality within households.

The IDM certainly offers more to the plate than existing measures, which are often constrained by limited data sources such as income or expenditure. It is grounded in academic and policy discourse on definitions and measurements of poverty, but takes the theory one step further by taking the priorities of the poor into consideration.

The measure not only drew attention to gender differences in priorities expressed by poor people, but also differences reflecting the gender roles and responsibilities assigned by households and communities. For instance, significantly more women than men prioritised cooking fuel and personal care as important for determining whether a person experiences poverty or not, reflecting the hardships faced by women in domestic circumstances. Based on what poor women and men considered important in defining poverty, the project then developed a measure of deprivation comprising the 15 dimensions most common across sites and countries.

The IDM was piloted in the Philippines, and revealed differences in individual levels of deprivation within the household, based on gender, generation and location. The IDM also offers a unique gendered poverty analysis by including dimensions such as family relations, freedom from violence, voice in the community, use of time, caring and household labour burdens, and participation in economic activity (paid and unpaid work).

Seeing poverty through a gender lens is a crucial element in analysing and tracking it more effectively. The IDM offers some hope for the Pacific region. Fiji is leading the way as the first country in the region to undertake a multi-topic individual and household survey using the IDM approach. Collecting data at the individual level will not only tell a deeper and richer story about how women and men experience poverty, but will also capture information on the key dimensions of life that poor women and men value as important.

The United Nations has set inequality as one of the foci of the post-2015 development agenda. If this is to be effectively addressed, it is important that gender-sensitive data reflecting the gender-based challenges and deprivations faced by individual women and men is used to design women’s empowerment programs.

Priya Chattier is a research fellow in The State Society and Governance in Melanesia Program, Coral Bell School of Asia Pacific Affairs, The Australian National University.

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Gay Asia should resist liberal assimilation http://www.eastasiaforum.org/2015/08/28/gay-asia-should-resist-liberal-assimilation-2/ http://www.eastasiaforum.org/2015/08/28/gay-asia-should-resist-liberal-assimilation-2/#comments Fri, 28 Aug 2015 12:00:03 +0000 http://www.eastasiaforum.org/?p=47455 Author: Sherman Tan, ANU

While it is incredibly difficult to make generalisations about LGBTIQ advocacy efforts or debates over gay rights across Asia, many commentators have expressed optimism after a number of public expressions or political initiatives in support of gay unions and rights.

A Filipino protester from a gay and lesbian activist group mocks 'Lady Justice' in a rally calling for the resignation of Philippine President Benigno Aquino III, 24 July 2014. The group condemned the social injustices caused by the Aquino regime. (Photo: AAP)

Most have hailed these events as important milestones for the affirmation of sexual freedoms, from gay couples publicly ‘tying the knot’ in Myanmar, to pride parades such as Pink Dot SG in Singapore, and government-appointed same-sex marriage committees in Nepal. Thailand, Vietnam and Taiwan, too, are reconsidering existing prohibitions on same-sex marriages. These show that both Asian citizens and political regimes alike have become thoroughly literate in the vocabulary of LGBTIQ advocacy (which covers the lesbian, gay, bisexual, transgender, intersex, and queer communities).

But not everyone agrees on the extent of social acceptance for gay rights, unions or marriages. Across Asia, governments are sensitive to impassioned debates over same-sex marriage legislation in the West. They are recognising that they can no longer ignore nor explicitly denounce this new wave of sexual self-determination, introduced through the forces of cultural globalisation and via increasingly cosmopolitan segments of their citizenry.

Yet — both citing and siding with anti-LGBTIQ conservatives — these very same regimes have also been quick to dampen speculation about the possibility of legalising gay marriage. In some cases, they continue to maintain draconian laws that criminalise same-sex behaviour, all in the name of protecting traditional public interests or values.

Many LGBTIQ activists boldly claim that social conservatism towards these issues is rapidly dissolving. They point to the growing public acceptance and support for their cause in the form of state-tolerated campaigns, online and live advocacy efforts and a general climate of political and sexual liberalisation.

But these liberal gestures — touted as a sign of changing times and the rise of a new Asia, one free from all kinds of bigotry and cultural discrimination — might not turn out to be the utopia its proponents had hoped for. If ‘everyone’s a little bit racist’, as the Broadway musical, Avenue Q, declares, then perhaps, one should not exclude the possibility that ‘everyone’s a little bit homophobic’ too. Indeed, could the vogue for liberal attitudes towards gay rights be sidestepping — or worse, obscuring — an underlying climate of traditionalism and sexual conservatism?

It is important to be cautious when celebrating the growing presence of grassroots social activism, non-governmental organisations and human rights watch-groups across Asia concerned with sexual rights and diversity. These organisations claim the right to advocate and speak for the gay person, but their liberal agenda does little to overturn traditional mindsets rooted in histories of religious belief, family values and kinship ties.

Many LGBTIQ-identifying individuals can little afford the costs of estrangement or isolation from intimate others, regardless of whether public discourses exhort them for bravery or endow them with the rights of sexual self-determination. More troubling is the tendency for the queer community to be portrayed as a deeply oppressed underclass. As such, they get conflated with other groups pressing for political liberalisation and social recognition, thus effectively diluting their specific sexual demands and struggles.

Most of all, it should be acknowledged that the struggle for gay rights and the legalisation of gay marriages continues to feed heterosexual liberal fantasies, instead of challenging the status quo. Public campaigns, articles and speeches beseeching sexual rights remain entrenched in the language of victimhood, struggle and triumphant overcoming when discussing LGBTIQ communities.

These melodramatic plots, evident in stories of forbidden love and the struggle for emancipated desire among queer individuals and couples, make sense when read against other equally important social currents in Asian societies today. The institution of marriage is paling in significance, and family oriented-ness is declining among younger generations. Given the conscious decisions of heterosexual individuals to remain single or marry later in life due to economic imperatives, Asian societies are fraught with collective anxieties over familial continuity and reproduction.

In other words, gay struggles for recognition and legitimacy serve the indirect purpose of reviving the intrinsic value of intimate partnership. They operate as exemplary models for heterosexual couples to learn from and emulate. Tales of queer couples’ valiantly fought battles to love and be loved in the face of adversity constitute a powerful — but mostly unconscious and unacknowledged —mechanism that prompts other citizens to revalue romantic couplehood and marriage.

Unfortunately, in the public circulation of these dramatised stories and romantic clichés, LGBTIQ narratives have become decontextualised, instead supporting a generic ‘freedom to love’ without a referent. This kind of advocacy neither challenges heterosexual ideals as the dominant social paradigm, nor addresses the unequivocally unique sexual orientations of LGBTIQ persons.

Queer advocacy in a liberal mode might be subordinated to other heterosexual or political agendas to the point of its unrecognisability or even disintegration. It is essential that LGBTIQ movements in Asia reclaim their own particularity and assert the validity of their cultural and sexual demands uncompromisingly. Instead of pandering to heterosexual publics in an effort to be included as a part of blanket liberalism, queer activists should emphasise their difference from and irreconcilability with existing traditions and conservatisms. Only by doing so can they champion the distinctive value of gay.

Sherman Tan is a PhD candidate in anthropology in the College of Asia and the Pacific at the Australian National University.

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Where to now for the Chiang Mai Initiative Multilateralisation? http://www.eastasiaforum.org/2015/08/28/where-to-now-for-the-chiang-mai-initiative-multilateralisation/ http://www.eastasiaforum.org/2015/08/28/where-to-now-for-the-chiang-mai-initiative-multilateralisation/#comments Fri, 28 Aug 2015 00:00:20 +0000 http://www.eastasiaforum.org/?p=47459 Author: Kaewkamol Pitakdumrongkit, RSIS

East Asian financial cooperation is at a crossroads. The Chiang Mai Initiative Multilateralisation (CMIM) and its surveillance unit — the ASEAN+3 Macroeconomic Research Office (AMRO) — are continuing to grow in size and importance. But the structure of these two entities must change to accommodate this growth.

An Indonesian employee prepares rupiah banknotes at a money changer in Jakarta, Indonesia, 25 August 2015.  (Photo: AAP)

The CMIM is a currency swap agreement among the finance ministries and central banks of the ASEAN+3 states (including the Hong Kong Monetary Authority). The scheme, which evolved from the earlier Chiang Mai Initiative (CMI) bilateral currency swap network in 2000, aims to provide financial support for short-term liquidity problems. To manage macroeconomic difficulties, each member can swap its local currency with US dollars up to the amount of its financial contribution to the reserve pool times its borrowing multiplier.

After an amended agreement that came into effect on 17 July 2014, the size of the CMIM was doubled from its initial value of US$120 billion to US$240 billion, and a crisis-prevention mechanism — the CMIM Precautionary Line (CMIM–PL) — was introduced. The IMF delinked portion was raised to 30 per cent, meaning that members could draw up to 30 per cent of their maximum borrowing amount without requiring IMF lending conditions.

Despite these accomplishments, the CMIM is still a work in progress. In May 2012, some member states pushed to increase the IMF delinked portion to 40 per cent by 2014, but this has not yet been realised. AMRO is still drafting the operational guidelines and qualifications for access to the CMIM–PL. And AMRO still has to go through domestic processes to ratify the ‘AMRO Agreement’, which will transform it into an international organisation.

These matters are intertwined and are crucial to advancing this regional financial safety net. Addressing these issues requires clear vision about the future relationship between the CMIM and other international lending institutions such as the IMF.

The CMIM lending conditions must be tailored to best suit the interests and needs of East Asian nations, and will likely be different from the IMF’s. But the differences between CMIM and IMF conditions must complement — not compete with — each other.

The link with the IMF remains another concern. When the CMI was introduced, ASEAN+3’s surveillance mechanism was not on par with the IMF’s. The states agreed to incorporate IMF lending conditions into the CMIM to discourage moral hazard (when states take on more risk after being insured by other institutions).

Since then, CMIM participants have worked to reduce links to the IMF. The delinked portion increased from 10 per cent in 2000 to 30 per cent in 2012. So when will ASEAN+3 raise the delinked portion further?

The answer largely hinges on how AMRO develops in years to come. If AMRO is strengthened and functioning well as a surveillance unit, the likelihood of moral hazard will be reduced, requiring less links with the IMF.

But the entity must improve capacity and further its role as an independent authority to effectively undertake these functions.

The easier task is strengthening AMRO’s manpower. AMRO remains very small — housing only about a dozen experts — but there have been steps in the right direction. ASEAN+3 have added two deputy directors and one chief economist to the office.

But the jury is still out on how to make AMRO more independent. The entity assists the Executive Level Decision-Making Body (ELDMB) to make decisions on issues such as approving CMIM lending. But the ELDMB is mandated to oversee AMRO’s activities. The ELDMB consists of the deputy-level officials of the ASEAN+3 finance ministries and central banks. As such, AMRO is inevitably tied to governments. Such a relationship could affect its activities.

It seems clear that the CMIM cannot escape from the old game of sovereign politics. In East Asian financial history, conflicting interests and contestations between states have spilled over and influenced several CMIM details.

How will future outcomes unfold? Will they be in favour of the potential lenders (China, Japan and South Korea) or the potential borrowers (ASEAN)? The decision-making structure of the CMIM has been set up in a way that no single member is dominant. China (including Hong Kong), Japan and the 10 ASEAN nations have equal vote share at 28.41 per cent. South Korea’s vote share is smaller (14.77 per cent), but the two-thirds supermajority voting system allows the country to cast a determining vote under certain circumstances. Neither ASEAN nor the +3 nations can block a collective decision on its own. Future results will depend on how the parties collaborate with one another.

In coming years, we are likely to witness how the CMIM will progress. It will involve both technical sophistication as well as politics. But the outcomes that do unfold will reveal invaluable information about the political dynamics in East Asia. For those interested in East Asian regional cooperation, the CMIM is definitely worth keeping an eye on.

Kaewkamol Pitakdumrongkit is an assistant professor at the Centre for Multilateralism Studies, S. Rajaratnam School of International Studies, Nanyang Technological University.



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Is Abe’s womenomics working? http://www.eastasiaforum.org/2015/08/27/is-abes-womenomics-working/ http://www.eastasiaforum.org/2015/08/27/is-abes-womenomics-working/#comments Thu, 27 Aug 2015 12:00:30 +0000 http://www.eastasiaforum.org/?p=47448 Author: Helen Macnaughtan, University of London

In September 2013 Japanese Prime Minister Shinzo Abe pledged to create a society in which ‘all women can shine’. Abe acknowledged that women had long been an underutilised resource in the Japanese economy. He promised to boost female labour participation rates, increase the presence of women in corporate board rooms and improve gender equality. Two years on, is womenomics working in Japan?

Japanese Prime Minister Shinzo Abe poses with his new female Cabinet Ministers (clockwise), Yuko Obuchi, minister of economy, trade and industry, Haruko Arimura, minister in charge of supporting women's empowerment, Midori Matsushima, minister of justice, Eriko Yamatani, chair of the National Public Safety Commission and minister in charge of the abduction issue, and Sanae Takaichi, minister of internal affairs and communications, in Tokyo on 3 September 2014. (Photo: AAP)

The good news is that women and work is finally a key focus of the political and corporate agenda. The Abe government is actively promoting the so-called ‘20–30’ numerical target, which aims to ‘increase the share of women in leadership positions to at least 30 per cent by 2020 in all fields of society’.

There are new government-led initiatives focusing on the empowerment of women in business, such as the Ministry of Economy, Trade and Industry’s (METI) ‘Diversity Management Selection 100 Project’ and the ‘Nadeshiko Brand’ program, jointly launched by METI and the Tokyo Stock Exchange. These high-profile projects publicise companies who are making ‘exceptional progress’ in encouraging women in the workplace. The designation process is stimulating competition among Japan’s leading corporations to create best practice and attain visibility as female-friendly employers.

New legislation likely to be passed later in 2015 (it has been under Diet deliberation since 8 August) will require both public and private organisations to disclose key data on the position of women in their employment as well as develop an action plan for the future. Ahead of this new law, the Japan Business Federation (Keidanren) is already asking member companies to make voluntary disclosures.

Many Japanese companies are also actively implementing initiatives for women. These generally focus on setting targets for hiring, retaining and promoting women, and ensuring there are support systems in place such as female-focused career training, extended maternity provisions and shorter hours for working mothers. It is also no longer acceptable in corporate Japan to channel women into non-career tracks and expect them to resign upon marriage or childbirth. Although Japan continues to rank poorly in international comparisons of women in business and leadership, steady incremental progress is being made.

But a number of key barriers could inhibit the ultimate success of womenomics.

Childcare remains a sticky issue. A majority of working mothers with pre-school children rely on nursery schools. Places are limited and there can be long waiting lists. Enrolment is from April each year even though babies are born all year round and maternity leave may start at any time. Companies also have to verify a woman’s full-time employment as part of the registration process for childcare centres.

Social norms still dictate that women are the main carers of children in the family, so working mothers are less likely to be offered client-facing roles or career promotions given the culture of long work hours. Unless working mothers (and fathers) can realistically combine parenthood and a career, it will be difficult to realise the aims of womenomics.

A second issue is the way Japanese companies have interpreted the gauntlet that womenomics targets have laid down. Equal employment regulations are making it easier than ever for women to remain working after marriage and childbirth. Yet in the current corporate culture this does not necessarily translate into career paths for women that are on par with those enjoyed by men. This leads to an environment where the presence of women is a ‘profiling’ activity driven by unrealistic targets, rather than an environment where women and diversity are viewed as a source of competitive advantage.

Many companies still operate with a ‘one size fits all’ hierarchical, linear career model. This career path does not easily accommodate the diverse needs of female employees or indeed those of male employees. The low level of women in Japanese companies, particularly in managerial roles, is not simply due to the challenges of parenting and work–life balance, but is also a problem of mindset.

Even companies that are progressing in their diversity-friendly policies, cite the difficulties of overcoming long-standing gendered workplace attitudes. Problems include a lack of confidence from women who see few female role models at the managerial level and who do not wish to put themselves forward for promotion into a linear career path (originally designed for male workers) that appears to offer little work–life balance.

Unconscious bias is also at play. A lingering paternalistic corporate culture presumes that female employees would not want to (or could not) handle the responsibility and challenges of a promotion. Unless workplace practices can embrace change, they will not be able to embrace women.

Womenomics is having a horizontal impact. Recruitment and retention of women is gradually improving in both public and private sector organisations. But these women are being slotted into an existing, rigid mode of employment. Unless employment practices adapt to the changing needs of a more diverse workforce, there will continue to be low levels of women who advance to positions of leadership.

At the moment, the mostly unattainable ‘20–30’ target is driving the womenomics debate. What is needed instead is a cohesive mix of policy and strategy that aims to realise social justice and gender equality. While there is now a broad acceptance that Japan’s economy needs women in the workforce, institutional models and social norms still need to catch up.

Dr Helen Macnaughtan is Senior Lecturer in International Business and Management (Japan) at SOAS, University of London and co-editor of Japan Forum.

This article was originally posted here in the Australia and Japan in the Region Forum, a publication of the Australia-Japan Research Centre.

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ASEAN’s ambitions risk outstripping its capacity http://www.eastasiaforum.org/2015/08/27/aseans-ambitions-risk-outstripping-its-capacity/ http://www.eastasiaforum.org/2015/08/27/aseans-ambitions-risk-outstripping-its-capacity/#comments Thu, 27 Aug 2015 00:00:10 +0000 http://www.eastasiaforum.org/?p=47443 Author: Barry Desker, RSIS

Southeast Asia looks set to usher in a new era of cooperation and stability following the ASEAN Foreign Ministers meeting in Kuala Lumpur, Malaysia in early August. But significant challenges to regional integration remain and the risk is that ambitious claims may outstrip the capacity to deliver.

The group photo at the opening ceremony for the 47th Association of Southeast Asian Nations (ASEAN) Economic Ministers meeting in Kuala Lumpur on 22 August 2015. (Photo: AAP)

Foreign ministers affirmed the commitment to establish the ASEAN Community by the end of the year, to be formalised by the ASEAN Heads of Government in November. The ASEAN Community will comprise the three pillars of the ASEAN Economic Community (AEC), the Political-Security Community (APSC) and Social-Cultural Community (ASCC), which were envisaged by the ASEAN Summits of 2003 and 2005.

The establishment of the ASEAN Community will represent the culmination of steps towards regional cooperation among the 10 member states of ASEAN that has been ongoing over the past several decades. From fragile beginnings in 1967, ASEAN has become a shining example of regional cooperation worthy of emulation.

With a combined gross domestic product of US$3 trillion in 2013, ASEAN now has the third largest GDP in Asia after China and Japan and a combined population of 600 million. And ASEAN GDP is projected to grow by more than 5 per cent per annum over the next five years, while intra-ASEAN trade is expected to exceed US$1 trillion. The establishment of the AEC will aim to create a single production and distribution base where products can be manufactured, distributed and sold anywhere in the region.

ASEAN will also seek to enhance connectivity throughout the region. An ASEAN highway network is a priority project, while maritime links will also be improved. Air services are being liberalised and plans are in place to enhance rail connectivity.

The emergence of the ASEAN Community is a giant leap forward from the 1960s when Southeast Asia was regarded as the Balkans of Asia, riven by inter-state and intra-state conflicts in the region. The cold war was raging and Southeast Asia was a zone of contention.

But since then, the situation in Southeast Asia has undergone a dramatic transformation. The original ASEAN Five (later six with Brunei) intensified their cooperative efforts in economic and political fields as set out in their Declaration of Bali Concord 1976, and later offered the hand of friendship to the four Indochina states. Vietnam subsequently joined ASEAN in 1995, followed by Laos and Myanmar in 1997 and Cambodia in 1999. The enlargement of ASEAN encouraged its leaders to make bold plans for the consolidation and development of the regional grouping. They envisioned the three Cs — an ASEAN Charter, an ASEAN Community and ASEAN Connectivity — to enhance ASEAN’s progress and prosperity.

But the challenge for ASEAN is that the ambitions of its proponents surpass their capacity to deliver. The focus of national governments will continue to be on building strong states and maintaining their hold on power. By aiming to establish the ASEAN Community and its three pillars by December 2015, ASEAN draws attention to current weaknesses in the level of regional integration.

Like other regional groupings, the reality facing ASEAN is that it is essentially a diplomatic community of policymakers, journalists and academics that has not sunk deep roots. ASEAN has been outstanding in promoting regional stability and security as well as promoting regional economic cooperation and development. The risk is that the extravagant claims for a Community (with a capital C) may go unfulfilled.

Yet the development of an ASEAN Community remains important as Southeast Asia is situated in the midst of major changes in global history. The United States is today the only superpower and has controlled the maritime space of the Indo-Pacific since 1945. A rising China, which has historically been focused westwards towards Central Asia, could emerge as a regional competitor for the United States in the decade ahead.

As China builds up its naval and air power, China’s presence in the East China Sea and South China Sea will increase. China is already the leading trading partner for states in Southeast Asia and is rapidly emerging as a major source of investment, tourism and business partnerships.

This means that China’s rise in the decades ahead will pose challenges for the region even as it creates opportunities. Policymakers in ASEAN states are concerned that China’s capacity to influence regional decisions will increase as China becomes more powerful.

States in the region will develop closer relations with China. Prospects for cooperation are strengthened by China’s enunciation of a Maritime Silk Road as a key objective, bringing with it the promise of enhanced mutual prosperity, increased trade and investment and greater regional peace and security. On the other hand, China’s extensive territorial claims in the South China Sea create the potential for conflict.

China has been unwilling to turn to international legal adjudication to settle conflicting maritime territorial claims, and its current land reclamation is far greater than that undertaken by any other claimant state. There is also a lack of progress in reaching an agreement with ASEAN on a Code of Conduct in the South China Sea. All this highlights ways in which China’s actions could negatively affect the ASEAN region and underscores the importance of continued efforts at enhanced regional cooperation as embodied in the creation of the ASEAN Community.

Barry Desker is a distinguished fellow and Bakrie professor of Southeast Asia Policy, S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University, Singapore.

This article appeared earlier in The Straits Times and here as a RSIS Commentary.

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South Korea must confront structural problems in the economy http://www.eastasiaforum.org/2015/08/26/south-korea-must-confront-structural-problems-in-the-economy/ http://www.eastasiaforum.org/2015/08/26/south-korea-must-confront-structural-problems-in-the-economy/#comments Wed, 26 Aug 2015 12:00:48 +0000 http://www.eastasiaforum.org/?p=47452 Author: Seongman Moon, KIEP

South Korea’s economic growth has slowed significantly since the 1997 Asian financial crisis. The five-year average GDP growth rate was 7.9 per cent during 1991–95, but dropped substantially to 4.5 per cent for 2001–05 and then 3.8 per cent in 2006–10. This slowdown is closely linked to that in domestic demand. After the burst of the credit card lending boom from 1999–2002, growth in domestic demand has been close to zero and has even dropped into the negative. These facts suggest that since then, South Korea’s economic growth has been entirely driven by the export sector.

A delivery worker unloads boxes from a cart at a market in Seoul on 3 August 2015. Export success conceals economic weakness in South Korea, argues Seongman Moon. (Photo: AAP).

Growth in exports has been high for the past 30 years, on average more than 10 per cent per year, confirming the widespread view that exports underpin South Korea’s economic growth. More importantly, the contribution of exports to GDP growth has not changed much since 1980. The five-year average of the contribution of exports to GDP was 3.9 percentage points from 1991–95, 3.6 percentage points during 2001–05 and 3.8 percentage points during 2006–10. This indicates that the slowdown in both GDP growth and domestic demand growth is because the spillover effects from the export sector have dampened. Why has this happened?

A clue lies in the proportion of domestic value-added components of exports, which has been trending downwards from around 76 per cent in 1995 to roughly 60 per cent in 2009. This suggests that the contribution of South Korean export firms to domestic production has declined because those firms have been typically outsourcing to foreign supply chains. This phenomenon is not limited to South Korea. Most OECD member countries have reported decreasing proportions of domestic value-added components since the mid-1990s, a result of the widespread use of global value chains. If domestic export firms extensively use global value chains, the contribution of domestic value-added components to gross exports is likely to drop.

But the decrease in the proportion of domestic value-added components of exports in South Korea is also related to some other factors, distinguishable from other OECD members, which significantly decrease the spillover effects of export growth.

First, there has been a substantial decline in the contribution of small and medium-sized enterprises (SMEs) to exports, relative to large-sized firms. This downward trend is a result of the relative labour productivity of each firm size. The ratio of value added per worker in SMEs to those in large-sized firms during 2002–06 was around 39.4 per cent, further decreasing to around 34.5 per cent during 2007–10. This implies that large-sized South Korean exporting firms purchase foreign intermediate inputs for their final export goods due to the low productivity of local SMEs.

Second, the relative labour productivity of the service sector to the manufacturing sector has been declining, from 62 per cent in 2002 to 47 per cent in 2012. In addition, the service value-added components of manufacturing exports are much lower in South Korea than the rest of the OECD. This lower productivity means firms in the service sector fail to exploit the benefits from engaging in global value chains, which in turn dampens the spillover effects from large-sized firms’ exports.

The share of the service sector in total employment has been growing, from 62.3 per cent in 1993 to 74.1 per cent in 2012. SMEs account for about 80 per cent of output and 90 per cent of employment in the service sector. This suggests that the productivity gap between the two sectors is closely linked to the productivity gap between SMEs and large-sized firms.

The reason for this relative productivity gap between SMEs and large firms can be found in the structural problems of the South Korean economy. After the Asian financial crisis, large-sized firms restructured, shedding labour and investing abroad, in order to regain competitiveness. But SMEs fell behind. And the regulatory environment discouraged the growth of new industries and the service sector.

Labour market segmentation due to the widespread use of temporary contracts may have negatively affected firms’ total factor productivity (TFP). One reason could be that as permanent workers become more costly to terminate, firms are less likely to convert temporary workers to permanent ones and are more likely to reduce investment in on-the-job-training for temporary workers. Knowing this, temporary workers tend to make less of an effort. This will decrease a firm’s TFP (which combines the productivity of both temporary and permanent workers). Because the share of temporary workers is larger in SMEs than in larger firms, the labour market segmentation may also contribute to the productivity gap.

These structural problems have curtailed any positive spillover effects from export growth — mainly driven by large-sized firms — across key dimensions of the South Korean economy. Although large-sized firms have substantially increased their sales in foreign markets, they have also substantially increased their usage of foreign components. This, and the productivity gap between SMEs and large-sized firms, exposes the economy’s inherent weaknesses. Future policymakers must overcome this challenge in order to ensure continued and equitable growth across the economy.

Seongman Moon is a research fellow at the Korean Institute for International Economic Policy (KIEP). The views expressed in this article are those of the author and do not necessarily represent those of the KIEP or KIEP policy.

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