A Total Of 176 Vietnamese Women At A Taiwanese Owned Apparel Manufacturing Company

Macro-Economic Issues(B) R&W Chapters 7-9

Link to Encyclopedia of the Orient

Link to WDI

Link to Syllabus

Link to https://ctools.umich.edu/portal

Reforms

See especially Chapter 9 of R&W.

Washington Consensus (p. 229 of R&W)

• Fiscal discipline

• Reorientation of public expenditures

• Tax reform

• Interest rate liberalization

• Unified and competitive exchange rates

• Trade liberalization

• Opening to foreign direct investment

• Privatization

• Deregulation

• Securing property rights

Rodrik’s amendments to the Washington Consensus p. 229

• Corporate governance

• Anti-corruption

• Adherence to WTO

• Following international financial codes and standards

• Prudent capital account opening

• Non-intermediate exchange rate regimes

• Independent central bank/ inflation targeting

• Social Safety nets

• Targeted poverty reduction

Samir Amin, 1931 -

Samir Amin is an Egyptian political author, born in 1931. He currently lives in Dakar, Senegal. Amin was trained in Paris, and is one of the best-known Neo-Marxian thinkers, both in development theory as well as in the relativistic-cultural critique of social sciences. He is the director of the Forum du Tiers Monde

(Third World Forum), based in Dakar. He is a promoter of the conscious self-reliance of developing countries, particular for the Arab world.His numerous books include Eurocentrism (1988), L'empire du chaos (Empire of Chaos, 1991) and Au-del? du capitalisme (Spectres of Capitalism, 1998).

Composite Index of Reform

Source: Dasgupta et al.(2002), Reform and Elusive Growth in the Middle East…

MNA - MENA EAP – East Asia LAC – Latin American SAR – Sub-Saharan Africa

Change in Composite

Reform Index

Source: Dasgupta et al., Reform and Elusive Growth in the Middle East…

World Bank Judges Egypt Top Reformer, 2008

Link to summary

Impact of Structural Reforms

Source: M.K. Nabli and Véganzonès (2004) Reforms and Growth in MENA Countries

Telecommunications Liberalization in MENA

Source: World Bank: Trade Investment and Development in MENA Figure 5.6

Inflation

Inflation, by RegionsInflation (GDP Deflator) by Regions, %/yr.

0

5

10

15

20

25

30

35

1960 1970 1980 1990 2000 2010

Middle East & North Africa

High income: OECD

East Asia & Pacific

Latin America & Caribbean

South Asia

Sub-Saharan Africa

Source: WDI data

Inflation-CPI MENA CountriesInflation (CPI) MENA

-25

0

25

50

75

100

1960 1970 1980 1990 2000 2010

Algeria

Egypt, Arab Rep.

Iran, Islamic Rep.

Iraq

Israel

Jordan

Kuwait

Lebanon

Libya

Morocco

Oman

Qatar

Saudi Arabia

Syrian Arab Republic

Tunisia

Turkey

Yemen, Rep.

Source: WDI data

Calculated RERs

Real Exchange Rates

25

50

75

100

125

150

1960 1970 1980 1990 2000 2010

Egypt

Jordan

Tunisia

Turkey

Calculated as x-rate x PUS/Plocal. Increase in RER should increase exports

Turkey kicks the habit of high inflation

Source: IMF Survey, September 20, 2004

Turkey: Real Exchange Rate

Source: Central Bank of Turkey

GRAPH: REAL EFFECTIVE EXCHANGE RATE INDICES

708090

100110120130140150160170180190200

Jan-

80Ju

l-80

Jan-

81Ju

l-81

Jan-

82Ju

l-82

Jan-

83Ju

l-83

Jan-

84Ju

l-84

Jan-

85Ju

l-85

Jan-

86Ju

l-86

Jan-

87Ju

l-87

Jan-

88Ju

l-88

Jan-

89Ju

l-89

Jan-

90Ju

l-90

Jan-

91Ju

l-91

Jan-

92Ju

l-92

Jan-

93Ju

l-93

Jan-

94Ju

l-94

Jan-

95Ju

l-95

Jan-

96Ju

l-96

Jan-

97Ju

l-97

Jan-

98Ju

l-98

Jan-

99Ju

l-99

Jan-

00Ju

l-00

Jan-

01Ju

l-01

Jan-

02Ju

l-02

Jan-

03Ju

l-03

Jan-

04Ju

l-04

Jan-

05Ju

l-05

Jan-

06Ju

l-06

Jan-

07Ju

l-07

Jan-

08

CPI Based Real Effective Exchange Rate (1995=100)

PPI Based Real Effective Exchange Rate (1995=100)*

RER is measured as E*Pus/Plocal: increases in RER increase home exports

Turkey: Real Exchange Rate

Source: Central Bank of Turkey

GRAPH: REAL EFFECTIVE EXCHANGE RATE INDICES

708090

100110120130140150160170180190200

Jan-

80Ju

l-80

Jan-

81Ju

l-81

Jan-

82Ju

l-82

Jan-

83Ju

l-83

Jan-

84Ju

l-84

Jan-

85Ju

l-85

Jan-

86Ju

l-86

Jan-

87Ju

l-87

Jan-

88Ju

l-88

Jan-

89Ju

l-89

Jan-

90Ju

l-90

Jan-

91Ju

l-91

Jan-

92Ju

l-92

Jan-

93Ju

l-93

Jan-

94Ju

l-94

Jan-

95Ju

l-95

Jan-

96Ju

l-96

Jan-

97Ju

l-97

Jan-

98Ju

l-98

Jan-

99Ju

l-99

Jan-

00Ju

l-00

Jan-

01Ju

l-01

Jan-

02Ju

l-02

Jan-

03Ju

l-03

Jan-

04Ju

l-04

Jan-

05Ju

l-05

Jan-

06Ju

l-06

Jan-

07Ju

l-07

Jan-

08

CPI Based Real Effective Exchange Rate (1995=100)

PPI Based Real Effective Exchange Rate (1995=100)*

50%

100%Inflation in Turkey

Israel: REERIsrael-REER

40

60

80

100

120

140

1970 1975 1980 1985 1990 1995 2000 2005 2010

Israel

Source: Data from WDI

RER in Egypt and Jordan

RER is measured as E*Pus/Plocal: increases in RER increase home exports

Source: Domac and Shabsigh IMF (1999)

Evolution of RER in Morocco and Tunisia

Source: Domac and Shabsigh IMF (1999)

RER is measured as E*Pus/Plocal

Fiscal Issues, Including Defense

MENA: Gov’t Fiscal Balance

Source: World Bank (2006) Economic Development and Prospects: Financial Markets in a New Age of Oil page 112

Tax rates


World Defense Expenditures, 1999

(US$ billion) (US$ million) (US$mill)

World 852 Algeria 1,830 Oman 1,780

W. Europe 188 Egypt 2,390 Qatar 1,060

Middle East 55 Iran 6,880 Saudi A. 21,200

Africa 20 Iraq 1,250 Syria 4,450

China 89 Israel 8,700 Tunisia 357

India 11 Kuwait 2,690 Turkey 9,950

Russia 35 Lebanon 653 UAE 2,180

USA 281 Morocco 1,450 Yemen 374

Source: US Arms Control and Disarmament Agency, World Military Expenditures and Arms Transfers 1999-2000

Relative size of Military Expenditures

Source: Cordesman (2004) Military Balance in the Middle East

Decline of Real Military Expenditures in MENA,

1985-1999

Source: Cordesman (2004)Military Balance in theMiddle East

Defense Expenditures/GDP, RegionsMilitary Expend/GDP, Regions

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

1985 1990 1995 2000 2005 2010

Middle East & NorthAfrica

East Asia & Pacific

Latin America &Caribbean

South Asia

Sub-Saharan Africa

High income: OECD

Source: WDI

MENA: Military Expenditure/GDP, %MENA: Military Expend/GDP (%)

0

5

10

15

20

1985 1990 1995 2000 2005 2010

Algeria

Bahrain

Egypt, Arab Rep.

Iran, Islamic Rep.

Israel

Jordan

Kuw ait

Lebanon

Libya

Morocco

Oman

Saudi Arabia

Syrian Arab Republic

Tunisia

United Arab Emirates

Yemen, Rep.

Source: WDI (2006)

MENA: Military Expenditure/Gov’tMENA: Military Expend/Gov't (%)

0

10

20

30

40

50

60

1985 1990 1995 2000 2005 2010

Algeria

Bahrain

Egypt, Arab Rep.

Iran, Islamic Rep.

Israel

Jordan

Kuwait

Lebanon

Morocco

Oman

Tunisia

Turkey


Yemen, Rep.

Tariffs and Trade Policy

Typical review of Reforms

No factories: no problems

Link to MERIP on failure of WTO round in Seattle

Turkey’s FDI in Egypt

Link to article

Turkey Sets Up Its First Industrial Park in EgyptAFP PHOTO/ KHALED DESOUKI

CAIRO: After signing a free trade agreement in 2005 that was dubbed “a turning point in relations between two regional powers,” it was only a matter of time before Turkey established its first private industrial park in Egypt.Turkish President Abdullah Gul inaugurated Wednesday “The Polaris” industrial park, the first of its kind in Egypt, with investments totaling $1.5 billion. The private industrial park is a joint venture between the two countries that is estimated to attract $4 billion of investments in the next four years. “Trade ties between the two countries have already been on the rise since [ratification] of the FTA,” said Minister of Trade and Industry Rachid Mohamed Rachid in a press statement. “The majority of Turkish investments in Egypt seek to export to foreign markets, especially in Europe, the Middle East and Africa, as well as benefit from partnership agreements between Egypt and Europe, allowing preferential advantage of products manufactured in Egypt to enter these markets without customs,” he added.Sprawling two million square meters in the Sixth of October City — an area fit to host some 300 companies and factories — the cluster will include Turkish manufacturing operations from a number of sectors including textile and ready-made garments, furniture, automotive, glass, and food processing. The ministry expects total production capacity to reach $3.5–4 billion per year.Gul, who started an official visit to Egypt on Tuesday, told Reuters that recent economic reforms in the Arab country spurred interest from Turkish investors.

Trade Policy Indicators

Source: Dasgupta et al.,Reform and Elusive Growth in the Middle East…

Unweighted Import Tariff Rates-Regions

SAR: South Asia, SSA: Sub.Sah. Africa, ECA: East Asia


MENA Tariffs

Column Titles:Simple Average,Weighted AverageStd. Deviation.

ECA4 – Central Europe & TurkeyEAP5 – East Asia

Source: World BankTrade, Inv. andDevelopment

Long Term Trends in Trade Integration: World and MENA


Intra-Industry Trade Ratio in MENA

Source: World Bank: Trade Investment and Development in MENA Figure 2.7 p. 81

Index for all manufactures, in1988 and 2000.

Higher numbers indicate moreintegrated trade.

Morocco: Employment Growth and Manufactured Exports


Export Diversification of MENA (late 1990s)

The smaller the number, the more diversified

Inter-regional trade among ESCWA

World Market Share of Textiles and Garments


Share of World Exports of Services: MENA and Other Regions


Free Trade Agreements Involving MENA Countries

Israel EU Turkey Egypt Jordan GCC Algeria Moroc Tun Leb Libya Bahr Oman

USA 1985 2001 2006 x x

Israel \ x x 2004

EU \ ? EUAA x EUAA EUAA EUAA x No!

Turkey \ x x x

Egypt \

Jordan \ x x x

GCC x x

Most MENA countries are members of the World Trade Organization: Algeria, Iraq, Iran, Lebanon, Libya, and Yemen are negotiating accession, and only Syria is not actively seeking entry.Jordan also has FTA type agreements with Syria, Kuwait, and Singapore.Israel has FTAs with Canada, Mexico, and several other countriesTurkey and the EU have an agreement which involves significant reduction of tariffs (everything but agriculture), but does not include Turkey’s membership in the EUEUAA – Association Agreement to the European Union–Mediterranean FTA - is a proto-FTA of the EU with the Mediterranean countries, also involving foreign aid, investment regulations, and similar arrangements.The Greater Arab Free Trade Area (1997) is a work in progress.

Bush kicks off new round of free-trade talks in the Middle East

U.S. president seeks to create FTAs with every nation in the region by 2013

By Agence France Presse (AFP) Compiled by Daily Star staff Friday, March 11, 2005The Bush administration, seeking to provide economic support for its efforts to spread democracy in the Middle East, launched a new round of free-trade talks in the region this week while an Egyptian official said Wednesday he believed his country's own negotiations with the United States would start soon. Egyptian Trade Minister Rashid Mohammed Rashid described his meeting in Washington with Acting U.S. Trade Representative Peter Allgeier in optimistic terms, saying he was hopeful that free-trade talks with the United States would begin "in the near future." "We do not have a specific date for when we can start negotiation of an FTA (Free Trade Agreement). But we are both moving on the right track," Rashid said in describing his talks with Allgeier.The Bush administration is pushing to strike free-trade deals with a number of countries in the Middle East as a prelude to Bush's ultimate goal of creating a free-trade area throughout the region by 2013. The hope is that greater trade with the United States will bolster economic growth in the region and help support Bush's goals of fighting terrorism and spreading democracy in that part of the world.The administration currently has free-trade agreements in that area of the world with Israel, Jordan and Morocco. A free-trade deal negotiated last year with Bahrain is pending congressional approval.The administration has delayed starting talks with Egypt until the country makes further economic reforms. Rashid argued that the country is moving quickly to implement a wide range of economic reforms and a free-trade agreement with the United States would help promote even greater reforms.

FDI, Privatization, and Growth of Stock Markets

Link to data on Recent FDI into MENA

Link http://www-personal.umd.umich.edu/~mtwomey/econhelp/344files/Table18%20International%20Finance.doc

Link to FDI Table 17: 20th Century FDI in MENA

Link http://www-personal.umd.umich.edu/~mtwomey/econhelp/344files/Table17EarlyFI.doc

Share of FDI Inflows p. 182

Source: World Bank (2004) Unlocking the Employment Potential in the MENA page 182

Quick Review of Theory of Foreign Investment

Distinguish Direct Investment from Portfolio Investment

Direct Investment because of special advantage of Investor Company Technology, Trademark/Patent, Operational practice, Access to credit or external markets, protection of home countryAttraction of country: low wages, availability of resources, tax benefits access to marketProfit rates, wages, import reliance, etc. will be higher for FDI companyBenefits will decline over time (product cycle)

FDI will be market seeking or resource seeking

FDI Potential


Jordan Times on Vietnamese Women’s Strike in Jordan: March 2008

Link to article

Link to site on QIZ’s http://www.jordanecb.org/investment_qiz.shtm

QIZ Vietnamese workers refuse to end strike

By Hani Hazaimeh SAHAB - A total of 176 Vietnamese women at a Taiwanese-owned

apparel manufacturing company in Al Tajamouat Industrial Estate are still on strike demanding a pay increase.Upon the work stoppage on February 10, the workers linked their return to a W&D Apparel Corporation’s consent to increase their monthly salary from $175 to $265 per month and a basic eight-hour workday. The factory owner said the demand contradicts employment contracts they had signed. He accused some strikers of exercising violence and sabotage.“When the company refused to meet their conditions, they started rioting and sabotaged some of the company’s properties. The management had no choice but to call police to restore order,” James Shen, W&D general manager, told The Jordan Times yesterday.“Some of the strikers stole mechanical parts from sewing machines to prevent the company from hiring other workers to replace them,” he charged.He added that the management has met with 10 representatives of the strikers, but the two sides reached no agreement although the managers offered some “compensation”. He explained that the financial compensation was paid for those who had worked overtime hours and were the most productive. “Those were satisfied with the compensation and wanted to go back to work. But those who did not get compensation threatened them,” Shen claimed.Thirty-year-old Di Thi Wei, one of the workers, upheld his claim.She told The Jordan Times that she accepted the compensation and decided to go back to work despite the strike leaders’ threats. “The company moved us to a different place to protect us from being assaulted by the strike leaders,” she added. Di Thi was one of the 85 women who resumed work, said the general manager, noting that the company had to rent new dormitories to ensure their safety.Echoing her colleague’s words, Nguyen Thi Tuoi, 26, said she was beaten badly by the strike leaders for going back to work before she moved to the new dorms.“They even poured cold water on me while I was sleeping in bed in the middle of a cold night,” she told The Jordan Times. “They tore my clothes and my shoes and I had to borrow clothes from another worker.”

Jordan Times: March 5, 3008

Excerpt from US Embassy Site on Jordan FTA http://usembassy-amman.org.jo/QIIZ.htm

QUALIFYING A PRODUCT Q: How does the FTA affect the Qualified Industrial Zone (QIZ) initiative? A: The FTA does not supersede or eliminate the QIZ initiative. The QIZ initiative currently grants immediate tariff and quota-free access to the U.S. market to goods that are produced in the QIZ’s and meet specific rules of origin requirements. Under the FTA, tariffs and quotas for many goods are phased out over time, and rules of origin require 35% Jordanian content. Thus for some high-tariff goods, producing in QIZ’s will retain an advantage. For instance, many apparel goods face U.S. tariffs of up to 30%. Under the FTA, tariffs on these goods would be reduced over ten years, and Jordanian exports would have to meet the 35% Jordanian content level. Under the QIZ initiative, those same goods would enjoy immediate elimination of tariffs and quotas, and would require a lower level of Jordanian inputs. Thus in this case, QIZ-produced products would enjoy a comparative advantage.

Q: Who qualifies products for duty free entry in the United States? What information is required? A: A committee consisting of Jordanian and Israeli government officials determines whether products are eligible for duty-free treatment. The manufacturer must provide detailed information about the costs of materials and labor to prove that the product fulfills QIZ production requirements.

Privatization Proceeds


Cumulative Privatization Proceeds/GDP (%), 1988-2003

Egypt 6 Qatar 3

Jordan 11 Saudi A. 2

Lebanon 1 Tunisia 4

Morocco 19 Turkey 3

Oman 3

Positive but < 0.5 Algeria, Bahrain, Iran UAE, Yemen. Presumably zero elsewhere (e.g. Libya, Syria).

Source: Privatization proceeds from WB Privatization database http://rru.worldbank.org/Privatization/; GDP from WDI

Stock Market data

Source: Neaime (2006) Thunderbird Review

Market Capitalization/GDP

Market Capitalization/GDP

1

10

100

1000

1985 1990 1995 2000 2005 2010

Egypt, Arab Rep.

Iran, Islamic Rep.

Israel

Jordan

Kuwait

Lebanon

Morocco

Oman

Qatar

Saudi Arabia

Tunisia

Turkey


United States

Source: WDI. Missing are Algeria, Iraq, Syria, Yemen

Lebanon

US

Jordan

Iran

Debt Data

Table 8.2 p. 214. External Debt, 1994 and 2004

Debt/GDP

MENA: Debt/GDP

0

50

100

150

200

250

1970 1975 1980 1985 1990 1995 2000 2005

Year

Perc

ent

Egypt

Jordan

Lebanon

Morocco

Syria

Tunisia

Turkey

Foreign Assets/GDP: Oil Exporters (Data in billion US$)

Overseas Assets

GDP Ratio

UAE 900 187 4.8

Saudi Arabia 600 372 1.6

Kuwait 300 109 2.8

Qatar 100 62 1.6

Sources: Estimates on overseas assets – referring to 2007-, from Setser and Ziemba, “Understanding the New Financial Superpower- The Management of GCC Official Foreign Assets,” RGE Monitor Dec. 2007.

GDP estimates (for 2007) from EIU Monthly Reports.

Tech. Composition of exports of Lebanon and other MENA

Trade to GDP Ratios in MENA


Hirschman Export Concentration Index

LAC-Latin America, EAP5 East Asia, ECA3 Europe.

Source: World Bank, Trade Investment and Development

Tourism/GDP: MENA and Other Regions


Business

A Total Of 176 Vietnamese Women At A Taiwanese Owned Apparel Manufacturing Company