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Asian Drivers and Poor Countries A policy research agenda. Javier Santiso Chief Development Economist & Deputy Director OECD Development Centre. OECD Development Centre Paris 16-17 March 2006. 1. The cognitive effect: new emerging capitalisms. 2. - PowerPoint PPT Presentation
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1
Asian Drivers and Poor Asian Drivers and Poor CountriesCountriesA policy research agendaA policy research agenda
OECD Development Centre
Paris 16-17 March 2006
Javier SantisoChief Development Economist & Deputy Director
OECD Development Centre
2
11 The cognitive effect: new emerging capitalisms.The cognitive effect: new emerging capitalisms.
The trade effect: the dark side of the boom. The trade effect: the dark side of the boom. 22
China and India as a wake up call.China and India as a wake up call.33
3
EmergingAsia8.0%
GDP share of world output (WEO, 2004)
EU30.7%
US29.6%
Korea&Japan12.7%
China4.2%
The cognitive impact: The emergence of new capitalisms. Center and Periphery rebalanced…
LatAm4.8%
Asia represents more than one fifth of world output.
4
China has doubled its GDP in 8 years: a unique combination of economic pragmatism and catching up process…without the help of Money Doctors!
Chinese growth rates has been higher than those observed in Brazil and Mexico during their glorious years.
Source: based on WEO and PWT
PPP per capita GDP in constant prices
(thousand of US$, 2004-5 estimate)
0
4
8
12
16
20
24
2819
85 1
950
1988
195
3
1991
195
6
1994
195
9
1997
196
2
2000
196
5
2003
196
8
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
e
China
J apan
Korea
Brazil
Mexico
5
Asia´s growth is based on an outward looking strategy: a development strategy to follow for Latin America and
Africa.
Source: IMF DOTS
… and its share in world merchandise trade has duplicated in less than a decade.
China's share in world merchandise trade (%, 1980-2004)
0%
1%
2%
3%
4%
5%
6%
7%
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
Trade openness (X+M/GDP, 2004)
0%
50%
100%
150%
200%
250%
Mal
aysi
a
Tha
iland
Chi
na
Sou
th K
orea
Indo
nesi
a
Indi
a
Chi
le
Mex
ico
Ven
ezue
la
Uru
guay
Arg
entin
a
Col
ombi
a
Per
u
Bra
zil
Region's Average 2004
Source: WTO, National Statistics
China’s trade openness surpasses that of all Latin American countries …
6
11 The cognitive effect: new emerging capitalisms.The cognitive effect: new emerging capitalisms.
The trade effect: the dark side of the boomThe trade effect: the dark side of the boom. . 22
China and India as a wake up call.China and India as a wake up call.33
7
Some findings: The Good, The Bad and the Ugly.
Countries specializing in the production and export of components, capital goods and raw materials feel positive effects from China’s growth while countries specialized in the production of consumer goods feel negative effects (Eichengreen & Tong, 2005).
The exchange rate issue maters: a 20% appreciation of the renmimbi reduces exports to the US by a fifth, while other regions will increase their sales to that market (0.5% for Latin America) (Lopez Cordoba, Micco and Molina, 2005).
Tout est pour le mieux dans meilleur des mondes? (Candide, Voltaire).
8
China´s strong demand for energy and commodities: a bonanza or a threat?
Source: BBVA, Cochilco
Consumption of aluminum, 2004(estimate)
24%
22%
20%
23%
11%
North America
Western Europe
China
Other Asia
Rest of world
Consumption of nickel, 2004(estimate)
11%
38%
11%
13%
20%
7%
North America
Western Europe
China
J apan
Other Asia
Rest of world
Source: JP Morgan estimates
Source: BP
Share of total oil exports by destination region/country, 2003 (%)
28%
2%
0%
2%
26%1%
6%
12%
19%
1%
3% USA
Canada
Mexico
S. & C. America
Europe
Africa
Australasia
China
J apan
Other Asia P acific
Rest of World
Share of total copper exports by destination region/country, 2004
18%
0%
31% 9%
17%
5%
14%
6%
50%
America
Others
Europe
South Korea
China
Taiwan
J apan
Others Asian
Asia
9
Source: C.HJ.Kwan, Nomura Institute of Capital Markets Research Source: Blázquez, Rodríguez and Santiso (2006)
China’s demand for commodities: a bonanza or a threat?
Asian countries competition* vs. Chinese exports to US, %
010203040506070
*Value of exports to US from China in same product categories as country´s exports, as % of country´s total exports to US
Latin American countries competition* vs. Chinese main export products
0%
10%
20%
30%
40%
50%
60%
México
Bras
il
Colombia
Arge
ntina
Perú
Urugu
ayChil
e
Vene
zuela
*Arithmetic average of the following indexes: CC= and CS=
where ajt and ait equals the share of item “n” over total exports of countries j (China) and i in time t.
å --n
njt
nit aa
2
11
åå
å
n
njt
n
nit
n
njt
nit
aa
aa
22 )()(
10
China has become a major destination of Brazilian exports: The bonanza.
Source: SECEXSource: BBVA
Trade Balance with China
574
966
2.385
1.729 1.694
0
500
1000
1500
2000
2500
3000
2001 2002 2003 2004 2005p
US$ millions
Major countries of destination of Brazilian exports
United States 22,6% 1º United States 21,1%Argentina 11,2% 2º Argentina 7,6%
Netherlands 5,4% 3º Netherlands 6,1%Germany 5,3% 4º China 5,6%Japan 4,6% 5º Germany 4,2%Italy 3,8% 6º Mexico 4,1%
Belgium 3,8% 7º Italy 3,0% United Kingdom 3,0% 8º Japan 2,9%
France 2,5% 9º Chile 2,6%Spain 2,4% 10º France 2,3%Mexico 2,2% 11º United Kingdom 2,2%Chile 1,9% 12º Spain 2,1%
Russia 1,6% 13º Belgium 2,0%Paraguay 1,6% 14º Russia 1,7%China 1,4% 15º Venezuela 1,5%
1999 2004
11
Brazilian exports of primary products: more is not better (Dutch disease and monopsony power: issues to watch).
0.05
0.06
0.07
0.08
0.09
0.10
0.11
0.12
Jan
-89
Jan
-90
Jan
-91
Jan
-92
Jan
-93
Jan
-94
Jan
-95
Jan
-96
Jan
-97
Jan
-98
Jan
-99
Jan
-00
Jan
-01
Jan
-02
Jan
-03
Jan
-04
Herfindahl-Hirschmann Concentration Index ofBrazilian exports by country of destination
more
con
cen
trati
on
less
con
cen
trati
on
Source: BBVA and Bradesco
Herfindahl-Hirschmann Concentration Index of Brazilian exports by industry, 1990-2003
0,00
0,02
0,04
0,06
0,08
0,10
0,12
0,14
0,16
0,18
0,20
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
Source: WTO.
+ c
on
cen
trati
on
+ d
ivers
ific
ati
on
12
11 The cognitive effect: new emerging capitalisms.The cognitive effect: new emerging capitalisms.
The trade effect: the dark side of the boom. The trade effect: the dark side of the boom. 22
China and India as a wake up call.China and India as a wake up call.33
13
China competes intensively with Mexico on a global level
Chinese trade competition with Latin America
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.0 0.1 0.2 0.3 0.4 0.5 0.6
Mexico
Brazil
Colombia
VenezuelaChile
ArgentinaPeru
Costa Rica
Chinese global trade competition
0.2
0.3
0.4
0.5
0.6
0.7
0.30 0.35 0.40 0.45 0.50 0.55 0.60
Mexico
ThailandHungary
USA Czech R.
Spain
Poland
Japan
Source: Blázquez, Rodríguez and Santiso (2006)
14
11,700 Km
• Lower transport and communication costs • Access to FTA• Just-in-time delivery
Mexico is more competitive in manufacturing more sophisticated products which require frequent communication with the client or
supplier and short reaction times.
Shipping time
24 Days
160 Km
4 Days
Mexico benefits from its geographic proximity to its major export markets:
Mexico’s competitive advantage: proximity to export
markets
15
Source: US Census Bureau, CIBCWM (2005)
* Total expenditure on freight as a share of total imports of commodity, average for all countries
Source: CIBCWM (2005)
México vs. China at different oil prices
Mexico’s competitive advantage: lower transport costs
US imports from China tend to be more transport sensitive than from Mexico. Could transport savings
offset Chinese lower wages ?
1.7 2.14.7 6.91.9 1.81.8 1.95.2 1.76.7 5.24.9 1.74.8 3.03.0 2.04.9 2.0
Trade-weighted Freight Rate 3.7 2.9
General Industrial Machinery Scientific InstrumentsTextile Yarn Special trans&commodities
Footwear Power Generating MachineryManufactures of Metals nes General Industrial Machinery
Apparel Office MachinesFurniture Apparel
Telecommunications Electrical MachineryElectrical Machinery Telecommunications
Office Machines Road VehiclesMisc Manufactures Petroleum
Transport Costs* of US Top 10 Imports (2003)
CHINAAverage
Freight RateMEXICO
Average Freight Rate
16
World Bank
US$/TEU
CMPCH Index
LSU Index
Singapore 1 0.38 0 0.33 2 6.76 6.72 117 NA NAHong Kong 0 0.25 0 0 NA 6.38 5.46 NA NA NATaiwan 0.5 0 0 0 NA 5.18 4.49 140 163 NAJapan 0.75 0.13 0.89 1 NA 5.16 5.16 250 202 NAMalaysia 0 0.25 0 0.38 7 4.95 5.76 75 NA NASpain 0 0.06 1 0 4 4.88 6.08 200 105 NAKorea 0 0.38 0 0 NA 4.12 5.22 NA NA NAThailand 0.5 0.63 0 0.38 4 3.98 5.12 93 NA NAArgentina 0 0.13 0 1 7 3.81 4.52 NA 139 NAVietnam 0 0 0 0.5 NA 3.81 5.02 NA NA NAChile 0 0.25 0.43 1 3 3.76 6.05 202 100 NAChina 0.5 0 0 0 7 3.49 4.44 110 NA NAIndonesia 1 0.06 0 0.38 5 3.41 4.06 NA NA NAMexico 0.5 0.38 0 1 4 3.34 2.61 NA NA NAVenezuela 0 0 1 1 11 3.28 3.63 NA NA NAEl Salvador 0 0 0 1 4 2.95 2.3 NA NA 61Brazil 0.5 0.75 0 1 10 2.92 4.45 328 292 NAPeru 0.5 0 0.5 1 7 2.88 3.32 NA 142 NAIndia 0 0 0 1 NA 2.79 4.28 NA NA NAPhilippines 0.5 0 0 0.38 7 2.79 3.51 118 NA NAEcuador 0 0 0.43 1 15 2.63 3.65 NA 139 NACosta Rica 0 0 0 1 4 2.46 3.28 NA NA 68Colombia 0.5 0.13 0.5 1 7 2.26 1.88 NA NA NABolivia NA NA NA NA 9.5 1.61 4.38 NA NA NAUruguay 0 0 0 1 5 NA NA NA NA NA
NA: Not AvailableSource: Data for the first 4 columns was kindly provided by Carsten Fink, Aaditya Mattoo, and Ileana Cristina Neagu* (2002).
Container Handling ChargesCooperative Agreements
Index
Median Clearance
time (Days)
Port Efficiency Index (1-7)
Crime Index (1-7)Country
Cargo Handing
Restriction Index
Mandatory Services
Index
Price Fixed Agreements
Index
Pending reforms : the upgrade of port facilities
17
Conclusions: A Watch List
Africa and Latin America: Out of the Value-Chain Game?
The share of China’s total exports produced by foreigners has risen sharply, from 32% to 60% between 2000 and 2005.
Foreign outsourcing is becoming a major driver of India’s and China’s high tech exports, both countries moving up quickly in the value added ladder.
In 2005 for example, of China’s top 100 exporters, 53 were foreign companies and all were electronics/information technology companies.