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Bulletin of Indonesian Economic Studies
ISSN: 0007-4918 (Print) 1472-7234 (Online) Journal homepage: http://www.tandfonline.com/loi/cbie20
The Economics of East Asian Integration: A
Comprehensive Introduction to Regional Issues
Shuhei Nishitateno
To cite this article: Shuhei Nishitateno (2013) The Economics of East Asian Integration: A Comprehensive Introduction to Regional Issues, Bulletin of Indonesian Economic Studies, 49:3, 395-397, DOI: 10.1080/00074918.2013.850645
To link to this article: http://dx.doi.org/10.1080/00074918.2013.850645
Published online: 05 Dec 2013.
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Book reviews 395
Central Java (chapter 6, by Muhammad Wildan). Jamaah Islamiyah and other radical groups emerged from this city.
In spite of the book’s clear exposition of the varieties of Islamic conservatism, it is heavily biased towards the modernist groups of Indonesian Islam. Van Bru-inessen mentions the traditionalist group Nahdlatul Ulama, yet there is no single chapter on this group or similar groups, despite the fact that traditionalists are among the most conservative groups in Indonesia (especially if we follow Van Bruinessen’s deinition of conservatism).
Religious conservatism has long been present in Indonesia. Just because the lib-eral discourses of Islam in the Soeharto era were widely covered by the media, it does not mean that the conservatives were marginal. The current turn towards the conservatives should therefore be seen not as a revival of a subordinated group but as an expansion of the dominant ideology.
Luthi Assyaukanie
Paramadina University
© 2013 Luthi Assyaukanie
http://dx.doi.org/10.1080/00074918.2013.850644
Masahisa Fujita, Ikuo Kuroiwa and Satoru Kumagai (eds) (2011) The Economics of East Asian Integration: A Comprehensive Introduction to Regional
Issues, Edward Elgar, Cheltenham, UK, pp. x + 524. Cloth: £125.00.
Production fragmentation, where a country’s production process is sliced into discrete activities, which are then allocated across multiple countries based on factor endowments such as labour, capital and technology, has been a feature of economic integration over past decades. The geographically integrated produc-tion process began to emerge when technological developments in transportaproduc-tion and communication reduced the cost of long-distance transactions. Combined with the liberalisation of trade and investment, this enabled multinational enter-prises to outsource an increasing amount of their production abroad and to inter-nationalise their value chains. The unprecedented economic growth of East Asian countries owes much to their integrating themselves into such international pro-duction networks.
This book provides a comprehensive overview of this integration. Part 1 begins with stylised facts of economic integration from historical and statistical points of view, followed by theoretical underpinnings that explain the process of eco-nomic integration. Using international trade data and an input–output table, the authors present the degree and modality of economic integration, before drawing on studies of the new economic geography to explain the fundamental mecha-nism of economic integration. Part 2 discusses the role of production networks and innovation, with an emphasis on manufacturing. Part 3 deals with various matters relating to agriculture, service, labour and money. Part 4 discusses the agents of economic integration, including institutional arrangements such as free-trade agreements, transport networks and infrastructure. The conclusion
396 Book reviews
ines the dificulties for economic integration posed by poverty, the environment and energy.
The book has many implications for Indonesia, but I focus here on productivity, poverty and the environment. As indicated in chapter 6, by Kensuke Kubo, Indo-nesia’s total factor productivity growth has stagnated in past decades, although its magnitude has varied (depending on industries and periods). Kubo argues that this lack of growth could be caused by low levels of investment in research and development (R&D), which would limit both the absorptive capacity of local irms and the technology transfer from multinational enterprises. Firms or indi -viduals need to invest in order to adapt new technology and knowledge to local conditions. The propensity for R&D in Indonesia is expected to increase with economic development, as experienced by advanced countries such as South Korea, Taiwan and Singapore. Kubo points out, however, that Indonesia might be required to invest more heavily in R&D than the advanced countries to realise productivity gains, because the technology is becoming more complex.
The level of poverty in Indonesia is also addressed (chapter 16, by Hisaki Kono). Theoretically, economic integration is pro-poor, at least in the long run, because it creates job opportunities through agglomeration and concentrated dis-persion, as well as by attracting foreign direct investment and expanding trade. Yet low levels of enrolment in secondary and tertiary education in Indonesia have limited any beneits to the poor. The government has made remarkable progress in reducing poverty in both rural and urban areas during economic integration, although the poverty rate (at around 20%) remains high compared with that of Malaysia and Thailand (both at around 5%). Indonesia also lags behind Thailand and Malaysia in its amount of physical infrastructure (for example, in 2004 only 55% of Indonesia’s roads were paved, compared with 80% in Malaysia and 97% in Thailand). Kono suggests that better infrastructure in Indonesia’s remote areas would grant farmers and local producers better access to urban and export mar-kets as well as to intermediate inputs, enabling them to take advantage of the opportunities presented by economic integration. Employment support services and microcredit schemes are other effective policy tools in making economic inte-gration work for the poor.
Another side of economic integration is its effect on the environment. In chap-ter 18, Michikazu Kojima and Etsuyo Michida conclude that the environmental consequences of integration could be favourable if the positive effects of tighter regulation and cleaner technology outweigh the negative effects of income and composition. The fact that Indonesia has experienced air and water pollution, soil contamination, and deforestation, for example, during economic integration sug-gests that the negative effects have been greater. The income effect is associated with the environmental Kuznets curve hypothesis – an inverse-U relationship between income and pollution. Indonesia may be on the upswing of the Kuznets curve, where pollution increases as an economy develops. The composition effect concerns the pollution-haven hypothesis, which claims that pollution-intensive industries of advanced economies tend to migrate to developing countries, where environmental regulations are often weakly enforced. The authors argue that East Asia needs a regional cooperation framework similar to the European Union Network for the Implementation and Enforcement of Environmental Law, or the North American Agreement on Environmental Cooperation, to hinder such
Book reviews 397
moves. Readers should be aware of not just the miracle of East Asian economic integration but also its dificulties.
Shuhei Nishitateno
Ministry of Economy, Trade and Industry, Tokyo
© 2013 Shuhei Nishitateno
http://dx.doi.org/10.1080/00074918.2013.850645
Hal Hill and Maria Socorro Gochoco-Bautista (eds) (2013) Asia Rising: Growth and Resilience in an Uncertain Global Economy, Edward Elgar, Cheltenham,
and the Asian Development Bank, Manila, pp. xvi + 424. Cloth: £99.00.
Asia – particularly East Asia – has experienced rapid economic growth since the 1980s and has overcome several inancial crises, including the 1997–98 Asian inancial crisis and the 2008–09 global inancial crisis (GFC). The ability of Asian countries to sustain growth and eradicate poverty requires continued productive investment in physical and human capital as well as in physical infrastructure. This voluminous book, edited by two eminent economists, one from The Aus-tralian National University and the other from the University of the Philippines, presents a comprehensive discourse on Asia’s past and prospective economic per-formance and considers how best to sustain the region’s prosperity in the face of depressed aggregate demand from the West.
The GFC, which started in the US, in late 2008, reshaped the global economy and redeined Asia’s role within it. World economic growth slowed, but Asia’s largest emerging economies (that is, China, India and Indonesia) continued to thrive. This uneven growth not only enhanced East Asia’s already increasing prominence but also raised important questions, such as how to maintain the region’s momentum; how to remove existing bottlenecks to growth (such as inad-equate levels of physical infrastructure); how to ease international commercial tensions caused by the reluctance of China, in particular, to appreciate its cur-rency; how to strengthen inancial development and regulation, to guard against inancial malpractice; and how to develop high-quality institutions that underpin and sustain economic transformation.
The book comprises three parts. The irst provides an overview by the edi -tors on the dificulties of sustaining Asia’s growth and prosperity in an increas -ingly uncertain global economy. The second discusses the various development challenges facing Asia’s emerging economies, such as those of institutions and governance, infrastructure, productivity and capital accumulation, savings and investment, inance, and the various investment treaties signed in ASEAN. The third provides various country studies, including of Asia’s two largest emerging economies, China and India, and the four largest ASEAN countries, Malaysia, Indonesia, Thailand and the Philippines.
The book’s discussion of China and India is of particular interest, because never in world economic history have such large countries, with a combined population of around 2.5 billion, grown so rapidly for so long – China since the late 1970s and India since the early 1990s. The rise of these two Asian giants has also raised
