Economic Growth and Structural Transformation in Southeast Asia

Abstract

This paper analyzes macroeconomic growth of the economies in Southeast Asia since the end of the Second World War. It argues that there appears a convergence in development strategy among the economies in this region in recent decades. With few exceptions, every economy in Southeast Asia has become more market-oriented, more outward-looking, and more industrialized. Along with this transformation, their economies have grown rapidly and their income today is multiple times higher than what it was at the end of the Second World War. However, the convergence of development strategy did not take place in a few years but occurred sequentially over the course of half a century. The sequence in which each country adopted the growth-enhancing strategy is correlated to the ranking of per capita income. Singapore, the country with highest income today, was also the first one that implemented this strategy in 1965, followed by Malaysia and Thailand in the 1970s, Indonesia in the early 1980s, Vietnam and Lao PDR in the late 1980s, and Cambodia in the early 1990s. Even Myanmar, once one of the closest economies in the world, adopted similar strategy in the late 1980s and eventually opened up its economy in 2010. The paper also discusses the limit and the drawback of the growth strategy currently adopted by virtually all economies in this region.