Who ever said China was communist?

From the Telegraph:

In another sign of Asia’s ascendancy, and of its growing economic and political union, duties will be dropped on everything from steel to rubber and shoes to electronics.

China hopes that the zone will quickly rival the European Economic Area and the North American Free Trade Area and provide new outlets for its goods in the face of Western protectionism.

Duties will be scrapped on 90pc of goods traded across China, Indonesia, Malaysia, Singapore, Thailand, Brunei and the Philippines. Over the next five years, tariffs will also be removed on trade in Cambodia, Laos, Vietnam and Burma.

Jamaica vs. Singapore

In the Journal of the American Enterprise Institute, Josh Lerner writes:

To understand their importance, we can contrast Jamaica and Singapore. Both are relatively tiny states, with under 5 million residents apiece. Upon Singapore’s independence in 1965—three years after Jamaica’s own establishment as a nation—the two nations were about equal in wealth: the gross domestic product (in 2006 U.S. dollars) was $2,850 per person in Jamaica, slightly higher than Singapore’s $2,650. Both nations had a centrally located port, a tradition of British colonial rule, and governments with a strong capitalist orientation. (Jamaica, in addition, had plentiful natural resources and a robust tourist industry.) But four decades later, their standing was dramatically different: Singapore had climbed to a per capita GDP of $31,400 (2006 data, in current dollars), while Jamaica’s figure was only $4,800.

Is there a direct effect of corruption on growth?

Transparency International has just released its 2009 Corruption Perceptions Index (CPI), which ranks public sector corruption levels in 180 nations.

The least corrupt countries are New Zealand, Denmark, Singapore, Sweden and Switzerland, while Iran, Venezuela, Turkmenistan, Uzbekistan, Chad, Iraq, Sudan, Myanmar, Afghanistan, and Somalia represented the most corrupt countries in the world.

So what is the effect of corruption on growth? In a new paper, Ratbek Dzhumashev (Monash University) examines this question.

His research “shows that direct and indirect growth effects of corruption can be statistically significant. Moreover, the empirical results confirm the existence of both negative and positive growth effect of corruption.”

On the negative end, corruption inhibits growth “by distorting the publicly provided productive externality and by deteriorating the overall business climate and perpetuating bad expectations about economic opportunities.”

On the positive end, he finds that “investment levels are higher with an increase in corruption levels, other things being equal.”

Dzhumashev concludes:

Nevertheless, the overall effect of corruption is negative, as the negative effects transmitted directly and through the public sector inefficiencies are greater than the positive effect through investment.

Asia urges Obama to refocus on free trade

Is it just me, or does it seem like a sad moment in history when the United States needs to be urged by anyone to refocus on free trade?

Financial Times reports:

Lee Kuan Yew, Singapore’s first prime minister and a regional elder statesman, said the US risked economic exclusion from Asia unless it reversed its protectionist stance.

A further eight years of protectionism, assuming Mr Obama won a second term and without a change of policy, and the US would be “out of the economic race, and if you are out of the economic race you will lose in the long run”, he said.

The World is Spiked

The 2007 Index of Silicon Valley introduces the idea that “The World is Spiked,” meaning that “although the global competitive field is ‘flattening’ regions still vary by their relative strengths and weaknesses from which regional specializations and comparative advantage emerge—creating ‘spikes’ in a flat world.”

The map below illustrates “spikes” for different regions based on relative rankings in three critical areas: employment in information technology per capita, patents per capita and venture capital per capita. According to report, “these ‘spikes represent important strengths in the knowledge based economy: talent, ideas and investment.”

(Click to enlarge)

Notice that South America and Africa are not represented. Moreover, Israel is the sole country listed from the Middle East.

The IMD Stress Test

The IMD – Switzerland’s international business school – published a “Stress Test” for countries facing the global economic crisis. The test contains 20 criteria grouped into 4 subcategories: Economic Forecasts/Perspectives, Business, Government, and Society. According to the report, the most significant conclusion is that small export oriented economies with stable socio-political environments will outperform other countries. Denmark ranked first, followed by Singapore and Qatar. The US ranked 28th, trailing 27th Kazakhstan. Israel beat the U.S. in every category.