PROSPERITY OF NATIONS – THE CASE OF SOUTH EAST ASIA

One standard measure of wealth and prosperity widely accepted and used in economics is GDP per capita. (Gross Domestic Products per capita). As a continuing discussion on my earlier piece of Prosperity of Nations, I intend to expand the subject a bit more for the case of South East Asian countries – in particular for the case of Indonesia, Thailand, Philippines, Malaysia, Singapore and Myanmar (or Burma). I do not cover Vietnam, Cambodia, Laos and Brunei, since data are not available to me for analysis. I am planning to use GDP per capita as my basis for discussions. As explained before, any meaningful analysis must be done based on long periods of data. The most complete database that I managed to get is from Prof. Angus Maddison; he has compiled data for various countries since 1820 till today.

As we hypothesized, 100 years or so ago, the the GDP per capita (or in another word – status of wealth of the populations) in South East Asian countries were pretty much having the same base. And yet today, the divergences are significantly large. The questions that we want to ask: how such divergence occur, and why? What path did these countries took that makes them today to be far different from each other? And for some of us who have travelled the region, such remarks as “this is like Malaysia 30 years ago” – seems to be familiar cliché – reveal the fact that some regions never did grew at all over the last 30 to 50 years!!

Angus Maddison, champion the hypothesis that in order to understand the wealth of nations, we have to go back, even 1000 years ago; at the time, the dominant economies of the World are India and China. Both combined for more than 50% of the World GDP. Today, the US, Europe and Japan combined constitute of 40% of world GDP. While over the 1000 years, China and India went through a long period of decline, until only the last 30 years, the trends were finally reversed. The Graph below provides an interesting view of the subject.

Image

Now let us look at the case of the SEA Nations over the last 180 years….

GDP per capita for SEA Nations from 1900 to 2008

Note: figures are based on 1990 USD (adjusted)..

As I have stated before, at the early 1900’s, all SEA nations started at almost similar base, and the clusters remains pretty much the same till post-colonial (1950 onwards), and only in the 80’s when major divergence start to take place.

Table below shows the GDP/capita figures for 1820, 1870,1950 and 2008 (and the difference with Singapore – as the benchmark):

1820 1870 1950 2008 Difference
Singapore 83 682 2,219 28,107
Indonesia 612 578 803 4,428 -23,679
Philippines 584 624 1,070 2,926 -25,180
Thailand 570 608 817 8,750 -19,357
Malaysia 603 663 1,559 10,292 -17,815
Burma 504 504 396 3,104 -25,003

 

As the table shows, in 1820, the countries are pretty much at par with each other. The difference in 1950 (post WWII) are again not so significant. However, by 2008, we can see that Singapore is 5 times wealthier than Indonesia, 2.5 times Malaysia, 9 times Myanmar; Malaysia is 2.5 times Indonesia, 3 times Myanmar, and so on. In a nutshell, these countries took different path of growth and that’s why we can see the remarkable difference between them today.

In the case of Singapore, I would say that it would be inaccurate to group them together in the analysis, since it is a city state; and hence it would be not exactly correct to compare with them clearly large and populous nations such as Indonesia and others. The appropriate way to compare is to measure Singapore against Jakarta, Kuala Lumpur and Bangkok (Manila and Yangoon, if we want) as cities. As of 2011, the GDP per capita of Jakarta is approximately USD10,000; of Kuala Lumpur is at USD16,000; and of Bangkok is at USD14,000. Whereas GDP per capita for Singapore is currently at USD50,000. While the numbers might look still remarkably different (in comparison to Singapore); they all are decent numbers if taken into consideration of the size of these cities in terms of populations: Jakarta (10 millions), Kuala Lumpur (1.6 millions), Bangkok (8 millions), and Singapore (as the whole country: 5 millions). In gross terms the GDP of the cities are as follows: Jakarta (US100 billions), Kuala Lumpur (US26 billions), Bangkok (US112 billions), and Singapore (US240 billions). Kuala Lumpur being the smallest in terms of GDP, due to being smallest in size and population.

For the purpose of country by country comparisons, let us exclude Singapore from the next level of analysis.

GDP per capita: ex-Singapore

[Notes: Source of data – Angus Maddison; all figures are in USD 1990 prices].

We can see that post colonial period, it took about 30 years before the growth starts to really take off, that is from 1980’s onwards, and that’s when the path of each countries diverged. We can also say that Malaysia and Thailand, being less populous, took a much stronger growth trend, compared to more populous countries like Indonesia and Philippines; and in case of Philippines, is much more sad compare to Indonesia. Myanmar (or Burma) is of course a very sad case until today. I am sure if the data sources are available, the stories of Vietnam and Cambodia will show another set of trends.

The most important issue arises of these observations: why did Malaysia and Thailand fares better than the others? Why the growth started after 30 years post independence? Why some did better, while others didn’t do as well? And furthermore, where will these countries be 20 to 30 years from today? And how it will get there?

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1 Comment

Filed under Economic and Finance, Malaysian Affairs, Philosophy

One response to “PROSPERITY OF NATIONS – THE CASE OF SOUTH EAST ASIA

  1. Smt

    Salam dr wan hasni. Can i please have your contact number or email address. Need to ask you abt the house in taman tar uf ut belongs to you. near masjid darul ehsan. Thank you.

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