Asia has seen an incredible economic rise over the past decades, with global powerhouses like China, South Korea and Japan leading the continent to where it stands today in the world. However, Asia has not yet reached its full potential, as countries in the Southeast region have not been fully utilising free market mechanisms like northern neighbours. As a result, reforms, policy formulation and implementation have taken longer than necessary, leaving Southeast Asian economies lagging behind the rest of the world. Here are four ways they could kickstart progress.
Freedom to innovate
Some developing countries, like Botswana and Chile, have opened their economies to take full advantage of the opportunities for economic development through innovation, but many have not. Innovation ultimately sparks a country’s economy and helps to develop locally owned business. India and Bangladesh have exposed themselves to some free market ideas, and as a result have seen more growth and innovation in all industries, particularly agriculture. For example, since adopting free marketism in the 1980’s, Bangladesh has achieved success in food-grain production recently, which has made the country nearly self-sufficient in food grain in normal years. A freer market economy in other areas could therefore unleash great economic powers, especially if it is accompanied by industrialisation and global integration.
Competition to increase market efficiency
Southeast Asian countries have vast human resources as well as natural resources. Thailand, Myanmar, Laos, and Malaysia have the world’s largest tin deposits, whilst India and Bangladesh have superior agricultural commodities. But with strict government policies, these resources are not utilised at their optimum capacities. Introducing free market ideals to free up enterprise will drive firms to produce goods and services at lower cost and operate more efficiently. As firms use the latest technology to produce goods at lower costs, the technology itself becomes cheaper, enabling entrepreneurs to start up their own businesses. Being able to be one’s own boss, in a trade of one’s own choosing, allows an individual to apply their talents most appropriately and make a profit, while competition lowers prices for everyone.
Free trade frequently benefits the poor especially. For developing countries, namely the ones in Southeast Asia, there has recently been a considerable amount of pressure to shift towards trade liberalisation. Perhaps as globalisation continues to rise, Southeast Asian countries can increase their presence in the world market by advancing their economies through free market mechanisms. They have a long way to go. For example, the Bangladeshi government has adopted import substitution policies with restrictions on imports to protect and support domestic production. As such, the nation does not have any affiliations with multinational corporations. In fact, Bangladesh does not even have McDonald’s as they fear having a Western business will wipe away their national identity that they worked so hard to establish in the past forty years. However, for a poor nation to get back on their feet, it is essential to adopt strong trade liberalisation practices. Trade liberalisation can be major contributor to growth through specialisation, with advancing technology and improving productivity. To make the most of Southeast Asia’s potential, the removal of barriers to trade would need to be accompanied by complementary reform policies for improving productivity, growth and welfare.
Many now believe that choice and competition are the ultimate antidote to many of the economic problems faced by Southeast Asia. If embraced properly, liberalisation and globalisation could virtually end government-created artificial scarcities in the region. When firms and individuals face incentives to be innovative and work hard, this creates a climate of innovation and economic expansion, as seen by the growth of China and now, finally, India, as they accelerate towards free marketism. Free markets can help to increase real GDP and improve living standards. This increased wealth can, in theory, benefit everyone.
The society of any developing country is not a blank canvas on which the market economy can be easily introduced, but given the clear benefits, it’s time for Southeast Asia to start trying.