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Espino, Carla Divina B. 2009177851/ PS0921 A.

B Political Science

POL S4: Comparative Southeast Asian Government and Politics December 20, 2010

COMPARATIVE PAPER FOR PRELIM TERM

I. II.

Title: A Comparative Economic Analysis on Thailand, Indonesia, Malaysia, Philippines and Singapore. Introduction: WHAT TO COMPARE? This comparative paper is set to compare the economy of Thailand, Indonesia, Malaysia, Philippines and Singapore, particularly on their Gross Domestic Product. WHY COMPARE? We compared the Gross Domestic Product of countries mentioned, as given in its meaning, to sum up the growth of their economy because GDP is a summation of all producers income including the private consumption, investment, exports, imports, government spending, etc. GDP will somehow cover the whole economy of a country. The gross domestic product (GDP) or gross domestic income (GDI) is the amount of goods and services produced in a year, in a country. It is the market value of all final goods and services made within the borders of a country in a year. It is often positively correlated with the standard of living, alternative measures to GDP for that purpose. Gross domestic product comes under the heading of national accounts. GDP is widely used by economists to measure the health of an economy, as its variations are relatively quickly identified. However, its value as an indicator for the standard of living is considered to be limited. Not only that, but if the aim of economic activity is to produce ecologically sustainable increases in the overall human standard of living. HOW? Here, we compared the GDP growth of each country and ranked them on the last part of this paper. Comparison is based on their Gross Domestic Product in Purchasing Power Parity calculations, GDP-per capita, GDP-compositions by sector and GDP real growth. The level of GDP in different countries may be compared by converting their value in national currency according to either the current currency exchange rate, or the purchase power parity exchange rate. Current currency exchange rate is the exchange rate in the international currency market, while purchasing power parity exchange rate is the exchange rate based on the purchasing power parity (PPP) of a currency relative to a selected standard (usually the United States dollar). This is a comparative (and theoretical) exchange rate, the only way to directly realize this rate is to sell an entire CPI basket in one country, convert the cash at the currency market rate & then rebuy that same basket of goods in the other country (with the converted cash).

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Summary: In terms of Gross Domestic Product of the five countries that we are comparing, Indonesia, having $969,200 GDP, is ranked 1 in terms of GDP in 2009. And having least GDP among these five countries is Singapore with $234,500. Thailand is 3rd in the ranking, 4th is Malaysia and 5th is Philippines with $538,600, $381,100 and $327,200 respectively. Note: prior and following numeric data were based on CIA- The World Factbook.(2009) OVERVIEW ON FIVE COUNTRIES III. Thailand: The economy of Thailand is an emerging economy which is heavily export-dependent with exports accounting for more than two thirds of gross domestic product (GDP) the exchange rate is Baht 31.00/USD. Thailand experienced rapid economic growth between 1985 and 1995 and is a newly industrialized country with tourism, due to well-known tourist destinations such as Pattaya, Bangkok, Phuket, Chiang Mai and Ko Samui, and exports contributing significantly to the economy. It is an advocate of the free enterprise system. Certain services, such as power generation, transportation, and communications, are state-owned and operated, but the government has considered privatizing them in the wake of the financial crisis. Thailands GDP is $538,600 in 2009. Their growth rate is at -2.2%. Thailand's increasingly diversified manufacturing sector made the largest contribution to growth during the economic boom. Industries registering rapid increases in production included computers and electronics, garments and footwear, furniture, wood products, canned food, toys, plastic products, gems, and jewelry. High-technology products such as integrated circuits and parts, electrical appliances, and vehicles are now leading Thailand's strong growth in exports. The Thai government is focusing on financing domestic infrastructure projects and stimulus programs to revive the economy, as external trade is still recovering and persistent internal political tension and investment disputes threaten to damage the investment climate. IV. Indonesia: Indonesia is a founding member of ASEAN and a member of the G-20 major economies.The Economy of Indonesia is one of the emerging market economies of the world. It has a market economy in which the government plays a significant role by owning more than 164 state-owned enterprises and administers prices on several basic goods, including fuel, rice, and electricity. In the aftermath of the financial and economic crisis that began in mid-1997, the government took custody of a significant portion of private sector assets through acquisition of nonperforming bank loans and corporate assets through the debt restructuring process. The gross domestic product of Indonesia is at $969,200 (on PPP) by 2009. The real GDP growth rate of Indonesia, as estimated by 2009, is 4.5%. The government in 2010 faces the ongoing challenge of improving Indonesia's insufficient infrastructure to remove impediments to economic growth, while addressing climate change mitigation and adaptation needs, particularly with regard to conserving Indonesia's forests and peat lands. Indonesia's main export markets (2005) are Japan (22.3%), the United States (13.9%), China (9.1%), and Singapore (8.9%). The major suppliers of imports to Indonesia are Japan (18.0%), China (16.1%), and Singapore (12.8%). V. Malaysia: Malaysia is a middle-income country; it has transformed itself since the 1970s from a producer of raw materials into an emerging multi-sector economy. Exports - particularly of electronics - remain a significant driver of the economy. As an oil and gas exporter, Malaysia has profited from higher world energy prices, although the rising cost of domestic gasoline and diesel fuel, combined with strained government finances, has forced Kuala Lumpur to reduce government subsidies. International trade, facilitated by the adjacent Strait of Malacca shipping route and manufacturing are both key

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sectors of the country's economy. Malaysia is an exporter of natural and agricultural resources, the most valuable exported resource being petroleum. At one time, it was the largest producer of tin, rubber and palm oil in the world. Manufacturing has a large influence in the country's economy, although Malaysias economic structure has been moving away from it. In an effort to diversify the economy and make Malaysias economy less dependent on exported goods, the government has pushed to increase tourism in Malaysia. As a result, tourism has become Malaysias third largest source of income from foreign exchange, although it is threatened by the negative effects of the growing industrial economy, with large amounts of air and water pollution along with deforestation affecting tourism.The government is also trying to lessen its dependence on state oil producer Petronas, which supplies 40% of government revenue. Decreasing worldwide demand for consumer goods hurt Malaysia's exports and economic growth in 2009, although both began showing signs of recovery late in the year. For purchasing power parity comparisons, the US Dollar is exchanged at 1.70 Ringgit only. The gross domestic product of Malaysia is $381,100 as of 2009 while their GDP real growth is -1.7% (2009 est.) Malaysia has the largest operational stock of industrial robots in the Muslim world. In June 2010 Najib administration will introduce the Tenth Malaysia Plan, outlining new reforms. Najib already has introduced several reforms in the services sector in a bid to attract direct foreign investment, which has stagnated in recent years. VI. Philippines: having a mixed economic system, important sectors of Philippine industry include food processing, textiles and garments, and electronics and automobile parts. Most industries are concentrated in the urban areas around Metro Manila, while Metro Cebu is also becoming an attraction for foreign and local investors. Mining also has great potential in the Philippines, which possesses significant reserves of chromites, nickel, and copper. Recent natural gas finds off the islands of Palawan add to the country's geothermal, hydro, coal, and oil exploration energy reserves. Major trading partners include China, Japan, the United States, Singapore, Hong Kong, Saudi Arabia, South Korea, Thailand, and Malaysia. Philippine GDP grew just 1% in 2009 but the economy weathered the 2008-09 global recession better than its regional peers due to minimal exposure to securities issued by troubled global financial institutions; lower dependence on exports; relatively resilient domestic consumption, supported by large remittances from four-to five-million overseas Filipino workers; and a growing business process outsourcing industry. In 2009, the gross domestic product of the country is $327,200. Also by that year, the estimated the GDP real growth year is 1.1%. The Philippines must maintain the reform momentum in order to catch up with regional competitors, boost trade, alleviate poverty, and improve employment opportunities and infrastructure. Inadequate tax revenues could limit the government's ability to address these issues. VII. Singapore: The Economist Intelligence Unit in its "Quality-Of-Life Index" ranks Singapore as having the best quality of life in Asia and eleventh overall in the world. Singapore possesses the world's ninth largest foreign reserves. The country also maintains armed forces that are technologically advanced and well-equipped. Singapore has a highly developed state capitalist mixed economy; the state controls and owns firms that comprise at least 60% of the GDP through government entities such as the sovereign wealth fund Temasek. It has an open business environment, relatively corruption-free and transparent, stable prices and one of the highest per capita gross domestic products (GDP) in the world. The economy depends heavily on exports, particularly in consumer electronics, information technology products, pharmaceuticals, and on a growing financial services sector. Singapore also enjoys a remarkably open and corruption-free environment. As estimated in 2009, the GDP of Singapore is $234,500 and a real growth of -1.3% due to the global financial crisis. Singapore has attracted major investments in

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pharmaceuticals and medical technology production and will continue efforts to establish Singapore as Southeast Asia's financial and high-tech hub. To maintain its competitive position despite rising wages, the government seeks to promote higher value-added activities in the manufacturing and services sectors. It also has opened, or is in the process of opening, the financial services, telecommunications, and power generation and retailing sectors to Foreign Service providers and greater competition. The government has also attempted some measures including wage restraint measures and release of unused buildings in an effort to control rising commercial rents with the view to lowering the cost of doing business in Singapore when central business district office rents tripled in 2006. VIII. Comparative Analysis and Ranking:

Gross Domestic Product (PPP) (in USD [2009])


1,000,000 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 Thailand Indonesia Malaysia Philippines Singapore

Overview: The gross domestic product (GDP) or gross domestic income (GDI) is the amount of goods and services produced in a year, in a country. It is the market value of all final goods and services made within the borders of a country in a year. It is often positively correlated with the standard of living, alternative measures to GDP for that purpose. Gross domestic product comes under the heading of national accounts. GDP is widely used by economists to measure the health of an economy, as its variations are relatively quickly identified. However, its value as an indicator for the standard of living is considered to be limited. Not only that, but if the aim of economic activity is to produce ecologically sustainable increases in the overall human standard of living. In this graph, we can see the Gross Domestic Product of the five countries that we are comparing. Thailand has a GDP worth of $538,600, Indonesia has $969,200, Malaysia has $381,100, Philippines has $327,200 and Singapore has $234,500. Indonesia has a per capita of $4,000, only 4th in terms of per capita. On the other hand, Singapore having least GDP with $234,500 has the highest per capita of $53,900. Thailand, ranked 2nd in overall GDP is only 3rd in terms of per capita

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($8,200) compared to other four countries. Malaysia ranked 3rd in overall GDP but 2nd in terms of per capita with $14,900. And lastly, Philippines have a least per capita of $3,300 but 4th largest GDP with $381,100. Indonesias GDP is largely contributed by their industrial sector with 47.6% followed by services with 37.1% and their agriculture with 15.3%. 45.1% of Thailands GDP is from the services sector, 43.3% is from the industry and 11.6% is from the agricultural sector. Malaysias GDP is greatly composed of the services sector with 49.7% followed by industry with 40.9% and agriculture with 9.4 %. 55% of Philippines GDP is from the services sector, 30.2% is from the industry sector and 14.8% is contributed by the agriculture sector. Singapore 73.2% of the GDP of the country if from the services sector and 26.8% is from the industry and remarkably 0% is from their agriculture. Indonesia claims the 1st spot in real growth ranking with 4.5% followed by Philippines with 1.1% in 2009. On the other hand, Thailand, Malaysia and Singapore have a negative GDP real growth rate. That means that their economy didnt have much force to struggle against the global recession. Thailand has the lowest growth rate among five countries. Having these data, we can rank these five countries as Indonesia ranked 1st and 5th or last is Singapore. Thailand, Malaysia and Philippines ranked 2nd, 3rd and 4th respectively. Now we identify some factors that used in determining GDP and the strength of the economy (as a whole) of the five countries GDP-per capita (PPP)

GDP-Per Capita
60,000 50,000 40,000 30,000 20,000 10,000 0 Thailand Indonesia Malaysia Philippines Singapore

Gross Domestic Product- per capita is the approximation of the value of goods produced per person in the country, equal to the country's GDP divided by the total number of people in the country. What is its important in determining the health of the economy? Well, GDP per capita is indicator of the average standard of living of individual members of the

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population. An increase in GDP per capita signifies national economic growth. But does it signify the measure of GDP as a whole? Indonesia has the highest gross domestic product with $969,200 and has a per capita of $4,000, only 4th in terms of per capita. On the other hand, Singapore having least GDP with $234,500 has the highest per capita of $53,900. Does this mean that a high per capita does not necessary follow a high GDP as a whole? The answer is yes. The same with 3 other countries, Thailand, ranked 2nd in overall GDP is only 3rd in terms of per capita ($8,200) compared to other four countries. It is inconsistent that Malaysia ranked 3rd in overall GDP but 2nd in terms of per capita with $14,900. And lastly, Philippines have a least per capita of $3,300 but 4th largest GDP with $381,100. The reason behind this maybe the factors to be considered in having a gross domestic product, GDP-per capita is not only the factor that will determine a countrys GDP. Other factors are exports, imports, government spending, investment gross etc. etc. however; other factors are not to be discuss here. GDP- Composition by sector

80 70 60 50 Industry 40 30 20 10 0 Thailand Indonesia Malaysia Philippines Singapore Agriculture Services

Here, in this graph, we can see the GDP-composition by sector. This is to determine what sector contributes greatly to ones gross domestic product. Composition by sector helps us to understand WHAT sector strengthens ones economy. Indonesias GDP is largely contributed by their industrial sector with 47.6% followed by services with 37.1% and their agriculture with 15.3%. 45.1% of Thailands GDP is from the services sector, 43.3% is from the industry and 11.6% is from the agricultural sector. Malaysias GDP is greatly composed of the services sector with 49.7% followed by industry with 40.9% and agriculture with 9.4 %. 55% of Philippines GDP is from the services sector, 30.2% is from the industry sector and 14.8% is contributed by the agriculture sector. Singapore 73.2% of the GDP of the country if from the services sector and 26.8% is from the industry and remarkably 0% is from their agriculture.

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Compared to all the five countries, Indonesia has the highest percent on Industry. Petroleum and natural gas, textiles, apparel, footwear, mining, cement, chemical fertilizers, plywood, rubber, food, tourism are the main industries in Indonesia. Indonesia's oil industry is one of the oldest in the world. Indonesia's oil reserves were usually found in medium- and small-sized fields, so that continued exploration was vital to maintain production and known reserves. However, the country's production of crude oil and condensate has continued to decline since 1997 - from 543,753,000 barrels consisting of 484,341,000 barrels of crude oil and 59,412,000 barrels of condensate to 534,892,000 barrels in 1998 and to 366,825,000 barrels in 2006 consisting of 322,295,000 barrels of crude oil and 44,895,000 barrels of condensate. Indonesia's production of crude oil in 2006 was dominated by production sharing contractors (PSC); PSCs produced 324,733,263 barrels in 2006 including 215,600,709 barrels from onshore and the rest from offshore. Having the most shares of services in their GDP compared to four other countries is Singapore with 73.2%. Manufacturing and financial business services are the twin engines of the Singapore economy and accounted for 26% and 22%, respectively, of Singapore's gross domestic product in 2000. The electronics industry leads Singapore's manufacturing sector, accounting for 48% of Singapore's total industrial output, but the government also is prioritizing development of the chemicals and biotechnology industries. The nature of the services sector itself has witnessed tremendous change over the years. From the days of small scale family owned sundry services to the higher skilled and higher value added activities like financial services and information technology in recent times. Within the service sector, Financial and Business (F&B) services witnessed the maximum gain in share of total services, accounting for 40% of total services output in 1996. Its followed by commerce, transport and communications. The Government is recommending a national standard for the service sector in Singapore. Singapore is one of the few countries in the world trying to establish a national standard for the service sector. SPRING Singapore (Standards, Productivity and Innovation Board) has been instrumental in developing standards for services. In 2005 the service sectors contribution was 62% of the GDP and 77% of employment. Strength in two main sectors, in industry and agriculture, proves that Indonesia claims the first rank on the list in economical force. The consistent monsoon climate and almost even distribution of rainfall in Indonesia make it possible for the same types of crops to be grown throughout the country. Less than one-fifth of the total land surface, however, is devoted to crop cultivation. Most agricultural land is dedicated to rice or to various cash crops. Intensive cultivation is restricted to Java, Bali, Lombok, and certain areas of Sumatra and Celebes. In Java much of the land of the northern coastal and central plains is planted with rice. But 2nd to Indonesia is Philippines. The Philippines is still primarily an agricultural country despite the plan to make it an industrialized economy by 2000. Most citizens still live in rural areas and support themselves through agriculture. The country's agriculture sector is made up of 4 sub-sectors: farming, fisheries, livestock, and forestry (the latter 2 sectors are very small), which together employ 39.8 percent of the labor force and contribute 20 percent of GDP. The country's main agricultural crops are rice, corn, coconut, sugarcane, bananas, pineapple, coffee, mangoes, tobacco, and abaca (a banana-like plant). Secondary crops include peanut, cassava, camote (a type of root crop), garlic, onion, cabbage, eggplant, calamansi (a variety of lemon), rubber, and cotton. The year 1998 was a bad year for agriculture because of adverse weather conditions. Sector output shrank by 8.3 percent, but it posted growth the following year. Yet, hog farming and commercial fishing posted declines in their gross revenues in 1999. The sector is burdened with low productivity for most of its crops. One of the most pressing concerns of the agricultural sector is the rampant conversion of agricultural land into golf courses, residential subdivisions, and industrial parks or resorts. In 1993 the nation was losing irrigated rice lands at a rate of 2,300 hectares per year.

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Small land-holders find it more profitable to sell their land to developers in exchange for cash, especially since they lack capital for seeds, fertilizers, pesticides, and wages for hiring workers to plant and harvest the crops. Another concern is farmers' continued reliance on chemical-based fertilizers or pesticides that have destroyed soil productivity over time. In recent years however, farmers have been slowly turning to organic fertilizer, or at least to a combination of chemical and organic inputs. Environmental damage is another major concern. Coral-reef destruction, pollution of coastal and marine resources, mangrove forest destruction, and siltation (the clogging of bodies of water with silt deposits) are significant problems. The agriculture sector has not received adequate resources for the funding of critical programs or projects, such as the construction of efficient irrigation systems. According to the World Bank, the share of irrigated crop land in the Philippines averaged only about 19.5 percent in the mid-1990s, compared with 37.5 percent for China, 24.8 percent for Thailand, and 30.8 percent for Vietnam. In the late 1990s, the government attempted to modernize the agriculture sector with the Medium Term Agricultural Development Plan and the Agricultural Fisheries Modernization Act. The fisheries sector is divided into 3 sub-sectors: commercial, municipal, and aquaculture (cultivation of the natural produce of bodies of water). In 1995, the Philippines contributed 2.2 million tons, or 2 percent of total world catch, ranking it twelfth among the top 80 fish-producing countries. In the same year, the country also earned the distinction of being the fourth biggest producer of seaweed and ninth biggest producer of world aquaculture products. In 1999 the fisheries sector contributed P80.4 billion at current prices, or 16 percent of gross value added in agriculture. Total production in 1999 reached 2.7 million tons. Aquaculture contributed the most, with 949,000 tons, followed closely by commercial fishing with 948,000 tons, and municipal fisheries with 910,000 tons. Domestic demand for fish is substantial, with average yearly fish consumption at 36kg per person compared to a 12kg figure for consumption of meat and other food products. GDP- real growth rate

Gross Domestic Product Real Growth Rate (2009)


5 4 3 2 1 0 -1 -2 -3 Thailand Indonesia Malaysia Philippines Singapore

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Real growth rate shows the increase in value of all final goods and services produced within a nation in a given year, taking into account inflation. Inflation's effects on an economy are various and can be simultaneously positive and negative. Negative effects of inflation include a decrease in the real value of money and other monetary items over time, uncertainty over future inflation may discourage investment and savings, and high inflation may lead to shortages of goods if consumers begin hoarding out of concern that prices will increase in the future. Positive effects include ensuring central banks can adjust nominal interest rates (intended to mitigate recessions), and encouraging investment in non-monetary capital projects. The GDP growth rate is the most important indicator of economic health. If GDP is growing, so will business, jobs and personal income. If GDP is slowing down, then businesses will hold off investing in new purchases and hiring new employees, waiting to see if the economy will improve. This, in turn, can easily further depress GDP and consumers have less money to spend on purchases. Economic growth can be either positive or negative. The long-run path of economic growth is one of the central questions of economics; despite some problems of measurement, an increase in GDP of a country is generally taken as an increase in the standard of living of its inhabitants. Over long periods of time, even small rates of annual growth can have large effects through compounding. A growth rate of 2.5% per annum will lead to a doubling of GDP within 29 years, whilst a growth rate of 8% per annum (experienced by some Four Asian Tigers) will lead to a doubling of GDP within 10 years. This exponential characteristic can exacerbate differences across nations. Indonesia claims the 1st spot in real growth ranking with 4.5% followed by Philippines with 1.1% in 2009. Only Indonesia and Philippines has a positive GDP real growth. This means positive growth in the gross domestic product is a sign that their economy still has some fight left in it during recession. This is supported by the statement that in the Philippines growth slowed to 3.8% in 2008 as a result of the global financial crisis. In 2009, the real growth rate was 1.1% but is projected to rebound to 7.5% in 2010. On the other hand, Thailand, Malaysia and Singapore have a negative GDP real growth rate. Negative growth can be referred to by saying that the economy is shrinking. Negative growth is associated with economic recession and economic depression. That means that their economy didnt have much force to struggle against the global recession. Thailand has the lowest growth rate among five countries. The comparison with all these five countries is that decline on their GDP real growth is because of the on going global economic recession. However, the difference is that some manage to keep their economy stable if not better during the recession. IX. THEREFORE: Final ranking: In terms of GDP-per capita First is Singapore with $53,900 per capita, next is Malaysia with $14,900. Third, with $8,200 is Thailand. Fourth is Indonesia and last is Philippines with $4,000 and $3,300 respectively. In terms of GDP real growth rate Indonesia has the 1st spot in real growth ranking with 4.5% followed by Philippines with 1.1%. Third is Singapore and fourth is Malaysia. Thailand has the lowest growth rate among five countries.

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FINALLY, GDP as a whole Calculating the gross domestic product of Thailand, Indonesia, Malaysia, Philippines and Singapore it is safe to say that Indonesia is the largest national economy among the five countries and even in Southeast Asia. And in spite of a negative GDP real growth, Thailand has the 2nd largest GDP and this classifies Thailand as the 2nd largest economy in Southeast Asia after Indonesia. Malaysia is 3rd in ranking compared to other four countries. Next to Malaysia is Philippines. The economy of the Philippines is the 4th largest economy in South East Asia. Although, Singapore has the highest GDP-per capita, it is ranked 5th or last among 5 countries in terms of gross domestic product.

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