The above examination of the distributional consequences of development policies has focused on the induced income effects assuming an unchanged (or historically determined) distribution of assets and structure of institutions for asset accumulation. There are of course other, more direct means of reducing income inequality and poverty. In one, government intervention would aim at increasing the endowment of income-generating assets (both physical and human capital) for the poor, either by the redistribution of existing assets (for example, through land reform) or by concentrating asset increments (for example, human capital investments) on the poor. Another policy approach to poverty alleviation would subsidize direct-transfer, “basic needs” programmes, in which minimum consumption levels of certain goods and services are provided directly to the poor.

Because transfer-oriented policies do not deliberately promote asset creation and have only a limited effect on labour productivity, some trade-off will inevitably arise between economic growth and poverty reduction. 19 Moreover, as Adelman and Robinson (1978) have analysed using their CGE model for South Korea, the effectiveness of direct income transfers weakens over time since the benefits tend to be dissipated into higher prices; on the other hand, price subsidies for the necessities of life (food, housing, and medical care) create significant market distortions and also become less effective over time. Furthermore, there is the problem of efficient delivery, considering that the benefits tend to leak out to non-target groups. Even if the concentration of poverty is known, the scope for overlap with those who do not deserve the income transfer and price subsidies (because their income is already high) can be considerable. Another form of leakage relates to the increased purchasing power of the poor resulting from the subsidies; some of this extra income can be used to purchase other, not so basic, needs. All this complicates the design of eligibility criteria and raises the costs of programme administration.

Indeed there is ample evidence (from experiences in countries such as Sri Lanka and Egypt) that the fiscal costs of direct transfer and price subsidy programmes tend to be high.

1. Sukhothai Thammathirat Open University

Bangpood, Pakkred

Nonthaburi 11120

Thailand

2. University of the Air

2-11 Wakaba

Chiba City

260 Japan

3. Universitas Terbuka

PO Box 6666

Jakarta

Indonesia

4. Korea Air and Correspondence University

169 Dongsung-dong

Chongro-ku

Seoul 110-791

Republic of Korea

5. Allama Iqbal Open University

Sector H-8

Islamabad

Pakistan

6. The Open University of Sri Lanka

PO Box 21

Nawala, Nugegoda

Sri Lanka

7. Indira Gandhi National Open University

Maidan Garhi

New Delhi 110 068

India

8. Payame Noor University

PO Box 19395-4697

Lashgarak Road

Tehran

Islamic Republic of Iran

9. Open Learning Institute of Hong Kong

9-13 Trade Department Tower

700 Nathan Road

Mongkok, Kowloon

Hong Kong

10. Kota Open University

Pushpa Niwas, Station Road

Kota (Rajasthan) 324 002

India

11. Nalanda Open University

Camp Office: 136 A/D

SK Puri, Patna-800001 (Bihar)

India

12. Dr B R Ambedkar Open University

6-3-645 Somajiguda

Hyderabad 500 482 (AP)

India

13. Yashwantrao Chvan Maharashtra Open University

College Road

Nashik 422 005

India

The foregoing analysis has considered the implications of Japan's expanding economic role and influence in the Asia-Pacific region from the perspective of the dynamic interaction of economic, political and security factors. The objective of the analysis was to gain a clearer picture of the systemic effects of the relative rise of Japan's role vis-à-vis the United States, and to develop alternative scenarios for Japan's future role in the region.

Any discussion of specific implications for the future structure of economic, political and security relationships in Asia and the Western Pacific, and for the interests of various Asia-Pacific countries and sub-regions is bound to be controversial. The following discussion is intended to suggest some tentative implications for the future of the region that would appear to follow from the foregoing analysis, within the stated frame of reference, i.e. the respective roles of the United States and Japan. A different frame of reference might yield an alternative or even competing set of implications.

Evolving dynamics of the Asia-Pacific region

Several basic generalizations concerning the roles of the United States and Japan in the changing dynamics of the Asia-Pacific region appear to follow from past experience and current trends.

First, it cannot be assumed that current power relationships in the Asia-Pacific region are immutable or that the nations of the region will continue to strike the same balance in their security and economic policies. The end of the Cold War has had significant impact on the political and security calculations of many countries in and outside the region, and has caused economic relations in many cases to be viewed in a new light. In particular, U.S. relations with Japan and other East Asian allies have come under strain due to trade friction and a weakening sense of shared security concerns.

Second, this revised relationship between economics and geopolitics appears to challenge some basic assumptions about the region's economic future.

The decade of the 1980s saw a quantum increase in the size of the Asia-Pacific economies and the growth of intra-regional trade. Intra-Asian trade is growing rapidly in response to new patterns of offshore investment by Japan and the NIEs and the resultant growth of export-oriented manufacturing and incomes. With Japan and the NIEs accounting for 69 per cent of the total, intra-Asian exports totalled US$270 billion in 1989, compared with Asian exports of US$206 million to North America and US$182 billion to Europe. Led by manufactured goods, intra-Asian exports grew at nearly 30 per cent per year during the period 1986-88, then slipped to 12.1 per cent growth in 1989. Trade among the NIEs alone totalled US$28 billion in 1989, up 17 per cent over 1988. Intra-ASEAN trade totalled US$50 billion in 1990, a five-fold increase over the level of the mid-1970s.

Japan, the United States, and the Asian countries themselves have all played important roles in bringing about this rapid growth of intra-Asian and trans-Pacific economic ties. Although Japan has emerged as the main catalyst of regional integration, the role of the U.S. economy as a seemingly insatiable consumer of Asian manufactured goods has given the region its main export dynamism. Both the NIEs and the ASEAN countries have played their parts through economic reforms emphasizing free markets, privatization of state-owned enterprises, export-led growth and favourable terms for foreign investment.

Significantly different interpretations can be given to these changes in the structure of regional economic ties. One perspective emphasizes that “both the United States and Japan have come to dominate the trade of these [Asia-Pacific] nations to a greater degree than in the past.” Another view stresses the asymmetry of the U.S. and Japanese roles, especially the large U.S. trade deficit, on the one hand, and the large Japanese surplus, on the other.

The paper by Akrasanee and Stifel is an extremely timely contribution to the growing literature on AFTA. It deals with issues that tend to be swept under the carpet because they are usually considered “sensitive”. I have no basic disagreement with the tenor of the paper, especially on the evolution of ASEAN from the inception to the Fourth ASEAN Summit in Singapore in January 1992.

One should not lament the fact that there had been little substance in ASEAN economic co-operation until recently. Without a doubt, ASEAN is the most successful regional grouping in the Third World. Regional groupings in Latin America, Africa, the Middle East, the Caribbean and South Asia pale in comparison with ASEAN. Hindsight tells us that it was wise of ASEAN to have spent its early years just laying the political foundations as a prelude to regional economic co-operation. Evidently, ASEAN countries have benefited much from such political cooperation because it helped defuse tensions and conflicts in the region so that member states could successfully concentrate on their economic pursuits. ASEAN has thus contributed significantly, albeit indirectly, to the prosperity of its members.

The low and declining proportion of intra-ASEAN trade in the total trade of ASEAN need not be viewed negatively. Indeed, the success of regional economic co-operation cannot be accurately measured by the share of intra-regional trade because it fails to capture many positive elements that are not easily quantifiable. The share of intraregional trade is essentially a function of the nature, character and structure of the regional economy. Undeniably, ASEAN economies owe their prosperity largely to their extra-regional trade and investment linkages. It is not in the interest of ASEAN countries to re-orientate their economies. It is unlikely that intraregional trade will have a high profile even under AFTA, although it will grow in absolute terms. Clearly, ASEAN's most lucrative markets lie outside the region.

When interviewed in 1989 on the goals or purposes of the UKOU, Lord Walter Perry, first Vice-Chancellor, had this to say:

Before the second objective could be achieved, it was necessary to achieve the first — through the building of a credible institution in the eyes of the academic world. Today, the UKOU services twice the number of its undergraduate students as “associate students”, i.e., those enrolled in the continuing professional education programme.

Change is the norm in today's world and it is often said that technology-based training is outdated within a decade, and in some areas, within five years. There is therefore a need for systematic updating and upgrading of knowledge, skills, and attitudes through continuing professional education and training. As the countries in Asia move towards greater and greater technological advancement, distance education institutions will be the ones which will provide greater impetus to this area of continuing education.

Most working adults cannot afford to stop work to update or upgrade their knowledge and skills. The economic and opportunity costs are high and many need to keep working to support themselves and their families.

The distance education mode of teaching and learning offers the mature worker the opportunity to learn while remaining economically active. Conventional universities have played, and will continue to play, important roles in continuing education. These are normally in the form of evening extra-mural classes or evening postgraduate lecture programmes.

Costing of distance education is a complex task as open universities function in several modes — some single, some dual, some mixed. Indeed, the Comonwealth Secretariat addressed this issue in a report in 1986.

Whilst there is general consensus among economists that economies of scale are reaped by distance education systems, the structure of distance education cost systems is a problem. The majority of costing models are crude and many institutions tend to underestimate costs involved or have found it difficult to explain and justify the level of costs to their political masters, the governments or institutions which have set them up. The costing problems are bad enough with stand alone institutions providing government-subsidized undergraduate programmes. However, when continuing education and post-graduate programmes, which are often self-funding, are added to the existing programmes, the costing becomes even more complicated. When one has to deal with dual-mode teaching where a distance teaching unit is set up in conventional universities, the problems are exacerbated because no common measures exist to compare costs of conventional and distance education.

An important consideration of cost is how distance education is presented and what growth stage the institution has reached. Some generalizations can be made:

1. (a) in the initial stages, there is high capital investment in buildings and equipment;

2. (b) cost varies with the types of media used — the more media, the higher the cost; the more electronic media, the higher the cost;

3. (c) where country-specific materials have to be developed because of culture and language requirements, course development costs in the production years are high.

Therefore, different distance education institutions have different types of expenditure. Generally, however, lower costs and expanding educational opportunities are still the main advantages of distance education. Over the years, there have been changes in policies of financing distance education. One change in policy is in the movement from dual mode universities for distance education to “stand alones”.

I think Dr Pelkmans was being too modest when he states in his paper that he has “some knowledge about international organizations including ASEAN”. Rather, his paper and presentation indicates a thorough familiarity with the ASEAN institutional organization and provides an excellent review of the proposals put forward by the Group of Five (of which he was a member) on the strengthening of the structure and mechanism of ASEAN, and of the subsequent institutional decisions of the Singapore summit.

Dr Pelkmans then proceeds in his paper to deepen the institutional debate by raising some counter-arguments to the criticism of the G-5 report by Dr Chng Meng Kng (1991) particularly in light of the decisions of the recent ASEAN summit and the European experience.

Being a lawyer and not an economist, I was particularly interested by Dr Pelkmans' comments on the need to take implementation seriously and the need for institutional, legal, or administrative requirements to ensure implementation. As has been said, in international economic law, the economist tells us what should be done while the lawyer is left to figure out how to do it. Dr Pelkmans touches on these issues briefly in the final section of his paper. I agree with his comments and I would like to expand briefly on them.

Constructing a free trade area is largely a problem of “managing” interdependence. In considering the problem of “managing” interdependence, governments may be limited in their policy choices by sets of rules, procedures and principles that may constrain their options. Although it is arguable that, in theory, each state is free to regulate economic transactions which take place with it or within its boundaries as it pleases, in practice, international economic relations are governed by an international legal framework which comprises multilateral, plurilateral and bilateral agreements, international economic law forms the international legal framework which establishes the parameters within which international trade in goods and services and foreign investment is conducted. Such a framework is necessary in order to promote increased order and predictability in international transactions.

The post-1965 record of East Asian development performance demonstrates the considerable scope for complementarity between poverty alleviation and economic growth in the development process. We can also conclude that government policies have been a major determinant of the development path for the East Asian LDCs, including the outcomes in income growth and distribution. Behind the success stories is a development strategy and policy environment conducive to output mixes, technology choices, and patterns of trade that roughly conform to the country's initial factor endowments and evolving comparative advantage. On the other hand, development performance is observed to be inferior in both growth and equity where government policies heavily discriminate and distort the production structure (favouring industry over agriculture, import-competing over export-oriented sectors, non-tradables over tradables), market orientation (domestic market over foreign markets), size structure (large over small firms and farms), and relative factor use (capital- intensive over labour-intensive technologies and production techniques).

Contrary to popular impression, export-oriented or “outward-looking” policies do not deliberately promote exports beyond the level that would result from unrestricted trade. The objective of such policies is to neutralize the existing bias against exporting, due to trade restrictions (import quotas and tariffs) and associated exchange rate overvaluation, through import liberalization and/or various forms of export incentives. This is not to suggest that export- led development strategies adopted by the Asian NICs did not go “beyond free trade”; nor does it mean that a positive bias in favour of exports is not defensible on “externality” grounds.

The Philippines, Thailand, and Indonesia did not switch to export-oriented policies, after the easy import substitution in final consumer goods was exhausted, as quickly as Taiwan, South Korea, and Singapore. As indicated above, exports of labour-intensive manufactured products in the latter countries expanded sharply from the mid-1960s to the early 1970s, substantially contributing to labour employment and economic growth, which was favoured by the continuous rapid expansion of the OECD economies and substantial decline in industrial protectionism.

I found Rolf's paper very interesting but somewhat too wide-ranging. It covered global and regional issues. It dealt with issues on trade, investment, technology, even the monetary system, international migrations, as well as issues of culture and environment. Because it is so wideranging, I have more or less focused my attention and discussion largely on two broad areas. First, I would like to comment broadly on the trends of regionalism and its implications for AFTA, and second, the impact of China on AFTA and the future evolution of AFTA.

At the outset, I would like to emphasize that my comments represent only my own personal views and do not necessarily represent those of the institutions with which I am associated. Now, if one takes a longer-term historical and broader geographical perspective, one can describe the existing trend in regionalism, i.e. AFTA, Single European Market, NAFTA, as akin to a fragmentation process which I would call the trend towards regional economic Olympics. The GATT is the world Olympics and as the fragmentation of the global trading system proceeds, we are now gradually having European Olympics and American Olympics. In some sense, these are the natural responses to the dynamic challenge of Japan and the NIEs' market penetration in North America and Europe in the past 30 years. The response is a highly natural one because it basically implies that the consumers and voters are asserting their market bargaining power. Before, you can enter my market freely without giving any concession; now the consumer (and the voter) is exerting its market bargaining power by asking for investments to come in, to be located where the purchasing power is, and to generate more local content, employment and wages. And at the firm level, through restrictions on local content, rules of origin, competitive policies and others, the producers are attempting to tilt the strategic balance so as to ensure that the gains in trade are more appropriate to the host country and its firms as opposed to firms in the exporting countries.