ABSTRACT
In the same way that no economy starts out with the best set of economic policies, no economy starts out with the best institutions to support the policymaking process. Instead, they inherit institutions that reflect their own unique culture and history. Therefore, the task of structural reform needs to be addressed in the context of domestic economic and political institutions and processes. The experience with structural reforms in East Asia – both the successes and the failures – exemplifies this reality. Unless there is a strong domestic constituency in favour of reform, and unless that constituency can be mobilized effectively, it is inherently difficult to change the institutional foundations that govern and limit the performance of an economy, so deeply are they embedded in domestic social and political as well as economic affairs. Yet as the examples in this book illustrate, national institutions, though resi-
lient, are not impervious to change. Sometimes a crisis in external economic relations has catalysed institutional change and structural reform. Sometimes institutional reform has been a product of political leadership. Sometimes the institutions themselves have evolved though the pressure of circumstance and the power of ideas to transform an existing mandate for new purposes. And constituencies in favour of reform can be cultivated. We also know that external intervention in domestic reform by interna-
tional agencies (such as the International Monetary Fund and World Bank) or by foreign governments is a process fraught with political sensitivity and difficulty, and can be counter-productive in its effect. Even where there is strong political commitment to collective regional action in cross-border institutionbuilding and regulation of markets, such as there would appear to be in Europe, the politics of external intervention to support institutional change and structural reform is problematic in principle. This book examines the nature of structural economic reform and the institu-
tional circumstances in which it succeeds or is inhibited. The book also suggests principles that might inform the design of policy-making institutions so as to improve both the chances of success with structural reform and the efficiency of microeconomic policies. It draws on experience with structural reform
across a range of economies at different stages of economic development in East Asia. The aim is to shed light on the kind of regional cooperation that might best support the structural reform agenda in East Asia and the Pacific. This chapter sets out some of the principles that are critical to success in
regional cooperation. Chapter 2 examines the nature of structural reform and the elements in it that help to deliver better economic outcomes and performance. Chapter 3 details key elements of a structural reform agenda. Chapter 4 outlines some desirable characteristics of policy-making institutions if they are to ensure successful structural economic reform. Chapter 5 illustrates the argument by looking at experience with the challenge of structural reform in Japan. Chapter 6 examines the history of structural reform and its impact on productivity in Australia. Chapter 7 reviews the effectiveness of policy-making institutions in the Philippines. Chapter 8 sets out the historical and political context of structural economic reform in Indonesia. Chapter 9 assesses regulatory reform in Malaysia. Chapter 10 looks at the particular case of passenger transport reform in Thailand. Chapter 11 discusses the regulatory environment in which private enterprise has emerged in Vietnam. Chapter 12 reviews the phases through which economic reform has passed in China. Chapter 13 returns to the starting point to assess the alternatives for regional cooperation in supporting the structural reform agenda in East Asia.
