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DRAFT: Comments welcome, please consult author before citing. Poisoned apple? Globalization and the natural resources ‘curse ’ in Southeast

By Ian Coxhead


The rapid growth of China, along with its increasing integration with world markets through WTO accession, abolition of MFA quotas, and reduced trade barriers with ASEAN, is expected to have significant effects on the structure of trade, and thus of production, in SE Asian economies. World Bank estimates indicate that through bilateral trade and through competition with China in third-country markets, SE Asia’s resource-abundant economies will become more intensive in natural resource-based exports and much less so in low-end, labor-intensive manufacturing such as garments. Both these effects will tend to increase demand for natural resources, one through a direct product market effect, the other by driving down the price of a complementary input, low-skill labor. A question that then arises is how these trends will interact with the other major phenomenon currently sweeping through SE Asia, namely decentralization. Experience in the region indicates that in the best situations, decentralization plus local demands for more environmentally-friendly development are complemented by national laws and policies. In the worst cases, however, with reduced national government power and little or no accountability at the local level, the potential for disastrous rates of resource exploitation is high. If sufficiently severe, the combination of increased demand for natural resource products and diminished constraints on exploitation of the resource base could expose the region to reduced rates of economic growth, a variant of the “curse of natural resources” argument in which “resource intensity tends to correlate with slow economic growth ” (Sachs and Warner 2001). In this paper I explore issues arising from globalization and localization and their potential interactions in SE Asia’s natural resource-abundant economies. What are the longrun prospects in these economies for continued rapid rates of economic growth

Year: 2011
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