Economy of Asia

The economy of Asia comprises more than 4 billion people (60% of the world population), living in 46 different states. Six further states lie partly in Asia, but are considered to belong to another region economically and politically.

As in all world regions, the wealth of Asia differs widely between, and within, states. This is due to its vast size, meaning a huge range of differing cultures, environments, historical ties and government systems. The largest economies in Asia in terms of nominal GDP are Japan, China, India, and South Korea. Economies range from Japan, as the world's second largest economy by nominal GDP, to Cambodia as one of the poorest.

In terms of GDP by purchasing power parity, China has the largest economy in Asia and the second largest economy in the world, followed by Japan and India as the world's third and fourth largest economies respectively.

Economic development

Ancient and medieval times

Asia was relatively rich in the ancient times. China and India alternated as the largest economies in the world from 1 A.D to about 1800 A.D. China was a major economic power and attracted many to the East, and for many the wealth and prosperity of the ancient culture of India personified South Asia, attracting European commerce, exploration and colonialism. The Silk Road became the main East-West trading route in the Asian hitherland while the Straits of Malacca stood as a major sea route. In the Straits of Malacca, Malacca established itself as an important port in Asia.

Pre-1945

Prior to World War II, most of Asia was under colonial rule. Only relatively few states managed to remain independent in the face of constant pressure exerted by European power. Such examples are Siam and Japan.

Japan in particular managed to develop its economy due to a reformation in the 19th century. The reformation was comprehensive and is today known as the Meiji Restoration. The Japanese economy continued to grow well into the 20th century and its economic growth created various shortages of resources essential to economic growth. As a result the Japanese expansion began with a great part of Korea and China annexed, thus allowing the Japanese to secure strategic resources.

At the same time, Southeast Asia was prospering due to trade and the introduction of various new technologies of that time. The volume of trade continued to increase with the opening of the Suez Canal in the 1860s. Manila had its gallion or Manila gallion wherein products from the Philippines were traded to Europe. The Philippines was the first Asian country to trade with Latin America via Acapulco. Tobacco, coconut, corn, and sugar trade was the most in demand during that time. Singapore, founded in 1819, rose to prominence as trade between the east and the west increased at an incredible rate. The British colony of Malaya, now part of Malaysia, was the world's largest producer of tin and rubber. The Dutch East Indies, now Indonesia, on the other hand, was known for its spices production. Both the British and the Dutch created their own trading companies to manage their trade flow in Asia. The British created the British East India Company while the Dutch formed Dutch East India Company. Both companies maintained trade monopolies of their respective colonies.

In 1908, crude oil was first discovered in Persia, modern day Iran. Afterwards, many oil fields were discovered and it was learnt later that the Mideast possesses the world's largest oil stocks. This made the rulers of the Arab nations very rich though the socioeconomic development in that region lagged behind.

In the early 1930s, the world underwent a global economic depression, today known as the Great Depression. Asia was not spared, and suffered the same pain as Europe and the United States. The volume of trade decreased dramatically all around Asia and indeed the world. With falling demand, prices of various goods starting to fall and further impoverished locals and foreigners alike. In 1941, Japan invaded Malaya and thus began World War II in Asia.

1945-1990

Following World War II, the People's Republic of China and India, which account for half of the population of Asia, adopted socialist policies. These policies limited the economic growth of the region. In contrast, the economies of superiors Japan, South Korea and the other tigers Taiwan, Singapore, and Hong Kong--were economic successes, and the only successful economies outside of North America, Western Europe and Australia. The Philippines from Post World War II until the late 1960s had the second largest economy in Asia. The Philippine economy during the 1980s was marked by stagnant growth as a result of dictatorship and martial law.

One of the most pronounced Asian economic phenomenons during this time - the Japanese post-war economic miracle greatly impacted the rest of the world. After World War II, under central guidance from the Japanese government, the entire economy was undergoing a remarkable restructuring. Close cooperation between the government, corporations and banks facilitated easy access to much-needed capital, and large conglomerates known as "keiretsu" spurred horizontal and vertical integration across all industries, keeping out foreign competition. These policies, in addition to an abandonment of military spending, worked phenomenally well. Japanese corporations as a result exported and still export massive amounts of high quality products from The Land of The Rising Sun. Another equally amazing economic success story is that of South Korea's. The country was left improverished after the Korean War, yet was able to recover at double digit percentiles. Many conglomerates, such as Samsung, LG, Hyundai, Kia, SK, and more grew tremendously during this period. South Korea has now become the world's most wired and high tech country in the world.

This period was also marked by military conflict. Wars driven by the Cold War, notably in Vietnam and Afghanistan, wrecked the economies of these respective nations. When the Soviet Union collapsed in 1990-91, many Central Asian states were cut free and were forced to adapt to pressure for democratic and economic change. Also, several of the USSR's allies lost valuable aid and funding.

1991-2007

After the liberalization of the economy of India, undertaken by then finance minister and current Prime Minister of India, Dr. Manmohan Singh, the Indian economy coupled with the Chinese economy to power Asia into being one of the hotspots for world trade. The Chinese economy was already booming under the economic measures undertaken by Deng Xiaoping, in the 1980s, and continuing under Jiang Zemin in the 1990s. In 2007, China's economic growth rate exceeded 11% while India's growth rate increased to around 9%. One of the factors was the sheer size of the population in this region.Fact|date=July 2008

Meanwhile, Thailand, Malaysia and Indonesia emerged as the new Asian tigers with their GDPs growing well above 7% per year in the 1980s and the 90s. Their economies were mainly driven by growing exports. The Philippines, also considered a new Asian Tiger, began to open up its economy again in the early in the 90s. Vietnam's economy began to grow in 1995, shortly after the United States and Vietnam restored economic and political ties.

Throughout the 1990s, the manufacturing ability and cheap labor markets in Asian developing nations allowed companies to establish themselves in many of the industries previously dominated by companies from developed nations. Asia became one of the largest sources of automobiles, machinery, audio equipment and other electronics.

At the end of 1997, Thailand was hit by currency speculators, and the value of the Baht along with its annual growth rate fell dramatically. Soon after, the crisis spread to Indonesia, Malaysia, South Korea, Hong Kong, Singapore and many other Asian economies, resulting in great economic damage on the affected countries (Japan largely escaped the crisis). In fact, some of the economies, most notably those of Thailand, Indonesia, and South Korea actually contracted. This later would be known as the Asian financial crisis. By 1999, most countries had already recovered from the crisis.

In 2004, parts of Sumatra and South Asia were severely damaged by an earthquake and the subsequent tsunami. The natural disaster wiped out huge amounts of infrastructure throughout the affected area and displaced millions.

Future

Asia's large economic disparities are a source of major continuing tension in the region. While global economic powers Japan, South Korea, China, and India continue powering through, and Indonesia, Malaysia, Thailand, the Philippines, Pakistan, and Vietnam have entered the path to long-term growth, regions right next to these countries are in need of severe assistance.

Given the large number cheap and amply available labor in the region, particularly in China and India, where large workforces provide an economical advantage over other countries, the rising standard of living will eventually lead to a slow-down. Asia is also riddled with political problems that threaten not just the economies, but the general stability of the region and world. The nuclear neighbors -- China and India -- constantly pose a threat to each other, causing their governments to heavily invest in military spending.

Military intervention by the United States in Afghanistan and Iraq has also inflamed extremism and resulted in several terrorist attacks in a number of Asian countries. Another impending crisis is the depletion of oil reserves in the Middle East. Most of these economies have traditionally been over-dependent on oil and have had difficulty establishing another pillar in their economies.

Yet another potential global danger posed by the economy of Asia is the growing accumulation of foreign exchange reserves. The countries/regions with the largest foreign reserves are mostly in Asia - China (Mainland - $988 billion & Hong Kong - $130 billion, September 2006), Japan ($881 billion, September 2006), Taiwan ($261 billion, September 2006), the Republic of Korea ($228 billion, September 2006), Singapore ($129 billion, June 2005), India ($200 billion, April 2007). This increasingly means that the interchangeability of the Euro, USD, and GBP are heavily influenced by Asian central banks. Some economists in the western countries see this as a bad thing, prompting their respective governments to take action.

The economies of Asia are expected to be unequally divided for a long period of time. Far Eastern nations such as economic leaders China, Japan and South Korea will continue to flourish. Japanese products such as Sony and Hitachi are commanding premium prices in the western world. South Korean conglomerates Samsung and LG are respectively the first and second largest in Asia in terms of annual revenues. These two rivaling countries are expected to be joined by new economic competitors such as China and India. On the other hand, the Middle East and a few parts of South East Asia is and will be in a state of trouble.

Trade blocs

Asia-Pacific Economic Cooperation

The Asia-Pacific Economic Cooperation (APEC) is a group of Pacific Rim countries who meet with the purpose of improving economic and political ties

Association of Southeast Asian Nations

The Association of Southeast Asian Nations (ASEAN) is a political, economic, and cultural organization of countries located in Southeast Asia. Founded in 1967, its aim is to foster cooperation and mutual assistance among members. The countries meet annually every November in summits.

The current member countries of ASEAN are Myanmar (Burma), Laos, Thailand, Cambodia, Vietnam, Philippines, Malaysia, Brunei Darussalam, Singapore and Indonesia. Papua New Guinea is given an observer status.

In 2005 ASEAN was instrumental in establishing the East Asia Summit (involving all ASEAN members plus China, Japan, South Korea, India, Australia and New Zealand) which some have proposed may become in the future a trade bloc, the arrangements for which are far from certain and not yet clear.

The Asian Currency Unit (ACU) is a proposed currency unit for the ASEAN "10+3" economic circle. (ASEAN, the mainland of the People's Republic of China, Japan, and the Republic of Korea).

Closer Economic Partnership Arrangement

The Closer Economic Partnership Arrangement (CEPA) is an economic agreement between the People's Republic of China and both the Hong Kong SAR government (signed on 29 June 2003), and the Macau SAR government (signed on 18 October, 2003), in order to promote trade and investment facilitation.

The main aims of CEPA are to eliminate tariffs and non-tariff barrier on substantially all the trade in goods between the three, and achieve liberalization of trade in services through reduction or elimination of substantially all discriminatory measures.

Commonwealth of Independent States

The Commonwealth of Independent States (CIS) is a confederation consisting of 12 of the 15 states of the former Soviet Union, both Asian and European, (the exceptions being the three Baltic states). Although the CIS has few supranational powers, it is more than a purely symbolic organization and possesses coordinating powers in the realm of trade, finance, lawmaking and security. The most significant issue for the CIS is the establishment of a full-fledged free trade zone / economic union between the member states, to be launched in 2005. It has also promoted cooperation on democratisation and cross-border crime prevention.

outh Asian Association for Regional Cooperation

The South Asian Association for Regional Cooperation (SAARC) is an association of 8 countries of South Asia, namely Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka and Afghanistan. These countries comprise an area of 5 130 746 km² and a fifth of the population of the world.

SAARC encourages cooperation in agriculture, rural development, science and technology, culture, health, population control, narcotics control and anti-terrorism.

outh Asia Free Trade Agreement "(proposed)"

The South Asia Free Trade Agreement is an agreement reached at the 12th South Asian Association for Regional Cooperation summit. It creates a framework for the creation of a free trade zone covering 1.6 billion people in India, Pakistan, Nepal, Sri Lanka, Bangladesh, Bhutan and the Maldives.

Currency

Below is a list of the currencies of Asia, including all fully Asian states plus Russia, with exchange rates between each currency and both the "Euro" and "US Dollars" ^{as of 9th December 2004}.

"Table correct as of 9th December 2004 (see [http://www.xe.com/ucc/full.shtml] for latest)"

Economic sectors

Primary Sector

Asia is by a considerable margin the largest continent in the world, and is rich in natural resources. The vast expanse of the former Soviet Union, particularly that of Russia, contains a huge variety of metals, such as gold, iron, lead, titanium, uranium, and zinc. These metals are mined, but inefficiently due to continued use of poorly maintained, obsolete machinery left over from the communist era. Nevertheless, profits are high due to a commodity price boom in 2003/2004 caused largely by increased demand in China. Oil is Southwest Asia's most important natural resource. Saudi Arabia, Iraq, and Kuwait are rich in oil reserves and have benefited from recent oil price escalations.

Asia is home to some four billion people, and thus has a well established tradition in agriculture. High productivity in agriculture, especially of rice, allows high population density of many countries such as Bangladesh, Pakistan, southern China, Cambodia, India, and Vietnam. Agriculture constitutes a high portion of land usage in warm and humid areas of Asia. Many hillsides are farmed in a "terrace" method to boost arable land. The main agricultural products in Asia include rice and wheat. Opium is one of major cash crops in Central and Southeast Asia, particularly in Afghanistan, though its production is prohibited everywhere. Forestry is extensive throughout Asia except Southwest and Central Asia, with many of the items of furniture sold in the developed nations made out of Asian timber. Fishing is a major source of food, particularly in Japan.

econdary Sector

The manufacturing sector in Asia has traditionally been strongest in the East region - particularly in China, Taiwan, Japan, South Korea and Singapore. The industry varies from manufacturing cheap low value goods such as toys to high-tech added value goods such as computers, CD players, Games consoles, mobile phones and cars. Major Asian manufacturing companies are mostly based in either South Korea or Japan. They include Samsung, Hyundai, LG, and Kia from South Korea, and Sony, Toyota, Toshiba, and Honda from Japan. Many developed-nation firms from Europe, North America, Japan and South Korea have significant operations in the developing Asia to take avantage of the abundant supply of cheap labor. One of the major employers in manufacturing in Asia is the textile industry. Much of the world's supply of clothing and footwear now originates in Southeast Asia and South Asia, particularly in Vietnam, China, India, Thailand, Bangladesh, Pakistan, and Indonesia.

Tertiary Sector

Asia has three important financial centers, located in Hong Kong, Singapore and Tokyo. India has been one of the greatest beneficiaries of the economic boom. The country has emerged as one of the world's largest exporters of software and other information technology related services. World class Indian software giants such as Infosys, TCS, Wipro and Satyam have emerged as the world's most sought after service providers. Call centers are also becoming major employers in India, Philippines, Malaysia, etc. due to the availability of many well educated English speakers. Here again India holds close to 60% of the trade share. The rise of the Business Process Outsourcing (BPO) industry has seen the rise of India and China as the other financial centers. Experts believe that the current center of financial activity is moving toward "Chindia" - a name used for jointly referring to China and India - with Shanghai and Mumbai (Bombay) becoming major financial hubs in their own right. Other growing technological and financial hubs include Seoul (South Korea), Dhaka (Bangladesh), Kuala Lumpur (Malaysia), Karachi (Pakistan), Bangkok (Thailand), Manila (Philippines), Jakarta (Indonesia), Chennai (Madras) (India), Hyderabad (India) and Bangalore (India).

ee also

*Asia
*History of Asia
*Geography of Asia
*Commonwealth of Independent States
*List of Asian countries by GDP
*World economy
*1997 Asian Financial Crisis

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