We argue that East Asian countries should focus on applying existing technology to local needs, since doing so promises large tangible returns, especially in terms of improving the efficiency of the manufacturing sector, the main engine of the region's economies. Second, we point out that while the IT revolution may enable East Asian countries to leapfrog some technological barriers, it does not enable them to leapfrog sound economic policies. Such policies remain as relevant to good economic performance in the New Economy as they did in the Old Economy. Third, East Asian countries must fulfill certain pre-conditions to make sure that the New Economy takes hold. Above all, they must liberalize their telecommunication sectors so as to improve the quantity and quality of telecom services. A more balanced pattern of development is therefore desirable, and IT can make significant contributions toward this objective. In particular, by reducing the concentration of information and knowledge in the main city and disseminating those valuable resources to the rest of the country, IT reduces the inequality of opportunity that lies at the root of the inter-regional economic inequality.
Developing Asia has benefited greatly from the rise of the People's Republic of China (PRC), primarily through the trade channel. The PRC and its neighbours have collectively formed a regional production network, and the PRC is becoming an increasingly important source of final demand. Two empirical techniques are used to examine the likely economic impact of growth deceleration in the PRC on other Asian economies: (1) a singleequation approach that captures the trade channel; and (2) a global vector autoregressive model that captures the effects beyond the trade channel. The results of both analyses confirm that deceleration in the PRC will have a non-negligible negative effect on other economies, especially on East and Southeast Asian economies. An out-of-sample analysis to tease out the effects of slower growth in the PRC from the recent growth performance of selected Southeast Asian economies suggests that the PRC effect is contributing to the growth dynamics of this region but is not always dominant.
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