September 22, 2015 Print

View of Kuala Lumpur, capital city of Malaysia.

Asia has become a powerhouse in global markets, a trend that is only expected to grow over time. Asia’s economy contributed almost 40 percent of the world’s productive output in 2014, and accounted for nearly two thirds of global economic growth. Deeper market integration and liberalization in the region is critical to the global economy, which is why Atlas Network developed the Liberating Asian Enterprise project. This project encourages Atlas Network partners in Asia to conduct original research and marketing projects that focus on overcoming obstacles to market exchange and examining the sources of cronyism that undermine free, competitive markets.

“Economic reform and restructuring in many Asian countries has created tremendous trade and investment opportunities and a great consumer market in the region,” said Laura Liu, economic trade and policy advisor for Atlas Network. “However, the hard-to-measure factors such as government regulations, weak legal regimes, licensing procedures, and corruption still play a significant role in increasing costs of doing business and greatly undermine the region’s long-term economic development prospects.”

Despite decades of sustained economic growth, the cost of doing business in many Asian countries remains stifling to their local economies. On average, it takes up to 25 and 34 days respectively to start a business in Indonesia and the Philippines, compared to only three days in Singapore, which is the highest-ranked country (second only to the Hong Kong region of China) in the worldwide economic freedom rankings of both Atlas Network partners the Heritage Foundation and the Fraser Institute. To date, it takes up to 32 payments and 872 hours per year to complete all the tax-filing procedures required in Vietnam, while only five payments and 82 hours are required to complete an annual tax filing in Singapore. It is estimated that, by 2020, reducing existing trade barriers alone would result in a 17 percent increase in GDP for Bangladesh and Sri Lanka, a 15 percent increase for India, and a 5 percent increase for Pakistan.

Thus far, beginning in the middle of 2014, 10 think thanks from seven countries have completed research projects on numerous policy issues, including — but not limited to — barriers to entry, entrepreneurship and licensing, price controls, property rights, public spending, taxation, state finances, and trade barriers. As a result of the program, 30 of these research projects have been completed and are beginning to yield practical policy impact in their respective countries.

Centre for Public Policy Research (CPPR), an Atlas Network partner based in Kochi, India, published its study, “Liberalizing Liquor Trade in India,” in November 2014. The study found India to be one of the world‘s most restrictive places for trade and doing business. In 2014, India ranked 110 out of 152 countries, in terms of economic freedom and 133 out of 152 in the World Bank Group’s Doing Business rankings. Despite being the world’s fastest-growing market for alcoholic beverage consumption, trade in liquor has often been suppressed by taxes and other restrictive policies in India. Restrictive policies at the federal and state levels are often carried out under the concern that alcoholic beverages should be heavily regulated to prevent public health and safety issues related to drinking.

After research based on statewide statistics, CPPR has concluded that these policies are harmful to the consumers because they fuel more black market exchanges, increase corruption, raise prices, and lead to more public health concerns because of the prevalence of cheap, extremely poor-quality counterfeit products.

The study found that that an average Indian liquor consumer pays five to six times the manufacturing cost. High custom duties and liquor bans have pushed foreign liquor sold in star hotels 6 to 7 times higher than international prices. Liquor prices in India are significantly higher than 95 percent of the countries in the world. While the combined earning of the states and union territories (excise) from alcohol beverages in the 2011 fiscal year is estimated to be 4.67 billion USD, accounting for about 16 per cent of their own tax revenues.

Read the full CPPR study, “Liberalizing Liquor Trade in India.”

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Institute for Democracy and Economic Affairs (IDEAS), an Atlas Network partner based in Malaysia, completed its study of free-trade agreements (FTAs) in December 2014, “Public Procurement in FTAs: The Challenge for Malaysia.” It examines opportunities and challenges for the Malaysian economy if the country accedes to an FTA that has public procurement provisions. It examines the key provisions in the procurement chapter of an FTA and the core principles that shape them: non-discrimination, convergence, and transparency.

The study considers what suppliers must do to take full advantage of the opportunities offered by access to a much larger procurement market, and the consequent benefits to each partner country. Under an FTA with procurement provisions, Malaysian suppliers would have access to the much larger procurement markets of partner states. Additionally, FTAs that include procurement may encourage local firms to be more competitive. The third benefit that Malaysia may gain stems from the convergence of procurement systems of partner countries required by an FTA.

Challenges lie ahead, however, because suppliers and contractors in Malaysia are accustomed to protective barriers and may not have, at least initially, the capacity to compete for public contracts against larger or better-known rival companies from more developed partner states.

Read the full IDEAS study, “Public Procurement in FTAs: The Challenge for Malaysia.

Center for Civil Society (CCS), an Atlas Network partner based in India, conducted a study about problems with institutional control over education titled, “Limiting Choices and Denying Opportunities! The Case of School Closures in Punjab.

Thousands of schools that have long operated in India, successfully educating children from low-income families, are being closed by the government after the enactment of the Right to Education Act (RTE). With its focus on inputs into education, the RTE prescribes a number of stringent norms and standards with which schools must comply in order to be recognized and operate. However, these budget private schools (BPS), which charge less than the government per-child expenditure in public schools, are often unable to meet RTE standards without significantly increasing their fees, and non-compliance with standards leads to closure of the school. Many schools now face the very real possibility of closure, with 19,414 schools that have been closed or issued notification for closure and 3,494,520 students from economically weaker backgrounds that have been displaced.

The study points out deficiencies in the current government system, most important being the erratic and arbitrary procedures followed by the authorities for closing down the school. There are no set guidelines that are uniform across all states in the country, so the evaluation procedure has become more subjective in nature, and the detailed guidelines for carrying out school closing procedures have become subject to ambiguous interpretation by government officials.

The study recommends that government should focus more on the quality of teaching and learning results, basing their judgment of each private school on the same parameters. Officials should take into account the preference of parents toward BPS alternatives, rather than finding ways to close these schools that are meeting real demand. The school closures provide a platform to understand parents’ concerns regarding the education of their children, who need competitive space to be created between public and private schools. This provides choice for students and their parents regarding their quality of education.

Read the full CCS study, “Limiting Choices and Denying Opportunities! The Case of School Closures in Punjab.

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Policy Research Institute of Market Economy (PRIME), an Atlas Network partner based in Pakistan, published a study the importance of private investment as the driving force behind economic growth titled, “Public Sector Development Expenditures and Economic Growth: The Case of Pakistan.”

The study investigated the relationship between Pakistan’s economic growth record and three forms of investment: public-sector development programs (PSDP), foreign direct investment (FDI), and private investment. The results reveal that all three have a long-run positive relation with growth — but private investment has the strongest impact and FDI has the least. Moreover, it is the private investment and growth of Pakistan’s economy that leads to increased public development projects, which means that increasing private investment in the economy has a twofold impact on PSDP. An increase in economic growth increases development projects, and increased revenue generation through taxes creates more resources for PSDPs.

Read the full PRIME study, “Public Sector Development Expenditures and Economic Growth: The Case of Pakistan.”

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