Asia-Pacific Sustainable Development Journal - Volume 25, Issue 1, 2018

Structural transformation – the movement of workers from low productivity to high productivity activities – is an essential ingredient of inclusive growth. In the present paper, evidence on why the pace of structural transformation has differed widely across countries in Asia is reviewed, with a specific focus on China, India and Thailand. It is argued that government failures relating to the functioning of labour, land and product markets, and market failures relating to coordination of investment, credit market imperfections and human capital formation have been the primary causes of the slow pace of structural transformation in several Asian countries. In the paper, it is suggested that emphasis be placed on reforming policies that impede the functioning of labour, land and product markets and strengthening industrial and education policies to tackle specific market failures pertaining to investment coordination and human capital formation.

The paper provides an analysis on the impact of external sector openness and financial sector development on per capita income in the South Asian economies of Bangladesh, Bhutan, India, Nepal, Pakistan and Sri Lanka. For the annual series from 1980 to 2015, the instrumental variable model using a generalized method of moments (GMM) approach is estimated. The results show that liberalizing the external sector raises per capita income, conditional on the level of financial sector development. The large-economy influence analysis shows that India will benefit the most from external sector liberalization and other economies involved in this study still need to focus on financial sector development as opposed to on liberalizing capital flows. It further indicates that premature external liberalization in small and poor economies tends to be beneficial to the large neighbouring economy, which in this case is India, leading to resource exploitation. Accordingly, unless financial markets and institutions are strong enough to effectively deal with domestic resource mobilization, opening up the external sector alone may impede the economic development process.

In the present paper, the effect of foreign direct investment (FDI) inflows on income inequality in Asia-Pacific Economic Cooperation (APEC) economies is investigated by using annual data for the period 1990–2015. The variables used are the Gini coefficient, FDI inflows, gross domestic product (GDP) per capita, trade openness and human capital. Also, panel Autoregressive Distributed Lag (ARDL) and panel heterogeneous non-causality tests are used in this study. The panel ARDL results suggest that, in the long run, FDI inflows decrease income inequality. This supports the argument that encouraging FDI inflows does not harm the distribution of income in APEC economies. The results also confirm that GDP per capita and trade openness help reduce income inequality while human capital widens income inequality. The results from this study suggest that APEC authorities could implement sound policies to attract more FDI, as evidence indicates that those inflows would narrow income inequality in APEC economies.

The objective of the present paper is to demonstrate that despite several years of reform, the tax-GDP ratio in India is well below international standards and has been static over the last decade. Based on a crosscountry analysis of tax-GDP ratios in 115 countries over the period 2005-2015, an estimate is made of the extent of under-taxation in India. Considering that children in the age group of 0-14 years constitute about 40 per cent of the population of 1.3 billion in India, in the paper, it is argued that the tax-GDP ratio must be raised to enhance allocation to education, health care and physical infrastructure to ensure demographic dividends by providing the increasing workforce with productive employment opportunities. The reforms needed to raise the revenue productivity of the tax system while taking into account the best practice approach to tax reform are identified in the paper.

Interest in contract farming is increasing because of its potential as an alternative channel for linking producers to international markets. However, there is limited knowledge on contract farming of tea production in Viet Nam, especially in more inaccessible provinces where tea production plays an important role in generating employment, improving livelihood and reducing poverty. In the present paper, the impact of contract farming on productivity is reviewed in Pho Tho province, a major tea production area that has not been the focus of any other studies. Using survey data, an analysis is conducted on the factors affecting tea productivity and the impact of contract farming on tea productivity in the province. The results indicate that the impact of factors on tea productivity is ambiguous. They also indicate that technical efficiency of tea production of contracted farmers is higher than that of other types of farmers by almost 5 per cent and that contract farming has a positive influence on tea productivity in the province. Because of different climatic conditions, the results from this study are not generalizable across Viet Nam, but they can be applied in the Northern midlands and mountainous areas.