How Southeast Asia Can Avoid Dutch Disease

The likes of Laos and Myanmar can avoid the middle-income trap by establishing mechanisms to invest their resource-driven revenues.

The News Lens
Date: 2018/05/15
By: Hiroyuki Taguchi
According to the World Bank’s classification, all of the economies of the Association of South East Asian Nations (ASEAN) except Brunei and Singapore now belong to the middle-income class.

These countries are expected to sustain their economic growth to escape the “middle-income trap.” Those among them that have abundant natural resources would naturally like to use them for productive purposes and to the maximum extent. History, however, tells us a paradoxical story. It reveals the problem of a “resource curse,” whereby resource-rich economies show poor economic growth performance.

The namesake example is “Dutch Disease” — the story of the Netherlands in the late 1950s, which discovered natural gas in the North Sea. In the aftermath, its manufacturing activities were “crowded out” through an export boom leading to the appreciation of its currency.    [FULL  STORY]

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