Aid, Adjustment and Public Sector Fiscal Behaviour: Lessons from a Relatively Poor Performing East Asian Economy

The outstanding pre-1997 economic performance of East Asia has attracted its fair share of attention. A number of factors have been offered as determinants of this performance, which has involved not only rapid and sustained economic growth but reduced income inequality and poverty. These factors include the achievement of macroeconomic stability, a strong export orientation, increased human and physical capital, high rates of saving, strategic interventions and flexible labour markets.1 In these respects East Asia is, or at least was, held up as an example for other countries to follow, especially those in sub-Saharan Africa. Comparison of the underlying economic structures and conditions and economic policies between these two regions is not uncommon. While such pursuits have merit, the real benefit of looking at the experience of a particularly successful group of economies, and identifying factors which have caused their success, is that it conditions or informs questions about the performance of other countries, including the poor- performing countries of sub-Saharan Africa. This is especially so if relatively good empirical information is available for the former group of economies, as is generally the case in East Asia, as more questions about them can be answered with some confidence.