A seminar to discuss structural adjustment in a region that is at times seen as becoming a pivotal part of the global economy in the twenty-first century is likely to be quite exciting. The task of being a moderator for such a seminar is a privilege and deserves some reflection. Indeed, the structured functions of the moderator need to be adjusted through at least five phases of the seminar.

A seminar to discuss structural adjustment in a region that is at times seen as becoming a pivotal part of the global economy in the twenty-first century is likely to be quite exciting. The task of being a moderator for such a seminar is a privilege and deserves some reflection. Indeed, the structured functions of the moderator need to be adjusted through at least five phases of the seminar.

Initially, he is one of the backroom coordinators who ensures that the protocols for each day’s proceedings are carried out by the right participants at the right times. Besides the well-recorded tapes, the moderator keeps note of the progress of the discussions. Toward the end of the seminar, the moderator briefly metamorphoses into a panelist, who also proffers a summary of the discussions. The really difficult work begins with the scripting and editing of the transcripts and the preparation of summaries of the discussions. In a more subjective, if slightly academic, mode, the moderator draws his conclusions about what can be learned from the discussions. His final duty is to deliver a clean manuscript for publication.

The seminar itself was so structured as to present a kind of contrapuntal effect within an overall theme, which attained an essential harmony between the three papers prepared by the staff of the Fund and the four papers by participants from the region, who were central bank staff or academics. Similarly, the three papers by staff from the Fund were commented on by participants from the region. Overall, perspectives of place and time were balanced by selected discussions regarding the respective roles of fiscal and monetary policies, trade policies, and exchange rate policies. The lessons from the Southeast Asian experience, as interpreted by Ruarte, were balanced by specific discussions about commodity price fluctuations by Jaafar. Generally, a considerable degree of agreement characterized the seminar, with commentators offering statements of a supplementary nature or indicating that there were alternative viewpoints. The panel discussion was the most exciting part of the seminar. The respective backgrounds of the panelists ensured stimulating discussion that was set within a background paper that provided the appropriate boundaries.

All this made the task of the moderator both easy and difficult. The well-written papers and comments required virtually no editing and are so apposite that they need no further comment. Difficulty emerged when one tried to draw conclusions and lessons from the seminar and its discussions. Perhaps, Zen-like, the first lesson is, “That the basic lesson is that there is no lesson.”

The greatest danger in the social sciences, of which the study of monetary, fiscal, and trade policies is a part, is that of making generalizations without adequate realization of all the major factors involved. It may be true that when there is an economic crisis of an urgent nature, some immediate action has to be taken to remedy the situation. Therefore, some advice has to be given as to which particular measures should be taken. The decision maker will have some model in his mind. In countries where the data bases are inadequate, estimates have to be made. Most advisers will draw upon two sources for their recommendations: their knowledge of the theoretical aspects of monetary, fiscal, and trade policy formulation and administration and their direct, as well as indirect, experience of the successes and failures in certain countries, or in their own country, in the past.

Since the coinage of the term “newly industrializing economies,” these advisers may be inclined to hold up the accomplishments of these economies as models for the lesser developed countries or for countries facing crises or shocks that the newly industrializing economies have overcome. In case this comment is taken to be somewhat xenophobic, I should hasten to add that the term “adviser” includes regional economists, most of whom would have undertaken their tertiary education in appropriate fields in the well-developed countries. This kind of danger is referred to by Asher, who presents a series of rather pertinent questions by referring to well-known writers, such as Toye, Dornbusch, and Ferguson.

It may be well realized, although it was not referred to in the seminar, that prior to their metamorphosis into newly industrializing economies, the little “tigers” experienced rather authoritarian political systems that were only modified, in some instances, after economic growth had reached a satisfactory level.

It may seem to be unnecessarily pedantic to argue about words or technicalities, per se. Nevertheless, it is often useful in the social sciences, especially in economics, to be as clear as possible about the conceptual basis of any term that is used. The term “structural adjustment” seems to be adequate for the purposes of the seminar. Nevertheless, there remain two aspects of structural adjustment that should always be borne in mind. First, there is the realization that the type of structural adjustment being thought of in our context is mainly limited to the formulation of trade, monetary, and fiscal policies and to their administration. Second, every package of measures recommended needs to be carefully customized to meet the specific needs of a country at a particular time.

Furthermore, while some economists may be quite certain about such concepts as the real effective exchange rates (Quirk, p. 99), others consider that there are many problems involved in its calculation (Oum, p. 128). Finally, apart from the admonition regarding the making of generalizations from inadequate data, fallacies could emerge from confusion regarding the nature of causality itself. No apologies are offered for bringing in seeming irrelevancies. Some justification may be derived from the notion that generalizations and derived lessons from the successful experiences of certain developing countries with structural adjustment have sometimes been applied to others, unsuccessfully.


In the presentation of a summary, it is useful to begin with a Cartesian approach.

In Paul Streeten's introduction to a similar seminar in 1988, he remarks that structural adjustment usually has six objectives:1

  • The reduction or elimination of a balance of payments deficit.

  • The resumption of higher rates of economic growth.

  • The achievement of structural changes that would prevent future payments and stabilization problems.

  • The making of an economy that would be less vulnerable to future shocks.

  • The reduction of rigidities in the economy, that is, increased flexibility and adaptability for both products, as well as factors of production.

  • The elimination of hunger and malnutrition; the alleviation of poverty; or the development of cultural autonomy, self-reliance, or greater national strength and military power. These are fundamental.

The four participants from the Fund presented their views about the nature and scope of structural adjustment. Azizali Mohammed, in his opening remarks, touched upon Malaysia's structural adjustment and its transformation from a vulnerable primary commodity producer to a balanced and diversified trading nation. He also noted that the Fund's involvement in the 1980s with the problems of heavily indebted countries has moved it into areas of longer-range structural adjustment and reform, rather than short- to medium-term macroeconomic management. This shift has generated scope for misunderstanding, if not deliberate obfuscation.

Hemming justified a tighter definition of structural adjustment on the grounds of “the seriousness of the initial imbalances, the urgency with which balance of payments viability and price stability must be restored, and the mechanisms used to achieve these objectives” (p. 45).

Quirk drew lessons from the experience of Korea and some of the countries of the ASEAN (Association of South East Asian Nations) to the effect that “any model of structural adjustment will have as essential components a realistic, market-related exchange rate and positive real interest rate structure, and an adequate after-tax return to exporting industry. These are necessary but not sufficient conditions for successful adjustment” (p. 115).

Ruarte, in the longest definition, said, “Structural adjustment can be defined as the creation of conditions for sustained, noninflationary growth, and the elimination of impediments to the full and efficient use of resources. Furthermore, adjustment must permit the attainment of certain basic, and widely shared, social goals” (p. 156).

Two of the commentators (Sirivedhin and Ariff) amplified the scope of structural adjustment with the following comments. From the point of view of phasing, Sirivedhin said, “In general, monetary policy and exchange rate policy are the major players in short-term balance of payments adjustment, with fiscal policy playing a supportive role; whereas when it comes to long-term growth-oriented adjustment, fiscal measures can assume a prominent role, together with other structural adjustment measures. Monetary measures will help to improve the efficiency of resource allocation and expand productive capacity” (p. 67). Ariff said, “Structural adjustments in a country should reflect the changes taking place in the country's comparative advantage. Industrial transformation is never-ending and ongoing in a dynamic setting” (pp. 97–98).

This discussion about the scope of structural adjustment was rounded off with Sirivedhin's reference to the prerequisite for Thailand's accomplishments, “… the Government had the political will to painstakingly follow through the adjustment program that had been mapped out” (p. 71).

If there are any lessons to be learned from this seminar, they are likely to be more useful for decision makers and theorists who are concerned with the ASEAN region of Southeast Asia. In a general way, some of the lessons may be stimulating starting points for those who are concerned with other regions of the Third World. With due modesty, it should be realized that the report of this seminar cannot aim to be either a comprehensive textbook on the strategies for structural adjustment, nor can it try to be an encyclopedic survey of the current economic history of the countries included in the scope of the study. Neverthelss, there are many useful lessons about strategies, tactics, and techniques for initiating structural adjustment and for managing it. The blending of participants with global expertise together with practitioners in situ, including a dash of academics, has created a rich brew that should nourish the minds and hearts of those who are compelled to think of economic management every working day of their lives.

Growth Is the Aim

It would seem that states of the region have accorded the highest priority to economic growth. For the achievement of this end, each state has endeavored to manage its resources and arrange its “structure” in such a way as to sustain the highest possible rate of economic growth.

From the experience of most of the economies that now seem to have enviable rates of growth, in the longer term, broad-based rearrangements of structures were essential. These included shifts of emphasis in patterns of production, as well as employment, from agriculture, especially from small-scale agriculture, to manufacturing and ultimately to the production of services. Ex-colonies that derived wealth from the export of primary commodities have slowly turned toward the export of manufactured goods to the advanced countries and where possible, to the export of oil. Within countries, import substitution, which represents the initial phase of industrialization, has gradually evolved to export promotion. To support these longer-term adjustments, certain institutional reforms of fiscal and monetary policies, as well as trade, must occur.

Philosophically, there seems to be a hidden dogma that, apart from exceptional circumstances, market forces are likely to be more conducive toward the realization of conditions favorable for growth. The term “the market” actually implies a situation where there are virtually no restrictions on the behavior of buyers and sellers of products and services. This is sometimes referred to as “deregulation,” or the removal of constraints. Occasionally, a critical finger points at the misallocation of resources that result from bureaucratic attempts to administer the market.

The state is discouraged from being involved in entrepreneurial endeavors. A well-recommended method for reducing deficits in public expenditure is the removal or “privatization” of state enterprises.

Empirically, several papers point out that the ASEAN-4 (Indonesia, Malaysia, the Philippines, and Thailand) have performed better than many other Third World countries, especially in Latin America. By virtually every measure, the four newly industrializing economies (Hong Kong, Korea, Singapore, and Taiwan Province of China) are therefore held up as models to be emulated by countries aiming at growth.

Some papers remind us that there could be objectives other than rapid and sustained economic growth. It may be said in a lighter vein, however, that the axiom is, “If growth is the aim, structural adjustment is the game.”

At this point, it may be useful to mention that by the end of the decade some of the ASEAN-4 may have leapfrogged some of the newly industrializing economies to create a new model that may come to be known as the post-newly industrializing model.

Growth Comes with Trade

In order to obtain the benefits of scale, the countries of the region must engage in international trade. All of them have centuries of experience in commodity trading. Nevertheless, in recent times the terms of trade have consistently run against the ASEAN exporters of primary commodities. Economic growth has been hampered by a similar trend occurring in imports of consumer goods and capital goods. Therefore, the lesson for them is to bring about structural adjustments that will enable them to develop industrial exports. Frequently, the evolutionary cycle is seen as stages that proceed from import substitution to export promotion with the possibility of both stages co-existing at an advanced position.

There are discussions regarding the detailed techniques involved in adjusting monetary and fiscal regimes to enable the promotion of exports to expand without undue hindrance. Internally, the path toward high growth needs to be paved with a high level of domestic saving. Another prerequisite that involves other parties is the need to manage exchange rates so that while there is flexibility, on the whole, there is stability.

The role of the other parties concerned becomes more significant if we remember that it takes two to trade. A free market in country P that is actually making structual adjustments in the interest of stability and flexibility needs to interface with a corresponding free market in country Q. The whole approach may fail if country Q engages in strategies of open or disguised protectionism to ensure political support from its home front. Thus it is feared by some that in 1992 Europe will be more closed than open to the manufactured exports from the ASEAN-4 and the newly industrializing economies of Southeast Asia. In the long run, it may be wise not to overestimate the accessibility of Japanese or Korean markets for manufactured products from Southeast Asia.

Money and Growth

Seminar participants continually returned to the subjects of monetary and fiscal, as well as exchange rate, matters in almost every session.

Essentially, fiscal policy has the role of ensuring that there is sufficient domestic saving, in general, and public saving, in particular, to guarantee that the investment requirements associated with the growth target are met without threatening the balance of payments and inflation objectives. For tax policy, a broad-based tax on final consumpion, such as a value-added tax levied at a single rate to ensure neutrality, is suggested as being most desirable. Various other recommendations on trade taxes, personal income tax, and company tax were discussed.

Although Hemming recommended that wage levels should be adequate to guarantee that the public sector can retain the quality of manpower it needs and to discourage employees from taking second jobs or engaging in fraudulent activities to increase their incomes, empirical evidence from the region suggests that only one country has succeeded in following this recommendation. For many of the other countries in the region, privatization of public enterprises or the expansion of the financial sector has led to a severe drain of talented public administrators toward the financial or manufacturing sector.

Public enterprises are said to be inefficient producers who rely heavily on budget subsidies to cover their losses. The pervasive influence of politicians should be reduced so that public enterprise management has greater autonomy over policy and investment.

In the long run, “money is neutral.” This is a view that deserves to be considered by all planners who wish to make structural adjustments in the hope of achieving growth. Resource distribution is thought to be more effective in promoting growth if interest rates are allowed to rise to their market-clearing levels.

In sum, creditability is greatly enhanced by fiscal discipline.

Experience of the Region

The actual experiences of countries in the region that have made structural adjustments may help those concerned with policy formulation and implementation in countries that are considering structural adjustment. Those concerned can prepare conceptual maps of the achievements and failures of those countries that have made structural adjustments. In this way, by designing maps of several types of experiences, planners can realize the range of choices that are open to them, besides the interrelated nature of the variables that comprise structural adjustment.

In one sense such maps are a mirror of the past. In another sense, they may provide the basis for drawing insights as to alternative choices for the future. Even though the map may be a crucial tool for the policymaker, it is only an aid. Every country has its own unique historical situation. The matrix of socioeconomic variables embraces more than fiscal, monetary, or trade matters.

Even the experience of a single country can be rather different at different times in its history. It should be realized that all changes, reforms, or adjustments are not only interacting with other variables but the net effects are cumulative. In the seminar, the regional scene in its widest scope was described by Villegas. He traced the patterns of growth for the ASEAN-4 and two newly industrializing economies (Singapore and Korea) for the period 1980–88.

Structural changes, gross investment, and the “domestic resource gap” led to a discussion of foreign sources of investment.

From the point of view of trade policies, Mangkusuwondo chose a wider scope by including South Asia. Oum, for his discussion on exchange rate policies in the search for a model, compared the region, including Korea, not only with three Latin American countries (Argentina, Brazil, and Mexico) but also with Turkey. The exports of Southeast Asia are composed of primary commodities and manufactured products. An empirical view of external factors affecting growth can only be understood if the markets for which these exports are destined are also examined. This was the main thrust of Jaafar's paper. In passing, he concluded that Malaysia has been quite successful in living with instability both in trade and in product diversification within a long period of sustained growth.

Many quite specific lessons that may be conducive toward the achievement of successful structural adjustment were drawn from the experience of Korea and from specific instances in the region.

The Panel Discussion

In the background paper for the panel discussion, Arya knitted together and highlighted the information provided in the previous papers. Significant patterns were delineated and important new perspectives offered so as to keep the ensuing panel discussion within manageable boundaries. Once again the map-making concept was relevant.

Instead of delving into causality and modeling, the paper examined the history of the previous two decades in terms of challenge and response. A statistical model of the term “total shock” was defined to include the terms of trade effect, the export volume effect, and the interest rate effect. Essentially, the paper indicated that the shock tremors included the oil market collapse, global inflation, and the deteriorating terms of trade for countries in the region. Incidentally, it may be observed as a matter of interest that the actual experience of passing over the threshold and being recognized as a newly industrializing economy may itself be a kind of shock or rite of passage that has not attracted much attention thus far.

The paper concluded with admonitions in three directions. If all or many of the countries of the region are successful in structural adjustments and manage to expand their industrial exports, then finding enough absorptive capacity in the developed countries might become a problem. Second, while it may be excellent strategy to leave more and more of the business of resource allocation to the unregulated market, export-oriented strategies, such as import substitution, involve a high degree of government intervention, including selecting industries, providing support, and guiding and directing their development. Third, trade barriers would need to be dismantled.

As has been mentioned above, it takes two to trade.


To paraphrase a fragment of a joke often heard at meetings on development some two decades ago, “… as a topic, structural adjustment has been much explored, although it is still quite attractive.”

The seminar had the essential purpose of exploring the dynamics of success in promoting economic growth. The examples were the newly industrializing economies of East Asia; the novitiates were the ASEAN-4. Equally important was the attempt to understand the contributions by the respective governments and private sectors toward the creation of vibrant economies that demonstrated sufficient adaptability in the face of vicissitudes of the world economy during the last two decades.

A Positive Assessment

The respective economies of the region and the main concepts involved in structural adjustment were thoroughly explored from a variety of perspectives. Many lessons were mentioned and many models were demonstrated, but no prescriptions for specific therapy of particular countries were offered. In any case, every participant always spoke in his or her personal capacity.

The papers were concise, objective, and amply supported by data. Most of the commentators either amplified or complemented the papers they were commenting on. Thus one can assume that they were generally in agreement with the statements and conclusion in the papers.

Indeed, the whole seminar was characterized by a high degree of passive consensus. That is to say, there was a minimum of sharp dissent. Nevertheless, a few questions were diplomatically put forward. In a limited sense an outsider could feel that he was listening to a colloquium of sages rather than a “contention” of gurus. This gave the seminar its pragmatic elegance and its harmony.

A certain proclivity for the free market in resources and in trade was perceptible. The only challenges to this view were regarding the timing of deregulation or the fine-tuning of particular structural adjustments.

There seemed to be an implied absolute that the right metamorphosis would be from a backward, primary producing country to an export-driven economy like that of a newly industrializing economy, with the possibility of becoming a more advanced type of economy in the full course of time.

Some Lacunae

It has been pointed out that there were no empty moments in the agenda of the seminar. Nevertheless, as in all economic matters, the means (i.e., the time) could have had alternative uses and it is in this respect that some missing topics may be mentioned.

In logic, Mill's methods encourage thinkers to examine not only the positive aspects but also the negative aspects of problems. There was rather little discussion of attempts at structural adjustment that had failed. From this, should we conclude that all the reforms of all the newly industrializing economies and some of the ASEAN-4 were always successful? Some examination of what not to do could have been useful too.

There is what the Japanese call kaizen, or improvement, that may make successful structural adjustment even better. This aspect could be given more attention in considering the current situation among the ASEAN-4.

Another philosophical challenge is the consideration as to whether structural adjustment is absolutely inevitable if economic growth is intended. And, of course, the extent to which the need for structural adjustment comes from mismanagement within or from exogenous political or economic pressures are irresistible.

The Wrap-Up

In Japanese culture, the wrapping is often valued as much as the gift itself.

As Mohammed said, “… this seminar has been a success … of all the seminars I have attended, I can assure you, Mr. Chairman, that this is one of the most enjoyable. One where the interest has been sustained at all times, where people even at the end of the day have been making points that were useful, valuable insights….”

What more could be desired from a seminar devoted to the exploration of a rather technical subject, structural adjustment, with participants from the financial and academic sectors of the region.

For the opportunity of being in the seminar and rubbing shoulders with such a pragmatic and learned group, this moderator is most grateful.


Paul Streeten, ed., Beyond Adjustment: The Asian Experience (Washington: International Monetary Fund, 1988), pp. 1 and 2.