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This paper examines prerequisites for a successful interstate economic corridor development program in a country with a federal system of government through an in-depth study of the design, implementation, and the developmental impact of the Northern Corridor Economic Region (NCER) in Malaysia that encompasses the states of Penang, Kedah, Perak, and Perlis. The analysis suggests that the NCER has the potential to leverage on the core strengths of the state of Penang—global connectivity, mature business ecosystem with a strong presence of multinational enterprises, and sizable talent pool—in order to redress the widening interregional and urban–rural development divide. While it is too early to assess the full outcome of NCER initiative, a potential problem looms in the future. The Northern Corridor Implementing Authority (NCIA), charged with implementing projects in the NCER, is structured with no formal positions allotted to planning officials from the member states. This will not pose problems in implementing projects that are in broad alignment with the interest of the states. Conflicts will arise, however, when state and NCIA views on projects differ. This potential problem can be overcome by restructuring the NCIA to allow for the formal inclusion of planning representatives from member states.

Summary This paper investigates the impact of foreign labor on domestic manufacturing wages through a case study of Malaysia, a country where foreign labor has played a key role in manufacturing growth over the past two decades. The main focus of the paper is on an econometric analysis of the determinants of inter-industry variation in wage growth using a new panel dataset. The results suggest that wage growth is fundamentally embedded in the structure and performance of domestic manufacturing. There is evidence of a statistically significant negative impact of foreign labor on the growth of unskilled-worker wages, but the magnitude of the impact is rather small.

This paper examines the determinants of private saving in the process of economic development, in the light of the Indian experience during the period 1954 - 1998. The methodology involves the estimation of a saving rate function derived within the life cycle framework while paying attention to the structural characteristics of a developing economy. It is found that the saving rate rises with both the level and the rate of growth of disposable income and the magnitude of the impact of the former is smaller than that of the latter. The real interest rate on bank deposits has a significant positive impact, but the magnitude of the impact is modest. Public saving seems to crowd out private saving, but less than proportionately, suggesting that public policy can influence the national saving rate. Among the other variables considered, the spread of banking facilities in the economy and the rate of inflation seem to have a positive impact and changes in the external terms of trade and migrant remittances a negative impact on private saving.

Sarkar and Singer (1991) argue that the terms of trade for exports of manufactures from developing countries (DCs), like that for their primary commodity exports, have manifested a long-term trend favoring the importing developed countries. We contend here that the authors have not paid adequate attention to appropriately adjusting the data and that they have misinterpreted the results. When these limitations are taken into account, a sound basis exists for the conclusion that, through rapid expansion of manufactured exports, DCs as a group have achieved significant gains in import purchasing power without generating adverse impact on the net barter terms of trade.

The authors developed a framework for analyzing the relationship between domestic financial markets and the effects of trade liberalization and applied it to Sri Lanka's experience between 1977 and 1987. They found that the domestic financial market significantly affects the outcome of trade liberalization. Because Sri Lanka deregulated its interest rates when it undertook the trade liberalization, this allowed those earning more from trade liberalization to hold financial assets rather than nontradables. The availability of savings and time deposits at attractive interest rates prevented the premature appreciation of the exchange rate, thus helping to maintain the competitiveness stimulated by trade liberalization. By reforming interest rates, removing credit ceilings, and increasing competition among banks, Sri Lanka helped increase private sector savings - which could be reallocated to the tradable sector. Unlike earlier studies on financial reform in Sri Lanka, this one finds that financial reforms have increased private savings in financial institutions, raised economywide financial intermediation ratios, and expanded credit to the private sector. More important, the authors find a statistically significant relationship between the financial intermediation ratio and the real exchange rate.

Commodity composition and growth of exports from a “second-tier” exporting country, Sri Lanka, are examined in terms of “net” export earnings series derived using the input- output technique. The findings show that, in view of the high import intensity of the emerging export pattern, the conventional practice of using gross export data to analyze export performance leads to rather misleading conclusions as to the reduced importance of primary exports in the export structure and overall export growth.