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3 Asian Economies With Room for Improvement

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Yesterday, I assigned somewhat disappointing grades to the would-be economic reformers of Asia's three leading economies: India (B), Japan (C-) and China (C+).

But those aren't the only Asian countries with ambitious leaders and a need for economic reform. Today, I'll turn my attention to Park Geun Hye of South Korea, Benigno Aquino of the Philippines and Joko "Jokowi" Widodo of Indonesia, in order to evaluate how far they have -- or haven't -- gotten with their plans to generate growth and raise living standards.

Parkonomics: Park was always an unlikely reformer. In February 2013, she followed her father's footsteps into the presidential Blue House with a pledge to undo the economic system he built between 1962 and 1979 in order to restore the nation's global competiveness. More than two years later, she hasn't fared very well.

Her goal was to transform Korea, Asia's fourth-biggest economy, into a "creative economy," driven more by services and innovation than industrial brawn. That meant reversing the economic model, heavily reliant on exports by family-owned conglomerates (or chaebol), set up by her strongman father Park Chung Hee. Early on, things looked promising: She rolled out measures to support small and midsize enterprises, inspire startups and curtail the influence of companies like Samsung, Hyundai and LG. Park even proposed tax changes to force the chaebol to either invest, or share with workers, the approximately $2 trillion of cash sitting on their balance sheets.

Over the last 12 months, however, Park's government has lost its reformist zeal. It has even fallen back on the oldest trick in the Korean policy maker's playbook: browbeating the central bank to cut interest rates to boost the country's housing and stock markets. Meanwhile, Park has allowed the chaebol's influence over the national economy to grow even larger. (Samsung's revenues now equal 25 percent of South Korea's gross domestic product.)

A court ruling this week determined Samsung copied Apple's smartphone designs, underscoring Korea's lack of progress: The country is still good at cribbing existing technologies, but not at inventing them. And that's partly because Park has been too timid. For that, she earns a C.

Aquinonomics: The Philippine president carried his own family baggage into office in June 2010. After his opposition-leader father was assassinated in 1983, Aquino's mother, Corazon, led the street protests that toppled dictator Ferdinand Marcos in 1986 and later became president.

Since his own election five years ago, Aquino has transformed the Philippines from the "Sick Man of Asia" into an economy that won record foreign-direct investment in 2014 -- 66 percent above 2013's impressive haul. He has attacked corruption, gone after tax cheats, and imposed higher levies on cigarette and alcohol tycoons. He even crossed the powerful Catholic Church by supporting population-control measures.

Aquino needs to do a better job, however, of preparing the country for his departure. Aquino, who is limited to one six year term, will step down as president in June 2016. Absent reforms to the country's political institutions, which are less transparent and accountable than they ought to be, the Philippines will likely remain one bad leader away from renewed economic chaos. (It's worrying, in that sense, that the perceived frontrunner to replace Aquino, Vice President Jejomar Binay, recently had his bank accounts frozen after an investigation by the country's Anti-Money Laundering Council.) Still, Aquino earns a solid B+.

Jokowinomics: Admittedly, it's premature to grade a leader just 213 days after his election. But Jokowi's disastrous showing in recent weeks demands scrutiny.

Jokowi is the first Indonesian leader who isn't the scion of a dynastic family or the military. Early on, he proved his independence by cutting subsidies, going after dodgy dealings in the energy sector and increasing transparency at government ministries. Jokowi pledged more "inclusive" growth and an infrastructure boom that would attract investment; his hikes to gas prices freed up $17.5 billion for the government to spend on ports, roads and other projects.

But when Indonesian growth started sputtering in recent months, that Jokowi disappeared. In his place, we've had an economic nationalist who prefers playing to the masses. He has been talking up a national Indonesian car (how did that work out for Malaysia?), and endorsing protectionist laws that require technology companies that sell their products in the country to source their components domestically. He has also been handing money to inefficient state enterprises in order to please the Indonesian Democratic Party of Struggle that backed him in his election campaign.  All this is especially troubling because, as southeast Asia's biggest economy, Indonesia's health matters greatly to neighboring Malaysia, Singapore and Thailand.

On the bright side, Jokowi still has four years to rescue his legacy. For now, however, he gets a C-.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Willie Pesek at wpesek@bloomberg.net

To contact the editor on this story:
Cameron Abadi at cabadi2@bloomberg.net