In sum, while Thailand and Malaysia have quite different factor endowments and traditions that have created substantially different initial conditions, there appear to be significant increases in the symmetry of their economic structures. Prior to the crisis, each experienced high rates of economic growth; impressive levels of saving and investment relative to GDP; strong fiscal balances strong inward FDI flows through the mid-1990s robust increases in exports, creating an important ‘engine’ of growth; significant diversification out of agriculture and into manufacturing and services; considerable diversification of export structure(especially to ward manufacturing, e.g., electronics is now one of the largest exports in each country); and large current account deficits financed in similar ways. In fact, there is empirical evidence of a strong positive correlation between inward FDI flows into Thailand and those going to Malaysia,
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Suggesting significant ‘policy externalities’. Each has been successful at mobilizing domestic factors of production but with disappointing rates of productivity growth, which emerged as an important policy priority in both countries, along with the need to address infrastructural policies.
Also. prior to the crisis, economic integration with respect to trade has increased (though is still small) if gauged by a trade-shares approach,and when evaluated on a relative basic (the ‘double-density’ measure), is actually quite high (but declining). Finally, proxies for similar changes in economic structure and macroeconomic ‘symmetry’ reveal significant convergence between Thailand and Malaysia