Divergent Trajectories: Healthcare Insurance Reforms in East Asia ...

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citeDivergent Trajectories: Healthcare Insurance Reform in East Asia andLatin AmericaThe prospects for the welfare state have been the subject of a spirited and livelydebate. Ever since the decline of the full employment-welfare state contract in WesternEurope in the 1970s, the question about the state’s role in protecting citizens against thevicissitudes of the market economy has sparked an animated discussion that hasresonated not only in the advanced industrial economies, but also in the new developingdemocracies of Latin America and East Asia. While optimists asserted that the systemsof social protection created in the early twentieth century largely resisted cutbacks,pessimists pointed to evidence of the welfare state’s demise – the tightening of eligibilityrules, reduction in benefits, and shrinkage of public services – and warned direly thatwelfare programs were converging towards a minimum level of services that wouldworsen inequality.Yet, contrary to claims that globalization is causing a trend towards a “race to thebottom,” a rich variety of welfare programs are taking shape across East Asia and LatinAmerica. These programs reveal contrasting degrees of universalism and redistributionthat are underpinned by differing notions of citizenship and solidarity. During the 1980sand 1990s, along with deepening capital and trade markets openness, Latin Americanstates adopted “neoliberal” policies that encompassed privatization of state-owned andoperated services. 1These countries decentralized state services, increased private-sector1 See Raul Madrid, Retiring the State: the Politics of Pension Privatization in Latin America and Beyond(Stanford: Stanford University Press, 2003); Sarah M. Brooks, Social Protection and the Market in latinAmerica (Cambridge: Cambridge University Press, 2009); Carmelo Mesa-Lago, Ascent to Bankruptcy:Financing Social Security in Latin America (Pittsburgh: Pittsburgh University Press, 1989); Carmelo Mesa-1

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citeparticipation in welfare provisioning, and engaged in considerable cost-cutting, whichresulted in a general decline and neglect of welfare programs during the 1980s. With thereturn to democracy in the 1990s and the evident failure of market-oriented reforms toameliorate the problems of poverty and inequality in the region, Latin Americanpolicymakers began to cast greater attention upon social policy. During the 1990s, socialexpenditures increased in Latin America, evident in higher per capita spending and theintroduction of new instruments and programs to tackle the problems of poverty and lackof access for lower-income groups. 2However, the most heralded of the new initiatives,which include social emergency or social investment funds, emergency employmentschemes, and direct (conditional) transfers and subsidies, adhere to the principle oftargeting social policy towards the poorest and most vulnerable groups. Policymakershave been challenged in moving beyond these kinds of programs towards more universaland redistributive ones. While advocates contend that targeted policies “make the bestuse of scarce resources for poverty alleviation,” 3 critics accuse such policies ofperpetuating a two-tier system that relegated the poor to inferior benefits and reinforced“inequalities between poor people and the rest of society.” 4At the same time that social spending and program retrenchment were takingplace in Latin America, a debate about the need for greater state responsibility for socialwelfare gained traction in East Asia in the late 1980s-early 1990s. Since their transitionsto democracy in the late 1980s, Korea and Taiwan have passed new legislation expandingLago, “Social Welfare Reform in the Context of Economic-Political Liberalization in the Latin AmericanCases,” World Development 25:4 (1997); M. Victoria Murillo, “Political Bias in Policy Convergence:Privatization Choices in Latin America,” World Politics (54:4) 20022 Social Panorama of Latin America, 1990-2001, (Santiago: CEPAL, 2001)3 Karl Ove Moene and Michael Wallerstein, “Targeting and political support for welfare spending,”Economics of Governance (2001).4 Shaping the Future of Social Protection: Access, Financing, and Solidarity (Santiago: CEPAL, 2006).2

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citeprovisions for social assistance, medical insurance, and pension programs. As a result,both countries now have national pension systems as well as single-payer national healthinsurance programs. 5These programs are cast broadly along the lines of traditionalsocial insurance programs based on collective pooling of risk, with responsibilitiesdistributed among state, capital, and labor. 6Reflecting this, levels of social spendinghave risen steadily in many developing democracies in Asia, especially in the former“East Asian tigers” of South Korea and Taiwan as well as, to a lesser degree, in Thailand.While the industrialization thesis may account for some of these states’ increasedspending, what is more to the point is that the increased spending took on quite differentforms among countries in East Asia, suggesting that there was more at stake than merelyan increase in social spending.That states governing a sizeable portion of the world’s population haveimplemented programs representing a markedly distinct paradigm of welfare/pensionprograms casts doubt upon naysayers’ prophesies of globalization’s inevitable “race tothe bottom.” The puzzle that emerges from a comparison of welfare state developmentsin Latin America and East Asia is that in some countries in the latter region, over therelatively brief course of 15 years, a limited and segmented welfare system that cateredlargely to formal sector workers, was minimally financed by the state, and was heavilydependent on private responsibility – on the part of households and companies – has beentransformed into a national system that provides universal coverage and benefits to allcitizens. This has been accompanied by a shift in attitude among citizens as well as in the5 Kwon Huck Ju, “Transforming the Developmental State in East Asia,” Development and Change (36:3)2005, Joseph Wong, Healthy Democracies, Soonman Kwon, “Economic Crisis and Social Policy Reformin Korea,” International Journal of Social Welfare (10:2) 20026 Robert Holzmann, “Pension Systems in East Asia and the Pacific: Challenges and Opportunities,” SocialProtection Unit [World Bank] June 2000.3

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citelanguage of the debate about the state and its responsibilities for social welfare spending.Whereas during the 1970s and even 1980s, the notion of state responsibility for welfareprovisioning would have struck ordinary citizens in Korea and Taiwan as unfamiliar oreven as an “unpatriotic” burden that impeded the state’s more urgent and overridingobjective of pursuing national economic growth, by the 1990s, citizens’ attitudes hadshifted dramatically. Leftist newspapers, intellectuals and activists, and civil societyorganizations stridently called upon the state to deliver protection to vulnerable citizensand to create a nation based on socioeconomic equality.Welfare state development in Latin America and East Asia are marked by twodistinct outcomes. The first is along the dimension of universality of access, and thesecond along the dimension of solidarity or redistribution. Among the patterns thatemerge, we find that in several countries in East/Southeast Asia – Thailand, South Korea,and Taiwan – over the course of the 1990s and 2000s, more and more citizens came tobenefit from a universal access to healthcare. Whereas the reach of the healthcareprograms previously had been confined to a select group of formal sector workers,benefits were expanded to encompass more segments of the population, most notably therural and informal sector workers. However, we also find that reforms that greatlyimproved the solidarity and equity of programs were undertaken in only some East Asiancountries. For instance, while in Korea and Taiwan, single-payer national funds wereestablished that enhanced the solidaristic elements of healthcare insurance across bothformal and informal sector workers, in Thailand, separate programs continued to bemaintained for formal sector workers.4

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citeIn contrast, in Latin America, during the 1980-90s, most countries put in place amixed system of private-public health systems. While healthcare systems in thesecountries ostensibly extended access to all citizens, in reality, coverage in many countriesfell short of being universal. Moreover, inevitably, lower-income citizens were pricedout of the private system and came to be concentrated in the public health sector,burdening the latter with a greater pool of higher-risk patients and creating a dual systemof care that discriminated between higher- and lower-income citizens. As a result, poorercitizens often faced healthcare provisioning that was plagued by lower quality services,overcrowding, and lack of capacity. Policymakers sought to ameliorate some of theseproblems through measures that improved access, particularly for the lowest incomegroups. On the other hand, efforts at integrating the public and private systems havebeen far more limited, and hence, the degree of redistribution or equity within thehealthcare system is low.Why do we see variation with respect to these two dimensions of healthcarereform, both within as well as across regions? I argue that the divergence in policyoutcomes depended upon two factors: first, the nature of electoral party competition inthese new democracies provided different incentives and payoffs to parties forimplementing universal versus targeted social policies. I claim that where party systemsare less institutionalized, have weakly nationalized presences, and are underpinned byanemic or fluid partisan attachments, a universalizing social policy initiative is morelikely to yield greater electoral payoffs. In this kind of electoral landscape, sweepingsocial policy initiatives may be efficacious means of replacing clientelistic networks oroverlaying new socioeconomic cleavages that create more programmatic partisan5

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citeattachments among voters. Conversely, in countries where party systems are moreinstitutionalized, have nationalized presence, and stronger partisan attachments, partieshave weaker incentives to propose universalizing social policy initiatives; such policiesentail higher fiscal costs, are likely to meet resistance from stakeholders whose interestthey threaten, and, in a more stable electoral environment, the political payoffs – theextent to which parties can attract more voters – may not be fruitful enough to justify itscosts. Under these circumstances, social policies that selectively target groups of citizensmay be more cost-effective strategies for solidifying or carving out incremental gainsamong a voter base.Secondly, I argue that policy initiatives that enhanced solidarity or redistributionbetween lower- and higher-income workers depended upon the willingness of higherincomeworkers to pool their income and health risks with less-privileged citizens. Ingeneral, in these developing democracies, formal sector workers (a category that,generally speaking, encompasses highly-skilled manual and white-collar groups)benefited from higher-quality healthcare insurance and services, while informal sectorworkers had poorer terms of insurance and access to healthcare. Whether moresolidaristic reform efforts succeeded depended upon whether privileged workers werewilling shoulder the costs of greater risk pooling. I argue that this willingnessimportantly was influenced, in part, by growing labor market insecurity during the 1990s,to which the more privileged workers also grew susceptible, but even more so by howlevels of inequality in a society mediated formal sector workers’ perceptions of sharedinterests in solidaristic social protection. Levels of equality shaped the perceptions of6

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citedistance that privileged workers felt between themselves and their less privilegedbrethren and influenced their willingness to mobilize for more equitable reforms.CASE SELECTION: SOUTH KOREA, THAILAND, AND CHILEThis project seeks to theorize about welfare reform outcomes, specificallyfocusing upon healthcare insurance reform, in a universe of middle-income developingdemocracies in East Asia and Latin America that includes South Korea, Taiwan,Thailand, the Philippines, Indonesia, Venezuela, Argentina, Brazil, Chile, and Uruguay.During the past twenty years, many of these countries initiated healthcare insurancereforms, along with efforts in other social policy areas such as pensions, education, andsocial assistance programs. For many of these countries, the proposed health insurancereforms represented bold and ambitious efforts to change systems inherited from priorauthoritarian periods and attempted varying degrees to introduce mechanisms of greatersolidarity and redistribution to their existing systems.From among this group, I examine in closer detail the trajectories and outcomesof health insurance reform in three countries, South Korea, Thailand, and Chile. In allthree,the proposed reforms attempted to introduce meaningful changes to both axes –universality and solidarity – although their success varied considerably. Korea achievedsignificant gains towards both universality and solidarity. Thailand substantiallyexpanded coverage for a quarter of its population with a new national program, althoughit failed to merge this program with already existing programs that covered formal sectorworkers. Finally, Chile passed legislation that improved access to those who weremarginalized in the existing system; however, efforts to implement greater redistributionbetween lower-income and higher-income segments did not succeed.7

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citeKOREAIn 2000, the South Korean National Assembly passed legislation that integratedthe country’s fragmented corporatist healthcare insurance societies into a nationaluniversal single-payer health insurance system managed by the state. The “IntegrationReform” represented the culmination of a series of changes to the healthcare system thatsignificantly expanded coverage and increased the system’s mechanisms ofredistribution. Between 1987 – the year of democratic transition – and 2001, coverageexpanded from 41% of the population to 97%. At the time of transition, only formalsector workers who were employed by firms larger than 100 workers – were guaranteedinsurance through their employers. In a succession of measures, the first democraticallyelected government of Roh Tae-woo expanded coverage to the rural and informal sectors.In 1987, farmers were handed out healthcare insurance cards. Two years later, a programto cover the self-employed was implemented. These extensions were achieved throughthe incremental establishment of quasi-private insurers that pooled workers by workplaceor geographic location. As a result, South Korea’s health insurance system came toresemble a corporatist system that was composed of hundreds of quasi-private insurers,each of which offered different benefits packages and charged different premiums todifferent pools of workers. The system generated considerable inequity between largecompanyand small-company employees and between urban and rural workers, asworkers at large companies paid lower premiums and received better benefits while theself-employed/informal and rural workers paid higher premiums for poorer services. By8

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citeconsolidating all of these separately-run schemes into a single payer fund, the 2000legislation reduced systemic inequity.THAILANDIn 2001, the Thaksin Shinawatra government passed legislation that extendedcoverage to 18.5 million people (or 27% of the population) who were previouslyuninsured. Following the institution of the “30-baht card” scheme, the coverage rate inThailand reached 95.6%. Prior to this reform, Thailand’s health insurance programsconsisted of four separate schemes that covered different segments of workers: civilservants, formal sector workers, the rural poor, and low income families and theirdependents. These various programs, which were separately managed, had beenintroduced on a piecemeal basis between 1975 and 1990. All of these programs chargedwidely varying benefits and fees that generated considerable inequity in healthcareinsurance. The objective of the 2001 legislation was to provide equal access to qualitycare regardless of a citizen’s socioeconomic qualifications. To ensure this, the “30 bahtcard” program guaranteed that no citizen would pay more than 30 baht on any clinic visit,including for pharmaceuticals. While some procedures were exempted (cosmeticprocedures, chemotherapy, renal dialysis, organ transplants), the “30 baht card” improvedaccess to care for groups who were previously uninsured. At the same time, the initialproposal’s call to merge these programs with those covering formal sector workers into asingle universal program was fiercely resisted by civil servants and formal sector workerswho wanted to maintain their separate programs and not risk a diminishment of theirbenefits packages.CHILE9

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citeThe Chilean health system was a dual public/private system; those individualswho could afford private insurance or who worked for companies that purchased privateinsurance received healthcare at private clinics. The rest of the population was treated atfacilities in the public health sector, which generally was burdened by overcrowding,long waiting lines, and inferior infrastructure. Although the question of dismantling thisparallel private-public system was never seriously entertained, the health reformproposed in 2000 (“Plan AUGE”) forded meaningful milestones towards connecting thetwo systems by guaranteeing all Chileans timely treatment for 57 “priority diseases” atany facility, public or private. 7An important component of the reform called for apooled fund that would enhance the system’s financial solidarity by redistributing moneyfrom the private to the public system, but the government ultimately abandoned thisproposal. Thus, while the more targeted component of the reform was implemented, theproposal to increase financial solidarity between the private and public systems was not.An examination of these sets of reforms illustrates that the three cases varied intheir efforts to achieve greater coverage and equity of benefits. If we map theseoutcomes onto a 2-dimensional graph, with the vertical axis representing solidarity andthe horizontal axis representing universality of coverage, we find that South Koreamoved from low coverage to high coverage and from low to high levels of risk-pooling.Thailand, too, expanded coverage but fell short of integrating higher-income formalsector workers into its 30-baht card program. Finally, Chile’s AUGE program achievedgreater access for lower-income workers although its healthcare program alreadydelivered, in principle at least, universal coverage. Risk-pooling, on the other hand,7 The list of “priority diseases” was set to be increased incrementally over time.10

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citeremains fragmented, with lower-income and less healthy workers pooled into the publicsector and higher-income workers opting for the private insurance market.[Insert Graph]At the same time that the three cases manifest considerable variation with respectto outcomes, they also permit controlling for important alternative explanatory variablessuch as the strength of labor organizations, political partisanship, state capacity, and tradeand capital openness. For one, as Table 1 (on p. 21) depicts, labor organizations arecomparably weak across all three countries. Compared to other Latin American and EastAsian countries, Korea, Thailand, and Chile have lower-than-average union density rates.In part, this reflects the legacy of the authoritarian regimes’ severe repression of workingclass organizations during the 1970s-80s. For the East Asian states, keeping labor costslow was instrumental to the success of the developmental economic models, while, inChile, dismantling labor organizations was a fundamental part of forging a neoliberalpolitical economy. Although labor organizations gained some ground post-transition,their organizational strength still remained comparably anemic – Chile reported uniondensity of 16% in the late 1990s, South Korea reported a figure of 11.6%, whileThailand’s was lowest at 5%. 8Moreover, labor organizations are decentralized, andcollective bargaining in all three countries takes place primarily at the enterprise unionlevel. 9Although central trade confederations do exist in Chile as well as in Korea, strongrivalries between two main confederations in Korea have hindered labor solidarity.8 Labor Statistics (Seoul: Korea Labor Institute Press 2007).9 Frank Volker, “The Labor Movement in Democratic Chile, 1990-2000,” Working Paper #298 (2002).11

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citeSecond, the healthcare insurance initiatives – as well as other welfare reformssuch as pensions and social assistance programs – were spearheaded by governments onboth sides of the partisan spectrum across the three countries and sometimes withincountries. In South Korea, the earlier initiatives to expand coverage were undertaken bya right government (headed by the military regime’s candidate), while the 2001“Integration Reform” that established a single-payer system was the legislativeachievement of a left-of-center government. In Thailand, the right-wing Thaksingovernment was the key architect of the “30-baht card” scheme. Finally, Chile’s AUGElegislation was proposed by the left-of-center Concertacion coalition. The lack of aconsistent relationship between partisanship and policy preferences casts doubt upon thepossibility that differences in ideological commitments accounted for the outcomes.More intriguingly, even in those cases where left parties were responsible for expansivepolicy initiatives, such as the Integration Reform in South Korea and Plan AUGE inChile, the ambitions of the reforms did not correspond to the strength and maturity ofparty organization and party system institutionalization. Party systems in South Koreaand Chile, for example, were characterized by significant disparities ininstitutionalization. On one hand, the Chilean party system ranking as one of the moststable in Latin America, 10 while on the other, South Korean parties have long beenidentified as short-lived vehicles of electoral ambitions for charismatic politicians thatwere not characterized by any meaningful ideological distinctions. 11 Accordingly,conventional wisdom would lead us to expect the Concertación to implement more10 See Arturo Valenzuela, Chile: Politics and Society, Scott Mainwaring and Tim Scully, BuildingDemocratic Institutions: Party Systems in Latin America, Siavelis, Peter, The President and Congress inPostauthoritarian Chile: Institutional Constraints to Democratic Consolidation11 Chung-In Moon and Jongryn Mo, Democratization and Globalization in Korea: Assessment andProspects (Seoul: Yonsei University Press 1999).12

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citeprogrammatically left policies. But in fact, the organizationally weak South Korean leftparty achieved some success in constructing resonant ideological cleavages aroundsocial, political, and economic issues such as North-South reunification, corporategovernance, economic redistribution, and welfare policy, and pushed through policiesconsistent with these preferences, even in the face of a divided government. 12Third, these three cases exhibit strong and relatively consistent economicperformances. Between 1990 and 2002, Chile grew by an average rate of 5.7%, SouthKorea by 6.3% and Thailand by 5.0%. Second, the three governments demonstratedprudent budgetary management during this time. Chile reported a fiscal surplus of 1.4%,while South Korea recorded a fiscal deficit of -1.0% and Thailand a deficit of -1.5%. 13While there is some dispersion in these performances, nonetheless, the gap isconsiderably narrower than other East Asian and Latin American countries. These threecases exhibited reasonably comparable macroeconomic indicators that reduce thelikelihood that sharp contrasts in macroeconomic management inevitably forced themtowards divergent social policy choices.Fourth, the three countries have coherent state apparatuses that have high internalunity and organization. The developmental state scholarship informed our understandingof the importance of state structures in not only achieving industrial growth but also inimplementing social policy. As Evans stated, “[D]ifferent kinds of state structures createdifferent capacities for action. Structures define the range of roles that the state iscapable of playing.” 14In his study of redistributive policy in Brazil, Weyland argues that12 Song Ho Keun, “Politics, Generation, and the Making of New Leadership in South Korea” Developmentand Society 32:1 (2003)13 World Development Indicators, 2006 14 Peter Evans, Embedded Autonomy (Princeton: Princeton University Press, 1995) 11.13

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citefollowing decade. Finally, in South Korea, while trade did not change meaningfullybetween the two decades, averaging around 66% of GDP in both decades, the level ofFDI/GDP increased from below 2% in 1990 to around 12% by 2000, while portfolioinvestment rose more significantly from 1% in 1990 to 23%. In Chile, the level ofFDI/GDP increased from 30% in 1990 to 61% in 2000 while portfolio investments rosefrom around 8% to 13%. 18LITERATURE REVIEWTo explain the divergent outcomes of healthcare insurance reform in South Koreaand Chile, my argument emphasizes the degree of solidarity between the formal andinformal sectors as well as the different incentives that electoral competition in weaklyinstitutionalized and regionalized party systems generated versus more robustlyinstitutionalized and nationalized party systems. This argument builds upon and extendsseveral important schools of thought within the welfare state literature. I briefly reviewthese major contributions, evaluating both their shortcomings in explaining the puzzle Iexplore in this project as well as the ways in which they informed my own argument.The globalization argumentOne of the most vigorous debates in the welfare state literature centers on thecapacity of governments to sustain welfare spending in the face of increased integrationin the markets for goods, capital, and services. The conventional wisdom aboutglobalization was that the competitive pressures brought about by increased trade ingoods and services and greater openness to capital flows would make it more difficult forstates to provide social welfare. Because these programs are financed by taxes on capital18 International Financial Statistics and Government Financial Statistics, various years (IMF)15

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citeand labor, they increase the costs of production for capital. In an open-trade economy,the entry into the domestic markets of goods made in lower-wage countries disadvantageslocal producers, encouraging them to lobby their governments to reduce the burden offinancing welfare programs. According to this perspective, openness to capital flowsspurred a similar dynamic. With “footloose” capital, firms have the ability to move theirassets and investments across borders; consequently, profit-seeking firms will locate theirinvestments to countries where the costs of doing business are lower and where states canprovide a stable macroeconomic environment, including lower inflation and tighter fiscaldiscipline, which generous welfare programs are assumed to impede. 19 By imposing thelogic of the market upon countries’ domestic policies, globalization forces states to forgocollective social protection schemes and to adopt neoclassical economic alternatives thatemphasize individual over collective responsibility.This logic is thought to be even more inexorable in developing countries becausethey rely more heavily on foreign capital inflows to supplement lower levels of domesticsavings, and their domestic producers are less competitive in world markets. Inparticular, analysts argued that the fiscal constraints imposed by neoliberal economicpolicy prescriptives left little room for states to negotiate protective social policy. 20Theimperatives of this policy regime significantly reduced domestic policymakers’independence since their capacity to attract trade and capital investments depended onmaintaining budgetary discipline and flexible labor markets.19 Dani Rodrik, Has Globalization Gone Too Far? (Washington, D.C.: Institute of International Economics,1997)20 Nita Rudra, “Globalization and the Decline of the Welfare State in Less-Developed Countries”International Organization 56:2 (2002)16

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citeThis first generation of literature has come under considerable fire. A substantialresponse to this earlier thinking presents persuasive evidence that left governments andinstitutions still yield salubrious effects on welfare spending and social policies.Garrett’s work on the advanced industrial economies perhaps best represents thisscholastic response; he found that in countries where left parties were allied withencompassing labor organizations, governments were able to pursue economic policiesthat redistribute wealth and risk in favor of the more vulnerable, in spite of increasedeconomic openness. 21 In a related vein, Swank made the case that “the institutionalstructure of the polity and programmatic structures of the welfare state are fundamentallyimportant for determining the quality and character of interest representation of prowelfarestate interest, the relative political capacity of these interests, and the broaderconstellation of supportive norms and values.” 22Scholars working on welfare spending in developing countries have investigatedthis relationship as well. Kaufman and Segura-Ubiergo (2001) demonstrates that amongLatin American countries, popularly-based governments (defined as governments thathave close historical links with labor unions or a long-standing programmatic orientationtoward the “popular sector”) have a significant and positive short-term effect on socialspending. 23Rudra (2002), in a study of 53 less-developed countries, found that, incontrast to Garrett’s findings in the OECD sample of countries, increased capital andtrade openness combined with weak labor power produced a significant and negative21 Geoffrey Garrett, Partisan Politics in the Global Economy (Cambridge: Cambridge University Press,1998)22 Duane Swank, Global Capital, Political Institutions, and Policy Change in Developed Welfare States(Cambridge: Cambridge University Press, 2002)23 Robert Kaufman and Alex Segura-Ubiergo, “Globalization, Domestic Politics, and Social Spending inLatin America: A Time-Series Cross-Section Analysis, 1973-97,” World Politics 53 (2001)17

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citeeffect on welfare spending in LDCs. Rudra’s results affirmed that governments’commitments to welfare spending depend on strong labor-market institutions. 24Notwithstanding these insights, the literature’s exploration of globalization’seffects leaves several important lacunae that merit further investigation. One area thatcompels further inquiry is whether deepened integration yielded comparable effects upondifferent segments of workers. Along with greater trade and capital openness, employersin advanced as well as developing countries increasingly embraced flexible or atypicalhiring practices during the 1990s, as they turned to temporary and part-time contracts aswell as sub-contracting that permitted them to shed workers more easily and to minimizethe costs of paying employees welfare benefits. 25These developments are thought tohave produced new fissures in the labor market between workers with secureemployment (insiders) and those who face more precarious terms of employment(outsiders) (Rueda). These different groups of labor market participants are viewed tocomprise distinct voter constituencies with disparate policy preferences and interests.Yet, it is not clear that the boundary between the preferences of these groups is asimpermeable outside of the OECD. Given that employment protection legislation in themiddle-income developing countries is weaker than it is in OECD countries, it seemsplausible that the boundary between formal and informal sector workers might be lesshardened in East Asia and Latin America. This raises the question of whether, in thesecountries that manifest weaker EPL for formal sector workers, the pressures ofglobalization generated more possibilities for informal and formal sector workers to24 Nita Rudra, “Globalization and the Decline of the Welfare State in Less-Developed Countries”International Organization 56:2 (2002)25 OECD, Employment Outlook, several years, Kevin Gray, Korean Workers and Neoliberal Globalization(London: Routledge, 2008), Kirsten Sehnbruch, The Chilean Labor Market (New York: Palgrave, 2006)18

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citerecognize a common ground of shared interests, yielding greater scope for alliances andcoalitions to be formed across segments within the labor force.Second, the globalization literature tends to focus on levels of social spending asthe measure of interest. In privileging the importance of expenditures, the literature risksoverlooking other equally, if not more important aspects of welfare policy such as theextent of redistribution and risk pooling that perhaps more incisively captures howglobalization shapes the political dynamic behind the welfare policy debate. Toparaphrase Esping-Anderson, to assume that all spending counts equally may be quitemisleading. For instance, a country’s welfare spending may be high because it allocatesgenerous benefits to a privileged group such as civil servants. Conversely, the costsincurred by a universal program that offers benefits to all citizens depend on thegenerosity of these benefits. If a universal program extends low levels of benefits, theoverall costs of the program may not be higher than that of a corporatist or liberal regime.Consequently, focusing on spending levels or changes in spending levels may notbe as illuminating as identifying how these monies have been spent. As a case in point,total health spending in South Korea, Thailand, and Chile, for instance, is roughly equalat around 6% of GDP. Notwithstanding this, the programs are established uponcontrasting objectives that are underscored by different rules regarding the eligibility ofparticipation and benefits for groups of citizens. This choice of program type has at leastas much, if not more, to do with how groups contest the allocation of financing,redistribution of income, and pooling of risk than merely spending. Voters and interestgroups weigh not only the costs of the program, which often remain variable andindeterminate during much of the policy discussion, but also what they stand to lose or19

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citegain by the proposed reform. The design of a program highlights these tradeoffs muchmore emphatically than its overall estimated cost.Power resources theoryThe central dynamic that animates the power resources theory is the conflictbetween workers and capitalists, two principal social groups in a capitalist democracythat have access to different resources. Capitalists wield market-based resources that putthem at considerable advantage against workers. To mitigate their vulnerability to themarket economy, workers need to rely on their strength of numbers and formorganizations that articulate their interests. Importantly, these working class demands aremediated by left parties in the political arena. 26According to power resources theory,variations in the size and shape of welfare regimes are produced by the relativedifferences between resources mobilized by the working class and left parties and thestrength of the organization of the capitalists and right parties (Castles, Esping-Anderson,Korpi, Huber and Stephens).An influential insight underpinning power resources theory is the recognition thatorganized power of the subordinate classes can counterweigh the power of capital; thus,this school emphasizes that relative power organizations are critical to exercising voice inthe political arena. In their absence, workers lack tools to be effective actors and insteadsubside into a passive group that is “acted upon.” However, notwithstanding theresonance of this insight, it is unclear, given the weakness of labor organizations indeveloping democracies, whether placing so much explanatory weight on a relativelyattenuated actor illuminates the outcomes. While labor organizations diminished in26 Evelyn Huber and John D. Stephens, Development and Crisis of the Welfare State: Parties and Policiesin Global Markets (Chicago: The University of Chicago Press, 2001)20

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citemembership and organizational breadth in the advanced industrial democracies during thepast two decades, they experienced even more attenuation in developing democracies(Murillo 2001, Deyo 1989). As Table 1 below demonstrates, the number of workersbelonging to unions in these regions is low relative to the levels evidenced in WesternEurope. Moreover, although union membership did rise slightly in some of thesecountries in the years leading up to democratic transition, it declined subsequently duringthe 1990s, reflecting the growth in the informal economy and employers’ increasedreliance on temporary contract labor. Additionally, labor organizations do not exerciseencompassing breadth in these countries. Collective bargaining, for instance, takes placeprimarily at the enterprise level. Unions often belong to competing labor confederations,so that it is difficult to find centralized labor organizations that can credibly represent theunified interests of labor (Yang 2005, María Lorena Cook 1998, V. María Murillo 2001,Volker 1996).Table 1: Comparison of Union DensityCountry Union density (%) Year Country Union density (%) YearArgentina 24 1997 Belgium 52 2000Bolivia 18 1997 Denmark 76 2000Brazil 32 1997 Finland 76 2000Chile 16 1997 France 10 2000Colombia 11 1997 German 31 2000Ecuador 10 1997 Ireland 51 2000Mexico 30.5 1997 Italy 40 2000Peru 8 1997 Netherlands 25 2000Uruguay 11.5 1997 Norway 56 2000Venezuela 14 1997 Portugal 33 2000S. Korea 11.6 2001 Spain 17 2000Taiwan 31.5 1998 Sweden 84 2000Thailand 5 2000 Switzerland 25 2000Indonesia 5 1998 U.K. 42 2000Philippines 4.2 2000 Canada 36 2000Singapore 20 1997 U.S. 16 200021

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citeMalaysia 15 1998 Japan 24 2000Australia 44 2000New Zealand 35 2000Source: Inter-American Development Bank database, OECD database, Asian Development BankA second generation of literature in the power resources tradition acknowledgedthe importance of contributions made by other social groups to welfare state outcomes;Esping-Andersen noted that the Scandinavian universal welfare states were achievedthrough the political support of a cross-class coalition of middle and working class voters.According to this account, the middle class’ preferences were instrumental in shaping thedesign of more generous universal benefits. Recent scholarship on welfare reformoutcomes in East Asia also noted the importance of other coalitional partners, inparticular the role played by NGOs and civil society groups in championing progressivepolicy (Yang, Haggard and Kaufman, Wong). Labor organizations, while a part of thisbroader cross-class pro-welfare alliance, played junior, subordinated roles in thecoalition, even in the countries where they were the most active. Contrary to laborspearheading such movements, we find that these coalitions were brought together underthe leadership of “middle-class” or white-collar based civil society groups, whichadvanced a platform for expansionist and more redistributive welfare policy that servedthe interests of both informal and formal workers. These East Asian examples suggest,then, that while power resources theory’s insights about the importance of theorganizational strength of subordinate classes are powerful, the theory’s assumption thatthese mobilizational resources inhere predominantly in the working class may not standup as well in developing democracies. In these countries, other groups – in particular, thewhite-collar class – also demonstrated significant mobilizational and organizationalcapacity. Under circumstances where their interests intersect with those of lower-class22

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citesegments, we may expect to these groups to play a “vanguard” role in organizing crossclasscoalitions.Electoral competitionFinally, recent literature highlights the important role that electoral competition innew democracies played in determining social policy outcomes. In his account ofhealthcare policy expansion in Taiwan and South Korea, Wong claimed that the pressuresof democratic competition motivated politicians to respond pre-emptively to theiropposition by advocating for healthcare expansion in the late 1980s. In particular, Wongidentified the terms of democratic breakthrough as critical to shaping the competitivepressures on ruling regime parties. Variation in how democratic breakthrough wasachieved – whether the transition was managed by political elites or the abrupt outcomeof violent social mobilization from below, the timing of founding elections – affected theextent of the threat to ruling regime parties from opposition parties, which in turn, shapedthe trajectories of expansionist policy. Wong also noted that the absence of salientpolitical cleavages afforded an opportunity for politicians to introduce socioeconomicissues in an effort to articulate new channels of partisan attachments. Thus, welfareexpansion in both these East Asian countries reflected responses by the ruling parties topre-empt the opposition and shore up voter support. Others working in this region havealso noted the importance of electoral pressures in motivating politicians to use socialpolicy initiatives as a means for attracting voters (Yang).These insights help explain why healthcare policy expansion in East Asia did notseem to correspond to any partisan color of the parties that introduced these measures.23

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citeYet, electoral pressures alone do not adequately explain the variations we find withrespect to the two dimensions of social policy outcomes: for one, while competitivepressures may induce parties to introduce expansive social policy as an attractiveelectoral strategy, this does not tell us why they choose more targeted versus universalexpansion. Relatedly, electoral pressures also do not account for when parties findredistributive and solidaristic policies more attractive than less redistributive options.A more encompassing explanation to at least some of these questions might befound if we examined variations in policy strategy in the context of how party systemdevelopment and institutionalization structures electoral competition. While democratictransition certainly ushered in a more competitive electoral environment, the partysystems in which these elections were contested differed substantially, especiallybetween countries in Latin America and East Asia. Disparities in the organizationalmaturity of the parties as well as in the levels of party system institutionalization anddegrees of nationalization generated different challenges and imperatives to bothreconstituted as well as newly formed parties. This, in turn, may affect their strategiccalculations about policy choice. Parsing out differences in the effects that party systeminstitutionalization, nationalization, and organizational maturity yielded upon electoralcompetition may offer a more theoretically robust framework for understanding howelectoral pressures motivated different trajecotires of health policy prescriptives acrossthe cases.THE ARGUMENTThis work seeks to explain the variation in healthcare insurance reform outcomeswith respect to scope of universalism and solidarity. The model I present privileges the24

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citerole that cross-class coalitions between formal and informal sector workers played as wellas the effects of party system institutionalization in shaping electoral competition toexplain the divergent healthcare reform outcomes we find in developing democracies.Since the 1990s, deepened integration into world trade and capital markets hasbeen accompanied by growing labor market insecurity for both formal and informalsector workers. Along with greater openness, countries in Latin America and East Asiaimplemented changes to labor market regulations that produced rising labor marketprecariousness during the 1990s and beyond. Neoliberal reforms in Latin Americasubstantially reduced the density and breadth of labor organizations and led to theattrition of formal-sector workers (Murillo, Roberts). Reform and downsizing of thepublic sector eroded the living standards and size of middle class workers that this sectorhad created during the import-substitution era. In East Asia, too, globalization introducedsignificant pressures upon the working and middle classes. A surprising feature of EastAsian labor markets is that, although developmental policies created a large and vibrantclass of skilled and white-collar workers, many of these workers nonetheless belonged tothe “irregular” sector, as they were either self-employed or contract workers. These“irregular” employees accounted for more than a third of the active working populationduring the 1980s, and their share rose even higher during the 1990s and 2000s.Yet, while workers across both regions experienced more insecurity in the termsand status of their employment, the policy response to compensating workers has beenquite varied, as has already been recounted. In South Korea, the policy response was topush for a reform that increased redistribution between formal and informal sectorworkers, and in particular, between upper-income and lower-income workers. In Chile,25

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citethe policy effort focused on extending access to those who were least privileged, whilethe component of the initiative that was designed to enhance financial solidarity betweenhigher-income and lower-income workers failed. Finally, in Thailand as well, whileaccess and coverage was dramatically increased, formal sector workers resisted policyproposals to integrate their healthcare insurance program with those of informal sectorworkers.I argue that the variability in the extent of solidarism in the reform outcomesreflects differences in perceptions that segments of workers held about the repercussionsof shared labor market insecurity, which, in turn, affected their incentives to mobilizesubsequently as part of a cross-class coalition. Given that these proposed reformsentailed varying costs and benefits for different groups, where the potential losers –largely, the formal sector workers, and in particular, white-collar formal sector workers –perceived that their increasingly precarious labor status heightened the possibilities oftheir joining the informal or irregular sector, they were more willing to support thereform, calculating that the higher costs they would pay were a form of insurance againstthe risks of deterioration in their employment status.Growing insecurity yielded two possible outcomes for formal sector workers: one,they could become “irregularized;” or two, in the face of diminishing employmentopportunities or more frequent cycles of high unemployment, they could be forced to takejobs that they would have considered themselves overqualified for during more robustperiods of employment. In fact, increasingly over the 1990s, employers’ efforts tominimize labor costs in the face of deepened integration into the world market resulted inthe replacement of formal sector workers with irregularized workers on fixed-term26

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citecontracts. Somewhat surprisingly, these adjustment strategies affected not only unskilledand skilled manual workers but also white-collar workers. In countries such as SouthKorea and Taiwan, where the developmental state’s growth strategy rested upon thecultivation of more value-added, skilled manufacturing industries, increased tradeintegration heightened vulnerabilities for not only working class but also white-collarworkers. This reflected the fact that export-oriented industrialization, a cornerstone ofthe East Asian states’ developmental paradigm, was underpinned by not only a large poolof skilled and semi-skilled labor but also by skilled administrative and service-basedfunctions that composed a wide spectrum of white-collar jobs that supported these exportindustries.Thus, labor market flexibilization increased employment precariousness for bothformal and informal sector workers. Yet, the former’s proclivities for recognizing thisshared insecurity depended not merely upon the fact but also upon how levels ofinequality mediated their perceptions of the boundaries between themselves and informalworkers. I argue that in more equal societies, a rise in labor market insecurityaccentuated the formal sector’s perception that the boundary between themselves andinformal sector workers was relatively permeable. Because the disparity in educationaland professional qualifications between formal and informal sector workers is muchnarrower in more equal countries, privileged workers are less likely to distinguish ayawning distance between themselves and informal sector workers as well as more likelyto perceive a greater personal stake in redressing the inequities inherent in the healthcaresystem that discriminated against informal workers. Thus, these calculations are moreconducive to their recognition of a shared interest in more solidaristic healthcare and their27

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citewillingness to subsidize lower-income workers through a more redistributive program.This change in perception, especially among white-collar formal sector workers, waspivotal in spawning the formation of a broad cross-class coalition between labororganizations and more “middle-class”-based civil society groups that generated supportfrom both white-collar and working class voters for a more solidaristic single-payer fund.In contrast, in countries that were plagued by higher inequality, I argue that theincrease in labor market insecurity did not generate as much of a perception of sharedrisks between formal and informal sector workers. In these countries, workers across allsegments also experienced growing precariousness during the 1990s. Labor marketsurveys reveal that labor market flexibilization affected all classes of workers – fromunskilled and skilled manual labor to white-collar workers; across all segments, moreworkers were hired on short-term or fixed-term (honorario) as opposed to open-endedcontracts, which heightened employment instability and correspondingly, the risk ofbeing unable to afford healthcare insurance or being bumped out of company-basedinsurance pools. But despite the growth in insecurity, workers – blue-collar and whitecollarremained atomized and virtually no cross-class coalitions of grassrootsorganizations emerged. While many have argued that the paucity of grassrootsmobilization was rooted in neoliberal labor market policies (most prominently, thedismantling of the public sector and the diminution of labor unions), funding constraintsfor NGOs in Latin America, and the decimation of grassroots organizations during theauthoritarian periods, an alternative explanation for the absence of cross-classmobilization may lie in the barriers posed by high levels of inequality. Even whenupscale and downscale workers faced some measure of shared insecurity, the chasm that28

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citethey perceived in other labor market status markers – educational attainment, professionalqualifications – made it difficult for them to identify with one another and less inclined toview solidarity in social protection as a solution to growing labor market insecurity.While levels of inequality mediated different workers’ perceptions of shared riskthat affected their preferences for cross-class mobilization – most importantly, those offormal sector workers – the extent to which governments sought greater universality ofaccess reflected the nature of electoral party competition in these middle-incomedeveloping countries, which I argue, in turn, was shaped by party systeminstitutionalization and nationalization.In their 1995 work, Mainwaring and Scully brought attention to the prevalence ofweak party system institutionalization in new Latin American democracies, highlightingthe important linkages between party system stability and democratic consolidation.Following on the heels of this work, scholars of East Asian party systems also haveinvestigated the extent of institutionalization in East Asian regimes (Stockton, Kuhonta,Chang, Hicken). The general consensus reached by this raft of regional studies suggestedthat East Asian party systems evinced comparably weak, if not weaker, indicators ofinstitutionalization, at least as far as the quantifiable aspects of the Mainwaring-Scullyindex were concerned. Kuhonta and Hicken, for instance, found that most East Asiandemocracies exhibited higher Pedersen scores of electoral volatility, on average, thanmany Latin American countries (East Asian semi-authoritarian regimes such asSingapore and Malaysia bring down average volatility). Table 2 replicates theircalculations of the levels of electoral volatility across the two regions.29

Table 2 – Electoral Volatility Across Legislative ElectionsCountry Time Span Average VolatilityArgentina 1983-2001 25.1Venezuela 1958-2001 31.4Brazil 1986-2002 21.8Chile 1989-2001 16.7Mexico 1988-2000 22.7Average 23.5Taiwan 1992-2004 16.2S. Korea 1988-2004 29.1Thailand 1992-2005 35.0Philippines 1992-1998 37.3Indonesia 1999-2004 26.7Average 28.9Source: Kuhonta and Hicken (2009)Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citeSimilarly, if average age is considered as an indicator of party rootedness insociety, East Asian party systems scored poorly. The average age of parties is on averagelower in most East Asian countries than in Latin America (with the exception of Taiwan,where the average age is skewed by the longevity of the KMT). If the average age ofparties holding 10% or more of legislative seats post-democratic transition is calculated,the oldest party in South Korea was only 2 years old. (Conversely, the average party ageof Taiwan, on the other hand, was 43.5 years; this reflects the longevity of the 81-yearoldKMT as well as a low level of fragmentation in the Taiwanese party system in whichonly one main opposition party, the DPP, is present.)Third, analysts concluded that East Asian parties had high levels of non-partisanor unattached voters. According to survey results issued by East Asia Barometer, nearly60% of voters in Thailand responded that they did not feel close to any party while 46%of Philippine voters responded likewise. Even in countries that had more30

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citeinstitutionalized systems such as Taiwan, more than 40% of voters declared themselvesto be unattached to any party (Cheng). In part, this may reflect voters’ disenchantmentwith the KMT’s strong-arm tactics during the authoritarian era of manipulating electoraldistricting and other electoral rules that discredited the activities of political parties.Somewhat surprisingly, only 27% of Korean voters responded that they did not feel closeto any political party. However, their relatively higher level of attachment may reflectstrong provincial identities that bind them to a party whose leader was born in theirregion. Perhaps underscoring the tenuousness of partisan ties even among those whoprofessed an attachment, in all the East Asian countries, the overwhelming majority ofthose voters who identified themselves as “feeling close” to a political party also revealedthemselves to feel “just a little close” as opposed to “somewhat close” or “very close.”At the same time that Mainwaring and Scully’s index captures several importantmeasures of party system stability, it does not indicate other important characteristics ofparty systems that would affect the dynamics of party competition. One such indicator isthe extent to which party systems are nationalized. Jones and Mainwaring noted that thelevel of nationalization – or the extent to which a party’s vote share is consistent fromone region or province to another – is an important factor that shapes parties’ electoralstrategies. They claimed that “if the level of nationalization diverges sharply between[these] two systems, the competitive dynamics are quite different.” We would expectparties whose electoral strength is based on their dominance in certain regions to pursuedifferent strategies than those who have nationally consistent vote shares.I argue that variations in dimensions of party systems – institutionalization andregionalization – afforded parties different strategic opportunities to carve out electoral31

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citegains by championing universal versus targeted social policy. In poorly institutionalizedand regionalized party systems, where partisan attachments were fluid or regionallyrooted, parties, in order to attract new voters or consolidate a more stable coreconstituency, had incentives to cultivate new cleavages that would either attach morefirmly floating voters or cross-cut or complement existing regional attachments.Extending universal social policy benefits was an efficacious strategy for achieving this.To the extent that linkages with voters were based on non-programmatic or clientelisticnetworks, universal social benefits could woo away or attract voters whose loyaltiesderived from patronage goods. Second, for parties looking to expand beyond a regionalbase, social policy represented a potential wedge that could cross-cut regional (or ethnic,as in the case of Taiwan) cleavages and potentially attract voters who might previouslyhave voted based on these bases of identification. Here, universal social policy could beused as an electoral strategy to introduce a programmatic cleavage that could becultivated to override regional or patronage-based partisanship. In party systems whereparties’ vote shares were hampered by fragmentation, unstable because of the presence oflarge numbers of floating voters or limited by regional loyalties, universal social policy,in its sweep of breadth, could reach more potential adherents than targeted policy.In contrast, in party systems where parties had already achieved greaternationalization, institutionalization, and partisan attachments, universalizing social policywas not an efficient electoral gambit. Because voter attachments to their parties isalready firmer, there is less scope for social policy to serve as an issue that could detachvoters from competing bases of party identification. In more institutionalized systems,where the “territory” of new potential voters is less open, universal policy has a lower32

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citeprobability of returning votes and could result in “wasted” resources. In a more stableelectoral environment, where existing cleavages already divided the electorate, detachingvoters is more costly. In this environment, sweeping universal benefits may not yield thesame efficacy at wooing voters than in a more fluid party system. Thus, the costs ofmore universal policies may not be worth the narrower benefits. Instead, a policy thattargets benefits at specific constituencies whose loyalties a party may want to attract orreinforce may be more cost-effective.CONCLUSIONThis study of healthcare reform outcomes in middle-income developingdemocracies generates a number of interesting theoretical possibilities. First, it suggeststhat globalization can elicit demands for compensatory policy, but the form of thesedemands depends on whether the structure of the domestic political economy mediatesthe pressures of globalization in such ways as to foster cross-class solidarity. The studyalso elucidates that power resources may reside in more transient organizational formsthat are not as institutionalized as they emerged in the post-WWII advanced industrialeconomy landscape. Nonetheless, the mobilization of these organizational resources bysomewhat different class actors appears to make a difference in shaping policy outcomes.Second, the study suggests that there is further room for studying the effects of partysystem institutionalization. While we are led to believe that well-institutionalized partiesand party systems are more conducive to greater accountability, stability, and moreequitable outcomes, the outcome of the cases here suggest that in perhaps intermediatezones of institutionalization – where parties systems are weakly institutionalized but33

Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citemoving towards deepened institutionalization – competitive pressures on partiesmotivates them to seek more broadly equitable policy than those in already stabilizedparty systems.Appendix 1.ATrade/GDP ratiosRegion/CountryAverage trade/GDP1980-1990Average trade/GDP1991-2004EAST ASIASingapore 59 57 -2Malaysia 115.3 194 68.3South Korea 66.4 66.2 -0.2Thailand 56.5 101.9 80.5Philippines 51.7 91.1 76.2Indonesia 47.9 59.8 24.8Taiwan 70.4 80 14.3Average 69.6 92.8 37.4LATIN AMERICAEcuador 53.6 55.6 3.7Chile 53.5 60.2 12.6Bolivia 47.3 49.3 4.3Venezuela 46.7 50.7 8.5Uruguay 41.5 41.5 -0.1Peru 34.2 32 -6.4Mexico 30.2 53.3 76.5Colombia 28.8 37.6 30.5Brazil 17.4 21.7 25.1Argentina 15.2 24.1 58.6Average 36.8 42.6 21.3% change inaverage ratio34

Appendix 1.BFDI/GDPCountry/Region FDI/GDPPorfolioinvestments/GDPIllan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citeFDI+Portfolioflows/GDPTime periodEAST ASIASingapore 156 63.5 219.4 2001-2005Malaysia 38.1 25.5 63.6 2001-2005Thailand 12.8 9.3 22.1 1995-2002Philippines 15.2 23.8 38.9 2001-2005Indonesia 5.7 9.5 15.2 2001-2005South Korea 12.2 22.7 34.9 1997-2005Taiwan N/A N/A N/AAverage 40 25.7 65.7Avg minus 16.8 18.2 35SingaporeLATINAMERICAChile 58.8 14.3 73.1 1996-2005Bolivia 56.8 0.3 57.1 1997-2005Mexico 27 24.1 51 2001-2006Ecuador 32.7 24.2 56.9 1993-2004Argentina 25.1 23.7 48.8 1995-2006Colombia 20.3 11.2 31.5 1995-2006Brazil 22.2 27.7 50 2001-2006Uruguay 12.8 19 31.8 1999-2005Venezuela 25.8 20.3 46.1 1999-2005Peru 18.1 12.6 30.8 1995-2006Average 30 17.8 47.735