ECONOMIC

SYSTEMS AND
I N T E R N AT I O N A L
ECONOMIC
R E L AT I O N S

UNIT 5
WHAT ARE ECONOMIC
SYSTEMS?
Economic systems are groups of
economic units (producers,
consumers, government) that
performs economic activities
following the same laws or rules.
3 ECONOMIC SYSTEMS:
1. Capitalism
The properties
and businesses are
owned and controlled
by individuals or
private sectors.
3 ECONOMIC SYSTEMS:
1. Capitalism
The means of
production of
goods and services
are privately owned
and operated for a
profit.
3 ECONOMIC SYSTEMS:
1. Capitalism

Examples of
countries:
Singapore, New
Zealand, United
Kingdom, Australia,
Taiwan
PROS AND CONS OF CAPITALISM

PROS CONS

Competition among the businesses Uneven distribution of wealth.

keeps the prices of goods and
services low.
Consumers regulate the market. Creates money-oriented society.

Allows the building up of wealth and Exploits people who cannot compete.
possessions.
 3 ECONOMIC
SYSTEMS:

2. Socialism
It is the government
or the public who
owns and controls
the businesses.
 3 ECONOMIC
SYSTEMS:

2. Socialism
It was created to
eliminate the
differences
between rich and
poor. Wealth is
being distributed
evenly.
 3 ECONOMIC
SYSTEMS:

2. Socialism
Examples of
countries:
China, North Korea,
Cuba, Vietnam, Laos
PROS AND CONS OF SOCIALISM

PROS CONS

All members share benefits. No incentive for hard work.

Equal distribution of wealth. No competition means no reward to

be innovative.
Reduction of poverty. Higher taxes
 CAP ITALISM VS. SOCIALISM
Capitalism
The businesses are owned by private
individuals, few people only.
The price of goods and services
depend on the supply and demand.
Income distribution is not equal
The government has a limited role.
The main motive is to gain profit.
Socialism
The businesses are owned by the
public, the government or all people.
The government controls the price of
goods and services.
Income distribution is equal
The government has a huge role.
The motive is social welfare.
Social welfare is helping all people in
the country especially the poor.
 3. MIXED ECONOMIC SYSTEM

Capitalism Socialism
 3 ECONOMIC
SYSTEMS:
3. Mixed economic system
This is a combination
between socialism and
capitalism where the
government and
individuals own
businesses and properties.

Most economies in the

world are mixed.
CHARACTERISTICS OF MIXED
ECONOMY
1. Private and government own the factors of production such as land
and capital.

2. There are both public and private sectors.

3. Main motive is profit and social welfare.

4. Income distribution is less unequal.

 CAPITALISM VS. SOCIALISM VS.
MIXED ECONOMY
Capitalism Socialism Mixed Economy
Who owns the Private sector Government Both
means of
production?
What to produce? Goods which are in Goods which the Both
more demand and society needs
earn more profit
How to produce? Whatever profitable As per needs of Both
(saves cost) society
Example USA Russia India
ECONOMIC GROUPS IN ASIA

Economic groups are group

of countries working
together to improve their
country’s economic condition.
 1. Asia-Pacific Economic Cooperation (APEC)

Objective: This group seeks to

promote free trade and
economic cooperation around
the Pacific Rim.

Free trade occurs when goods and services can be bought and sold
between countries without tariffs.
Tariffs: a tax paid for the import and export of goods.
 1. Asia-Pacific Economic Cooperation (APEC)

Pacific Rim: comprises the

lands/countries around
the rim of the Pacific Ocean.
This groups has 21 member
countries.
 1. Asia-Pacific Economic Cooperation (APEC)

APEC was formed in the year 1989 in

Australia.
It was the idea of Bob Hawke, a former
Prime Minister of Australia.
The founding members were Australia;
Brunei Darussalam; Canada; Indonesia; Japan;
Korea; Malaysia; New Zealand; the Philippines;
Singapore; Thailand; and the United States.
 2. Asian Development Bank (ADB)

Objective: This group aims

to bring funds from
private and government
sectors to develop projects
in Asia.
 2. Asian Development Bank (ADB)

ADB was founded in the early

1960s as a financial institution
that would foster economic
growth and cooperation in
Asia.
 2. Asian Development Bank (ADB)

The ADB was officially created in the year 1965 in Manila,

Philippines with 31 member states and Takeshi Watanabe
residing as president.
 This groups has 67 member countries.
The head office is in Manila, Philippines.
 3. Association of Southeast Asian Nations (ASEAN)

Objective:
• To promote cooperation and
aids in the economy, society,
culture, science, technology.
• To create peace and security by
creating free trade to promote
trade and investments.
 3. Association of Southeast Asian Nations (ASEAN)

ASEAN was established on 8 August 1967 in Bangkok, Thailand

by five original member countries: Indonesia, Malaysia, Philippines,
Singapore, and Thailand.
 10
MEMBERS
OF ASEAN
The head office of
ASEAN is in Jakarta,
Indonesia.
 4. ASEAN Free Trade Area (AFTA)

The creation of the ASEAN Free

Trade Area (AFTA) was agreed at
the 1992 ASEAN Summit in
Singapore.
 4. ASEAN Free Trade Area (AFTA)

Objective:
• To reduce tariff in the member
countries where each member can
still deal with other countries outside
the group.
It’s a bilateral contract between
Thailand and other countries to help
open market for Thailand.
The members of ASEAN are also the members in this group.
EXAMPLE OF FREE TRADE AGREEMENT
BETWEEN THAILAND AND OTHER
COUNTRIES

a. Thailand-India Free Trade Agreement

Thailand can send products through
India to other South Asian countries
and gain benefits by reducing the cost
of importing raw materials from India
such as fishery, jewelry, metal, and
fertilizer.
EXAMPLE OF FREE TRADE AGREEMENT
BETWEEN THAILAND AND OTHER COUNTRIES

b. Japan-Thailand Economic Partnership

Agreement(JTEPA)
This would boost Thai exports to Japan as a
benefit of Japan granting tariff reductions to
exports from Thailand. Meanwhile, Thai
consumers would benefit from cheaper
imported Japanese consumer goods due to
reduced import tariffs on them.

This agreement was signed on April 03, 2007 by

the former Ministers of Japan and Thailand.
EXAMPLE OF FREE TRADE AGREEMENT
BETWEEN THAILAND AND OTHER COUNTRIES

c. China-Thailand Free Trade Agreement

The China-Thailand Free Trade Agreement
(FTA) was signed in June 2003 and took effect
four months later, in October 2003.
It is a “farm trade early harvest agreement.”
Both nations opened their agricultural markets.
The tariffs on 188 different fruits and
vegetables were reduced to zero as part of the
agreement.
5. Greater Mekong Subregional Economic Cooperation
(GMS-EC)

This was established by ADB to

support financially the member
countries to promote agriculture,
trade and investment.
5. Greater Mekong Subregional Economic Cooperation
(GMS-EC)

Objective:
To create more jobs for people
and improve the living standards
of the people.
This group has 6 member
countries.
6. Indonesia-Malaysia- Thailand Growth Triangle (IMT-GT)

This is a 3-side cooperation to

support each other in economy and
society by promoting the use of
resources for the best benefits,
sharing technology, and connecting
infrastructures.

Infrastructures are the systems built by the

government for the people to use like roads.
 FINAL TEST

Economic System and International

Economic Relations (Unit 5)