yada yada yada :))

1. Economic Development in Asia
Chapter 3 – Growth and the Asian Experience

2. • For the last forty years, a
group of countries in East and
Southeast Asia have grown at
remarkably high rates.
• Japan led the way, beginning
right after World War II.
• It was joined by Thailand,
Taiwan, Singapore and Korea
in the 1960s.
• Southeast Asia followed in the
1970s.
The Asian Growth Miracle

3. • The policy environment in most developing countries
throughout the world stressed import substitution policies
for industry.
• Government strategy that emphasizes replacement of
some agricultural or industrial imports to encourage local
production for local consumption, rather than producing
for export markets.
The theory was that developing countries had a
comparative advantage in primary products and so they
should export these products.
Policy Environment Before the
Transition to Rapid Growth

4. • Primary factors
- Openness
- Macroeconomic Stability
- Labor Market Flexibility
- Education Policies
• Secondary factors
- Initial Conditions
- Sector Policies
The Asian Growth Miracle

5. • The first factor in the primary strategy was outward
looking policies and emphasis on exports and
acquisition of foreign technology.
Silk Factory, China
Primary Factors-Openness

6. • First, some industrial capability
was built up by focusing on
import substitution in industries
with ties to agriculture -
footwear, food processing and
textiles.
• Second, after some years,
industrial policy shifted to
promoting external markets.
Primary Factors-Openness

7. • In Southeast Asia, the focus
was also put on rubber, sugar,
coconut and palm oil products
as well as some specialized
textile products such as silk.
• Slowly the emphasis shifted
toward labor intensive
industries that were not
necessarily tied to the
agricultural base such as
electronics assembly and
apparel.
Primary Factors-Openness

8. • The shift from import
substitution to export promotion
was led by a shift in the trade
regime so that there were lower
tariff rates on exports and
imports.
Primary Factors-Openness

9. • Transformation to labor intensive export oriented
industry was supported by flow of foreign direct
investment – initially from Japan and the US, particularly
in Korea, Taiwan and the Philippines.
• Later the volume increased and more flows began
coming in from Europe.
Primary Factors-Openness

10. Strategies to improve Openness:
• Foreign technology acquired by buying from foreign
companies under license.
• By copying it without license – sometimes legally and
sometimes not.
• By entering into joint ventures (FDI).
• East Asia (Korea, Japan, Taiwan) by and large followed
the first route while Southeast Asia followed the second.
Primary Factors-Openness

11. • The second set of primary factors focused on the
importance of macroeconomic policies and the role of
the government.
Primary Factors-Macroeconomic
Stability

12. • There was a lot of government intervention in
the industrial and financial sectors in some
countries and little in others.
• What was important was the efficiency and
incorruptibility of the bureaucracy.
Primary Factors-Macroeconomic
Stability

13. • In the Philippines, policy environments were similar to
those in the successful countries but growth was slowed
by other factors such as corruption, lack of political will,
corruption and domestic unrest.
Primary Factors-Macroeconomic
Stability

14. • The third set of primary factors
focused on education and labor
productivity.
• As stressed by the new growth
theories, education played a
critical role in both the transition
to an export led growth strategy
and to the ability to sustain it.
• By 2000, some of the
educational advantages of Asia
had began to erode.
Primary Factors-Education and
Labour Productivity

15. • The conclusion is that labor market
flexibility has to be considered
along with education.
• The miracles economies did not
have strong unions until recently
(Korea) and weak minimum wage
legislation.
• Mobility from rural to urban is also
high.
Primary Factors-Education and
Labour Productivity

16. • Initial conditions played a part in the success of the
miracle conditions.
• Land, income and wealth distribution in the miracle
economies were generally more even than in other
countries and regions.
• Average educational attainment was high at the miracle
economies.
Secondary Factors-Differences in
Initial Conditions

17. • Sector policies were influential
to the growth of the miracle
economies.
• Agricultural sector policies
were not particularly onerous.
• Industrial policies were benign
and competition flourished in
most countries.
• High levels and growth rates of
savings and investment in
miracle economies.
Secondary Factors-Sector Policy