COMPARING HIGH PERFORMANCE ASIAN ECONOMIES

EAST ASIAN TIGERS

Prof. Ruthie Garcia Vera

AP CGP

The High Performance Asian Economies: (HPAE) (as designated by the World Bank)

Hong Kong Malaysia

Indonesia Singapore

Japan South Korea

Taiwan Thailand

The Four East Asian Tigers:

The two city-states of Hong Kong and Singapore, South Korea and Taiwan.

They are also referred to as the Four Dragons or the Little Dragons.

The East Asian Tigers

refers to the economies of

Taiwan, Hong Kong,

South Korea and

Singapure.

These economies are

notable for maintaining

exceptionally high growth

rates, over 7% a year, from

the 1960s to 1990s.

Through this period, they

became industrialized, even

though they are not rich in

natural resources.

▪ These countries have risen out of extreme poverty

to become some of Earth's richest nations.

▪ They stand as proof that extreme poverty is not an

absolute condition, that actions can be taken to

make populations wealthier over the course of just

a few decades.

▪ In 2015 the last of the Four Asian Tigers officially

overtook Japan in terms of GDP, placing them

second only to China in terms of economic

success.

The reason behind their astonishing growth is that they

found their comparative advantage:

▪ Hong Kong and Singapore focused on being

international financial centers and Singapore in

particular also focused on becoming a port hub.

▪ Taiwan and South Korea focused on their

manufacturing sector with an emphasis on

information technology.

All of these nations in one way or another became some

of the leading exporters to the U.S. and they definitely

export more than they import.

Average Annual Growth in Real GDP per Capita, 1980–2010

Source: World Bank, World development Indicators: IMF World Economic Outlook Database.

What did the Tigers do Differently in Terms

of Provoking Development?

These nations kick started development in the 1960's by

implementing import substitution: raising tariffs to reduce

the imports of consumer goods, allowing a country's own

industries to develop and stabilize.

The Asian Tigers decided to capitalize on the growing

materialistic attitude developing in Europe and North America

and pursued an export-driven model of industrialization and

development. This was achieved by rapidly increasing the

production of goods that could be exported to the highly

industrialized nations of the world.

Rankings on the Ease of Doing Business Index, 2011

▪ All four territories had strong Chinese influence.

Singapore had a population that included 75% ethnic

Chinese, Hong Kong had 95% and Taiwan 98%.

▪ They were relatively poor during the 1960's and had

an abundance of cheap labor.

▪ They had non-democratic and relatively authoritarian

political systems, so the governments could easily drive

through their plans for economic development.

Common Characteristics of the Tiger Economies

■ Domestic consumption was discouraged through government policies such as high tariffs on imports, that led to the encouragement of high saving rates which allowed to invest in specific areas of industry.

■ All four countries singled out education as a means of improving productivity, focusing on improving

the education system at all levels and ensuring that all children attended elementary education and compulsory high school education.

■ Money was invested heavily in the development of their university systems and in sending students to foreign universities.

■ Coupled with educational reform, they were able to leverage this combination into a cheap, productive workforce.

■ The East Asian Tigers committed to equality in the form of land reforms, to promote property rights to small and medium-sized farmers, who then had security of tenure, which encouraged them to invest in their own land.

■ Policies of agricultural subsidies and tariffs on agricultural products were implemented as well.

■ This decreased rural discontent and also allowed investment in the mechanization of agriculture, which enabled for further industrialization to occur.

■ They established a banking system that favored their own states. They have also limited their foreign spending, investing solely in their nations.

■ Trade unions were discouraged and governments encouraged managers to provide job security and other benefits in a paternalistic type of industrial organization.

▪ The rise of these nations can be attributed to their favorable

geography. South Korea and Taiwan are surrounded by water

with regular and plentiful rainfall and a variety of rivers to act

as base infrastructure.

▪ Singapore is in the perfect spot on the globe to act as a port

for fuel services, and its small size help to make it appear

more successful than it may actually be.

▪ Hong Kong was leased by the British in 1897 and acted as an

intermediate the trading post between Britain and China,

making it the perfect spot for European foreign direct

investment in China.

▪ The rise of the Asian Tigers thus stands as proof that favorable

geography can play a dramatic role in development, acting as

an important catalyst for economic growth .

Geography as a Factor

Problems with Export-Driven Trade Model

■ The East Asian Tigers were strongly affected by the Asian Economic Crisis, to varying degrees. While Taiwan was not as strongly affected, South Korea was badly battered by the crisis. Because of the focus on export-driven growth, many of the Tigers became caught up in a game of currency devaluation.

■ The current criticism of the East Asian Tigers is that these economies focus exclusively on export-demand, at the cost of import-demand. Thus, these economies are heavily reliant on the economic health of their targeted export nations.

■ In addition, these nations have met difficulties after their initial competitive edge, cheap productive labor, no longer exists, especially with the emergence of India and China.

Sources of Growth, 1960–1994 (Percent)

South Korea

Once a subsistence agricultural

country, South Korea spent much

of the 20th century driving

modern industries such as

electronics, robotics and

software development.

According to the World Bank,

South Korea’s GDP grew by an

average of 10% per year

between 1962 and 1995 and it is

now regarded as one of Asia’s

most advanced economies.

• South Korea is a booming, trillion dollar economy.

• Its population is one of the most ethnically and

linguistically homogeneous in the world, with the

only significant minority being a small Chinese

community.

• It is the 11th largest economy in the world.

• After WWII, their GDP per capita was comparable

with levels in the poorest countries of Africa and

Asia.

• The Korean War made conditions in Korea even

worse.

• Its citizens enjoy very high incomes and a standard of living

rivaling that of wealthy nations such as Britain and

Germany.

• It boasts the world's greatest number of people with internet

access.

• It is home to many of the world's leading technological

developers including Samsung, LG and the Kia Automotive

company.

• Their success was achieved by a system of close

government-business ties, including:

▪ directed credit

▪ import restrictions

▪ sponsorship of specific industries

▪ a strong labor effort

Imports and Exports as a Share of GDP

Short History

Korea was ruled by Japan from 1910 until the end of World War II. Under

colonial rule there was no improvement in Korea's subsistence economy, and

the failure to hold democratic elections caused political tension which resulted

in a civil war between a dictatorship which favored communist principles at the

North and a system based on market principles with a democratically elected

government in the South.

After the end of the Korean War, the United States, concerned with

Communism's growth, aided South Korea in developing its market by

subsidizing (paying for) 70% of South Korea's exports such as rice on the world

market for reduced prices, giving Korea a significant advantage over the

companies of other developing economies such as Egypt or Ecuador.

This advantage helped Korea transition from a subsistence economy, producing

largely agricultural products (like rice), to a major manufacturer of goods in just

seven years (1953-1960). The South Korean government instituted very good

economic policies, funding excellent education programs in public schools and

building vital infrastructure for their cities and ports.

■ Korea's population is one of the most ethnically and linguistically homogeneous in the world, with the only significant minority being a small Chinese community.

■ Korea is one of the best educated countries in the world, with one of the highest rates of scientific literacy and mathematical knowledge.

■ It's highly skilled, technologically educated public made Korea one of the world's foremost exporters of high-tech goods, including software and electronics.

Taiwan

Taiwan’s proximity to China and Chinese

investment has helped establish a futuristic

city filled with skyscrapers, high speed

trains, and a strong education system.

Foreign investment has meant that Taipei is

home to some impressive headquarters such

as Foxconn (Apple’s products).

In the early 1960s, Taiwan had a GDP per

capital of just $170, but in 2015 it was

$22,469.

It may not be the wealthiest ‘tiger’, but it

has experienced the most notable growth.

■ Taiwan has many elements in place for the successful

development of high-tech and bio-tech industries.

■ These include strong intellectual property protection,

good infrastructure and networks, and ample funding.

■ Beginning as a largely impoverished nation, Taiwan has

grown to become one of Earth's economic leaders with a

quality of life similar to richer European countries.

■ Their consistent economic growth has made them one of

the select few members of the Asian Tigers.

In 1927, a war broke out between Chinese capitalists (the Kuomintang), and the

Communist Party of China (Mao Zedong). The war lasted until 1950, when the

Communists took over the Chinese mainland and the pro-capitalist Kuomintang

retreated to Taiwan, where they established a new economy based on market principles.

Taiwan started out with significant infrastructure (including roads and railroads) already

in place, built by former Japanese colonists to extract rice and sugar from the farms

within Taiwan. To help grow these crops, the Japanese also set up irrigation systems on

Taiwanese farms which aided in food production.

During the Cold War, Taiwanese food production was supported by the US government.

To support the capitalist regime in power, the United States sent a total of about $4

billion to Taiwan from 1951-65. Taiwan used this money to invest in fertilizers and

infrastructure to further boost crop production, leading to a surge in food productivity.

By 1960, Taiwanese farmers were producing an average of three tons of rice per hectare

(10.000 square meters) of farm, the highest crop efficiency in all of Asia except for

Japan. This efficient agricultural production provided a boost of wealth to the rest of the

economy and helped transition Taiwan out of subsistence.

Short History

Starting in the 1960s, the capitalist regime decided to lower tariffs (taxes) on all

imported and exported goods. With abundant infrastructure and with the civil conflict

with China largely over, rich world corporations began to flock to Taiwan and

construct factories, using its cheap labor to produce clothes and other knickknacks at

a very low cost.

This boom in foreign investment once again gave the government a surge of wealth,

which it used to invest in Taiwan's "Ten Large Construction Projects"; investments in

infrastructure which included the building of highways, seaports, airports and power

plants.

Like Korea, Taiwan also invested in technological education, creating a generation of

students familiar with high-tech products. Both of these investments caused Taiwan's

exports and industrial production to grow rapidly. Thus high food yields (once again

helped in part by US foreign aid supporting the capitalist regime) combined with low

tariffs, good infrastructure and a highly educated population turned Taiwan into one

of the most prosperous economies in all of Asia

Taiwanese President Ma Ying-jeou and

Chinese President Xi Jinping, Nov. 2015

Source: AP Photo/Chiang Ying-ying

President-elect Tsai Ing-wen

Source: AP Photo/ Ng Han Guan

In Jan. 2016 presidential

elections, Democratic

Progressive Party chairwoman

and nominee Tsai Ing-wen

came in first with 56.1% of

the vote.

The first unmarried woman

elected president of Taiwan,

Tsai was also the first elected

to have never held another

elected post.

Hong Kong

■ It was acquired by Britain from China in 1897 as a result of China's loss in the 1895 Sino-Japanese War.

■ It is the world's busiest deep-water harbor.

■ Considered banking capital of Asia.

▪ The territory of Hong Kong is a large city of about 7 million

people officially considered a province of China. Due to its 100

year exposure to Western culture and capitalist ideology, it

traditionally has more in common with Europe and North America

than with its Asian neighbors.

▪ Cheap labor and favorable tax incentives attracted many medium

and large sized corporations to the city, and the 1970s and 80s saw

a period of city-wide construction, with skyscrapers, public

housing and commuter train lines all funded by the country’s new-

found wealth.

▪ Between 1961 and 1997, the GDP of Hong Kong grew by 180

times, making it one of the world’s wealthiest countries.

▪ A supportive government, strong regulation and lack of public

debt means that it is well placed for continued growth, albeit at a

less dramatic pace.

■ Hong Kong is one of the most densely populated regions in the world with a population of over 7 million.

■ Hong Kong still has a dual Chinese and English school system.

■ Hong Kong has a varied mix of religions and all major religions such as Christianity, Hinduism, Buddhism, Daoism, and Islam.

Short History Where East Meets West

In 1839, the British Navy went to war with China over the right to sell narcotics in the

"Opium War". The British eventually used their superior military technology to win this

war and in 1897, they forced the Chinese government to allow the British to "rent out"

Hong Kong, a large trade city overlooking the Pacific Ocean.

The British "leased" Hong Kong from the Chinese government for the next century,

making the city an very important trade portal connecting China with the rest of Europe.

In 1900, Hong Kong's trading seaport was the fourth largest in the world, attracting

large amounts of foreign investment from companies in both China and Europe.

This city received another sudden boost in foreign direct investment in the 1940s, when

China's Communist Party began to win the civil war and hundreds of Chinese merchants

fled China, fearing that the Communist government might take over their business.

These merchants set up shop in Hong Kong, where they were allowed to continue doing

business without government interference. This huge shift of money to Hong Kong

helped to turn the city into Asia's unrivaled industrial center by 1960.

Hong Kong's citizens gradually became much wealthier than the residents of

other Asian nations as the city continued to attract copious amounts of foreign

investment.

By the 1960s, Hong Kong was one of Earth's major producers of textiles

(clothes and carpets), and had a virtual monopoly on European and North

American tourism to China during the 1960s and 70s.

It used this continuous flow of wealth to build vital infrastructure, including

highways, subway systems and high-rise buildings at breathtaking speed. As

Hong Kong families became wealthier, they could now afford to send their

children to school, and the city became rapidly well-educated. Hong Kong

soon became one of the world's leading manufacturers of high-tech products,

including computer hardware, software and other electronics such as

televisions, radio and microwaves.

Hong Kong's considerable wealth also contributed to the rise of its banking

sector, which became the major lender to businesses all over Asia. By the

1990s, Hong Kong was one of the most expensive cities in the world to live in

with a standard of living matching that of Europe and North America.

Hong Kong's favoring right-wing market freedom (involving very low taxes,

strong property rights and extensive market deregulation) is the reason for its

rapid rise to prosperity.

In its annual Index of Economic Freedom, the conservative Heritage

Foundation has ranked Hong Kong as the "most free" economy in the world

for the past 15 years and cited this as the reason for Hong Kong's rise to

prosperity as an Asian Tiger.

Although Hong Kong's favoring of capitalism certainly gave it an advantage,

its rapid growth has more to do with its strategic location, which made it the

portal of trade between China and Europe, thus making it a haven for foreign

investment.

Like Hong Kong, Singapore’s high growth economy is rooted in the world of finance.

Prized for its impressive docks and strategic position in South East Asia, it was able to capitalize on its reputation as a trade hub.

It is now one of the world’s foremost currency exchange centers, and boasts an incredibly diverse expat community which is indicative of the high volumes of foreign investment received over the years.

Singapore has the highest GDP of all the Four Asian Tigers.

Singapore

■ Located on the Southern tip of theMalaysian Peninsula, Singapore isthe third-smallest country in theworld in terms of land mass, and more accurately described as a city rather than a country.

■ Singapore is characterized by an export-oriented economy, relatively equitable income distribution, trade surpluses with the United States and other developed countries, and a common heritage of Chinese civilization and Confucian values.

■ An incredibly clean city, nothing is allowed to dull the shine - even down to the banning of chewing gum.

▪ The small island had no resources other than its strategic location

and the skills of its nearly 2.7 million people.

▪ Singapore was previously owned by the British Empire until it was

invaded and conquered by Japan during the Second World War.

▪ It later succeeded from the United Kingdom to become a sovereign

state in 1965. Since independence, Singapore has enjoyed a rapid

rise in incomes as a result of a boom in foreign direct investment.

▪ Singapore's success as a rapidly growing economy is perhaps the

most easily explained of the Four Asian Tigers. Singapore happens

to be situated in the perfect geographic location to promote foreign

investment, where every ship going from Japan, China or Korea

must pass right beside to get to consumers in Europe. As a result,

Singapore has always had a huge advantage over other nations in

being a center for international trade.

In the 1970s, Singapore used its geographic position to invest in key

infrastructure like seaports, which made it easier for ships to dock

along its coast.

It became a haven for petrochemical refineries. Ships carrying oil

from the Middle East to Japan and China would simply stop in

Singapore, refine the chemicals, and continue on their way.

Singapore used this original surge in wealth to invest in public

education. It soon had a skilled workforce able to attain high-paying

jobs in the computer engineering sector.

Singapore soon became a major exporter of computer hardware and

biotechnology, generating further wealth in the region.

Currently, Singapore is the ninth wealthiest country in the world in

terms of national wealth per capita, and is a cosmopolitan site for

tourism attracting wealthy families from all over Asia.

The Port of Singapore is currently the busiest in the world,

transporting one fifth of all shipping containers and half of the world's

annual supply of crude oil.

Its success as an extremely wealthy state stands as a testament to the

role geography plays in promoting certain economies over others.

Other Tiger Economies

■ Over time, the term Tiger has become synonymous with nations that achieve high growth by pursuing an export -driven trade strategy. More recently, the Southeast Asian nations of Indonesia, Malaysia, Philippines and Thailand have often been considered Tigers.

■ The term is not limited to Asian nations;

Ireland has been called the Celtic Tiger for its rapid growth in the 1990

Estonia is known as the Baltic Tiger for its presently high growth rates.

As countries develop, they are classified as different groupings, and the

transitions are gradual. Countries may be at various stages of

development and are developing in different ways and rates, therefore,

it is referred as the development continuum.

REFERENCES

http://www.povertyeducation.org/the-rise-of-asia.html

https://www.reddit.com/r/vexillology/comments/2jbs2z/flag_of_the_asian_tigers/

https://commons.wikimedia.org/wiki/File:Novos_Tigres_Asi%C3%A1ticos.png

http://developmentandglobalisation.weebly.com/classification--examples.html

http://www.nairaland.com/824175/story-behind-asian-tigers-nigeria

http://geography-student.blogspot.com/2011/07/are-four-asian-tigers-good-

model-for.html

http://www.e-ir.info/2014/10/16/the-asian-tigers-from-independence-to-

industrialisation/