Introduction
Assessing the economy of Asian countries that have marked the greatest improvement in terms of economic performance in the past decade, it is clear that the rapid pace at which the economy has grown is closely linked to their strong export orientation.
Economic growth within these East Asian economies followed the change of economic activity from being based on the customary importation substitution towards activities and policies that are more focused on exporting goods to other countries.
The result of such policies was immediate net annual growth of twenty percent and this extended over a long time period (Balassa, 590). The aim of this paper will analyze the similarities and differences between economic developments in Asian countries.
Emphasis will be laid on the difference and similarities between first and second wave. Under the first wave, we will discuss in detail, three cases, namely Japan, South Korea and Taiwan. Under the second wave, we will also discuss three cases i.e. China, India and Thailand.
First Wave of Economic Revolution
Japan
The achievement of export trade has always been closely linked to the general growth of Japan’s economic development. Volume trade averaged seventeen percent up to the year 1973. The net effect of export trade to Japan was not only limited to the provision of much needed foreign currency for the purchase of raw goods, but it also benefited the country through developing its industry so as to take advantage of the economies of scale that could not have succeeded if it was to rely solely on its domestic market.
It is also through export trade that firms realized the threat of competition and the need to be innovative and efficient (Buckley, 45).
So what are the catalysts for Japan’s success? The country’s industrial policy has always fostered a culture of innovation and support for local firms. Local firms are encouraged from the outset to aim for export of their products.
All this is done in order to ensure that the country is able to compete with the West when it comes to global trade. The industrial policies of Japan are aimed at offering not only financial support but also technical support that includes advisory services and arranging trade fairs all around the globe (Buckley, 67).
South Korea
Export trade in South Korea has mainly been catalyzed by two important key policies that were instituted by the Government. The first was land control: Land was redistributed so as to accommodate the rising population. At the time, there was a pending population crisis as immigrants flocked from the North.
A family was only restricted to three hectares. The second policy that assisted the country was education policy. The government realized at the time that the country needed qualified persons in order to run its industries, thus it placed emphasis on good and quality education for its citizens Thus the government can be attributed as one of the biggest enablers of the export trade and economic development of the country.
Policies regarding export trade were drafted and based on phases. For example, the plan applied all through the 3 decades can be divided into phases. Throughout the first and second financial year phases, the country was involved with export of any goods.
There was a generalization on the types of goods to be exported. The 3rd and 4th year was characterized by exports of heavy industrial machines while the phase after 1980 was characterized by export of high tech machines. This led to a steady and strong growth in South Korea’s economy (Balassa, 570).
Taiwan
Of all the three countries discussed under the first wave, Taiwan was relatively at a relatively better position to advance its export trade as it had acquired an already established infrastructure from its Japanese colonizers.
There was no shortage of skilled labor as Chinese immigrants from the mainland came in droves. Land and education polices had already been established and financial aid from America fuelled the development in the country.
This enabled the country to concentrate on the development of firms that could export products of international standards. Government policies are also largely responsible for the booming export trade as they allowed the private sector to thrive and provide the needed momentum for economic growth.
In addition, the Government has promoted a secure macroeconomic environment. It has also ensured strived to support local investments, industrial expansions that will drive up export volumes
The similarity between all the three cases is that the Government is hugely responsible for establishing crucial policies that have led to the growth of export trade in the countries.
Second Wave of Economic Revolution
At a common point, it can be said that commerce and manufacturing guiding principles of the Economies that made up the 2nd wave i.e. China, Thailand and India, were similar to those of countries that made up the first wave. I.e. Japan, South Korea and Taiwan.
After a phase where the countries implemented import substitution and where China’s policy was more focused on central planning, all the economic policies evolved to become more export oriented. This change in policies led to a further increase in trade (export and import) of goods. This had a net resultant effect of higher GDP growth (Chang, 136).
Critics have argued that where economic growth of the “first wave” countries was largely attributed to abnormally positive global trade environment, countries involved in the second wave had to endure a more complex environment that was plagued by increased and selective trade protectionism among trade partners witnessed from the fifties and sixties.
Despite of all the complexities, these economies have emerged as the leading lights of Asia’s economic growth. Another key difference between the two waves was that where export promotion was utilized by Japan, South Korea and Taiwan to encourage their local industries, countries in the second wave have not comprehensively utilized this tool and have instead used their exchange rate policies to stabilize their domestic macroeconomic environment rather than for export competitiveness.
In the case of China, economic growth has been realized despite the inherent political risk that the country faces. China being a one party state faces a political risk for local and foreign businessmen and investors (Chang, 142).
Conclusion
In summary from the above understanding of export policies in Asia, it is apparent that success that did not happen overnight due to supply and demand. Instead the economic boom was attributed to government intervention and participation in the development of local enterprise.
Most notably, stages of booming growth and expansion were distinguished by public policies enabling a steady fiscal environment with a diverse range of incentives for the private sector. Incentives also included the promotion the addition of both human and physical resources.
Works Cited
Balassa, Ben (1964), “The Purchasing Power Parity Doctrine: A Reappraisal”, Journal of Political Economy, 1964. Vol. 72, 584-596.
Buckley, Roy. (1998), Japan Today, Cambridge University Press, New York and Melbourne, 2007.
Chang , Hinn.(1993), “The Political Economy of Industrial Policy in Korea”, Cambridge Journal of Economics, 2003. Vol. 17 (2), 131-157.