Newly Industrialized Countries

1. Newly Industrialized Countries Asia’s Economic Tigers

2. Important Terms for Review • Exports – goods to be traded outside of a country • Free trade -- trade that occurs without government controls. • Good -- any kind of product. • Imports – goods brought into a country • Newly industrialized country (NIC) -- a country that is in the stage between being a relatively poor, developing nation and a relatively rich, developed nation. A NIC is progressing from labor-intensive to high- technology-intensive industries.

3. Important Terms for Review • Protectionism -- a general term used to describe government actions designed to limit or eliminate imports that compete with domestically produced goods. • Quota -- a quantitative restriction on imports. • Tariff -- a tax on specific imports, which creates a trade barrier by protecting domestic firms and industries from foreign competition. • Trade -- the exchange of goods, services, and information between nations or within a single nation.

4. The East Asian Tigers, sometimes also referred to as Asia's Four Little Dragons, referred to the economies of Taiwan, Hong Kong, South Korea, and Singapore; these nations were noted for maintaining high growth rates and rapid industrialization between the early 1960s and 1990s.  

5. Characteristics of the Tiger Economies • The East Asian Tigers pursued an export-driven model of economic development; these nations focused on developing goods for export to highly-industrialized nations. • Domestic consumption was discouraged through government policies such as high tariffs.

6. Characteristics of the Tiger Economies (cont) • The East Asian Tigers singled out education as a means of improving productivity; these nations focused on improving the education system at all levels; heavy emphasis was placed on ensuring that all children attended elementary education and compulsory high school education. Money was also spent on improving the college and university system.

7. Characteristics of the Tiger Economies (cont) • Since the East Asian Tigers were relatively poor during the 1960s, these nations had an abundance of cheap labor. Coupled with educational reform, they were able to leverage this combination into a cheap, yet productive workforce. • The East Asian Tigers committed to equality in the form of land reform, to promote property rights and to ensure that agricultural workers would not become disgruntled. Also, policies of agricultural subsidies and tariffs on agricultural products were implemented as well.

8. Common Characteristics of the Tiger Economies • Focused on exports to rich industrialized nations • Sustained rate of double-digit growth for decades • Non-democratic and relatively authoritarian political systems during the early years • High tariffs on imports • Undervalued currencies • Trade surplus • High level of U.S. Bond holdings • High savings rate

9. Problems with Export-driven Trade Model • The East Asian Tigers were strongly affected by the Asian Economic Crisis, which impacted each Tiger 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. • .

10. Problems with Export-driven Trade Model • 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.

11. Problems with Export-driven Trade Model • 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

12. Taiwan • 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.

13. Hong Kong • It was acquired by Britain from China in 1897 as a result of China's loss in the 1895 Sino-Japanese War. • The world's busiest deep-water harbor • Banking capital of Asia

14. Hong Kong (cont) • 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

15. South Korea Busan, South Korea • 11th largest economy in the world • In the aftermath of WWII, GDP per capita was comparable with levels in the poorest countries of Africa and Asia. Then the Korea War made conditions in Korea even worse. • This success was achieved by a system of close government-business ties, including directed credit, import restrictions, sponsorship of specific industries, and a strong labor effort.

16. South Korea (cont) Seoul, South Korea • The Asian financial crisis of 1997 exposed longstanding weaknesses in South Korea's development model, including high debt/equity ratios, massive foreign borrowing, and an undisciplined financial sector. • 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.

17. Singapore

18. Singapore • 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. • The small island had no resources other than its strategic location and the skills of its nearly 2.7 million people. • An incredibly clean city, nothing is allowed to dull the shine - even down to the banning of chewing gum. 

19. Singapore (cont) • It has an economy characterized by a seemingly paradoxical adherence to free trade and free markets in combination with a dominant government role in macroeconomic management and government control of major factors of production such as land, labor, and capital.

20. 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 1990s, while Estonia is known as the Baltic Tiger for its presently high growth rates.