The Asian Tiger Economies (Taiwan, South Korea, Singapore and Hong Kong)

The Asian Tigers began growing in the 1960s and have since the start of the 21st Century been seen as developed economies. These economies focused on export orientated growth rather than, the norm at the time, which was import substitution.

 

Their growth shared a number of characteristics.

 

  • All their economies had strong chinese influence. Taiwan was 98% ethnically chinese while the least chinese was South Korea which was 65%.
  • They all had very low per capita incomes in the 1960s, meaning labour was cheap.
  • They all began as autocracies, SK converted in 1980s but only once economic policies were in place supporting growth.
  • They focused on creating goods that would be bought by industrialised western nations. This meant they built up large trade surpluses with these nations.
  • They all saw education as the key to creating a more productive workforce. They ensured that both primary and secondary education was available to all and they invested in the improved of university education. Some schemes even allowed students to study at foreign universities. Singapore is second in the PISA tables while South Korea is currently 5th. The UK by comparison is not in the top 20 for a composite average of results.
  • The production and distribution of consumer goods was discouraged at first, and high import tariffs were enacted. This led to a savings revolution with citizens saving the increased disposable income that they began receiving. This in turn led to domestic banks being able to lend money to businesses easier and at a lower interest rate.
  • The government discouraged trade unions as it was worried that this would detract from the international competitiveness of their nations. They did however encourage managers to give employees job security.
  • Agricultural firms were not neglected with subsidies protected even while industrialisation was occurring.
  • Land reforms allowed individuals and firms greater security over their land incentivising investment and making the borrowing of money easier, as collateral now existed.
  • All four economies are geographically small in size and they all have high population densities.
  • They all had a relatively well developed level of infrastructure
  • Foreign Direct Investment was incentivised through the use of Special Economic Zones (SEZs) where there were lower business taxes and a cluster effect with many competitors being close together. There were also lower environmental legislation and red tape on firms.  FDI leads to cumulative causation (a multiplier effect) therefore benefiting other firms and individuals.
  • They all benefitted from good Geographical locations for trade, Singapore was located between the Pacific and Indian Oceans.

 

Are the Asian Tiger Economies a good model for other nations to follow:

 

  • The Asian Tiger method of growth relies heavily on growth in their target nations, where they aim to sell their goods. Their export orientated method of growth makes vulnerable to economic shocks in their export nations.
  • Part of their initial popularity with TNCs was the low per capita income. As the country developed and as citizens worked more, they demanded a higher income therefore the nations lost this, therefore impacting upon their international competitiveness. China, India and the MINTs are now the go to places for cheap labour.
  • In the 1990s, realisations that the economies had expanded too fast ledo the prices of property, shares and stocks becoming overvalued. This resulted in a stock market crash and recession.The IMF had to assist and there was social and political unrest.
  • Stronger companies and regulatory frameworks have allowed these economies to grow strongly since.
  • They must now create new industries and expand their service sector to ensure growth continues.