Lecture 2 Newly Industrialising Countries

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Lecture 2

ECON456/556

8 July 2013


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Recap - A framework for analysis;

NIC definition;

Socio-economic performance (comparative statistics); The focus of analysis is the period from 1960s-1980swhere these

countries rapidly transformed from poor to high income economies.

Background of NICs;

Geography and history ; and

Institutional set-up.

Conclusion

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One (long) sentence explanation (See lecture 1-a):

Core areas of analysis:

Economic and social transformation ; and

Industrialisation patterns, process, outcomes and experience

Theories

An understanding of economic development theories are crucial inunderstanding these economic

Factors & metrics for analysis

Focus on indicators that measure economic change and policies thatfacilitated the economic change;

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Geography, history and institutions

These are important, but not the focus of this unit

While focusing on the economics, an understanding of the

geography, history and institutions are also important to provide thecontext. In fact these factors are the deeper determinants ofeconomic growth;

Read this article by Bloch & Tang to understand the role ofgeography and institutions in economic growth

[Note: These two short articles [LINK HERE and HERE] capturesthe big debates on a very big questionwhat determineseconomic growth?]

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http://charlesesalazar.pbworks.com/f/Deep_determinants_of_economic_growth_institutions__geography_and_openness_to_trade%5b1%5d.pdfhttp://harvardmagazine.com/2012/07/why-nations-failhttp://www.economist.com/node/21549911http://www.economist.com/node/21549911http://harvardmagazine.com/2012/07/why-nations-failhttp://charlesesalazar.pbworks.com/f/Deep_determinants_of_economic_growth_institutions__geography_and_openness_to_trade%5b1%5d.pdf


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NICs/NIEsNo agreed definition.

Essentially to capture countries that have achieved high levelsof economic growth over a sustained period and concurrently,

rapid structural change;

A concept developed to capture two phenomenon:

A comparative-static view : a historical event which differentiatesindustrialisation experience before WWII, and after;

A dynamic view: see the emergence of NIEs

Main reference: Chowdhury & Islam (1993). The NewlyIndustrialising Economies of East Asia. Routledge.

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Unprecedented socio-economic achievements based not onnatural resources but on industrial production.

Rapid economic growth in comparison with past trends, and

with other countries;

Rapid structural change (contribution of sectors to GDP,employment ; technological advancement)

Rapid poverty reduction; and

Improvements in individual choice.

Next three slides illustrate NICs economic growth achievements.

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Rapideconomicgrowth

incomparisontoothereconomicregions


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26609

4383

55862

32105

13081

41114

0

10000

20000

30000

40000

50000

60000

1950

1952

1954

1956

1958

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

PPP Converted GDP Per Capita (Chain Series), at 2005 constant

prices

Hong Kong Japan Korea (RoK) Singapore Taiwan Australia

Penn World TableRapid catch-up and achieved high levels of average income per capita,and continues to grow. Note: Australia used as a benchmark.
https://pwt.sas.upenn.edu/php_site/pwt71/pwt71_form_test.phphttps://pwt.sas.upenn.edu/php_site/pwt71/pwt71_form_test.php


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9

0

5000

10000

15000

20000

25000

30000

35000

1985 1990 1995

RGDPch

United States Singapore Japan Australia Hong Kong United Kingdom Taiwan Korea, Republic of

Graduated into high income economies in mid 1980s-1990s


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The first tier NICs transformed from poor/rural/backwardcountries in the 1950s to rich/urban/modern countries in the late1980s/ early 1990s;

How did they do it: NICs used a mix of industrial policies in two different

industrialisation strategy - import-substitution, export oriented &mixed (see next slide for a flavour) to drive economic growth;

Industrial policies can be classified in several ways. One usefulway is to follow Lall & Teubal (1998): functional, vertical &

horizontal; There are several views on the effectiveness of these industrial

polices as they are practised in the NICs (some positive, othersnegative, some mixed.).
http://siteresources.worldbank.org/INTEXPCOMNET/Resources/Technology_Policies_East_Asia.pdfhttp://siteresources.worldbank.org/INTEXPCOMNET/Resources/Technology_Policies_East_Asia.pdf


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JICA, 2013

Broad sketch of Industrial Strategies & Policies of Selected NICs


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To give context to the economic change, it is important to get asense of the physical geography, the geo-political issues, and thehistorical context ;

Key questions: Physical geography of the country

Connectivity : accessibility to trade routes, markets?is it landlocked,mountainous, island, archipelago, etc.

Natural endowments: fertile agriculture land, minerals and fossil fuel,etc.

Climatic conditions: suitable for human living, agriculture, diseaseburden

NOTE: A brief knowledge of these factors to provide context to theeconomic factors is sufficient for this unit.

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Geo-political

Who are the immediate neighbours (friends, enemies?)

What are there spheres of influence ?

History (or initial conditions)

Society : (diverse?; feudal?; etc.)

Independent or colonised?

What happened post WWII?

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14Consider the geographical questions


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Source: Rowntree, Lewis, Price, Wyckoff (2008) 15Consider the geographical questions


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What is the political set-up of these economies (1960s-1980s)?

How were the leadership of these countries perceived by thelocal and international community?

How were the political system and economic systemconnected?

What was the relationship between state (the government) andsociety?

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1945 50 55 60 65 70 75 80 85 90 95 2000

60 61 79 87 88 92 97

Korea

49 75 78 88 Kim Young-sam

TaiwanChen

Shui-

bian

46 48 53 57 61 65 86 92 98

Philippines

Magsaysay Macapagal 99

Indonesia

55 59 65 90 Habibie

Singapore

57 70 76 81

Malaysia

46 48 57 58 63 73 75 77 80 88 91 97

Thailand

51 76 Kriangsak Chatichai

Vietnam

48 62 88

Myanmar

Source: Akira Suehiro, Catch-up Type Industrialization , Nagoya University Press, 2000, p115.

Kim Dae-jung

Nationalist Party Chiang Kai-shek Chiang Ching-kuo Lee Teng-hui

Rhee Syngman Park Chung-hee Chun Doo-hwanNoh Tae-

woo

Ramos Estrada

Skarno Suharto Wahid

Quirino Garcia Marcos Aquino

Labor

Party

People's

Action PartyLee Kuan-yew Goh Chok-tong

Vietnamese Communist Party

Authoritarian Developmentalism in East Asia

Phibun Sarit Thanom

UMNO / Rahman Razak Hussein Mahathir

U Nu Burma Socialist Programme Party / Ne Win SLORC

Indochina

Communist Party Labor Party

Prem Chuan


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This lecture presentation provides a guide on how tounderstand & analyse economic and social transformation inthe NICs. The framework presented can be used to analyse

(evaluate, compare and contrast) any economic unit (either acountry or a region);

Other than the hyperlinked readings in the PowerPoint, theother key readings are:

Tipton (1998): Chapters 3, 4, 6, 9, 10 and 12 [Read sections relatingto the NIC countries]

Chowdhury & Islam (1993). The Newly Industrialising Economies ofEast Asia. Routledge. Chapters 1 to 12. This is an excellent book tounderstand the mechanics of the transition. It is data intensive andprovides excellent documentation on the strategies and policiesthat the NICs took.

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Documents

Lecture 2 Newly Industrialising Countries