We start our discussion by trying to understand the Asian market as a whole. Asia as a continent that has grown in all aspects including its economy; this growth is not unique to the region but was also realized in other parts of the world. The economic development of Asia like any other was not uniform, as expected different countries with different market policies and administrative procedures lead to a non-uniform economic growth.
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Like everywhere else, there were those countries that had a higher growth domestic product compared to others, while other enjoyed a steady growth and others had a relatively slow economic growth. What was notable about this region was the rapid development of four countries; these are Hong Kong, Taiwan, Singapore, and South Korea which have come to be known as the Asian tigers (Carroll,134).
This paper tries to explore the advances and problems that these countries have experienced. They are a group of nations that started off like any other Asian country, but what put them a class ahead of the rest was their fast growth that began in the 1960s, It is their achievements that have made people research into their economic strategies; insight into their growth was made easier by recent advances in economic researches (Krugman, 63-64).
Though they were poor, they began by investing in their education system, as they believed education would increase productivity. They began by making basic education universal, all children were supposed to attend the elementary and compulsory high school. They went a head and provided funds for the development of their tertiary education level, this made sure that their colleges and universities had the required resources to train their people (Kim, 236-239).
This bold investment step ensured that their people were domestically trained and that majority never sort education and employment opportunities outside their region. Since they boasted of a large population, which provided their industries with cheap labor, then it was only logical to have their work force trained. This was the first step to development, the availability of a cheap, trained and productive labor.
Another important factor to remember was that these four tigers were bold enough to employ an export driven model. What this meant was that they aimed at producing goods and services mainly for export purposes only. Interestingly they targeted the highly industrialized territories and nations. Their governments went a head and discouraged domestic consumption by means of government policies such as high tariffs on goods meant for export (Solow, 67-70).
At the same time in order to control local consumption, they imposed high tariffs on imports. While their people found it expensive to consume export goods, this was equally so on imported goods. This had the effect of an ever-ready market for all their products. This factor further made their industries prosper and grow and ensured that their people had jobs (Kim, 240-241).
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It was noted that from the 60s this region had on average of an annual growth rate of 6% which they were able to maintain over a 30 year period to the 90s (Krugman, 65-70). This rapid growth rate was achieved through their ferocity in the development of their own economy and an interest of the emerging economies of other regions. Their main export target was the rich industrialized nations who they also enjoyed trade surplus with them. As is well known the leadership or administration of any country determines the development of its country. In addition, as we would have these tigers practiced non-democratic and a relatively controlling political systems during their early years of development (Solow, 72). What this meant was that they were able to maintain stability in the region as well as making sure that policies were satisfied.
They also maintained an undervalued currency, while holding high levels of U.S. treasury bonds; they also had high savings and investment rates. Though these points are subject to greater discussion, one thing has come out clear, an outward looking development approach in consideration a vibrant export sector, is conducive to economic growth (Kim, 243-250).
The tigers’ economy remained for along time a marvel and an example to others until loopholes started emerging. These are in the form of problems that have been there from the beginning or have just emerged in the last two decades, beginning from the 90s.
Recently the Asian markets have suffered financial crisis that threatens the world’s economy. The reason being, they are a major exporter, and more so due to globalization, the trade between countries has been on a long time high. With international high ways for money, and stock markets, exchange and interest rates are chained together. This also made every investor want to share in their economic success, but what they failed to see is the weak base on which the economy was built on. They began by maintaining an undervalued currency, but as years went by and their economy improved their currencies got overvalued (Carroll, 135-170).
Another major reason for this is their overvalued currencies and a lack of clear guidelines in the financial system, which led to inflated asset values and high foreign debt. This coupled with an unfavorable political system, lead to a failing economy. They held on to the authoritarian rule and forgot with globalization and a changing society this only served as a limiting factor not a motivator to investment. Lack of clear guidelines in the financial system is a deterrent to development; this is because there exists loopholes in the systems that do not cater for a safe cushion for their industries in case of a failing market (Solow, 75-80).
This is seen in the recent past, with loop holes were observed in the currency markets with some exchange rates falling. This fall was attributed to the lack of confidence by international investors. An example of this is the fall of the Hong Kong currency pegged to the US dollar; this was felt in other markets in the region as the confidence fell. Consequently, this spread throughout the globe with the market melt down (Carroll, 179).
This implies that there is low investors confidence that leads to low profits for industries. With Asian currencies low to the dollar and with the dollar now strong the market is not still at equilibrium as long as Asian region is in crisis. The strong dollar makes it cheaper to import goods rather than to produce them. The US companies will also find it hard to export, as their goods will be expensive. This imbalance will cause multinational companies to have a small profit margin, which is not investor friendly. Cheaper goods only lead to deflation and economic depression with many experiencing bankruptcy (Krugman, 77).
The way forward is the abandonment on the age long belief of developmentalist, where the government intervened a lot, they depended heavily on manufacturing, and export oriented industries. To solve this problem the Asian countries are encouraged to embrace entrepreneurship. They should take measures to create policies to encourage entrepreneurs and small businesses, they should also offer entrepreneurial training as opposed to the technical training they had, as well as offer financial access to them. The leaderships are encouraged to find policies that will cater for other forms of industrialization while considering the fact that their economies are globalized.
Carroll, Christopher D., and David, N. Weil. “Saving and Growth: A Reinterpretation.” Carnegie-Rochester Conference Series on Public Policy. 40 (1994):133-192.
Kim, Jong-Il, and Lawrence, J. Lau. “The Sources of Economic Growth of the East Asian Newly Industrialized Countries.” Journal of the Japanese and International Economies. 8 (1994):235-271.
Krugman, Paul. “The Myth of Asia’s Miracle.” Foreign Affairs. 73 (1994):62-78.
Solow, Robert M. “A Contribution to the Theory of Economic Growth.” Quarterly Journal of Economics. 70 (1956):65-94.