Four Asian Tigers

Contents Introduction Singapore South Korea Hong Kong Taiwan Asian Crisis 1997 India and the Asian Tigers

The Four Asian Tigers or Asian Dragons are the highly developed economies of Hong Kong, Singapore, South Korea and Taiwan. These regions were the first newly industrialized countries. They are known because they had very high growth rates (they become rich very fast) and fast industrialization between the early 1960s and 1990s. Now people say that all four countries are rich countries.

All four Asian Tigers have a lot of people who are very educated and good at their jobs. They also did different things, and tried to do them better than other countries. For example, Hong Kong and Singapore became very good at international finance, while South Korea and Taiwan became very good at information technology.

INTRODUCTION• Singapore became part of Malaysia on 16 September 

   1963.

• The merger was thought to benefit the economy by creating a common, free market, and to improve Singapore's internal security.

• Singapore gained its independence and became a republic following an ejection from Malaysia on 9 August 1965.

• Problems faced- 

• Mass unemployment

•  Housing shortages

• Education 

• Lack of land and natural resources such as petroleum

HISTORY 1965 TO 1979

ECONOMIC GROWTH-industries, tax holidays, port 

utilization(entrepot), exports

EDUCATION-English(medium), practical not intellectual, one fifth 

budget

HOUSING- cheap affordable houses

NATIONAL IDENTITY- foreign born, racial riots. National education, 

flag hoisting

LAW AND ORDER-longer working hours, lesser holidays

PUBLIC SERVICE COMPANIES-nationalized. For example, SIA, SingTel

NATIONAL DEFENCE-national service, two and a half years

The 1980s to 1990s Unemployment rate < 3% .

Real GDP growth = 8%.

Upgrading technology in its industries.

Singapore Changi Airport opened => extension of entrepot 

trade and attracting investors through a convenient way to 

enter and leave the country. 

The Housing Development Board continued to promote public 

housing.

Singapore upgraded its military.

Mass Rapid Transit (MRT) line was established. 

The education system's rigid structure was being criticized.

2000 to present Crisis faced

SARS outbreak

threat of terrorism.

recession

Counter-terrorism measures.

Reduction of National Service training requirements from two and a half years to two.

Primary education was made compulsory .This style of educational policy was still extremely competitive,

and favored those that did well initially, and tended to ignore the suffering students, in the process of

streaming.

Current scenario Economic growth in the first quarter was 45.9%

Economic growth in the second was 26%

Benchmark stock index, the Straits Times Index, did well too

Housing market prices rose by 38.1%

Unemployment rate has fallen to 2.2% (the lowest level in almost two years).

It hasn’t issued debt to fund deficit spending for over twenty years.

It is ranked tenth in the world in terms of foreign exchange and gold reserves.

Singapore has a chance to overtake China as Asia’s fastest growing economy.

SOUTH

KOREA

LOCATION

Why is it a Tiger?• Market economy which ranks

14th in the world by nominal GDP 12th in the world by Purchasing Power Parity(PPP)• One of the G20 major economies

• Member of OECD , Next Eleven

• Low unemployment rate of 3.3%

• 6th largest exporter , 10th largest importer

• Inflation rate (consumer prices): 2.8%

1960s to 1990s• Rapid industrialization

• Adoption of outward looking strategy in early 1960s

• Strategy promoted economic growth through labor intensive manufactured goods

• Government initiatives

• Inflow of foreign capital was greatly encouraged

• Achieved rapid growth in exports and subsequent increases in income

Exports Shipbuilding

A leading producer of ships, during the 1970s and 1980s

Industry declined during mid 1980s

Expanded in the early 1990s again

The world's dominant shipbuilder with a 50.6% share of the global shipbuilding market (Hyundai Heavy Industries, Samsung Heavy Industries, Daewoo Shipbuilding & Marine Engineering)

Mining Abundance of tungsten and graphite

Coal, iron ore and molybdenum on a small scale

Contd… Construction

60 percent of the work undertaken by South Korean construction companies in the Middle East by 1981

The Dong Ah Construction Company signed a contract with Libya for Libya's Great Man-Made River Project (a US $5.3 billion contract, which, when all five phases were completed, was projected to cost US$27 billion)

Samsung C&T Corporation, who had built noteworthy constructs such as Petronas Towers and Burj Khalifa

Automobile One of South Korea's major growth and export industries in the 1980s

By the late 1980s, the capacity had increased more than fivefold since 1984

Hyundai Kia Automotive Group is Korea's largest automaker

High-tech industries in the 1990s and 2000sArmaments Important manufacturer of armaments, both for domestic use and for export

Produces various core components of other countries' advanced military hardware(modern aircraft)

Military equipments and technology as mainstream products of exportation to boost its international trade

Contd…

Imports

• US-South Korea Free Trade Agreement

• Auto electrical products , beef, LNG, Oil, Minerals

• Imports--$323.1 billion: crude oil, food, electronics and electronic equipment, machinery, transportation equipment, steel, organic chemicals, plastics , base metals and articles

• Major importers to South Korea (2009)--China (16.8%), Japan (15.3%), U.S. (9.0%), Saudi Arabia (6.1%), Australia (4.6%).

Tourism• In 2007, South Korea had 6.4 million visitors making it the 36th most visited country in the world

• The number of tourists has grown due to the increased popularity of the Korean wave("hallyu").

• Seoul is the principal tourist destination

• Seorak-san national park, the historic city of Gyeongju and semi- tropical Jeju Island

• Incheon International Airport, rated the best airport worldwide

Foreign relations• Relations with more than 170 countries and a broad network of trading relationships

• Korea and Japan coordinate closely on numerous issues

• Founding member of the Asia-Pacific Economic Cooperation (APEC) forum

• 1953 U.S.-R.O.K. Mutual Defense Treaty

• Korea-U.S. Free Trade Agreement (KORUS FTA) on February 2, 2006

• Hosted international events such as the 1988 - Summer Olympics2002 - World Cup Soccer Tournament (co-hosted with Japan)2002 - Second Ministerial Conference of the Community of Democracies.2010 - R.O.K.-Japan-China Trilateral Summit , G-20 Seoul Summit

1990s and the Asian FinancialCrisis

• Stable and strong growth in both private consumption and GDP, for the first half of the 1990s

• Asian Financial Crisis hit in 1997

• The Korean Won started to heavily depreciate in October 1997

• Non-performing loans at many of Korea's merchant banks

• Korean Chaebol Daewoo dismantled by the government in 1999 due to debt problems American company General Motors( motors division) , Indian Tata Group ( trucks and heavy vehicles division)

• In December 1999, president Kim declared the currency crisis over

Post crisis• Moved away from the centrally planned, government-directed investment model toward a more market-oriented one

• Bounced back from the 1997-98 Asian financial crisis with assistance from the International Monetary Fund (IMF)

• Extensive financial reforms that restored stability to markets growth rates of 10% in 1999 and 9% in 2000

• Slowing global economy and falling exports slowed growth to 3.3% in 2001

• Consumer stimulus measures that led to 7.0% growth in 2002

• Consumer overspending and rising household debt slowed growth to near 3% again in 2003

Contd…• Economic performance in 2004 improved to 4.6% due to an increase in exports and remained at or above 4% in 2005, 2006, and 2007

• Slowed to 2.3% in 2008 and just 0.2% in 2009 due to the global financial and economic crisis in the third quarter of 2008

• Economic growth rate boosted through deregulation, tax reform, increased FDI, labor reform, and free trade agreements (FTAs) with major markets

• Economy responded well to a robust fiscal stimulus package and low interest rates in 2010

HONG HONG KONGKONG

SMALL STEPS MAKE A BIG LEAP…

UNDER BRITISH COLONIZATION: 1897-UNDER BRITISH COLONIZATION: 1897-19971997

Sudden boost in foreign direct investment in the 1940s

1949-PRC ( Peoples’ Republic of China) comes into being

Foray into textiles….development of highways, shipping, subways , high- tech products, electronics in 1960-70s.

Hugh investments in education-enhancement of human capital

Shift from manufacturing to services sector.

Emphasis on export economy…strong strategic partnerships with PRC.

REINTEGRATION WITH CHINA 1997-present

“One country ,two systems” Hong Kong firms began to

move their labor-intensive activities to the mainland to take advantage of cheaper labor.

Increase in trade, tourism, food grain imports.

Greater inflow of foreign investment in both regions.

Hong Kong- SAR( Special Administrative Region)

WHAT MAKES/MADE HONG KONG AN ASIAN TIGER??

Economy Role of the Government Partnerships with PRC Room for savings Fiscal policy Strategic Location Technological progress Investments in education Strong public services Transportation and communication GDP growth and stock markets.

Ninth most traded currency in the world The Hong Kong Stock Exchange is the 6th

largest in the world, with a market capitalization of about US$2.97 trillion.

GDP per capita at purchasing power parity is the 7th highest globally

GDP (purchasing power parity) GDP - real growth rate

GDP - per capita (PPP)

Unemployment rate 4.3% (2010 est.) 

5.4% (2009 est.)

Exports : $388.6 billioncommodities :electrical machinery and

appliances, textiles, apparel, footwear, watches and clocks, toys, plastics, precious stones, printed material

partners :China 52.7%, US 11%, Japan 4.2% EU 11.2%

Imports : $431.4 billioncommodities: raw materials and semi-

manufactures, consumer goods, capital goods, foodstuffs, fuel (most is reexported)

partners :China 45.1%, Japan 9.6%, Taiwan 7.6%, Singapore 4.8%, US 4.7%

GDP - composition by sectoragriculture: 0.1% industry: 7.6% services: 92.3% (2010 est.)

developed capitalist economy 19th largest in the world in GDP Real growth in GDP has averaged

about 8% during the past three decades

foreign reserves are the world's fourth largest

service sector makes up 73% of the economy

Uncertainty about the US commitment

Shift from subsidized import-substitution in the 1950s to export-led growth

Development of foreign trade and exports helped absorb excess labor

Industry

Information Technology TSMC and UMC Small and Medium-sized Enterprises (SME) "e-Taiwan” USD 1.83 billion

improve the information and communications infrastructure in Taiwan in five major areas: government, life, business, transport, and broadband

increase the number of broadband users on the island to 6 million

software market grew by 7.1% to reach a value of US$4 billion

digital content production industry grew by 15% in 2009, reaching US$14.03 billion

electronics sector is Taiwan's most important industrial export sector

Textiles are declining due to labor shortages, increasing overhead costs, land prices, and environmental protection

Agriculture and Energy

Agricultural production accounted for 35.8% of the GDP in 1951

Agriculture comprises about 2.6% of Taiwan's GDP presently – USD 1 billion

Lack of natural resources Imported energy totaled USD 11.52

billion in 2002, accounting for 4.1% of its GDP

Foreign Trade

Engine of Taiwan's rapid growth during the past 40 years

economy remains export-oriented United States is Taiwan's third

largest trading partner 11.4% of Taiwanese exports and

supplying 10.0% of its imports China has recently become Taiwan's

largest import and export partner

Financial Crisis

economy faced a downturn in 2009 heavy reliance on exports which in

turn made it vulnerable to world markets

government launched a US$5.6 billion economic stimulus package

provided financial incentives for businesses, and introduced tax breaks

“Heightened exposure to world markets will only become a true lever of economic development in the presence of institutions able to mitigate market failures and manage the competitive challenges and domestic dislocations produced by openness”

(Park 2002).

Science and industrial parks Hsinchu Science Park Industrial Technology Research

Institute (ITRI) Linhai Industrial Park South Taiwan Science Park Central Taiwan Science Park

Future

growth has become much more modest since the late 1990s

rise of China must abandon workforce intensive industries Recent developments include moving up the

food chain in brand building and design LCD manufacturing and LED lights are two

newer sectors biotechnology sector, the creation of

fluorescent pet fish and a research-useful fluorescent pig

•Foreign debt-to-GDP ratios rose from 100% to 167% in 1993–96, then shot up beyond 180% during the worst of the crisis.

•Indonesia, South Korea and Thailand were the countries most affected by the crisis. Hong Kong were also hurt by the slump. The People's Republic of China, India, Taiwan, Singapore were less affected.

•The ASIAN FINANCIAL CRISIS was a period of financial recession beginning in July 1997 and raised the fears of worldwide economic meltdown due to financial contagion.

The crisis started in Thailand with the financial collapse of the Thai baht caused by the decision of the Thai government to float the baht, cutting its peg to the USD.

Problems in Thailand’s economy-1.overvalued real estate markets, 2.weak and poorly supervised banking sectors, and 3.substantial short-term borrowing(portfolio investment)4. Market doubts were compounded by a lack of transparency5. Inadequacy of foreign exchange reserves (working capital of acountry) for supporting imports

•Maturity mismatch--borrowing short and investing (lending) long.•Currency mismatch--revenue and cost (liability) in differentCurrencies.

*Insolvency caused directly or indirectly by declines in the exchange rates.•Moral hazard on the parts of both lenders and borrowers

*Past bailouts of developed country lenders encourage moral hazard on the part of lenders.

*Implicit guarantee of banks and enterprises “too big to fail” by governments encourage moral hazard on the part of borrowers.•“Herd mentality”--too much money chasing too few good projectsleading to mis-pricing by developed country investors and lenders

Direct investment is better than portfolio investment

The economic downfall started when the “HANBO” group was found bankrupt and the Korean government was found to be deeply corrupted.

They began reexamining their banking practices and started calling in short-term loans, thereby "creating a vicious circle of Liquidity . This, in turn created a "domino effect" as more companies failed

HOW DID THEY SURVIVE THEIR SUDDEN ECONOMIC DOWNFALL?1.To avoid withdrawal of private lending , the interest rate was kept 4% above US treasury bills.2. To restructure its short-term debts ,lengthening their maturity and providing additional temporary credits to help meet the interest obligation.

HONG KONG survived the Asian Crisis due to its “FISCAL POLICY”

1. Saving of the budget surplus

2.Fixed exchange rate.

Singapore’s resilience in the face of the large and adverse economic shocks triggered by the Asian financial crisis can be traced to the four “foundations” it has laid over the years. These are:

(1) the maintenance of strong economic fundamentals, including a healthy banking sector, (2) the adoption of a managed exchange rate system,(MAS,NEER)(3) The establishment of an adjustable wage system, and (NATIONAL WAGE COUNCIL) (4) controls on bank lending in the Singapore dollar.

•The IMF created a series of bailouts ("rescue packages") to restore Asian currency. BUT THE SUPPORT WAS CONDITIONAL………..It demanded drastic economic reforms influenced by neoliberal economic principles called a "structural adjustment package" (SAP).SAP included-1.government spending to reduce deficits2.allow insolvent banks and financial institutions to fail3.aggressively raise interest rates

•The effects of the SAPs were mixed and their impact controversial.

•The contradictory nature of these policies, arguing that in a recession, the traditional Keynesian response was to 1.increase government spending,2. prop up major companies, and 3.lower interest rates.

•The path of "fast track capitalism“ was largely criticized.

The East Asian economies are unlikely to have another crisis in foreseeable future

1.The current account gaps have disappeared.

2. Short-term foreign capital (portfolio investment) has reduced.

3. External debts have declined.

4. Foreign exchange reserves has risen in absolute terms.

India & The Asian Tigers India’s Trade with the Asian Tigers Common features of the Tigers Lessons for India “Entigerment” for India?

Trade Asian Financial crisis of 1997 India’s “Look-East” Policy India’s membership with the ASEAN of

which four of the six East Asian Tigers are a part.India became a Dialogue partner of ASEAN in 1992 and Summit level partner in 2002

Factor Endowment Theory – Agricultural export from India and technology from the Tigers

Year (US $millions) (US $millions) % (US $millions) % (US $millions) % (US $millions) %

1991-92 37549.10 725.77 1.933% 555.31 1.479% 493.43 1.314% 698.76 1.861% 1992-93 38019.73 879.88 2.314% 498.36 1.311% 374.72 0.986% 1148.18 3.020% 1993-94 45517.90 1453.76 3.194% 769.93 1.691% 456.35 1.003% 1377.27 3.026% 1994-95 54999.72 1800.62 3.274% 961.59 1.748% 533.78 0.971% 1670.45 3.037% 1995-96 68571.85 2212.74 3.227% 1275 1.859% 640.32 0.934% 2018.13 2.943% 1996-97 72663.43 2183.56 3.005% 1403.25 1.931% 848.21 1.167% 2042.50 2.811% 1997-98 76583.23 2250.86 2.939% 1471.1 1.921% 877.38 1.146% 1979.98 2.585% 1998-99 75590.17 2329.38 3.082% 1701.57 2.251% 675.25 0.893% 1901.18 2.515% 1999-00 86558.16 3312.45 3.827% 1751.36 2.023% 732.46 0.846% 2206.09 2.549% 2000-01 94203.71 3474.50 3.688% 1338.2 1.421% 896.97 0.952% 2298.09 2.439% 2001-02 95524.22 3104.46 3.250% 1617.56 1.693% 922.12 0.965% 2283.19 2.390% 2002-03 114356.76 3592.99 3.142% 2171.14 1.899% 1243.69 1.088% 2862.02 2.503% 2003-04 142089.38 4757.75 3.348% 3596.49 2.531% 1302.29 0.917% 4213.09 2.965% 2004-05 194973.09 5419.72 2.780% 4548.57 2.333% 1709.88 0.877% 6649.27 3.410% 2005-06 252219.23 6677.32 2.647% 6390.12 2.534% 2011.71 0.798% 8777.77 3.480% 2006-07 311357.65 7159.60 2.299% 7315.81 2.350% 2590.05 0.832% 11550.70 3.710% 2007-08 412779.08 9009.02 2.183% 8893.99 2.155% 4137.41 1.002% 15493.14 3.753% 2008-09 473589.47 13093.04 2.765% 12601.91 2.661% 4231.60 0.894% 15663.41 3.307%

India’s total trade With World

Hong Kong total trade with India

Percentage share in India’s total trade

Korea Republic total trade with India

Taiwan total trade with India

Singapore total trade with India

Percentage share in India’s total trade

Percentage share in India’s total trade

Percentage share in India’s total trade

Common Characteristics of The Tigers Focus on exports to richer industrialized nations

Singling out education as a means of improving productivity.

Sustained rate of double digit growth for decades Non democratic and nearly authoritarian political

systems during the early years Undervalued currencies High level of U.S Treasury bond holdings High Savings Rate High degree of “Economic freedom”

Lessons for India Organic Development by emphasis on

sectors with competitive advantage Investment in Education Doing away with political bottlenecks Striving for reducing fiscal deficit Promotion of tourism Promote spirit of patriotism Improving savings rate Encouraging FDIs over FIIs Development and efficient utilization of ports

India, the new Asian Tiger?

Abundance of natural resources Large pool of educated workforce Huge markets Language, cultural and educational

facilities Research and Development

Opportunities Skilled Management Personnel

Back in the early '90s, Fortune wrote a lengthy cover story on the Asian miracle without even once mentioning India even tangentially. Today, somebody has started a magazine called Asian Century -- and it talks about everything from Bangalore's software professionals to Indian shopping malls.

Singapore

India’s largest trading and investment partner in ASEAN

Bilateral FTAs Indian PM’s visit to Singapore in 2002 to set up

Joint Study Group (JSG) Comprehensive Economic Cooperation

Agreement of 2005 Infrastructure, Real estate, Logistics,

Communication Developmental and Planning projects in roads,

ports, airports, power and telecom. Singapore keen on healthcare, education &

training, retail and automotive sectors in India AAA rated Singapore is India’s advantage

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South Korea

FTA ensures Bilateral trading relations Prospective Korean partnerships with

Small & Medium Enterprises (SMEs) Korea removed 93% duties on

industrial and agricultural exports to India and India removed 85%

Automobile components, heavy engineering, electronics and electrical appliances

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Hong Kong

Initiated talks on FTA Plans to enter into a Double Taxation

Avoidance Agreement (DTAA) to promote bilateral trade and investments

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