Robert Fitzgerald - The Competitive Advantages of Far Eastern Business

Edited by

ROBERT FITZGERALD

First published in 1994 in Great Britain by

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British Library Cataloguing in Publication Data

Comparative Advantages of Far Eastern

Business. - (Studies in Far Eastern

Business, ISSN 1351-0363)

I. Fitzgerald, Robert II. Series

338.095

ISBN 0-7146-4592-3 (cased) ISBN 0-7146-4144-8 (paper)

Library of Congress Cataloging-in-Publication Data

The Comparative advantages of Far Eastern business / edited by Robert Fitzgerald.

p. cm.(Studies in Far Eastern business, ISSN 1351-0363)

This group of studies first appeared in a special issue of the Journal of Far Eastern Business, Vol. 1, No. 1., Autumn 1994T. p. verso.

Includes bibliographical references.

ISBN 0-7146-4592-3 (cased) ISBN 0-7146-4144-8 (paper)

1. Industrial promotionEast Asia. 2. East AsiaIndustries. 3. East AsiaEconomic conditions. I. Series.
HC460.5.C63 1994

This group of studies first appeared in a Special Issue of the Journal of Far Eastern Business (Vol.1, No.l Autumn 1994),
[The Competitive Advantages of Far Eastern Business].

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form, or by any means, electronic, mechanical, photocopying, recording or otherwise without the prior permission of Frank Cass and Company Limited.

Typeset by Vitaset, Paddock Wood, Kent

Robert Fitzgerald, Royal Holloway, University of London

The speed of economic growth in East Asia has conjured up a range of resonant descriptions, from national Tigers to regional Miracle and imminent Pacific Century. The rise of Japan as a post-war superpower has been paralleled by the success of South Korea, Taiwan, Singapore and Hong Kong, the collective Four Tigers, and by the newly-emergent countries of Malaysia, Thailand and Indonesia. The rate of respective GDP change over many years, culminating in an industrial and trading region of world importance, has been seen as a phenomenon of unprecedented or, more dramatically, miraculous proportions. Prospects are enhanced by the rapid expansion of mainland China, the giant of East Asia, and by the strengthening of ties with America and Australasia, and countries within and outside the Pacific Basin have been weighing the long-term economic and strategic implications. The value of goods transversing the Pacific now surpasses the worth of the Atlantic trade, and the global economy is rightly viewed as a system of dominant regions in North America, western Europe and the Far East. Given this evolving triangulation, it is too early to project the circumstance of a Pacific Century, and the term miracle can be misleading if it suggests unique, almost inexplicable occurrences. The leading Far Eastern nations do stand as object lessons in development economics, but entrenched and widespread industrialisation from a position of recent, comparative disadvantage is understandable in terms that give full credit to the hard-won fruits of human and capital accumulation.

It is possible to distinguish rates and patterns of economic growth in specific Far Eastern nations which possess common characteristics, and their interdependence, driven on by Japanese foreign direct investment and a shared commitment to export-orientated industrialisation, encourages convergence. The causes of rapid development can be enumerated, and they might include cultural attributes, government policy, and competitive markets, in addition to high savings ratios and committed investment in education, production facilities and technology. It is questionable, and certainly difficult to decide, whether these all-embracing factors have more similarities than dissimilarities in their specific contribution to economic growth in each case. The World Bank report on The East Asian Miracle is correct in identifying and isolating the eight High Performing Asian Economies of Japan, the Four Tigers and newly industrialising Malaysia, Thailand and Indonesia, because they share remarkable growth rates as well as geographical proximity. They all find a place amongst those 20 countries which achieved the highest change in per capita GDP between 1960 and 1985, and six of them can be found amongst the first seven. During this period, average real income in Japan, Korea, Taiwan, Singapore and Hong Kong has more than quadrupled, and living standards have more than doubled in the South East Asian NICs. Overall, these eight economies have between 1965 and 1990 grown on a per capita basis twice as fast as either the OECD membership or the rest of Asia, and comparisons with Latin America, South Asia and Sub-Saharan Africa are even more noteworthy. One striking feature is the mixture of high growth rates and declining inequality.1 They have fulfilled, therefore, Kuznets criteria for modern economic growth: these societies have been or are being transformed by the application of technology in industrial production, and rises in average measures of real per capita income have taken place over a long period and directly benefited the majority of people.2 It is the compounded effect of growth from the 1960s onwards and over several decades which has marked out the Far East, especially when so many advanced nations have achieved only very modest annual increases in GDP.

TABLE 1
ASIA PACIFIC ECONOMIC COOPERATION STATISTICS

1991 GDP $bn	1991 GNP per head $	GNP Growth per head 198091 % p.a.	Export Volume Growth 198091 % p.a.
East Asia & Pacific	961.754		6.1	10.2
US	5,610,800	22,240	1.7	4.0
Japan	3,362,300	26,930	3.6	3.9
World	21,639,100	4,010	1.2	4.1

Source: World Bank, Global Economic Prospects and the Developing Countries (1993).

Although the fact of rapid economic development can be traced, it is no surprise that interpretations of the root causes do not enjoy broad consensus. In fact, there are very few comparative works on the economies of the Far East, and, despite a burgeoning literature on individual nations, there is an unmet demand for research which systematically examines the determinants of growth and rising living standards throughout the region. The World Banks report and its many supporting commissioned papers have attracted attention precisely because of the breadth of its data. It concentrates on the actions of governments, and argues that the successful Far Eastern nations have attended to basics by maintaining sound macroeconomic policies, low inflation and financial rectitude. The report does affirm the ways in which public policy has encouraged competitive business and trading environments, high savings ratios, and human skills and capital accumulation. Variations in experience are admitted, but, while the existence of an efficient civil service and a willingness to raise educational standards are admitted, the state is not accorded a leading role. The World Bank has produced a considered report that traces the economic history and circumstances of each country, and, in recognising problems of interpretation, it partially concedes the validity of other viewpoints. Its conclusions have not been free of criticism, mainly because they are predicated upon a neo-classical perspective. By acknowledging state activism to be important in the early stages of economic development, the World Bank accepts the benefits of market-friendly government policies, but, as one would expect from its source, the report is in the final analysis heavily market-orientated in its emphasis.3