For most of the past 300 years or so Ireland has had the dubious distinction of being a country more known for the hardships suffered by its inhabitants than for its beautiful countryside. While people in other parts of the United Kingdom and in Europe enjoyed a relatively high standard of living Ireland lagged far behind. Up until the early 1970’s the average income in Ireland was approximately one half of that of the rest of the UK. Over the next 35 years that status would change dramatically.
Today Ireland is rated one of the best countries in the world in which to live. Ireland boasts the fourth highest gross domestic product per person and very low unemployment. University tuition is free and there are a high percentage of skilled positions available.
How did Ireland accomplish such a dramatic turnaround?
New Economic Policies
Economists who have analyzed the emergence of the “Celtic Tiger” (a popular nickname for this period of unprecedented economic growth) have identified economic policies that encouraged growth. Beginning in the 50’s and 60″s Ireland began to shift away from protectionism and started to plan long-term for expansion and to increase international trade. Corporate tax rates were lowered and tax incentives were offered to foreign investors. Initiatives to expand exports were adopted.
In the 70’s the currency was strengthened and stabilized with Ireland’s entry into the EU. EU membership also provided Ireland access to substantial subsidies from France and Germany which was invested into public works projects to improve and expand infrastructure and education. Ireland now had greatly expanded access to European markets and began to increase exports. As its economy began to respond, Ireland focused on lowering its public debt and eventually achieved a 35% debt ratio, lower than most of other countries in the EU. As her financial position improved Ireland initiated several new programs that were aimed specifically at attracting high tech businesses and other growth industries. Ireland now offered an unbeatable combination of stability, favorable tax and trade policies, and a well educated English speaking labor force available at relatively low wages. This brought in employers from all over the world to do business in Ireland. By the end of the 90’s unemployment had fallen from 18% to 4%.
Ireland is not the only country to follow this basic formula for economic expansion (think of China, Brazil, Russia, India, and Mexico). Yet Ireland seemed to reap much higher dividends than most of the other counties adopting a similar approach. Looking at other changes in Irish society that occurred in concert with the changes in economic policy reveals that other factors may have played a critical role in the phenomenal success of the Celtic Tiger expansion.
Long-Term Planning and Investment in Basic Infrastructure
It is important to note that Ireland committed to a long-term plan for growth nearly 20 years before the Celtic Tiger expansion really took off. Ireland was willing to commit to new economic policies and maintain fiscal discipline for many years before substantial results were forthcoming, although there were clear signs of growth after the first five year plan was implemented. Ireland also invested for the long-term by initiating many public works projects designed to strengthen her infrastructure and education system. This increased Ireland’s production capacity and the quality of its workforce while creating jobs – which in turn increased income per capita and with it, consumer spending. By investing in the long-term Ireland was perfectly poised to take full advantage of favorable economic conditions when they occurred years later.
Some of the public works projects that Ireland committed to prior to the expansion included investing in her capacity to generate energy. Ireland invested in hydroelectric plants. The island’s numerous peat bogs were utilized to create a fuel for heating from dried peat products, and local off-shore gas fields were tapped. Prior to and during Celtic Tiger Ireland could operate without the financial burden of dependence on foreign oil. It is worth noting that as Ireland’s demand for energy began to surpass the capacity of her local energy sources her economic growth slowed in concert with her increasing dependence on foreign oil. Apparently these lessons on energy production were not wasted on the Irish. Today, Ireland is creating new capacity by developing wind based power generation facilities.
Political and Social Reforms
Prior to this renaissance Ireland had suffered from rampant corruption in high political offices. Society was divided politically and in the conflict between Catholics and Protestants there seemed to be no end in sight. Civil liberties were restrictive compared to other modern countries. These factors coupled with high unemployment and low wages caused Ireland to suffer from a kind of social and economic pessimism.
By the 80’s Ireland had cleared up much of its political corruption and began to develop a more cooperative political climate. Government, employers and trade unions forged landmark compromises to work together to bring in trade and investment. Universal education made it possible to maintain a highly educated workforce. More women pursued advanced education and entered the workforce. Birth rates per capita dropped as more women pursued careers. This reduced the ratio of dependents to wage earners and helped to lift the gross domestic product per capita.
During the most robust phase of the expansion Ireland benefited from the leadership of President Mary Robinson who garnered a 93% approval rating during her term. President Robinson was a true diplomat bringing together parties within Ireland and forming cooperative relationships with other nations. Robinson was also instrumental in expanding civil liberties. Shortly after Robinson left office to become the United Nations High Commissioner on Human Rights, the Belfast Agreement was signed bringing together political and religious foes to work to end the violence in Northern Ireland. All of these changes lifted the spirits of the Irish people and helped them feel better about their future.
The Power of Optimism
One could characterize the Celtic Tiger expansion as a journey from pessimism to optimism. An optimistic social climate is a powerful economic stimulus. When consumers feel good about the future they spend more money. When business leaders feel optimistic they are much more likely to invest in research and innovation and expand their operations and increase their workforce. What made the Celtic Tiger different is that the economic policies were supported by a cooperative political and social climate, a willingness to invest for the long-term and social policies and leaders who fostered optimism.
So far, it is estimated that Vietnam has 29 Golf Courses in operation that turn to be the effective drive for the nation’s social and economic growth in terms of jobs, investment, and tourism as well. Obviously, the development of Golf helps to create lots of all jobs for the locals, attract the foreign investment much better, and uplift the tourism industry in the new notch.
Believe in Development of Vietnam Golf Courses and Tours
Regardless of the disputes around the Golf Courses’ large areas or environmental pollution controversies from some skeptics, Golf has admitted as the healthy channel to promote Vietnam’s social and economic development with the vivid number of courses and its expansion. In the fight against the negative thoughts about Golf, more and more experts point out that the Golf Courses in Vietnam mostly meet the planning demands and do not take any land of agriculture or forests.
In reference to the volume of employment, the establishment of Golf has optimistically created lots of jobs for the laborers in the local. Meanwhile, it also attracts the foreign investment with the high rate. For instance, The Ministry Natural Resources and Environment that led the Golf Course Survey in 2010 proved that the national Golf Courses gained up to $224.1 million of investment and donated VND 505 billion to the state’s budget. How great the number is! Some of the top-rated Courses in existence like Phoenix Golf Course, Chi Linh Star Golf & Country Club, etc., have created up to 366 stable jobs on average of each for the local people.
In addition to the GDP growth, the Golf-related events and activities also help to raise the big amount of Charity Funds about $400 billion, for example. In most cases, Vietnam’s Golf planning and development ought to emphasize the significance of Golf on the nation’s social and economic equilibrium. For the purposes of promoting the Golf’s validity in the modern Vietnam’s contexts, the survey results are required to be presented in the public domain.
In respect to the growth of Golf Courses and the inexpensive fees for the golfers, Golf Tourism comes to life and is developed with numerous services for the wholesome Golf trips. In the eye of many golf experts, Golf is like a beautiful girl that needs treating with true love in order to further the advancement of Vietnam’s golf industry.
Promising Growth of Vietnam Golf Courses
Regardless of the jitters about the expansion and competition among many Golf Courses in Vietnam, it is believed that the Golf Industry here will grow more and more since both owners and directors together attempt to better up the Vietnamese tourism as well as economy. Informatively, the Prime Minister did approve the Golf Planning with the promises of developing up to 90 Golf Courses throughout 34 cities and provinces.
Featuring the positive ambiance for the national growth, the construction of Golf Courses and the popularity of Golf Tours have played in the essential role. According to the Golf experts, the love golfing and developing it right in Vietnam since it leaves the optimistic influences on the national economy, evidently. Whatever the thoughts of yours, it is impossible to deny the significant of Golf in Vietnam’s evolution in the recent years.
There are many countries in the world that are experiencing immense growth that even outranks the United States and can provide great opportunities for those who are looking for international investing prospects. China is now 2nd in terms of market capitalization and is closely followed by the likes of Britain, France, Japan, India, Brazil and Russia. The tremendous growth in the economies of these countries over the last ten years is shown in the stock market capitalization of these countries offering incredible investing opportunities.
The economic growth in countries such as Russia, Brazil, India and China has far exceeded the growth of other developed countries. Between the years 2004 – 2008, the real GDP averaged 3.5% in Brazil, 5% in Russia, 8.9% and a whopping 10.8% in India and China respectively compared to the economic growth of the United States which just been a mere 1.8% in the same time period. Even though international investing in these emerging markets may carry far more risks than investing in the US, the potential return that one can get out of these makes the prospect of international investing extremely appealing.
Since Japan, South Vietnam and Korea embraced capitalization twenty years ago, it has spread like a wild fire with China joining in later on. Moving millions into urban cities in a few days was practically impossible but China has proved how this can be done as it continues to attract millions every year into these so-called capitalistic urban enclaves which has actually made China what it is today.
One of the biggest plus points of international investing is that it lets you purchase shares in some of the world’s biggest and fastest growing organizations and these investments reap greater rewards with the span of time if the investor is willing to shoulder the risks that are part and parcel of going international.
Investing can be done in several ways. One of the ways of international investing is through international mutual funds which include several blue chip companies. You can also look towards indexed mutual funds that replicate the returns that are achieved through a market index like the MSCIEAFE international index of the S&P 500 in the United States. There are also exchange trade funds that offer a pretty good substitute to mutual funds and trade on the stock exchange just like any other conventional stock but they represent not one but a complete basket of stocks in different companies.
Transport infrastructure is an essential component of any economy, which can positively or adversely affect the welfare and development of a town, city, region or country. If transport infrastructure are planned and implemented in an efficient manner, they produce economic and social benefits that create increased access to markets, employment, investment, as well as initiating a multiplier effect that will be felt through the entire economy. However, if transport infrastructure is deficient, they can result in economic and socio-economic loss from not having the correct transportation systems in place to allow the economy to perform to its optimum.
Transportation has been closely aligned and related to economic growth and development since the time of the industrial revolution. As each stage of human development has evolved, specific transport styles and infrastructure have developed and adapted to allow the expansion of local, regional and national economies. One of the lessons learnt from the past that needs to be recognised in today’s development and adaptation of transport infrastructure, is that no one transportation type is solely responsible for past growth; rather a combination of transport types and the infrastructure that has been developed to support them. Through human civilisation, mobility has been one of the most elementary characteristics of economic growth, facilitating the transport of people and products.
The economical importance of existing and future transport infrastructures can be viewed at both macro and micro levels. Macroeconomic benefits of efficient transportation systems relate to the economy as a whole, and links to the level of productivity, output, income generation and employment of a region or country. Comparatively, microeconomic benefits of efficient transportation systems relate to the movement of products, consumers and producers, as well as the physical cost of this movement. When transport infrastructure is planned for and implemented in the correct manner, the infrastructure created provides a web of links that enable the entire range of the factors of production, that lead to economic growth, to work together in a synergetic manner. In other words, the elements of production and economic growth; being space, capital and labour, experience significant improvements in their ability to perform and create stimulus to the economy when personal mobility and distribution capabilities are at their optimum.
With transport infrastructure being vital in the production of economic, social and socio-economic outcomes, it is vital that those charged with the responsibility of planning and implementing the systems are well experienced and have the capability of turning plans and construction into synergetic transportation systems that not only enhance, but promote economic growth.
Our company, Harrison Grierson, is a large advisory and design consultancy working in four key market sectors; Land & Buildings, Water & the Environment, Utilities and Transport. The Company operates throughout Australasia and the Pacific Rim from New Zealand and Australia. With a focused organisational culture that stretches back over 125 years, the Company is well positioned to provide clients with a variety of professional skills in engineering, surveying, planning, urban design and landscape architecture from an integrated network of offices that functions as one business.
The planning commission deputy chairman rightly opined that growth takes precedence over deficit. In other words, the commission would like to concentrate on the economic growth now and about the deficit later. At present the fiscal deficit in Indian economy is about 11% of GDP. The government’s goal is to bring it down to 3% of the country’s GDP. The exclusive deficit of the central government is about 7% of the GDP. Some statistical organisations put India among some of the very high fiscal deficit economies.
Five year plans and investment:
The public investment for the development of the country has been increasing since 1951. For better services and to provide employment to the educated and skilled Indian citizens the public sector units came in to existence. Over the years due to mismanagement of these units, these have become a burden on the Indian economy though some of them have been contributing to the growth in the economy.
Rural development, Industrial development, human resource development, etc are some of the priorities in the five year plan periods for the over all economic development of India.
Free technical training for the educated but poor youth to enhance their skills has been one of the primary motives of the government as their skills contribute in producing goods and services and thus the economic growth of the nation.
Electricity, transportation, communication, education, health, credit facilities, marketing, irrigation, etc are some of the vital and basic necessities for the economic development of the nation.
The country’s security is of utmost importance. Defence expenditure is very high in India. This is due to several boarder and other territorial disputes with the neighbouring nations like Pakistan, China, etc.
Due to ever increasing fiscal deficit, the government has been privatising and also slashing many subsidies. In other words the government has been moving towards more openness and reforms. Some economists also opined that the government can get Rs.25,000 crores annually if it moves towards disinvestment.
Government’s support services:
The human resources development is one of the primary objectives of any government. In India too the government spends huge sums on this sector so that they can contribute to the development and growth of the nation. For instance there are free education schemes for poor, subsidies on fee, lower interest loans for higher education abroad and in India. Similarly there are many kinds of subsidies for the farmers as agriculture has been a source of livelihood for many and also as it contributes to the economic growth and development of the nation.
The government also bears the burden of promoting the exports by subsidising, promoting and supporting the export oriented industries. This measure is to reduce the trade deficit.
Containing the huge fiscal deficit:
The centre’s fiscal deficit for the first two months ( April and May) of the current financial year is about Rs. 90, 758 crores. This is mainly due to indirect tax cuts by the government to deal with the economic slow down. For instance, the excise duty on most products was reduced by 6% points and the service tax was cut by 2% points. These measures would induce demand by reducing the prices and thus production and employment.
Fiscal deficit for May 2009 was Rs. 36,600 crores as tax receipts dipped by 10%, this is mainly due to the decline in indirect tax collections.
In the month of April 2009, the fiscal deficit rose to 64% due to increasing government’s expenditure. Sixth pay commission awards, declining tax revenues, etc are some of the contributors for this state of affairs.
The government employees have been demanding increase in perks as the prices of essential commodities and other expenditure have been rising.
The declining tax revenues are due to, 1. Cenvat (central value added tax) was cut from 14% to 10% and then to 8%. 2. service tax from 12% to 10%, and 3. The reduction in customs duty on several items resulted in 17% decline in gross tax revenues. Thus in the month of April 2009, the effective collection of personal income tax which has increased by 20% is the only bright spot.
The rise in expenditure bill for April month was due to increase in the non-plan expenditure. This expenditure includes, recurring expenditure on completed projects, salaries, and subsidies. Fertiliser, and defense expenditure contributed for the heavy expenditure.
Spending needs to be better targeted to reduce wasteful expenditure. For instance, 1.The government can withdraw some tax concessions, 2.The third generation mobile licence auctions will yield Rs.25,000 crores to it. and 3. Disinvestment of loss making public sector units will yield about Rs. 80,000 crores. These steps will bring deficit back to about 6.5% of GDP.
A lot of people are surprised that Panama is accelerating positively. Many of my friends are in fact wide-eyed when I tell them that Panama City is a modern city that’s home to tall skyscrapers and state of the art hospitals. Come to think of it, Panama is still considered as a third world country; hence, it can be quite surprising for some people to know that the economic growth of Panama continues to be on a high note. In fact, the Panama government has scheduled a lot of infrastructure and developmental projects for this country to make it further soar to greater heights.
Economic growth of Panama for 2012 is at 11% which has exceeded earlier predictions of only a 7% growth. This economic boost is the strongest by far in the whole of Latin America. Growth for 2013 is expected at 8% but many economists believe that Panama will again exceed this conservative number. 2013 has already started off with major investment and expenditure projects that exceed $15 billion.
The Panama Canal has contributed significantly to the country’s booming economy; thus, this famous canal is slated for expansion in 2013. On top of this, President Ricardo Martinelli has also approved the improvement of Panama’s new metro transportation system and the expansions of roadway and hydroelectric plants. Two new airports will also open in 2013 that will pave the way for tourism, trade and business opportunities. Panama’s premier Tocumen International Airport is also slated for expansion that will include expanded routes in 2013 for the Copa Airlines. These airport expansions will further ensure Panama’s title as “The Hub of the Americas”.
A bright future is most certainly in store for Panama, much to the delight of the Panamanians and thousands of expats who have made the country their second home. While the country is having simultaneous expansion projects in its core businesses, foreign direct investments are also expected in 2013. Panama has copper reserves that are substantially large as well as gold reserves to boast. Billions of dollars in revenues are projected for Panama’s mining projects and plenty of other investments.
With economic growth comes an improved way of life for the citizens of Panama. Water supply and sanitation will be improved in 2013 as well as facilities of public hospitals and schools. New construction permits are also up in 2013 for both the residential and non-residential sectors. New hotels, real estate, shopping malls and office buildings will be built as Panama opens its doors to a wide range of business opportunities.
One thing is certain and that is, Panama is definitely on the right path to greater development. This fact has made Panama a great venue for retirement, tourism and business. Thousands of American and European expats are already living in Panama and this will most probably increase in number as the country shows sure signs of a bright future ahead. Economic growth in Panama is therefore positively accelerating. This has most certainly made a lot of people smile as this means a more comfortable and quality way of life for everyone living in Panama.
The first reaction of economies in transition is a sharp decline in their production, mainly in industrial production. In the countries which attained independence with the demise of the British Empire (where the sun never set) – industrial production fell by 20% on average. Even this was because these countries continued to maintain economic ties with the “mother” (the United Kingdom). They also continued to trade among themselves, with the rest of the British Empire, through the Commonwealth mechanism.
This was not the case when the second biggest empire of modern times collapsed, the Soviet empire. When the USSR and the Eastern Bloc disintegrated – the COMECON trading bloc was dismantled, never to be replaced by another. All the constituents of the former Eastern Bloc preferred to trade with the west rather than with one another. The Empire left in its wake mountains of trade debts, total lack of liquidity and money losing barter operations carried out in unrealistic prices.
Thus, industrial production plunged in the newly established countries (CIS and the countries which were part of Former Yugoslavia) as well as in other former members of the Eastern Bloc by 40-60% over a period of 5 years. A slow recovery is discernible only in the last two years and industrial production is picking up at an annual rate of 2% (Estonia) to 8% (the Czech Republic) – depending on the country.
This disastrous drop in the most important parameter of economic health was largely attributable to a few, cumulative factors:
The sudden evaporation of all the traditional export markets – simultaneously. Macedonia has lost 80% of its export markets with the bloody and siege-laden disintegration of the Former (federation of) Yugoslavia. Similar vicissitudes were experienced by other countries in transition.
A huge, unsustainable internal debt between the companies themselves (each acting in the dual role of supplier and of client) – and between the enterprises and the state. This burden was only very mildly ameliorated by bartering. Mostly, it led to severe cases of insolvency or lack of liquidity and to a reversion to pre-monetary economic systems.
This lack of liquidity also prevented the investment in capital assets (plant modernization, personnel training, data processing and decision making tools) necessary to sustain efficiency gains, increase productivity and maintain competitiveness.
Gross inefficiency of the industrial plants which was due to massive hidden unemployment, low maintenance standards and the aforementioned lack of capital.
Outmoded and outdated management techniques. The old guard of managers in industry were ill adapted to the rapid changes wrought about them by capitalism and wise industries. They continued “to fight the last (and lost) wars”, to bemoan their fate and not to provide a sense of direction, a vision of the future and the management decisions which are derivatives of the above.
Faulty legislation, dysfunctioning law enforcement systems, crony capitalism and privateering (the sale of state assets to political allies or to family members of influential political and economic figures) – all led to fuzzy ownership structures and to a virtual abandonment of the protection of property rights. In the absence of clear ownership and under the threat ever–imminent loss of property, the profit motivation has degenerated into speculative binges and bouts and decision making was transformed into power contests.
These industries produced and manufactured goods in accordance with some central planning, an theoretical model of the marketplace, or rule-of-thumb thinking. The result was mountains of shoddy merchandise, of low quality and very little demand. Antiquated design and lack of responsiveness to market needs and consumers’ wishes only exacerbated the situation.
This absence of market research, market analysis and, more generally, market awareness led to the almost complete absence of marketing, sales promotion, or advertising (in the modern sense). Paradoxically, the communist era industries demonstrate a deeper belief in “the invisible hand of the market” than do their capitalist brethren. They entrust the function of the dissemination of information and its influence upon the decisions made by consumers – entirely to the market. If the product is either needed or good enough, it will sell itself, was the thinking. Marketing and advertising were thought of as illegitimate cajoling, pushing consumers to make decisions that they would not have made otherwise.
Industry operated under all these crushing constraints in an environment of heavy to impossible regulation, trade protectionism (which denied them the benefits of competition), corrupt bureaucracy, rolls of red tape, heavy political involvement and a total distortion of economic considerations by “social” ones. This was further compounded by a decaying banking system (where the distinction between lender and borrower was rendered superfluous by the concept of “social capital” which belongs to everyone equally). It could not supply the industrial sector with capital replenishment and the total absence of capital markets did not help.
Last – but far from being least – was the non existence of a “Protestant” or “Asian values” work ethic. Low salaries, feigned “equality” and absent profit motivation – all led to a disincentived work environment. The norm in many of these countries is still: “come to work, open and close the door and get paid”, as the saying goes. This is the benign case. Stealing from the workplace has become an acceptable way of complementing income and moonlighting was done at the expense of the official “primary” workplace.
But it seems that the worst is over and that the scene is fast changing.
However sloppy or criminal the process of privatization, still hundreds of thousands of new capitalists were brewed and introduced, willy nilly, to the profit motive. The spectre of capital gains, made most of them (except the most hardened) discover marketing, advertising, design, export, trade financing, public offerings, strategic partnerships, concessions and business plans.
Industries are much more focussed and market oriented. The new religion of capitalism, replete with entrepreneurship, free choice, personal profit and the invisible hand of the market has been successfully phased in.
Both the domestic markets and international trade are recovering nicely. Consumption is growing and with it exports. The political level is withdrawing from the scene through more or less successful privatization or transformation schemes and appropriate legislation to minimize the role of the state in the economy.
Some countries have opted to “skip” some of the industrial portion of the classic, evolutionary economic cycle – and go directly to investing in information and knowledge industries. They educate their workforce and retrain it accordingly. They invite multinationals – using a cocktail of tax incentives and direct grants and subsidies – to open back office operations (accounting, administration) and telemarketing operations in their countries. This calls for lower investment than in classic (or sunset) industries and has a high value added to the economy.
But the single largest driving force behind economic recovery is foreign capital. Foreign Direct Investment (FDI) is pouring in and with it: new markets, technology transfers through joint ventures, new, attractive product mixes, new management, new ideas and new ownership – clear and decisive.
So, industrial production is picking up and will continue to grow briskly in all countries in transition that have the peaceful conditions necessary for long term development. If Macedonia will follow the examples of the Baltic countries, of Poland, the Czech Republic, Hungary, Slovenia, even Russia, Ireland, Egypt, Chile, Indonesia, Israel and the Philippines – it will double its industrial production within 10 years and redouble it again in 15 years.
Israel, Ireland and … France and Japan (!) are examples of poor, agricultural countries, which made the transition to thriving industrial countries successfully.
But was their secret? How come Hong Kong and Singapore are richer than Britain by some measures? Together with South Korea and Taiwan they have been growing at an average rate of 7.5% annually for the last 30 years. China, Indonesia, Malaysia, Thailand, The Philippines have joined the “Asian Tigers” club.
They all share some common features:
Massive injections of labour (by massive immigration from rural areas to the cities, urbanization). Massive injections of capital and technology. The above injections were financed by an exceedingly high level of savings and investments (savings amount to 35% of GDP, on average).
Wise government direction provided through a clear industrial policy. This, though, is a double edged sword: a less wise policy would have backfired with the same strength.
A capitalist, profit seeking mentality.
An annual increase of 2-3% in productivity which is the result of copying technology and other forms of technology transfers from the rich West.
Strong work, family and society ethics within a cohesive, conformist and supportive social environment (the “Asian Values” are the Eastern equivalent of the “Protestant Work Ethic”).
Low taxation and small government budgets (less than 20% of GDP compared to twice as much in the West – and 3 times as much in France today).
Flexible and mobile labour and c (in certain countries) capital markets. When mobility or flexibility are restricted (Japan) it is the result of social treaty rather than of legislation, regulation, or other statist intervention.
A firm, long lasting commitment to education and to skill acquisition, even in hard circumstances. The number of educated people is low but growing rapidly, as a result.
Openness to trade, knowledge and to technology.
Imports are composed mostly of investment goods and capital assets. The culture of conspicuous, addictive (or even normal) consumption is less developed there.
Still, these countries started from a very low income base. It is common economic knowledge that low income countries always grow fast because they can increase their productivity simply by purchasing technology and management in the rich country. Purchasing technology is always much cheaper than developing it – while maintaining roughly the same economic benefits.
Thus, Hong Kong grew by 9% in the 60s. This growth coefficient was reduced to 7.5% in the 80s and to 5% in the 90s. But China, Malaysia, Thailand and Indonesia are likely to grow annually by 7-9% during the next decade.
Not that these countries are exempt from problems. The process of maturation creates many of them. There is the dependence on export markets and volatile exchange rates (which determine the terms of trade). When the West reduced its consumption of microchips and the Dollar appreciated by 50% against the Japanese Yen – all the tigers suffered a decline in economic growth rates, current account deficits of 5-8% of their GDP, strikes (South Korea) and Stock Market crashes (Thailand, to name but one of many). In Singapore and in Hong Kong, the industrial production plummeted by 5% last year (1996).
Years of easy money and cheap credits directed by the state at selected industries starved small businesses, created overinvestment and overcapacity in certain, state-supported, industries and destabilized the banking and the financial systems. It helped forge infrastructure bottlenecks and led to a shortage in skilled or educated manpower. In Thailand only 38% of those 14 years old attend school and in China, the situation is not much better.
Finally, the financial markets proved to be too regulated, the government proved to be too bureaucratic, corruption proved to be too rampant (Indonesia, Japan, almost everybody else). There were too many old conglomerate-type mega – companies which prevented competition (e., the Chaebol in South Korea or the Zaibatsu in Japan).
So, the emerging economies are looking to Hong Kong, Singapore and Taiwan to supply the ideal: truly flexible labour markets, no state involvement, lots of nimble, small businesses, deregulated markets, transigent industrial policies. These countries – and the rest of the Asian Tigers – are expected to beat the West at its own game: money. They have many more years of economic growth ahead:
Each Korean worker has only 40% of the capital goods, available to his Western comrade, at his disposal. Putting more technology at his fingertips will increase his productivity.