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East Asian Development Strategy: Lessons from the Four Tigers for Emerging Nations

The East Asian development strategy, exemplified by the rapid economic growth of the Four Tigers (South Korea, Taiwan, Hong Kong, and Singapore), serves as a model for developing nations seeking industrialization. This strategy, inspired by Japan's post-WWII recovery, emphasizes a strong business-government partnership. Governments provide support without controlling businesses, encourage foreign direct investment (FDI), and facilitate exports through Export Processing Zones. The approach combines elements of globalization with a focus on nurturing local industries, demonstrating that targeted intervention can lead to significant economic transformation.

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East Asian Development Strategy: Lessons from the Four Tigers for Emerging Nations

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  1. East Asian Strategy • Used by the Four Tigers • The only development strategy that has successfully moved developing states to industrialized states in the 20th century • Developing nations wants to know: can it work for us?

  2. 1. Japan as the Model • Strategy based on Japanese economic development model that rebuilt Japan after WW II • But Japan was reindustrializing • These nations are industrializing for the first time

  3. 2. Business-Government Partnership • The government of the nation assists business • It gives companies advice, capital (money), access to technology, and will protect businesses from foreign competition • It does not control business • The purpose is to generate wealth • This is not a command economy; not communism • It is government intervention to help companies make lots of money

  4. 3. Open up the Economy • Open the economy to foreign direct investment (FDI) • Welcome foreign MNCs • Try to attract them to your nation in hope they will build factories, employ your people • This is a liberal aspect of the strategy because you are trying to integrate into the world economy (globalization)

  5. 4. Exports! • The purpose of welcoming the MNCs is to hope that they will build products in your country, more accurately, they will build factories so that your citizens can build the company’s products and then export them • The key to wealth is exports to larger markets in Europe and the US • As a smaller nation, you know your nation will never be wealthy until you can sell products to larger markets

  6. 5. Export Processing Zones • To attract FDI, you create Export Processing Zones. These are special zones where foreign MNCs can build factories. You attract those factories by: • Relaxing labor laws, environmental laws, safety laws • Reducing tariffs for products shipped to those areas • Having highly skilled, but comparatively lower wage workers (compared to the US, Japan, and Europe) • See PPT Slide #17 in the Developing World PPT

  7. 6. Building Home Companies • You also prepare to create world class companies of your owns through several strategies • Create a world class educational system • Rules on foreign investment that may require foreign MNCs to invest in your nation through a joint venture with a local company • Rules that require a certain number of local people to be in management positions in any foreign MNC operating in the nation • You are preparing a managerial class that has experience and technology and is ready to break away from the foreign MNC and then compete with it

  8. Results • The strategy has worked! • The Four Tigers were the only nations to go from poor to rich in the 20th century • They did it through a semi-liberal (integrating with the world economy) and semi-nationalist (some protectionism of local businesses) strategy • They have embraced and pioneered globalization • Now everyone is trying the strategy (with a few exceptions)

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