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Lessons from the Asian miracles

Bailey Morris
Saturday 25 June 1994 23:02 BST
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MUCH has been written over the past year about the emerging 'miracle' economies of eastern Asia and their relevance to the rest of the world - especially to other developing countries trying for the same level of success.

Having just come from a conference in Singapore on a related set of issues, I am struck by how much is known about these extraordinary successes but also how much is not known. For example, it is relatively easy to identify the components that produced the spectacular growth rates of between 6 and 18 per cent but not so easy to explain the processes that were used or, more importantly, the players involved. Who took the critical decisions that led to success and why did they take them?

In South-east Asia and China today there is a certain smugness that emerges in talks with Westerners, based on the growing conviction that Asians have got it right and the rest of the world has got it wrong.

That is not to say that all of these miracle economies are the same, or, indeed, achieved their successes in the same way. Rather, there is growing consensus among Asians that they share certain common values and traits that lift their economies above chronic underdevelopment in Africa and above the growing violence, unemployment and stagnant growth that plague many of the Western economies. In other words, the Asian 'model', if there is such a thing, is the better course to follow.

The Asian specialists at the Singapore conference, sponsored by the Salzburg seminar, listed some of the common components of this model while also acknowledging the big differences among east Asian economies and China.

In addition to a favourable external environment, many of these common features are well known: overarching strategies for export-oriented, investment-driven economic growth; strong business-government partnerships; stable macroeconomic policies; able bureaucracies populated by technocrats and others who operate in a sufficiently transparent manner as to minimise corruption; a strong emphasis on education in addition to other social capabilities, such as family structures, that promote progress; and, above all, flexibility.

It should also be noted that most started with a relatively clean slate on which to write such programmes and that almost all were and are playing 'catch up' with the West.

Still, it is very clear that older Western economies may have as much to learn from the Asian experience as do poorer, less developed countries.

This is not to say that all is perfect in these regimes and will remain so. But it does imply that the successful Asian countries are working simultaneously with economic and social capabilities to achieve broader gains that benefit large segments of society - not just the favoured few. This sense of equity, when it works, is what produces consensus on broader national goals that are mainly handed down from the top by relatively enlightened bureaucrats who seem to have gained the people's trust instead of their enmity.

For example, during Singapore's 1985 recession, the government went to workers and negotiated a 10 per cent cut in social security payments in order to cut the wage bills of corporations to stimulate the economy. This was accomplished without the usual demonstrations and protests and the payments were made up after the recession, over a period of three years. The 'informal' deal succeeded because it was perceived as good for all.

Interestingly, according to the work of Thomas Rohlen of Stanford University, to George Yeo, Singapore's Minister of Culture, and others, the successful city state played a greater role in the success of these economies than did the more traditional 'nation state' structure. In other words, small can be more beautiful, particularly when the smaller economic entity becomes a driving force within the bigger whole.

Singapore's success as a highly disciplined city state, for example, has prompted regions of China not only to study it as a model but also to hire Singaporean advisers to guide new economic and social initiatives.

It is also clear that the successful Asian economies have tended to copy each other, unlike older Western economies that tend to go their own separate ways. A recent case in point is India, which has benefited very much from its successful plan to catch up with its arch rival, China.

However, it was not until 1991 that India threw out its old Soviet-style economic structure in favour of free markets and free trade, a liberalisation strategy that China had adopted 15 years previously, in 1979. Thus India has a lot of catching up to do. China's exports, for example, are about to cross the USdollars 100bn mark - four times the volume of India's.

But India's economy has taken a huge leap forward, achieving a rate of export growth of 21 per cent, foreign exchange reserves of USdollars 14bn, and direct foreign investment of USdollars 4bn. Furthermore, India's economic strengths can be viewed as China's weaknesses: an educated urban middle class of 300 million people; widespread use of English (now the world's preferred language of transaction); the world's third largest reserve of skilled manpower; a thriving private enterprise base; a big industrial base; a patent protection system; functioning stock markets; and an impeccable record of repatriation of foreign capital.

All of this suggests that, with the right policies, India could catch up to become an equally powerful economic player in the region.

In India's case, we know that an unlikely government has benefited from taking the China challenge very seriously and allowing major players such as Finance minister, Manmohan Singh, to inaugurate reforms that have not only silenced domestic left-wing critics but also integrated the economy more into the fast developing Pacific region.

The lessons would be better if we could trace the who's and why's for the entire region.

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