ASPECTS OF ECONOMIC PERFORMANCE IN THE “MIRACLE” ECONOMIES

1. ASPECTS OF ECONOMIC PERFORMANCE IN THE “MIRACLE” ECONOMIES ECN 4169 ISU SEMASA PEMBANGUNAN EKONOMI DAN PERANCANGAN

2. GROUP MEMBERS • SITI AMINAH BINTI SHAFIE 122590 • LIM KIM YONG 122784 • NEO HON MUN 122891 • SYARIZA SHAMSUDDIN 126909

3. What explained the miracle? • Miraculous development tends to imply luck or chance in the process of development. • What is not stated but must have been important is high levels of discipline on the part of society at large and of leaders both in government and the private sector.

4. The key conditions for growth appeared to involve ensuring correct macro-economic fundamentals : high savings rates; low budget deficits; low inflation; low external debt; keeping appropriate exchange rates; maintaining low price distortions; responding quickly to macro-economic shocks. • The miracle economies includes South Korea, Singapore, Taiwan and China.

5. Listing of the key driving forces and enabling factors could include: • High rates of savings since the 1960s (this later became self-reinforcing, with high growth rates, investment inflows and rapid demographic transitions permitting even more saving). • Government policies are reported to have also encouraged (and sometimes compelled) increased savings through a variety of means. • focus on export growth

6. high rates of investment (in both human and physical capital) - these alone reportedly accounted for about two-thirds of HPAEs growth. • The economies reported to be mostly investment-driven included Indonesia, Malaysia and Singapore. PR China's recent growth also appears to be investment-driven. Focusing such investment on key sectors until comparative advantage was reinforced or created seems to have been an important contributor to success in the high-performance economies.

7. Openness to foreign ideas and technology (and local investment in technological development). For example, during the 1980s, both Republic of Korea and Taiwan Province of China increased their formal R&D expenditures from approximately 1% to 2.5% of GNP. This has been a key contributor to productivity-driven growth.

8. Savings and investment High Growth Rates Of Savings And Investment Table 1 Gross Domestic Savings Rates (% of GDP) Economy 1960 1970 1980 1990 2000 China, People’s Rep. Of 29.0 34.1 38.7 38.9 Hong Kong, China 18.0 28.2 33.5 35.8 32.3 Korea 1.9 15.1 23.8 37.2 32.6 Taiwan 17.8 25.6 32.6 28.1 25.2 Indonesia 12.4 14.3 29.2 32.3 25.7 Malaysia 27.4 26.4 32.9 34.4 46.7 Philippines 16.2 21.9 26.6 18.7 16.5 Singapore 8.8 18.4 38.8 43.4 49.6 Thailand 14.1 21.2 22.3 34.0 32.3 Bangladesh 8.6 10.5 2.2 12.9 17.9 India 13.6 16.4 18.2 26.8 21.0 Nepal 2.6 11.1 7.9 14.7 Pakistan 8.9 7.8 13.5 14.0 Sri Lanka 15.8 12.0 13.2 17.3 US 19.3 18.3 19.6 16.4 17.0 UK 17.8 21.2 19.8 17.6 16.0 Japan 33.3 40.3 31.3 33.0 28.0

9. Table 2 Savings-Investment Gap As A Percentage Of GDP Economy 1960 1970 1980 1990 2000 China, People’s Rep. Of 5.0 13.2 2.4 Hong Kong, China 8.4 0.7 9.4 6.1 Korea -9.4 -10.2 -3.3 -0.1 4.2 Taiwan -2.4 0.0 2.0 5.6 1.7 Indonesia 8.3 3.9 1.4 Malaysia 15.5 8.2 1.8 1.4 21.2 Philippines 2.7 3.8 -0.6 -4.4 -1.6 Singapore -14.2 -1.9 10.9 20.0 Thailand 0.2 -2.6 -5.5 -6.3 10.2 Bangladesh -9.1 -4.2 -5.1 India 0.7 1.8 -1.1 3.6 -0.9 Pakistan -5.4 -9.8 -3.8 0.0 Sri Lanka -20.5 -7.1 -10.7

10. Growth Performance • Quick overview of East Asia. Include Japan, South Korea, Hong Kong and Taiwan. • Hong Kong belongs to China but is an separate administrative area. • East Asia is a big region with its total GDP is 7,347 billion US dollars (in 2000).

11. In terms of per capita GDP from US$37,546 for Japan, US$28,265 for Singapore and US$24,403 for Hong Kong. • The different of development has mainly resulted from different timing of starting modern economic growth at the market economy. • Japan started the MEG in 1985, while Hong Kong, Korea, Taiwan and Singapore started after World War Two.

12. In a decade from 1987, East Asian economies responded successfully to the globalization challenge and achieve a steady high growth. • Most of them achieved a rapid steady growth of 6-8 percent, except for Japan after 1992. • While Hong Kong during 1989-92 because of political reasons for the last two. • Their rapid growth was described as ‘East Asian miracle’ in the World Bank’s report.

13. The primary mechanism of their rapid development was a catching-up industrialization. • Introducing new products to domestic market trough import, developing domestic production to substitute import, and export their product abroad. • This sequence of development was witnessed from labor-intensive manufactures.

14. The successful industrial was attributed to many factors. • The World Bank report listed such good fundamentals as high saving ratio, good work ethics, propensity for education and cautious macro-economic policy management. • Their governments’ industrial policy guided the catching-up industrialization and provided financial support to promising industries.

15. Their potential advantage in those industries were apparent from their predecessors experiences. • The catching-up was achieved by indigenous firms but it was helped by FDI by preceding economies. • The former firms invested in the latter to take advantage of its cheap and to export its products to a third market or even back to their own home market, which promoted export and reverse import.

16. Growth Performance

18. Japan

19. Summary • From the summary above we learn that countries with miracle economies are not just because of luck. It is also comes with hard work from both the private sector and government sector working together to achieve the miracle ‘ economy‘.