The story of the four Asian Tigers is well known today: beginning from positions of relative disadvantage, these countries proceeded to overcome challenges against all odds and develop to a point of disproportionate economic significance. Their level of development was so great that they simply shrugged off global financial crises and emerged relatively unscathed. These economies, namely Singapore, Hong Kong, Taiwan, and South Korea, and their growth, has been heralded as the emergence of Asia as a global economic power. Consequently, this spawned discussions as to why these economies grew so rapidly. The most notable ones are, Prime Minister Lee Kuan Yew’s argument that Asian values are to be credited as well as the World Bank’s report crediting the neo-liberal policies such as export-oriented industrialisation, low taxes, and minimal welfare policies in these states.
All of these arguments, in some way, accept that the four Asian Tigers began as disadvantaged states, with minimal land and limited resources.
However, this assumption may not be the case. While minimal land tends to mean less capital to work with and fewer resources mean a greater need for imports per person, it also means that the total amount needed to import is less as a whole. The key factor to explain this would be the concept of market saturation. Every good has natural consumption levels limited by population size and income before it becomes diffused, or saturated. Lower populations and smaller size, therefore, results in lower bounds and less need for imports. The fiscal health of these states, therefore, can be explained by the fact that they never have to import much for their citizens. Additionally, because exports are directed towards an ever-expanding world market, they can export much more than proportionate to their size. In fact, many of the Asian Tigers seized upon this. Rather than having to focus on developing new infrastructure for developing the rural sector on a massive scale, they simply capitalised on the existing infrastructure set up for exports. Singapore repurposed a British Navy harbour on its southern coast alongside adjacent docks to form Keppel Harbour, and South Korea made use of an existing harbour at Busan for exports to Southeast Asia, Japan, and the United States.
While the Asian Tigers were experiencing their meteoric rise, the Tiger Cub Economies were forced to adopt reforms for their agricultural sectors to reduce their dependence on imports. In 1965, food imports accounted for a massive 19 per cent of the Philippines’ import bill. In such a position, who can blame them for wanting to reduce their deficit? To this end, Malaysia established the Federal Land Development Authority to settle rural areas and offered grants for the repurposing of land for agricultural purposes, and even still did not manage to produce enough to be self-sufficient; Indonesia instituted Bimbingan Massa (mass guidance) and Intensifikasi Massal (mass intensification) to support rice cultivation. The main point that should be understood is not that these countries were foolish for not adopting export-oriented policies, but that they could not. In contrast, the Four Asian Tigers, without significant populations to feed and therefore, trade deficits to rectify, could pursue their export-oriented industrialisation without worry.
Similar patterns were seen throughout the rest of Asia. industrialisation was not absent but was mostly focused on import substitution rather than the export-oriented industrialisation that the Tigers are famous for. Indonesia focused on modernising its oil industry, Malaysia focused on developing its automobile industry with help from Japan, and China focused on developing its agricultural industry. All of this required capital and resources, China, in particular, spent unthinkable amounts constructing dams, irrigation systems, and developing its agricultural sector.
After these projects were completed and settled, these countries were able to achieve some form of self-sufficiency in terms of their import substitution, and could, therefore, move towards more export-oriented industrialisation. It should, therefore, come as no surprise that China has risen as an economic behemoth in recent years and that the economies of many Southeast Asian economies have formed what is known as the tiger cubs.
Even the Four Asian Tigers themselves engaged in some forms of protectionism and import substitution policies, though not to the extent seen in the Tiger Cub Economies. South Korea promoted their ‘three white industries’ of cotton, sugar, and flour in order to reduce imports; Taiwan forcibly took over the land from landowners for agricultural production, and Singapore engaged in low levels of textile production. Both also selectively taxed imports to make them more expensive to encourage domestic production. Making the statement that export-oriented industrialisation is the only key to their economic success thus overlooks the bigger picture, that export-oriented industrialisation was part of a larger plan for overall fiscal health.
Import substitution policies were implemented, therefore, not as an opposite to export-oriented industrialisation, but as a precursor. The four Asian Tigers, with their small size and small population, did not have the same concerns of having massive trade deficits because their domestic markets were easily saturated. They were thus able to easily skip the implementation of import substitution policies, and move towards export-oriented industrialisation. While it is true that export-oriented industrialisation has been the great money maker for many states, it is important not to look at this policy in a vacuum. Policies interact and are put in place in response to events and circumstances, including previous policies. Export-oriented industrialisation is simply the continuation of a policy that pursues a favourable balance of trade when import substitution has achieved local market saturation. The supposed variation in policy, where the Asian Tigers foresaw the limits of protectionism and therefore moved towards export-oriented industrialisation, is therefore not sufficiently explained by the genius of the tigers, but the ease of which they completed the first phase of industrialisation through import substitution, and developed their own specialised industries for export. The other Asian countries adopted export-oriented industrialisation late, simply because of their large land and population size relative to the small Asian Tigers. It should come as no wonder then, that the smaller Asian Tigers experienced massive increases to their wealth first, while the larger Tiger Cubs only experienced this later.
What this possibly means is that the World Bank’s report, as well as many of the International Monetary Fund (IMF)’s plans that countries in economic turmoil accept, is not wrong in itself, but misplaced or misguided by an imperfect examination of economic history. The World Bank is indeed accurate in pointing out the power of export-oriented industrialisation in creating economic growth, and the IMF is also correct in its assumption that the structural adjustment programmes, with all the conditions the IMF insists on, can promote that industrialisation. But these policies must take into consideration the economic situation of the countries receiving them, lest they result in greater suffering and even poorer economic health. The neo-liberal policy of export industrialisation does work, but it must work, however, ironically it seems, on the back of mercantilist principles from which neo-liberalists seem so opposed to.