East Asian Strategy

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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?

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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

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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

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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)

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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 companys 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

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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

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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

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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)