Growth Experiences of the Asian Economies

Growth Experiences of the Asian Economies

DOI: 10.4018/978-1-4666-5848-6.ch002
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This chapter describes the growth experiences of the sampled Asian countries, which are used as reference points in this textbook. This niche sample reflects the strong growth performance of these economies. Following a brief geographical backdrop, their economic growth outcomes, the binding constraints to growth, and some of the important underlying growth factors are discussed. The chapter concludes by discussing their expected short-term growth outlook, especially after the GFC. As indicated in chapter 1, the survey shows that the EAEs (South Korea, Taiwan, Hong Kong, and Singapore) have recorded remarkable rates of growth since the 1960s. Data also shows that China and India's growth performances are commendable as well, although India has not recorded rates close to those of China. The other countries (Indonesia, Thailand, Malaysia, and Philippines) have also registered high rates of growth when compared to similar developing countries around the world. While the constraints to growth remain and are actually amplified by the GFC, the important growth factors that have added to the economic resilience of these economies have been openness to trade, accumulation and mobilization of human and physical inputs (including labor force), better infrastructure, and improved institutions. However, important trade related risks remain and these have been affecting the Asian economies severely. Detailed analysis of trade as an important driver of economic growth in the largest and most influential economy, China, is included in chapter 9.
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Although, some economists argue that developed economies have nothing much to learn from the Asian growth experience, we conjecture that the Asian syndrome can provide some useful lessons to other developing economies and those struggling to record any decent rates of growth1. Therefore, this chapter summarizes the growth experiences of the sampled Asian countries. It first provides a regional overview and proceeds to discuss each of the economies’ growth outcomes, their prospects and constraints to growth. Towards the end, a summary of the short-term growth outlook for the region is also presented. Finer details regarding the macroeconomic indicators and sectoral performances have been avoided because these are easily available from the Asian Development Bank (ADB), United Nations’ (UN) Websites and individual country reports. These details fit poorly into the broad macro-picture projected in this text. In addition, presenting too many minor sectoral details would pronounce economic growth as being synonymous to the short-term improvements in output, rather than it being a more comprehensive longer-term welfare enhancement mechanism. As is stated in this text, economic growth must be understood as a process for sustaining long-term prospects of creating welfare enhancing outputs.

The details in this chapter are important because the analysis presented later tends to reflect on the stated growth outcomes of these economies. However, unlike the above international institutions which produce a periodic review, what is included below is a snapshot of the economies’ growth paths from 1960-2010 highlighting the broad macro picture which has been of interest to many readers of economics. It is to the disbelief of many that this region grew so significantly in the last four decades or so, especially by working closely with China (but not so much with Japan) and integrating well into the global markets. What surprises many is their pace of growth. The sub-region (EAEs) has shown very strong performance in this period, see details in Chapter 1; also summarised below for brevity. The Asian economies were nowhere known to be significant in the 1950s and today are in the centre stage of world growth and trade. It seems that South-South trade did work as strongly as anticipated, but these economies have sourced markets in the developed countries. However, there are some serious contagion issues which make the Asian economies highly vulnerable to international developments. It is true that since productive resources have moved from developing (including from these economies) into the developed world, the developing economies’ advancement to respectable affluence levels is strongly undermined by the first order threats resulting from intense competition in trade, relative dis-advantage in technology, unstable markets and domestic economic fragility. Yet even then, the Asian economies have shown that the quest for growth is the key to economic success, everything else (to them, at this stage) seems to remain secondary. This has led to a second round re-thinking on the quest for growth in Asia. Raising income disparity, climate change and excessive market penetration are on the high of the list of issues being discussed on these economies. The fact that they face intense competition (reflected in their terms of trade) and are affected by resource deficiencies imply that their growth trajectories will be shaped with relatively higher difficulties compared to the developed economies. Therefore, this regional sample is an important and interesting one for investigation. This chapter (and also the text), is restricted from delving into development issues facing these economies although some have only been mentioned. This is because I do not want to shift the focus from economic growth to debates on development.

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