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Asian Tigers
CHINA
China's economy during the past 30 years has changed from a centrally planned system
that was largely closed to international trade to a more market-oriented economy that has a
rapidly growing private sector and is a major player in the global economy. Reforms started in
the late 1970s with the phasing out of collectivized agriculture, and expanded to include the
gradual liberalization of prices, fiscal decentralization, increased autonomy for state
enterprises, the foundation of a diversified banking system, the development of stock markets,
the rapid growth of the non-state sector, and the opening to foreign trade and investment.
Annual inflows of foreign direct investment rose to nearly $108 billion in 2008. In recent
years, China has re-invigorated its support for leading state-owned enterprises in sectors it
considers important to "economic security," explicitly looking to foster globally competitive
national champions.The restructuring of the economy and resulting efficiency gains have
contributed to a more than tenfold increase in GDP since 1978. Measured on a purchasing
power parity (PPP) basis that adjusts for price differences, China in 2009 stood as the secondlargest economy in the world after the US, although in per capita terms the country is still
lower middle-income. The Chinese government faces numerous economic development
challenges, including: (a) strengthening its social safety net, including pension and health
system reform, to counteract a high domestic savings rate and correspondingly low domestic
demand; (b) sustaining adequate job growth for tens of millions of migrants, new entrants to
the work force, and workers laid off from state-owned enterprises deemed not worth saving;
(c) reducing corruption and other economic crimes; and (d) containing environmental damage
and social strife related to the economy's rapid transformation. Economic development has
been more rapid in coastal provinces than in the interior, and approximately 200 million rural
laborers and their dependents have relocated to urban areas to find work - in recent years
many have returned to their villages.China continues to lose arable land because of erosion
and economic development.The Chinese government seeks to add energy production capacity
from sources other than coal and oil, and is focusing on nuclear energy development.
Throughout 2009, the global economic downturn reduced foreign demand for Chinese exports
for the first time in many years. The government vowed to continue reforming the economy
and emphasized the need to increase domestic consumption in order to make China less
dependent on foreign exports for GDP growth in the future.
HONG KONG
 Hong Kong has a free market economy highly dependent on international trade and
finance - the value of goods and services trade, including the sizable share of reexports, is more than four times GDP. Hong Kong's open economy left it exposed to
the global economic slowdown, but its increasing integration with China helped it
recover from the downturn more quickly than many observers anticipated. Hong Kong
over the past few years has become increasingly integrated with China through trade,
tourism, and financial links. The Hong Kong government is promoting the Special
Administrative Region (SAR) as the site for Chinese Renminbi (RMB)
internationalization.
TAIWAN
 Taiwan has a dynamic capitalist economy with gradually decreasing government
guidance of investment and foreign trade. In keeping with this trend, some large, stateowned banks and industrial firms have been privatized. Exports, led by electronics and
machinery, generate about 70% of Taiwan's GDP growth, and have provided the
primary impetus for economic development. This heavy dependence on exports makes
the economy vulnerable to downturns in world demand. In 2009, Taiwan's GDP fell
by 2.5%, due primarily to a 20% year-on-year decline in exports.
 Taiwan's diplomatic isolation, low birth rate, and rapidly aging population are major
long-term challenges. Free trade agreements have proliferated in East Asia over the
past several years, but so far Taiwan has been excluded from this greater economic
integration, largely for reasons of diplomacy.
THAILAND
 With a well-developed infrastructure, a free-enterprise economy, generally proinvestment policies, and strong export industries, Thailand enjoyed solid growth from
2000 to 2008 - averaging more than 4% per year - as it recovered from the Asian
financial crisis of 1997-98. Thai exports - mostly machinery and electronic
components, agricultural commodities, and jewelry - continue to drive the economy,
accounting for as much as three-quarters of GDP.
 The global financial crisis of 2008-09 severely cut Thailand's exports, with most
sectors experiencing double-digit drops. In 2009, the economy contracted about 2.8%.
The Thai government is focusing on financing domestic infrastructure projects and
stimulus programs to revive the economy, as external trade is still recovering and
persistent internal political tension and investment disputes threaten to damage the
investment climate.
JAPANESE ECONOMY
1974-1990 The Slow Growth Period
When it came to the 1970s,Japan included in the class of the industrialized countries.Japanese
goods had their place in world markets with competitiveness and technological inno
vation. In the 1970s and 80s,the most important events affecting the economy was oil crisis and
the yen appreciating. These two developments caused slow growth and lead the emergence of
structural changes in industial arena. Japan economy was open to technological innovation so got
positive conclusions from these unfortunate situations. In the years 1973 and 1979 experianced two
oil crises,the Japanese industry which depends on entirely on imported energy created fundamental
changes.Because of the growing US trade deficit in 1973, Bretton Wood system collapsed, Yen was
upvalued and 1$=272,18 yen was increased.Japanese goods became more expensive in the world
market which adversely affected the competitiveness of exports.Although yen’s value was on bumpy
road generally was an upward trend. The Japanese economy after the second war, was the first time
in 1974, shrinking 1.4 percent. Between 1974-90 no reduction occured but could not reach high-rate
growth and the average growth of this period was 4.1 percent.
1997 Asian Crisis
Southeast Asian crisis which affected world economy and especiaally financial markets started in
Thailand and quickly spread to Asia. Southeast Asian economic crisis began in summer 1997,
emerged because of conflict of international trade and financial institutions which were managed
badly. The crisis started in Thailand countries in the region were in an intense process of economic
integration so the crisis spread to the entire region. The years before the crisis Indonesia,South
Korea,Malaysia,Philippines and Thailand have suffered apital flows. Intensive capital inflows,
especially short-term capital movements can be attributed to irregular financial liberalization.
Outreach process, starting with the sectors were granted,and this has led to an increase in shortterm capital movements.Non-resident purchases of securities on a stock exchange and direct
investment were limitated (especially in South Korea), but international financial liberalization has
increased the possibility of short-term debt. An orderly financial liberalization may prevent
progression of short-term debt but if financial liberalization is not made in the correct order
especially there is no effective monitoring system ,financial fragşlşty will increase. In Asian countries
which had crisis there have been an improvement in the supervision of banking system but these
were not enough.
Also in Asian countries there was close relationship between large industrial companies,banks
and politicians. Due to the guaranteed on deposits,banks irresponsibly opened credits to larde
industrial companies and bad loans continued to increase. one of the reasons of this type of loans
was the dominant opinion about that state witt rescue the wrecked banks.Asian countries' national
interest rates are different from international interest rates because of this reason large-scale foreign
capital supply and the ability of finding loans of financial or non financial various institutions in the
international markets are combined so Asian banks' obligation in Bank Of International Settlements
increased. Thus, Asian countries' foreign exchanges stocks decreased according to external debt.
Because of fear of devaluation, foreign investors wanted to change domestic currenct toforeign
currency. In Asian countries such as Mexico,national currency appreciated in real terms caused
increase in short-term external debt, current account imbalance, instability and pressure in the
foreign exchange market. In such a case, they understtod that the market exchange rate policies of
Asian countries did not continue for a long time and speculative movements gained momentum
about the exchange rate. Asian countries exports became relatively expensive so exports decreased
in addition this deficit in current account balance,in construction industry which banks gave loans
most prices decreased rapidly caused devaluation in Asian countries. In order to prevent rapid
depreciation of national currency, increase of interest rates and the use of international reserves
could not prevent bankruptcy of exchange rate policy in Asian countries.
The Asian crisis started in Thailand affected other countries in the region quickly. In the stock
market of Indonesia, South Korea, the Philippines and Malaysia the value,price and transaction
volumes of stocks decreased.The effects of Asia crisis on Turkey were indirect. The crisis experienced
in new emerging markets and perceived as a regional later started to be seen common crisis in all
emerging crisis. As a result of this, foreign investors took their money and returned to their country.
At the beginning Turkey was not affected too much but in this stage borrowing from international
capital markets became a problem and affected balance of payments in negative way. Turkey
entered 2000 with the crisis virus.The economy experienced downsizing in 1998 and 1999,Simple
average of growth rate of this period was 1.3 percent
2000-
The Japanese economy grew in 2000 but in low level.In 1999,the growth rate was 0,2 percent but
in 2000 rose to 1,4 percent.In 2001,the reduction of world economy,falling down %50 per cent of
foreign trade surplus affected the growth negatively. In 2002,with the improvement of the global
environment, ımplementation of economic measures and positive development,foreign trade growth
reached zero.
Although general economic situation did not change radically, the first quarters of 2003 showed
more positive.During this period can be mentioned a remarkable growth and GDP growth.2004 was
the year Japan's economy finally broke out of the stagnation that lasted for a decade after the
collapse of the bubble. The stagnation was initially caused by corporations becoming unable to repay
their expanded debts.The recovery that began in 2003 indicated that Japan's economy had finally
overcome these burdens and had begun to take new steps on the route to catch up with the rest of
the world.China has become the closest partner for Japan's economy next only to the U.S. The
Chinese economy is experiencing fast growth but at the same time is becoming a large destabilizing
factor for the world, especially in terms of supply and demand of international resources such as
energy consumption, environmental destruction, observation of international rules as in protection
of intellectual property, and the foreign exchange system’s treatment of the yuan. China must
become a stable and respectable leader in the international economic system not only for China but
also for the world, especially Japan. Japan, through both official and private channels, must endeavor
to improve and strengthen ties with China and support its economy to grow steadily.October 2007
Japan's longest post-war period of economic expansion ended after 69 months and Japan entered
into recession in 2008, with 2009 marking a return to near 0% interest rates. The Japanese financial
sector was not heavily exposed to sub-prime mortgages or their derivative instruments and
weathered the initial effect of the global credit crunch, but a sharp downturn in business investment
and global demand for Japan's exports in late 2008 pushed Japan further into a recession.We can say
that global financial crisis hit the Japan's export and the country experienced economic recession.
Although Japan is not at the heart of financial crisis,yen appreciation and reducing in external
demand affected export adversely.
APEC
The Asia-Pacific region is the most dynamic economic region on the planet. It accounts for more
than half of the global GDP, and more than 60 percent of its exports go to the Asia-Pacific. Now
within the region, APEC is the most important economic organization. It has all the key members
participating, and the most important initiatives in the region take place either through APEC or are
created within APEC.
It is united in its drive to build a dynamic and harmonious Asia-Pacific community by
championing free and open trade and investment, promoting and accelerating regional economic
integration, encouraging economic and technical cooperation, enhancing human security, and
facilitating a favorable and sustainable business environment. Its initiatives turn policy goals into
concrete results and agreements into tangible benefits.
DEVELOPMENT MODEL OF SOUTH KOREA
South Korea was a country where the national GDP per capita was just $103 in 1965. From
that day to the present the growth in national GDP of Korea per year was about %7 and the GDP per
capita was %5,7. the principle which underlines the Korean miracle has been the applicability of the
strategic economic decisions of states.
The period starting from the coup d'etat in 1961 is a story of a country which came from its
ashes. Japan invasion, Second World War, and then Korean War had caused a great devastation in
the country there were no political authority left. Japanese limited the economic growth and
suppressed the political governors after they had left the country. Four of the 25 million populations
turned back to the homeland during the second world war and three million people had displaced
because of the Korean war. 1949 reform on soils-lands removed the bourgeoisie. Before the coup
d'etat-military coup the big capitalist who had risen during Rhee administration were sent in jail.
Besides the political opposition was entirely discharged and the fiscal system was nationalized.
Korean War had ended by a ceasefire in 1953 which had ruined all the country. Before the
fragmentation of Korea 85% of the industrial production and more than 90% of the energy capacity
were held on the northern side- North Korea. Rhee administration had an undisciplined, failed,
scattered and bribe-taker functioning bureaucracy. Till the end of the 1950s there was even no
certain development plan. After the student rebellion in 1961 the administration replaced by the
military and military had determined the economic decisions for the next 30 years.
In 1971 the government had initiated a campaign which was called “heavy and chemical
industry”. By this campaign it was aimed to make Korea competitive with the world in steel, shipbuilding, machine, electronic, petro-chemical and metallurgy industrial branches. Instead of import
substitution and protectionist policies, Korea had taken the world quality and standards. The main
objectives of the program were that ten years later starting to export in those products without any
state support and taking cautions against and possible threats.
The most important support from the state to the producers was the long run credits with
very low rates. For this reason the credit holders was knowing that that aid would gradually go down
so that they had to start making profits and decrease the dependency on the state.
The very first job of the army was to gather an “Economic Planning Council” and launching
the planned economy era. There were three factors that enabled the plans to reach the targets: top
level assistance of the state, taking the important economic decision makers into the execution of
the plans, close check and control of the process.
First five-year development plan(1962-1966): Because of the unexperienced planners and
urgent preparation of the plan the targets could not be reached. Nevertheless, the reached number
went beyond the targeted growth rate. This result increased the Korean’s self-confidence.
Second five-year development plan: in this plan modernization of the industrial
infrastructure and creating a self-esteemed economy. At the end it had been achieved. In that period
the national GDP (80%), export (%417) and tax revenue (%200) had increased.
Third five-year development plan: in this plan income dispersion gained importance.
Regional imbalance was tried to overcome and the private sector was strived to give wider role in
economic life. You see the targeted number and the reached number.
Fourth five-year development plan: it had failed. The reason was the world oil crisis. Deficit
in balance of payments appeared so that the plan could not be achieved. The targeted number was
% 9,2 but the reached one was %4,3 and the inflation jumped to the %25,6 in 1980 and the economy
shrinked by %8.
Fifth five-year development plan: this plan aimed to promote the macro balances and
especially growing the export. After the period the macro balanced was seen to get better and the
growth rate went beyond the target.
Sixth five-year development plan: increase of productivity and to lessen the state role over
the economy and privatization issues were the prominent topics.
Seventh Five-year Economic Development Plan (1992 – 1996): In the country until 2000
creating an advanced industrial economy, balancing the social and economical equality, developing
new materials, health chemicals, bio-technology and so on. Economic liberalization was an object
again.minimizing the state influence over the economy, consolidateing the role of private sector
were other objectives.
In the last 30 years Korean economy took itk place amongst the rapidly developing and
growing economies. However this growth had stopped in 1997 because the growth was use to be
financed by foreign loans but in parallel to the increase in production, profitability and productivity
could not be increased.
Consumption and the investments went down so the production capacity shrinked. Rapid
devaluation of Korean Won, prices went up, rising inflation to the level of 5%, and deficit in the
current account because of the unbalanced foreign trade: export: 136 billion $, import: 144 billion $.
Souh Korea used the Export as a way out of the crisis. In 1998, import decreased to 93 billion
$ and export stayed at the level of 132 billion $.in brief there happened a 32 billion $ surplus in
current account.
The reason why Turkey and South Korea made different choices in development models is a
subject for a wider research paper. However, it can be explained briefly in some short points like
below. Turkey chose an extansif model which is directed import substitution, regressive techniques
with wide range of labor and mostly labor-intensive. On the other side, South Korea felt the necessity
of integrating into a competitive world market so its import directed economy immediately opened
to the world. Capital-intensive industrialization was attracted. For this reason, it immediately began
to pick selective and massive technology transfer. New economic and law institution and new
functional mechanisms were initiated to preserve the copyrights of ne inventions.