Asian Tigers the future

The Asian tigers are made up of a group of countries; Taiwan, South Korea, Hong Kong and Singapore. They saw huge economic growth between the 1960s and 1990s.

 

From the 1960's onwards the Tigers developed, and by the 21st century they were in fully developed status. This is due to the investment from TNC's particularly from Japan in technology. The tigers adopted an export driven model of industrialisation and development meaning they no longer produced products for the domestic market. They opted for exportable products particularly aimed at industrialised nations of Europe and America. With the help of their huge cheap labour force and Foreign Direct Investment from wealthy countries the tigers saw huge economic growth. This meant quality of life massively improved as people were earning more money becoming more educated and had good facilities such as doctors available to them. However, after stocks crashed in the 1990s shares became overvalued causing a recession. The tigers relied on foreign markets so when they hit the recession they couldn't provide the products to the TNC's anymore. This meant a loss in the market to other countries such as India. This shows export led growth and cheap labour can't last forever, therefore in order to further develop they had to create new industries.

The Tigers main problem was the loss of FDI from TNC's as they moved to other countries. The TNC’s moved because as the Tigers economy grew the workforce wasn't as cheap as before so they were now less financially competitive, compared to other countries like China. These countries were now following the original tiger model offering a cheaper work force, better tax incentives and less strict environmental and political laws. For example, Nike who used to manufacture most of their products in Taiwan moved to other countries such as Vietnam and China. Nike doesn't own any factories; it rents out other firms. Therefore, it can easily re-locate to another area if needed. This is why countries compete with low wages and relaxed laws to attract these TNC's for their FDI. Many of these countries that are following the Asian Tigers early model, are a group of countries dubbed the 'Asian Cubs' they consist of Indonesia, Malaysia, the Philippines and Thailand.

 

In emerging economies such as Malaysia the model of the Asian Tigers is key to their success. Although its geographical location places in the 'poor south' the past 40/50 years of impressive economic growth make this untrue. Before 1970 Malaysia was a typical agricultural nation specialising in the export of raw materials. However, by 1980 80% of exports were manufactured goods. It grew due to the abundance of a cheap and well educated workforce which attracted businesses to set up their factories in Malaysia. Also due to the strong leaders particularly Dr Mahathir Mohamed who oversaw economic growth and developed the industrial policy which allowed foreign companies to invest. After the businesses had invested he then promoted local development. Another important factor was the 'growth poles' which saw domestic goods e.g. Food, drink and household goods located inland near to the capital (Kuala Lumpur) and the export goods e.g. Electronic machinery, equipment and textile industries concentrated in Georgetown close to the port and road bridge connecting Penong to the mainland and international airport. This meant that the exportable goods were close to transport points so global trade is easier. Thus prompting businesses to invest in the area as they don’t have to build infrastructure such as roads for transport as it is already there.

 

The economic growth of the Tigers has presented greater opportunities for emerging economies to develop, as TNC’s shift looking for cheaper economies to place their businesses. Some countries specialise in certain areas to attract an expert niche market for investors. For example India was used mainly for telemarketing particular technological therefore they had an expert advantage on tech TNC's over other countries who might offer cheaper wages but not be as specialised. In China they attract investors with tax breaks and tariff free processing, therefore their workforce becomes more appealing to an investor. Another advantage for these countries is having a large English speaking workforce for example India with over 350, 000 English speaking graduates every year. This is a bonus that the original tigers cannot compete with. They are also an incredibly skilled workforce therefore lots of high-tech industries have settled there such as HSBC. The development in technology has been down to the fact that they became so skilled in the areas they were working for, so they decided to do it themselves. This created many self-made entrepreneurs from India such as Vishal Sikka the CEO of Infosys, although he started the company by accident, it is now worth $1 billion and started with about $250. Sikka said that the capitalism fuelled the idea of Infosys, along with the huge opportunity for technologies as there was loads of engineers without jobs. However, India's labour cost advantages might only be temporary as other developing countries try to move into the same market. Infosys is developing more sophisticated aspects of the industry to add greater value in the face of possible low-cost competition. Another advantage for emerging economies would be having a large natural wealth for example Africa or South America. Brazil in South America is home to 200m people and is booming with natural wealth due to the Amazon Rainforest. Economic growth is so great that it is overtaking Britain to become the 6th largest economy. In the city of Manus growth is key so the first bridge ever across the Amazon is being built and $3trillion is being spent on infrastructure to create jobs and develop the country. Due to the huge natural wealth no resources need to be imported as everything comes from within Brazil. However, many complain that this is sacrificing the environmental sustainability of the country for economic gain. The Amazon is key to all human life on earth as it provides clean air and medicine such as Vicks Vapour rub. The medicine TNC's exploit the rainforests as the business makes $75bn per year. This again is another aspect that other countries can't compete with. For example China who destroyed most of the natural environment for economic gain, cannot cash in from their natural resources and has now even become the most polluted place on the planet.

 

However, these NICs can’t last forever as the Asian Tigers got richer it became increasingly more expensive to produce things there as wages became higher. So the market moved to continue to keep costs low to less developed countries such as the Asian cubs. Also new TNC’s grew out of the Asian Tigers economies e.g. Samsung originated in South Korea. These TNC’s set up their manufacturing in less developed countries as well. The growth of manufacturing into less developed countries from both new and established TNCs created a second wave of NIC’s. However now that these less developed countries are becoming richer TNC’s are starting to look elsewhere to place their business. This is currently happening in China, since the 1970s there has been rapid economic growth. This meant that GNI per capita rose from around $180 in 1978nto $2940 in 2010 with a growth rate of around 10% a year. However, China's economic growth has slowed to 6.9%. There are many reasons for this, over-capacity, huge debt and particularly the rising cost of labour caused by the original growth of the economy. These are all the signs of a maturing developed country. China has entered a stage where the population capacity is no longer the main factor of its growth. The Chinese central government has for years talked about a soft landing of its economic growth. This is because on its current trajectory, if the Chinese economy comes to a grinding halt, we would be looking at a disaster on a global scale. China has the second-biggest economy; any slowdown will have an impact on global growth. The International Monetary Fund cut its 2015 growth target to 3.1 percent from 3.3 percent. And Janet Yellen, the Chair of the US Federal Reserve, decided not to raise interest rates in September partly because China's economy was slowing.

  

In conclusion, the global economy has moved on from the Asian Tigers; the present and the future of the global economy now lie elsewhere. This can be seen as the tiger cub economies get stronger, labour become more expensive so TNC's start to look for less developed countries to manufacture their goods in. The shift in location of production opens up new NIC markets and a second wave of NICs are formed. However, the service industry started to grow in the Asian Tigers because people had more money so there was a natural shift away from manufacturing to tertiary, therefore they still continued to grow. The question is what happens when we run out of LIC's?