The countries of South-East Asia have rarely controlled their own destinies. Asia’s three giants — China, Japan and India — loom over the region. Colonial armies have fought there. Even peace and unprecedented prosperity have not shaken the assumption that South-East Asia’s fate will be decided by outsiders. Westerners still often refer to the area as “Japan’s backyard” or part of the “yen block”. They speak
about Asian capitalism and, love it or loathe it, they assume there is only one sort: that pioneered by Japan. Yet, to regard the booming economies of South-East Asia simply as pupils in a Japanese master class is to miss the point. The economic stars of the region — Singapore, Thailand, Malaysia and Indonesia — have followed a distinctive path to development. As a result, they are now exporting not just goods, but ideas. The economic strategies of China and India look much more like those followed in South-East Asia, rather than the North-East Asian model of Japan or South Korea.
There are three broad ways in which South-East Asian capitalism has differed from the Japanese and Korean varieties. It is much more open to foreign direct investment. It is much less prone to try to second-guess the market through a government directed industrial policy. And it has been much quicker to allow financial markets to develop. The distinction is clearest over attitudes to foreign direct investment. The Japanese and the South Koreans have been determined to build up national champions and have made it difficult for foreign-owned companies to set up shop. By contrast, the tigers of South-East Asia have built their booms by welcoming foreigners. Singapore, which practically invented this strategy, now has an economy dominated by multinational companies. The export industries of Thailand and Malaysia are also heavily reliant on foreign firms.
The distinction between North-East and South-East Asia is more blurred when it comes to industrial policy. There is much admiration in South-East Asia for the Japanese and South Korean government’s sponsorship of steel, shipbuilding and other heavy industries. The Japanese are trying to persuade Vietnam of the virtues of their style of economic planning. Both Indonesia and Malaysia have tried nurturing winners, in aerospace and cars respectively. But such efforts remain peripheral. In Indonesia, the framework for growth has been established by a determinedly orthodox group of economists who have concentrated on macroeconomic stability and opposed subsidies. Malaysia’s state-backed car industry has yet to prove itself commercially viable. By contrast, Thailand, which has followed the standard South-East Asian strategy of luring in foreign direct investment, seems likely to become the regional hub for motor manufacturing.
South-East Asian countries have also been much quicker to let financial markets flourish. In the early stages of South Korean and Japanese industrialisation, businesses in search of credit, had little option but to go to the banks, whose lending decisions were, in turn, heavily influenced by government. By contrast, the stock markets of Thailand, Malaysia and Indonesia were cleared for take-off early on the path to economic development, allowing companies to raise more money without heavy borrowing. South-East Asians have also been more willing to let foreigners invest in their stock markets.
If Asia’s two underdeveloped giants — China and India — manage the kind of economic miracles achieved in other parts of Asia, they seem likely to do it the South-East Asian way. Both countries have set out to court foreign direct investment. China took in 35 billion-worth in 1994 alone. India got into the game much later. But even its nominally Communist politicians are now eagerly scouting the world for foreign investors. Both countries still have large state sectors. But both now see their nationalised industries primarily as a burden that must be reformed, rather than as the fulcrum of an economic strategy. Finally, both China and India, like the South-East Asians, have encouraged companies to raise capital through their frenetic stock markets.
Such emulation of the South-East Asian strategy stems partly from choice and partly from circumstance. In the inward looking economies of China and India in the 1950s, 1960s and 1970s, directed lending and industrial planning were a disaster. Elements of those methods may have worked in the export-oriented economies of Japan and South Korea, which rose to economic power when stable Asian allies seemed more important to western politicians than closed Asian markets. Western priorities have now changed. More positively, the current generation of emerging Asian tigers can take advantage of the increasing sophistication of international capital markets and investors. Japanese critics of South-East Asian capitalism have argued that Indonesia, Thailand and Malaysia have created a “crony capitalism”, which rewards connections rather than entrepreneurial flair. The criticism has a grain of truth, but misses the much wider story. With Thailand, Malaysia and Singapore rattling along with economic growth rates of over 8% a year, the days when South-East Asia could simply be dismissed as Japan’s backyard are over.
1. Which of the following has not been referred to as a star of South-East Asia?
(1) Malaysia
(2) Singapore
(3) South Korea
(4) Indonesia
(5) None of these
2. Which of the following statements is true?
(1) India and China follow the economic policies of South-East Asian nations entirely out of choice.
(2) The communist politicians of India are against foreign investment in India.
(3) Indonesia tried to nurture its auto mobile industry.
(4) All of the above
(5) None of these
3. What is the meaning of the word “frenetic” as used in the passage?
(1) active
(2) volatile
(3) unpredictable
(4) mature
(5) None of these
4. What is Japan’s main complaint against the South-East Asian economies?
(1) They are capitalistic societies and hence do not have social equity.
(2) The American have now become more favourable to the South-East Asian nations.
(3) Entrepreneurial ability is not rewarded as much as connections are.
(4) All of the above.
(5) None of these
5. Which of the following statements cannot be inferred from the passage?
(1) All South-East Asian economies are galloping along at an annual economic growth rate of 8%.
(2) South Korea is a North-East Asian country.
(3) The Indian economy follows the South-East Asian model more closely than it follows the North-East Asian model.
(4) All of the above
(5) None of these
6. Which of the following is not the Synonym of Frenetic?
1) Frenzied
2) Frantic
3) Phrenetic
4) Fanatic
5) None of these.
7. Which of the following is the Synonym of Emulation?
1) Imitation
2) Humility
3) Carelessness
4) Satisfaction
5) None of these.
8. Which of the following is the Antonym of Dominated?
1) Eclipsed
2) Prevailed
3) Overshadowed
4) Surmounted
5) None of these.
Answers..
1. 3
2. 4
3. 2
4. 5
5. 5
6. 5
7. 1
8. 4
