By Luke S.
The spectacular growth of many economies in Asia over the past three decades has been a point of speculation for economists and many others over the years. Several countries around the world have tried to pinpoint the factors that led to these Asian countries’ success and attempted to emulate them.
Since the 1960s, Asia has managed to develop economically faster than any other region in the world. It recovered admirably from the Asian financial crisis of 1997/1998 and managed to weather the global economic crisis of 2008/2009 to emerge as an economic powerhouse. This growth did not occur at the same pace all over the continent.
Four countries dubbed the ‘Asian Tigers,’ namely Hong Kong, Singapore, South Korea and Taiwan, have continuously turned in a superior economic performance, surpassing other Asian countries. Emerging markets such as Indonesia, Malaysia, Thailand, Vietnam and the Philippines are quickly catching up, showing impressive growth of their own. However, China and India are widely recognized as the economic giants of the region and are expected to continue blazing the trail for years to come.
Even as these countries continue outperforming other more developed countries, many people still wonder about the factors driving their success. Before tackling this, it is better to first define what an emerging economy is. An emerging economy is one with low to middle per capita income. Countries falling into this category are experiencing tremendous reforms and developments, leading to their growth, although they have not yet attained the economic stability of developed countries.
Emerging economy countries are also largely transitional and are often in the process of moving from closed economies to open market ones. Such a country usually embarks on economic reforms that promote stronger economic performance characterized by efficiency and transparency. Furthermore, the country’s local currency may stabilize, creating confidence in the economy. This is vital, especially if the country is wooing foreign investors.
Another key characteristic of an emerging economy is the increase in both foreign and local investments. Foreign investments in a country lead to the injection of much-needed foreign currency into the local economy, boosting the country’s stock market.
There are many factors that have been credited with the Asian emerging economy boom. These countries have managed to capitalize on their demographic trends, increasing urbanization and supportive government policies to become the economic hubs they are. Most of these countries have youthful populations that also serve as the main source of labor. Additionally, their populations are undergoing rapid urbanization, creating a burgeoning middle class that increases the domestic consumption of goods and services. The majority of these governments have also managed to enact policies encouraging domestic growth through the promotion of local enterprises.
Industries spurring the boom
The countries credited with the Asian emerging economy boom owe their success to various industries. For instance, India has made its mark in the pharmaceuticals industry, while South Korea and Taiwan have excelled in the electronics industry. Nearly all the emerging Asian economies have robust manufacturing industries. Other industries behind the region’s booming economies include the textile, technology, agriculture and energy sectors.
A number of enterprising individuals have managed to succeed in these economies, investing in different industries and making their fortunes in the process. In order to do this, one needs to be a visionary with the ability to not only see the opportunities in every situation, but to also know how to capitalize on them. This is what SukantoTanoto did. He rose from humble beginnings as a construction contractor to the helm of Royal Golden Eagle (RGE), a global resources-based manufacturing group. He made his fortune in the paper and palm oil business before diversifying to other areas.
Tanoto is considered a pioneer of several industries in Indonesia. As an investor in the energy industry, he believes that a company should operate on sustainable growth while existing harmoniously with the environment. With this in mind, he champions environmental and energy conservation, two things that will no doubt be emulated by other companies in Asia.
The Asian emerging economy boom has both advantages and drawbacks. On the positive side, the boom has opened up the Asian countries, enabling them to trade with others. Investors, especially those from western countries, can diversify their investment portfolios by selecting Asian industries to invest in. This is sure to improve trade agreements between countries in the west and the east. Furthermore, western countries can choose to outsource their businesses to these emerging economies. By doing so, they will benefit from low costs of production, while the Asian countries will benefit from increased employment opportunities.
On the other hand, the emerging economies come with their share of drawbacks. While some of these Asian countries’ industries undergo speedy development, the same cannot be said about their infrastructure. The rapid urbanization often puts a strain on the available amenities, leaving governments scrambling to provide water, electricity and better road networks for an ever-growing population.
In spite of these challenges, the economic boom in Asia shows no signs of slowing down anytime soon. Buoyed by increased domestic demand, growing consumer markets, strong labor forces, expanding international trade and high external investments, this region’s economic momentum is set to continue. The countries themselves have made notable efforts to cultivate trade partnerships with other young economies in South America and Africa who provide a ready market for their exports.
There are those who view this region’s growth with skepticism. They argue the economic growth has been driven by ballooning credit and asset bubbles caused by the US Federal Reserve, combined with ultra-low interest rates in Europe and Japan. This resulted in the inflow of cash into the emerging market investments during 2009-2013, promoting the Asian economies. This makes the region’s growth appear unsustainable.
Only time will tell whether these emerging Asian economies will maintain their upward trajectories or prove their detractors right. In the coming decade, their economic survival will rely on deeper regional cooperation and integration, coupled with the enactment of better policies to further facilitate entrepreneurship and market-driven intervention by businesses that wish to expand across the national borders. One thing is for certain, however. The Asian economies are not yet ready to be written off.
The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.
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