The Characteristics Of Economic Activity In Newly Industrialised Countries

1444 words - 6 pages

The Characteristics of Economic Activity in Newly Industrialised Countries
Newly industrialised countries (NIC’s) are a group of countries
(mainly in Asia and south America) that have attained a high level of
industrialisation. These countries include Japan, South Korea,
Singapore, Hong Kong and Taiwan, who have undergone rapid and
successful economic transformation since the 1960’s. Three generations
of NICs have been recognised, First Generation NIC’s for example South
Korea, Singapore, Taiwan and Hong Kong, Second Generation NIC’s such
as Malaysia and Thailand and Third Generation NIC’s such as India.

One of the main characteristics associated with NICs is the idea of
rapid industrialisation. There are two policies that are used in
regard to industrialisation. They are: Export Oriented
Industrialisation (EOI) and Import Substitution Industrialisation.

South Korea, as an example of a First Generation NIC, had very low
prospects after the Korean War of 1950-3. However from the 1960’s the
economy took off again and South Korea started achieving rates of
growth for the best part of four decades. All aspect of the quality of
life improved and wages rose gradually. Life expectancy increased from
47 years in 1955 to 75 years in 2002. Hard work, rigorous schooling,
state enforced austerity and imported technology transformed the
economy and led to the country’s economic success. Industries were
able to invest and expand tremendously due to state directed bank
loans at a negative real rate of interest. This encourages more
investment and gave incentives to expand. It is important for a
country to be competitive within the world market in order to achieve
and also maintain a high volume of exports. South Korea was victorious
in doing so and grew from $33 million to 1960 to $206 billion in 2000.

Huge business conglomerates, known as chaebol, dominated the South
Korean economy and in 1997 the top four (Hyundai, Daewoo, LG and
Samsung) accounted for over half of the country’s exports. The
exporting success of the chaebol encouraged them to diversify and when
growth rates were high, such diversification was seen as a sign of
strength. The main objective that South Korea adopted to be successful
was to invest heavily and copy the developed world’s technology. This
was a way of producing wealth. More and more South Korean companies
moved production to China to take advantage of lower costs for example
Samsung built plants in China as they were attracted to low labour
costs and other costs.

There are many other ways that South Korea could have been more
successful for example, if the value of the yen had increased, there
would have been an increase in the relative price of South Korea’s
products...

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