In reference to MNCs and South East Asian economic growth, we frequently refer to the phrase “Tiger Economies”. It is used without a full explanation of the term. The work which follows has been extracted from a variety of sources. It is also well above the level required as necessary for A-level study, but you may find it useful to read, and it may help you to understand the growth of the region a little better. It will be particularly useful if you have some understanding of Economics or Business terms. The article commencing “The statistics on NIC performance….” has been extracted from a website, which, regrettably, I cannot find the address for. I apologise of infringes any rights which are held upon it. However, I recommend reading it, as it does explain in depth why the Asian Economies have done so well in recent years, and provides some facts to reinforce your studies.

Glossary of some abbreviations you may not be familiar with;
WTO               -           World Trade Organisation
GATT               -           General Agreement on Trade and Tariffs.
ASEAN                        -           Association of South East Asian Nations

The so-called Tiger Economies, which are more properly known as Newly Industrialising Countries (NICs), may be referred to under the heading of “new international division of labour (NIDL)”. It is using this heading that the following has been written, as a background and help to understanding NIC development.

New international division of labour (NIDL)

An emergent form of the division of labour associated with the internationalisation of production and the spread of industrialisation, especially in a number of rapidly growing NICs. Although termed ‘new’, the NIDL is more accurately understood as a manifestation of the perpetual global restructuring of capital at a global scale; an older process dating back since the colonial times.

The term has been used by Frobel et al (1980) in their account of the deindustrialisation of the old industrial countries. It is associated with the outflow of investment as capital operating on a global scale and taking advantage of transportation and communication technology and the fragmentation and locational separability of the productive process, to tap the global reserves of labour and to seek out cheap production sites in order to better face competitive pressures.

An alternative interpretation suggests that Multinational Corporations (MNCs) are pushed out of industrialised countries because of falling rates of profit. The implication is that the NIDL is a strategic response to the continuous imperative of accumulation in capitalism. TNCs - the major agents of the NIDL - reorganise the geography of their productive structure in order to enhance profitability and so stimulate the growth of industrial production in the NIC and elsewhere.

The NIDL is, in this view, the result of multinational restructuring of production. Only incidentally would the interests of an MNC coincide with the build up of an integrated an complex industrial structure in a developing country. The countries remain passive and dependent.

Reference; The Dictionary of Human Geography, 4th edition. R.J Johnston, D. Gregory, G. Pratt, and M. Watts.

The NICs successes—high growth explained

The statistics on the NIC’s performance are widely available. They depict rapid growth—double to triple that of the US, Japan and Germany in the 1960s to 1980s, rapid productivity growth, quick industrialisation, a high degree of investment and capital formation largely funded from domestic savings, and a high propensity to export, with consumer durables and machinery accounting for a large share of exports. These countries have also begun exporting capital in the form of investment and production facilities in other developing countries such as China, Vietnam and other countries in South - East Asia.

However, it is important to place these achievements in context. As the World Bank (1995) says,

"Apart from most, but not all, East Asian economies, it has been rare for Third World economies to make much advance on the First World. Some poor countries, especially in Africa, actually had a lower level of real output per head at the end of the 1980s than at the start."

According to Satoshi Ikeda, Taiwan, South Korea, Singapore and Hong Kong are the only Third World countries to have grown rapidly enough to close the relative income gap between themselves and the advanced capitalist economies.
The NICs account for only a tiny minority of Third World countries and despite their successes the total GDP of South Korea, Taiwan, Hong Kong and Singapore together were equivalent to only 16 per cent of Japan’s GDP in 1994.  
The NICs’ key to success was marrying imported technology and cheap labour to an export market. That cheap labour advantage is disappearing and export markets are tightening. Furthermore, the long-suppressed costs of high-speed growth now begin to emerge.
These costs, such as the severe exploitation and repression of labour, are most vividly displayed by the recent Korean workers’ general strikes. January 15 saw over 600,000 workers on general strike against repressive labour laws and attempts to further curtail democratic rights. Strikers came from most manufacturing industries, hospitals, public transport, media, and the public sector, with news polls indicating that the vast majority of those surveyed supported the strike. However, the strike was the culmination of a structural crisis with roots that go back a decade. Between the northern summer of 1987 and late 1989 Korean workers launched over 7000 strikes (close to 10 per day), a record for a country of this population.

In 1993 the World Bank released its analysis of the causes of the NICs’ development in The East Asian Miracle—Economic Growth and Public Policy. The purpose of that document was precisely to outline what lessons could be learned by other Third World countries from the NICs’ experience. It states:

What caused East Asia’s success? In large measure the HPAEs (High Performing Asian Economies including Japan, the four NICs and Indonesia, Malaysia and Thailand) achieved high growth by getting the basics right. Private domestic investment and rapidly growing human capital were the principal engines of economic growth. High levels of domestic financial savings sustained the HPAEs’ high investment levels. Agriculture, while declining in relative importance, experienced rapid growth and productivity improvement. Population growth rates declined more rapidly in the HPAEs than in other parts of the developing world. And some of these economies got a head start because they had a better educated labour force and a more effective system of public administration. In this sense there is little that is "miraculous" about the HPAEs’ superior growth record; it is largely due to superior accumulation of physical and human capital.

But these fundamental policies do not tell the entire story. In most of these economies, in one form or another, the government intervened—systematically and through multiple channels—to foster development, and in some cases the development of specific industries. Policy interventions took many forms: targeting and subsidising credit to selected industries, keeping deposit rates low and maintaining ceilings on borrowing rates to increase profits and retained earnings, protecting domestic import substitutes, subsidising declining industries, establishing and supporting government banks, making public investments in applied research, establishing firm- and industry-specific export targets, developing export marketing institutions, and sharing information widely between public and private sectors.

The NICs also engaged in "financial repression" where interest rates were kept low to cheapen borrowing by firms. Thereby savers, the majority of whom are households, subsidised corporate borrowers. Balanced state budgets were also required to bear down on interest rates and inflation.
The World Bank counsels policies that encourage macro-economic stability and high investment rates, namely tax and investment incentives to encourage business profitability; guaranteeing banking profits to ensure a "stable and secure" financial system; spreading private investment risks to the public by state guarantees of the financial viability of investments; and granting subsidies to and bailing out distressed strategic firms.
The World Bank also notes that these governments have been "less responsive than other developing economy governments to organised labour’s demands to legislate a minimum wage."

Sundaram’s position is essentially the same:

Domestic private sectors will need to be encouraged to make long term investments in the national economy, especially to enhance the economy’s productive capacity…Besides capital flight, another consequence of investor unfriendly policies has been more investments in short-term, quick return activities, such as property, share market and other speculation, largely at the expense of the development of the real (productive) economy. Hence, a nationalist alternative would encourage private capital accumulation, especially by genuine entrepreneurs investing in productive economic activities.  

In other words, both these positions seek to run the economy in the interests of private investors and their profits rather than in the interests of workers and peasants. Supposedly the labouring classes will be better off in the long run as wealth created "trickles down" to the workers through higher wages and increased employment.

Behind the growth statistics

In the long run, sustained growth and the advancement of the level of productive forces must be associated with increasing levels of labour productivity. The main sources are primarily increasing the percentage of the workforce in industry, increasing the education and skills of that labour force and adding more machinery to the production process. To measure these effects, statisticians subtract the effect of increased labour and physical capital stock and calculate a residual that is termed total factor productivity (TFP).

Numerous studies have been released which analyse the causes of the NICs’ economic growth and associated increases in labour productivity. The NICs grew mainly from increases to the industrial workforce and investing in more machines. Alwyn Young  found that such simple increases in inputs accounted for about two thirds of growth, rather than any change in technology or efficiency. In the case of Singapore, increased inputs accounted for 98 per cent of growth over the 1970–90 period.

In short, the World Bank is right: the NICs displayed "a superior accumulation of physical and human capital". Further productivity growth came from the process of industrialisation itself, relocating the country’s resources from sectors of low productivity to high productivity, namely from agriculture to industry.

World Bank researcher Hollis Chenery observed this process and cites numerous statistical regression studies done between 1950 and 1973. These show, in virtually all cases, that the shift of resources out of agriculture in the developing and semi-industrial countries is associated with increased growth. He concluded that the relocation of capital and labour to sectors of higher productivity account for about 20 per cent of average growth.

We have thus accounted for about 85 per cent of the NICs’ growth "miracle". The rest most likely comes from increased technical efficiency such as improved shop floor organisation and gains from specialisation. Very little productivity growth was attributable to improving technology.

This conforms with international experience. When TFP is broken down into technological change and technical efficiency, TFP growth in advanced capitalist countries is largely due to technology change. For example, growth theorist Robert Solow has found that technological progress accounted for 80 per cent of the long-term rise in US per capita income. Increased investment in additional physical capital accounted for the majority of the remaining 20 per cent.

This has profound ramifications for analysing the NICs’ achievements and prospects. A growth strategy based on massive increases in inputs will run into diminishing returns: the first bulldozer added to a production site will make a huge difference, while the twelfth bulldozer will make little. The economy-wide implications are for the NICs’ high growth rates to slow and there have already been numerous reports (such as those of the Asian Development Bank) which already cite a slowing down in productivity growth.

Paul Krugman  has compared the NICs’ growth with studies of the high growth rates in the former USSR. These studies also indicated that much of the Soviet growth was associated with an enormous increase in inputs, rather than with gains in efficiency or technology. This explained the persistent productivity gap between the US and USSR. Krugman also states that the strength of the Soviet economy was its ability to mobilise resources, not use them efficiently or innovate technology. As input-driven growth is inherently limited, Soviet growth was virtually certain to slow down, as it did by the 1970s.

Krugman also notes that Japan’s growth was due to both an increase in inputs and high rates of efficiency growth. He believes Japan is still catching up to the US, and this catch-up has slowed due to the lower rates of growth experienced since 1973. He states:

Japanese economists generally believe that their country’s rate of growth of potential output, the rate that it will be able to sustain once it has taken up the slack left by the recession, is now no more than three per cent. And that rate is achieved only through a very high rate of investment, nearly twice as high a share of GDP as in the United States. When one takes into account the growing evidence for at least a modest acceleration of US productivity growth in the last few years, one ends up with the probable conclusion that Japanese efficiency is gaining on that of the US at a snail’s pace…in other words, Japan is not quite as overwhelming an example of economic prowess as is sometimes thought.

In order to reach the next stage of growth, the technology gap between the NICs and the advanced capitalist economies will need to close. Their experience shows that technology diffusion throughout the world is often less wide that usually thought. A recent book by noted Japanese political economist Professor Kozo Yamamura, Asia in Japan’s Embrace, outlines the reality: "Japan is actually flying further and further ahead of the regional flock. The division of labour in Asia, based on technological capacity of each nation is becoming more, not less, vertical." Yamamura argues that Japanese capital and technology are based on a "grand production alliance" in Asia. Japan’s government promoted a corporate regional strategy around a division of labour based on the parent company in Japan supplying the most technologically advanced components in production while the other Asian countries supply the less sophisticated parts. For Yamamura, Japanese capital is particularly careful about control of technology diffusion and its ability to export capital due to the high yen further enhances its control.

As a consequence of this structural dependency on Japanese technology, two thirds of Taiwan’s technology transfer agreements are with Japanese firms. Taiwan, South Korea and the four biggest ASEAN countries all rely on Japan for some 40 per cent of their machinery imports.

Korea’s most noted success stories are predominantly dependent on Japanese technology. Japan accounts for 60 per cent of technology licences and 50 per cent of joint ventures in the Korean car sector, with US and Europeans accounting for the rest. In other industries there is a high dependence on US and Japanese licensed technology: wafer fabrication in semiconductors, engines and transmission in cars, computer-aided design in textiles and garments, hardware and software design in computers.

Korea combines others’ technology with low wages and an efficient manufacturing process, but Korean firms have been low in innovation and new product development. In key exports for example, 85 per cent of the value of a Korean TV and 70–90 per cent of the value of a laptop computer come from Japan and account for 60 per cent of the price. These technological rents result in fat profit margins for Japanese and US firms and very thin margins for their Korean counterparts. A cursory glance at the Fortune 500 list of the largest world companies lends weight to this conclusion, albeit with aggregated figures. In 1996, Hyundai automotive profit margins (net profit after tax divided by sales) were 1.4 per cent compared to Toyota Motors’ 2.4 per cent (despite the overvalued yen), Ford’s 3.0 per cent and General Motors’ 4.1 per cent.

However, despite these shortcomings NIC growth is still an achievement that most Third World countries cannot attain. The NICs derive this growth from their specific role within a regional division of labour, a role from which many other countries are excluded. This leads to the question of why the NICs could gain this role in the first place.

Can the NICs’ experience be repeated?

In the light of the preceding discussion it’s clear that the main factors preventing a general spread of the NICs phenomenon is the changed stance of the major imperialist powers, especially the US, and the long-run slowdown in world economic growth. These vital elements are nearly always missing from the plethora of studies of the NICs that have appeared in recent years. In their absence all the other reasons that are usually cited for the NICs’ rapid growth (from the "Confucian work ethic" to the "communitarian" approach of Asian capitalism) are at most contributing factors.

For example, in his work The Rise of the Korean Economy, Byung Nak-Song lists eight characteristics as "the most important components of the Korean model and necessary base for countries attempting to grow at high rates over a sustained period of time". These include "a long-term national vision", "communitarian capitalism", "competent leaders", "an ability to manage change and innovate" and "cultural congruency".

The fundamental determinants outlined above—the massive US subsidies, the preferential access to US markets, the super-exploitation of labour and suppression of union organisation—are either absent or simply mentioned in passing as points of detail. Thus, according to its apologists, with suitable adjustment for varying cultures and traditions, the model becomes reproducible and "as both the internal and global economic environment rapidly changes…the model suggested here may be applicable to any developing country."  

However, with the collapse of the Soviet Union there is no basis for a strategy of containment and pumping up economies to be bulwarks against "Communism". Capitalist development in the "periphery" now takes place under conditions of intensified inter-imperialist rivalry among the poles of the "Triad", with the economies of the Third World largely constrained to a subordinate role in relation to this or that pole. In the words of Doug Henwood, editor of the Left Business Observer:

Each member of the Triad has gathered under itself a handful of poor countries to act as sweatshops, plantations and mines: the US has Latin America; the European Community, Eastern and Southern Europe and Africa; and Japan, Southeast Asia. In a few cases, two Triad members share a country—Taiwan and Singapore are split between Japan and the US; Argentina, between the US and the EC; Malaysia, between the EC and Japan; and India is shared by all three…

Only about 25 countries fit into this clustering about the Triad, leaving 100 mainly small and poor countries on the margins. Though being a member of one of these clusters is no guarantee of prosperity, being left out is worse.  

The economic policies the NICs undertook were also greatly facilitated by the long wave of post-Second World War expansion, but today a long recessionary wave continues to prevail in the world economy, intensifying competition among all those countries aspiring to be NICs. For all the "players", whether mature or new NICs, it is much harder to have a strategy of export-oriented growth. Unsurprisingly, average growth rates for the NICs, although still much higher than elsewhere, are declining.

South Korea’s access to US markets is now being contested by the US itself. Byung-Nak Song himself notes this prospect:

The rapid growth of the Korean economy in the future has the potential to become a source of contention, especially with Korea’s major trade partners. Korea needs to consider possible repercussions from major trade partners. Korea is, as already mentioned, under pressure from the United States and other countries to open markets for goods such as agricultural products in which Korea has severe comparative disadvantages. Korea may face increasing pressure from America and other countries.

The limits of an export push strategy are shown by the restricted conditions of market access under the WTO and the rise of non-tariff barriers among the three major trading and investment blocs. These agreements will hamper developing economies’ use of policies that are viewed as "unfair" by major advanced capitalist countries. For example, subsidies to exports and directed credit programs linked to exports are not generally consistent with WTO and may therefore invite retaliation from trading partners.  

The conclusion to the World Bank’s report on the "East Asian Miracle" recognised that the world economic context today is different from the 1950s to the 1970s. It states:

Economic growth in industrial economies was rapid, barriers to trade were declining and global efforts to spur free trade under GATT were the order of the day. Times have changed. Economic growth has slackened in the mature economies that traditionally provided the main markets for developing economies’ exports.

The question whether a regionalised world presents any opportunities for new NICs is then considered. The reply depends, first, on whether markets are sufficiently large and, secondly, on whether they are accessible.  

The report concludes that markets in imperialist countries are sufficiently large, but are not necessarily easily accessible given the current trading climate. The markets are "highly competitive" on price, quantity, and technology. Furthermore, the WTO’s policies to reduce dumping, protection, and subsidisation of exports, increases the difficulty of implementing an interventionist NIC model:

Industrial economies are increasingly applying anti-dumping and countervailing duty measures to developing economies’ exports. These measures will make it more difficult to follow the example of Japan or Korea which protected domestic industry in order to subsidise exports…Developing economies that seek access to the emerging regional trade blocs may find it comes tied to increasing obligations that could inhibit adoption of interventionist policies. For example, interventionist versions of the export-push model could not be implemented with the EC with its current stringent rules on state aid and its provisions for allowing for the free movement of capital and for the community to implement competition policies. Moreover, no economy exposed to European competition could operate an effective infant industry strategy.

In summary, the prospect for NICs and aspiring NICs is not for no growth, but for slowing growth amidst heightened competition. As the more developed NICs lose their cheap labour advantage they are forced into more direct competition with the advanced capitalist economies, and to equip themselves for this competition the "communitarian" and "social" aspects of Asian capitalism have to be sacrificed: such is the root cause of the 1996-97 strikes in Korea.  

Of course, it is not excluded that Korea or other actual or aspiring NICs can continue to harvest what growth the system will continue to generate. However, it is a fantasy that the NICs, with all their necessarily brutal forms of super-exploitation, can be a general development model for the Third World, even though precisely this illusion is such an important tool in coercing the working people of the Third World to accept unending sacrifices. Indeed, it’s what Byung-Nak Song’s "long-term national vision" really means.

Table 1:
GDP growth of NICs











Hong Kong










South Korea






























All NICs










* Average.
† Estimate.
Source: Asian Development Outlook, 1995 and 1996, Table A1, p. 239, Asian Development Bank, OUP, 1995.


Table 2:
Sources of growth: South Korea compared to Japan, Germany and the US






Contributions of inputs















Total factor productivity





Source: Byung-Nak Song, op cit., Table 5.5, p.70.


Table 3:
Hours worked in manufacturing (NICs)




South Korea






Hong Kong






Sources: ILO Yearbook,Taiwan Statistical Data Book, 1990.

Table 4
Chaebol share in manufacturing capacity and GNP (South Korea)


Manufacturing sector

Share in Total GNP

Number of Subsidiaries


Value added

Fixed capital










Top 5









Top 10









Top 20









Top 30










Source: Byung-Nak Song, op. cit., Table 7.9, p.116.