I. The Asian Economy Bottoms Out
In the first quarter of 1999, the East Asian economic region witnessed positive gross domestic product (GDP) rates in South Korea, Singapore, and the Philippines, while Hong Kong and Malaysia reduced their negative GDP rates, beating previous economic forecasts.
Looking at the basic economic indicators in the first quarter of 1999, most observers believe that the East Asian economy has bottomed out and is beginning to recover from its darkest hour. At the same time, there has been a gradual increase in the gap between individual economic recovery rates.
South Korea, Singapore, and Taiwan have concentrated on increasing their exports of computer-related hardware, in which they enjoy a competitive advantage. It is also clear that their personal consumption is expanding. Judging from these two conditions, these three countries have positioned themselves for a strong economic recovery. South Korea and Singapore will post strong growth rates, and Taiwan is also expected to continue to register strong rates in the foreseeable future.
Thailand, Malaysia, and the Philippines have also stabilized their economic recovery through export expansion; however, they do not have a competitive advantage. If the U.S. economy were to slow down in the second half of this year, there is a possibility for slower economic growth in these countries due to the lack of competitive edge. Thailand, whose productivity started to rebound toward the end of 1998, will post a positive economic growth rate while Malaysia and the Philippines will register zero growth.
On the other hand, China, Hong Kong, and Indonesia have shown no signs of undergoing structural economic reform. These countries are expected to continue to hover at the bottom of the economic recovery cycle. Both Hong Kong and Indonesia are expected to continue showing negative economic growth rates, though the magnitude might be reduced. China is also expected to hover at growth rates of approximately 7.5%, compared to 9.7% in 1996, for example.
II. Road to Economic Recovery: South Korea, Taiwan, and Singapore
Through the increase of exports and productivity, there is a widespread sense that the “bottom out” phase is passing. The reasons these three countries (i.e., South Korea, Taiwan, and Singapore) have shown basic strength in their recovery follow.
A. High-tech Industry Drives Export-related Growth and Productivity
First, South Korea, Taiwan, and Singapore have concentrated on raising exports and productivity rates through their electronics, computer, semiconductor, and other high-tech industries.
These countries, before entering the financial crisis, were already modernizing their industrial structure, especially their computer-related fields-semiconductors and personal computers, where they maintained their superior international position. For example, Korea has captured a 40% share of the global DRAM market through the efforts of its three home-court makers: Samsung Electronics Co., Ltd., Hyundai Electronics Ind. Co., Ltd., and LG Semicon Co., Ltd.
Taiwan has become the global site for original equipment manufacturer (OEM) production for personal computer makers from the U.S., Japan and Europe. The country also boasts a leading PC maker, ACER, as well as motherboard makers, which have helped make Taiwan the world’s leading computer hardware supplier.
Singapore, on the other hand, does not have a domestic manufacturer with a global competitive edge as South Korea and Taiwan do. However, starting from the 1980s, Singapore has planned and promoted its computer network infrastructure through an emphasis on information-related equipment and semiconductor upstream processing. Singapore has also actively sought out and invited researchers from the U.S. and Japan. As a result of those invitations, foreign companies have established businesses in Singapore more readily, making Singapore a center for added-value export products.
As a result, since 1998, these three countries’ export and production have been driven by rising global demand for personal computers and semiconductors, together with their already well-established infrastructure.