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Newly industrialised countries (NICs): their initial growth, with particular reference to the ‘Asian Tiger’ economies.

 

A newly industrialised country is a country in which development has been rapid over its recent history.  It is a socio-economic term in that countries are classified by economic factors such as GDP, and rapid GDP growth rates, but also improving social factors such as life expectancy and education levels. In many cases, NICs are countries where the economy IS NOT AS HIGH AS developed country status but have grown much FASTER than other LEDC and LDCs.

Common features of NICs;

1.      Rapid economic growth normally based on exporting goods (e.g. China) or possibly services (e.g. India). Growth in the economy was in excess of 7% every year

2.      Industrialisation that is rapid within the country

3.      Rapid urbanisation via rural to urban migration as people flock to growing manufacturing industries

4.      Stable governments and strong political leaders that allow the country to develop

5.      Large amounts of FDI (Foreign Direct Investment, also known as INWARD INVESTMENT) from overseas TNCs and other countries

6.      A move from a primary (often agricultural) economy to an industrial economy

7.      The development of the NICs own Transnational corporations

8.      Have a large influence in their continental region (e.g. China in Asia)

9.      An increasingly open market economy.  This may be were the country initially protects its own industries behind tariff barriers allowing them to develop, but then opens up its markets to trade more freely with other places allowing more FDI

Initial growth

·        The original Asian Tiger economies are Hong Kong, Singapore, South Korea and Taiwan.  They experienced rapid growth between the 1960’s and 1990’s.

·        The next batch of NICs were the Tiger Cub Economies of Indonesia, Malaysia, the Philippines, and Thailand, the four dominant countries in Southeast Asia.  Their growth started c.1980

·        Celtic Tiger referred to the Republic of Ireland’s rapid growth from 1995 to 2008, whilst Baltic Tigers of Estonia, Latvia, and Lithuania grew rapidly from 2000 until 2006–2007

·        Brazil, Russia, India and China were recognised for the rapid growth in 2001 as BRIC countries and South Africa was added to make it BRICS

·        Mexico, Indonesia, Nigeria and Turkey (MINT) were coined the next batch of growth economies in 2014

GROWTH FACTORS FOR NICs

Many of these countries based the growth around the following factors or ADVANTAGES;

·        low labour costs,

·        expanding domestic (home internal) markets,

·        available raw materials,

·        reduced import and export tariffs,

·        weaker legislation with regards to staff safety and welfare, protecting the environment and planning.

 

All of these factors gave manufacturing industries an advantage in terms of COST so many richer countries TNCs set up branch plants in NICs or relocated their manufacturing there TOTALLY. Indeed, many of the industries involved low skilled activities with low technology but high labour input.  Not all of the initial advantages to companies are advantageous to society however, and are detrimental to people’s health and welfare.  These NICs began to dominate manufacturing in electrical goods, textiles and clothing, shipbuilding, and increasingly have moved into car assembly.  

 

Image © Rob Gamesby

http://www.coolgeography.co.uk

RECENT COMPETITION TO NICs

More recently, NICs have developed their own TNCs, India has the TATA Company and South Korea has Samsung and Daewoo. As the original NICs have been challenged by cheaper rivals, they have been forced to invest in those cheaper countries to remain profitable! This saves on labour costs, they have also had to invest in protected markets such as the EU by setting up branch plants there, Daewoo has an assembly plant in Romania for example that allows it access inside the protectionist EU.  Other avenues the original NICs have explored are opening up new or virgin markets such as in parts of South America and Africa.

 

The Asian “Tiger Economies”

The Asian Tigers were also known as the Asian Dragons. These Asian Tigers developed highly advanced and free economies from 1960 onwards and includes Hong Kong, Singapore, South Korea and Taiwan.  All 4 countries managed to maintain HUGE economic growth rates of over 7% every year and had very rapid industrialisation.

Today, all 4 have developed into advanced and high-income economies, specializing in areas of competitive advantage.

·        Hong Kong and Singapore have become world-leading international financial centers,

·        South Korea and Taiwan are world leaders in manufacturing information technology.

Their economic success stories have been copied or used as examples by other developing economies. Their data plus that of Malaysia (from 2014) is shown below. More information is available here.

 

 

Population

GDP PPP Per capita ($)

Trade (Millions of US $)

HDI (rank in brackets)

Median per capita income (US $)

Corruption perception Index (100 – very clean)

GDP growth rate

(%)

MEDC

UK

63,742,000

37,300

1,595,700

0.892 (28)

26,904

76

1.7

Tiger Cub

Malaysia

30,073,000

23,160

423,900

0.773 (62)

10,060

50

5.6

Original Asian Tigers

Hong Kong

7,219,700

52,984

944,800

0.891 (15th)

9,705

77

2.9

Singapore

5,399,200

78,762

818,800

0.901 (9th)

7,345

87

3.9

South Korea

50,423,955

33,791

1,084,000

0.891 (15th)

11,350

56

3.0

Taiwan

23,386,883

41,539

623,700

0.882 ( 22nd)

6,882

61

3.3

  

Malaysia – a case study of an Asian Tiger Cub

Malaysia is tropical country that occupies a peninsula south of Thailand and part of the Island of Borneo (which it shares with Indonesia and Brunei).  It is a tropical country which would have originally been CLASSIFIED on the on the southern side of the North-South divide, which places it within the less economically developed world. This is now inaccurate, due to Malaysia’s impressive economic growth as one of Asia’s NICs (newly industrialising countries) over the past 40 or so years.

 

Malaysia is an Asian Tiger cub, one of the second waves of Asian tiger economies. Prior to 1970 it was a classic agricultural nation that specialised in exporting raw materials - rubber and tin made up two-thirds of the value of exports in 1970.

By the end of the 1990s over 80% of exports were manufactured goods.

 

How did Malaysia grow economically?

1.      Labour – Malaysia had cheap labour in abundance in the 1970s and fulfilled consumer demand in richer MEDCs

2.      Transport – Malaysia had major ports such as Georgetown on Penang, this helped with trade

3.      Education – Malaysia has and had a well-educated workforce

4.      Government and politics – the country was governed by strong leaders including Dr Mahathir Mohamad who ruled from 1981 to 2003 who oversaw economic growth and increased prosperity for the people of Malaysia.

5.      Industrial policy – Malaysia allowed foreign companies to come in and invest, then strongly promoting the development of locally owned industries through protection and laws to give these home-grown industries privileges compared with foreign investors.

6.      Growth poles - manufacturing was concentrated in growth poles in Malaysia. Domestic goods such as food and drink and household goods are located in and around the capital city, Kuala Lumpur, which has an inland location. The export-orientated growth industries, mainly electronics but also including electrical goods, machinery, equipment and textile industries, are concentrated south of Georgetown along the eastern side of the island of Penang, close to the port and the road bridge connecting Penang to the mainland and international airport.

7.      Development of TNCs – Malaysia has its own car manufacturer, Proton, which sells cars to every continent

Get the lesson plan here

Try this exercise on NICs using Excel