ASIAN ECONOMIC HISTORY
Series Two: Economic Development in Brunei, Hong Kong, Malaysia, Singapore, South Korea and Taiwan, 1950-1980
Part 1: Files for 1950-1954
Part 2: Files for 1955-1958
Part 3: Files for 1959-1962
Part 4: Files for 1963-1966
This project provides archival documents relating to the economic success of Hong Kong, Singapore, South Korea and Taiwan, as rapidly emerging and newly industrialised economies (NIEs) by the late 1970s. It also covers economic developments in Malaysia following the granting of independence and the advances of the oil and petroleum industry in Brunei. Each region followed a different development path and was faced with a different set of basic characteristics:
Hong Kong: This had a traditional, laissez faire outlook and was very much service-based. It was an entrepot centre in the 1950s and its exports were largely labour intensive, specific manufactured products marketed to a small number of Western countries. Hong Kong has been gradually integrated into the Chinese hinterland economy. Trade barriers and protectionist policies in the 1970s threatened the survival of Hong Kong’s export market. By 1980 exports to the US, the UK and Germany made up over 50% of Hong Kong’s total exports. Imports from Japan, China and the US constituted over 50% of all imports. Textiles, clothing, electronics, watches, clocks, plastics and toys were key export commodities.
Singapore: A city-state economy which was heavily dependent on foreign multi-national capital investment. The role of the government in Singapore also fostered the correct conditions for economic growth. This was epitomised by an open economy approach, the creation of a conclusive environment for private enterprise through the pursuit of stable macroeconomic policies, and sustained investment in public infrastructure and human resources. In 1967 an export promotion strategy was adopted with the Economic Expansion Incentive Act. There was an emphasis on attracting value-added and skill-intensive activities. There was an investment in skill development and training. An increased labour force in the 1970s was made up from an influx of people from neighbouring economies. Re-export trade was always crucial. The state was active in promoting the economic development of Singapore and kept faith with a free-trade tradition. Singapore is very much an international trade dependent economy. The US and Japan are Singapore’s most significant trading partners. Key commodity exports include petroleum products, oil bunkers, televisions, radios, electronic components, ships, boats, oilrigs and clothing. Singapore became independent in 1965.
Taiwan: Financial development was dependent on international sub-contracting networks to help foster a strong small and medium-sized enterprise based domestic economy. The period 1952-1980 was characterised by government intervention and massive US aid. Between 1953 and 1957 US economic and military aid to Taiwan totaled US $1,708 million with a further US $1,223 million between 1958 and 1962, followed by US $706 million for 1963 to 1967. During this period aid was broadly allocated as follows:
Human Resources Development: 26%
Up to 1954 there was an import substitution strategy aimed at post-war construction. Between 1955 and 1960, Taiwan underwent a transition to an export promotion strategy. Export diversification was the dominant feature from 1963 onwards.
Taiwan’s industrial policy has succeeded in creating public enterprises when there was a lack of private funding, restricting imports, and occasionally financing private enterprises. The role of government enterprises has been declining continuously since 1950.
The creation of export processing zones in 1963 helped private enterprise. The advantages of small and medium-sized concerns was their flexibility to adjust to changing market needs and the ability to draw upon surplus labour from the declining agricultural sector.
The success of Taiwan’s trade has depended on a comprehensive government policy targeting export growth as the fundamental goal since the late 1950s. The successful land reform program of 1949-1952 initiated Taiwan’s trade development policy with increased agricultural exports financing imports of necessary machinery and equipment. During the import-substituting period of the mid 1950s, the government invested heavily in infrastructure and subsidised some light industries. Consumer goods industries developed quickly.
Since 1960, major efforts were made to promote foreign investment and trade. Banks offered low-interest loans to exporters. The phase of export promotion was followed by industrial consolidation in the period between 1973-1980. Competition from other low-cost manufacturing centres led to the development of capital-intensive industries. Since 1980 Taiwan has turned its attention to modernising its high-technology industries. Low domestic inflation and the triangular trade pattern between the US, Taiwan and Japan have been significant factors.
South Korea: The Korean War (1950-1952) destroyed traditional authority and class barriers as well as other impediments to economic development. The size of the military was greatly increased. The Korean economy was severely disrupted by the ravages of war and recovered very slowly in the period 1953 and 1961. It was manufacturing based with strong state influences and a nationalistic economic tradition.
Following the Korean War, from the early 1960s, the government in South Korea has played a significant role with appropriate development strategies, leadership commitment, institutional reforms and important budgetary and financial resource allocations. Key features were the availability of foreign direct investment (again massive US aid played a significant role). US military assistance to Korea amounted to US $1,275 million in the period 1956-1960 with a further US $974 million in the period 1961-1965.
Import substitution and stabilisation were the main features in the period 1952-1963. The turning point was the overthrow of the Rhee regime and the emergence of the Park Chung-Kee regime in 1961. Along with the construction of the first five-year economic development plan in 1962-1966, relevant institutions (for example the Economic Planning Board set up in July 1961, and the Korean Trade Promotion Corporation set up in May 1962) were established to provide support for the growing export market.
President Park chose an outward, industry and growth orientated strategy. His two famous maxims were “nation building through exports” and “export first” and these were well accepted by Korean businesses. The requirement for industry to catch up was reflected in the second five-year plan (1967-1971). Export agreements were drawn up between the government and relevant businesses. Firms that failed to achieve their export targets without a valid excuse risked administrative sanctions from the government.
With the advent of the President Park administration, foreign investment and loans began to pour into Korea. Again the US led the way. Between 1959 and 1968 total government loans, private loans and foreign investments, amounted to US $944 million. The 1970s saw the emergence of large corporations with an emphasis on shipbuilding, chemical industries and other heavy manufacturing. Typical exports in the 1960s were silk, tungsten, fish and fish products, animal oils and fats. By the mid 1970s this had changed to clothing, footwear, textiles, fabrics, electronic products and ships. By 1980 there was a greater emphasis on electronic products, ships, textiles and clothing, steel products and automobiles. There was a transition from agriculture to light industries followed by a further transition to heavy, capital-intensive and high technology orientated industries. Close ties with the US and methods closely following Japanese companies in the conduct of foreign trade are hallmarks of the South Korean economy.
Malaysia: Malaysia was formed in 1963 through a merging of the former British colonies of Malaya and Singapore, including the East Malaysian states of Sabah and Sarawak on the northern coast of Borneo. The next few years were dominated by Indonesian efforts to control Malaysia, Philippine claims to Sabah, and Singapore’s secession in 1965.
The first elections to the Federal Council in Malaya took place in July 1955 and in 1957 the Federation of Malaya gained complete independence from Britain. Tunku Abdul Rahman became the first Prime Minister. He and other leaders had formed a political alliance of the three main ethnic parties: The United Malays National Organisation, the Malayan Chinese Association, and the Malayan Indian Congress. This three-party partnership, known as the Alliance, was the forerunner of the multi-party grouping which continues in power today.
Economic and political disputes developed in the 1960s between the mostly Chinese state leaders of Singapore and the Malay federal government. The situation was resolved when Singapore withdrew from the federation peacefully and became independent in 1965.
However, racial tensions continued to hamper economic development. The Malays controlled government and agriculture, whilst the Chinese dominated commerce and industry. The Chinese resented the political power of the Malays and the Malays envied the economic success of the Chinese. These tensions triggered racial violence and riots in 1969 after an election on Peninsula Malaysia. The government was forced to declare a state of emergency which continued into 1971. With the return of stability after this turbulent period, the Malaysian economy began to prosper.
A middle income country, Malaysia transformed itself from 1971 over the next two decades, from a producer of raw materials to an emerging multi-sector economy. Growth was driven primarily by exports – especially electronics. In 1971 the government launched a 20-year plan called the New Economic Policy to achieve a better balance of wealth among racial groups. The multi-party alliance called the National Front was formed in 1974 uniting Malay, Chinese and Islamic groups. This laid the foundations for rapid economic growth, a platform which Prime Minister Datuk Seri Doktor Mahathir bin Mohamad built successfully upon in the 1980s.
Principal export commodities are electronic equipment, petroleum and liquefied natural gas, wood and wood products, palm oil, rubber, textiles and chemicals. The United States and Japan are key trading partners.
Brunei: Brunei is a different case. It was a British protectorate from 1888 until the granting of independence in 1984. Its economy has benefited from extensive petroleum and natural gas fields. This has given rise to one of the highest per capita GDPs in the less developed countries.
A small, wealthy economy – this has been based on a mixture of foreign and domestic entrepreneurship, government regulation, welfare measures, and village tradition. Crude oil and natural gas production account for a large proportion of GDP.
In recent years, substantial income from overseas investments has supplemented income from domestic production. The government now provides for all medical services and subsidizes rice and housing.
At the Commonwealth Conference on Foreign Affairs held in Colombo in January 1950, convened to exchange views on the needs of the countries of Asia, a Consultative Committee was established to survey needs, asses the resources available and required, focus world attention on the problems involved, and provide a framework within which international co-operation efforts could be promoted to assist the countries of the area to raise their living standards. At the first meeting of the Consultative Committee in May 1950 in Sydney, it was agreed that the Commonwealth Countries in the area should draw up development programs covering a six year period from July 1, and that other countries in the area should be invited to take similar action. The Plan’s life has since been extended from time to time at five-year intervals. At the Consultative Committee Meeting in Jakarta in November 1980, The Plan’s life was extended indefinitely.
The Plan embodies the concept of a collective intergovernmental effort toward the economic and social development of member countries in the Asia-Pacific region. It provides a forum for discussion of development needs of member countries and through consensus implements programs in response to their individual needs.
The Plan encourages developing member countries to become donors themselves and participate in economic and technical co-operation among developing countries.
The purposes of the Colombo plan are:
(a) to promote interest in and support for the economic and social development of Asia and the Pacific;
(b) to promote technical co-operation and assist in the sharing and transfer of technology among member countries;
(c) to keep under review relevant information on technical
co-operation between the member governments, multilateral and other agencies with a view to accelerating development through co-operative effort;
(d) to facilitate transfer and sharing of the developmental experiences among member countries within the region;
(e) to assist the Least Developed Countries (LDC’s) of the Colombo Plan region in their effort of economic development through dissemination of technical and industrial know-how by comparatively advanced countries.