East Asia in transition: South Korea in the limelight

Abstract

The 'East Asia challenge' of popular parlance over the last decade has been associated above all with rapid economic growth at a time when other regions of the world have seemed to languish. But growth has not always been maintained uniformly across the region. ThoughJapan has remained an economic powerhouse, since the early 1980s the 'four little tigers', Hong Kong, South Korea, Singapore and Taiwan, have begun to separate away in growth-rate terms from the other East Asian economies. They have become leaders in that group of countries loosely known as the newly industrializing countries (NICs). In 1987 three of them figured in the world's top five fastest-growing economies. The fourth, Singapore, even after a hiccup in 1985 still recorded a growth figure for 1987 four times that of the Organization for Economic Cooperation and Development (OECD) average. In several respects the 'four little tigers' seem close to graduation from the class of NICs. The South Koreans certainly consider themselves top of the class. However, as the international environment becomes less friendly, all four tigers face a challenge to their traditional dependence on export-fuelled growth. Rising protectionism in their key markets-all four send at least 25 per cent of their exports to the United States-is supplemented by growing competition from less developed countries in major labour-intensive exports. Although their responses are not identical, they are all beginning to adjust their economic policies and patterns. Conversely, their success in exports in certain sectors has begun to have an impact on the OECD countries-not just the United States and Western Europe, who too easily see them as 'mini-Japans', but also Japan itself, whose own industrial restructuring, brought about by exchange-rate changes, has become more complex as a result. Japan, echoing many of the Western complaints against South Korea and the other NICs yet itself still running surpluses with the West, finds itself caught between the NICs and the West. Hence the Japanese suggestion recently that the OECD members should sit down with the Asian NICs to thrash out their trade problems. Late in 1987 a senior US Treasury official warned that the tigers could be threatened with extinction.1 Given their past record of adaptation and survival, this could be wishful thinking. Economic growth has its counterpart in political stability, but in the East Asian NICs it has not always meant an open or broadly-based democratic process.2 Just as