How Asia Works

Andrew Chien
3 min readJun 13, 2021

The book “How Asia Works” basically talks about the fundamental reasons why some Asian countries could achieve great economic success but some not. Overall, three factors are listed to explain why some countries like Japan, Korea, Taiwan, and Singapore would succeed compared with the other Asian countries. In addition, this also shows how impactful the government policy could cause to the country’s destiny, especially when viewing Korea’s economy change from 2 times poorer than the Philippines to 11 times richer than it within half a century.

Let’s then start by discussing the first factor, agricultural reform. The agricultural reform is inevitable to reach the stage of matured and stable industrial society. Nonetheless, this can’t be done without effective privatization of the land. If the household can’t be incentivized to cultivate the land, then this means a waste of the labor force, especially in the rural area. This would further cause the negative cycle of pushing the transformation from agricultural society to industrial society.

The second factor is the infant industry policies. Doing the right thing at the right time is very important. In the phase of infant industry development, this is necessary to discipline the export and cull the losers. That means it’s essential for the government to take more restricted control over the manufacture and the finance to make sure only superior local manufacturer with the quality product could get the subsidy. By doing so, can increase the competitiveness of the domestic manufacturer and also give protection of its industry during the weak phase. Without doing this, it would cause the standstill of the industry transformation. Take Indonesia as an example, its government attracted many multinational companies due to its deregulated financial policy, however, it doesn’t force the multinational companies to pass the technology to the local manufacture, and neither does it require its local manufacture to follow the export discipline. Therefore, when China’s coastal manufacturing tribes become more attractive due to its more mature infrastructure and abundant quality labor force, all these multinational juggernauts would just leave for a better place without leaving anything with high value-added. This would later cause difficulty for Indonesia to handle its financial debts. From here, we can find the importance of export discipline as this is critical to technological upgrading.

Last but not least is the finance factor. It’s essential for the government to tighten its financial leash in early industrial development. The government should make sure the financial resource would go to the one that can boost the technological upgrading and the industry development rather than the speculative investment or the real estate. Without holding this regulation in hand, this would cause the vested interest to benefit from the government policy but the whole country to lose the impetus to upgrade. From here, we can know that the financial resource is important but it’s even more important to distribute it in the right place for long-term development.

All in all, it’s vital to put the industry phase into consideration when running the policies. Some policies that seem to work well in the western developed countries don’t guarantee to have the same result when applying to the other developing countries. Living in a period of such a dynamic world, it’s not easy to always make the right decision, but the agility to adjust and learn from history and mistakes are both critical to the destiny of the country.

Photo by Vladislav Babienko on Unsplash

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