The Characteristics of Economic Activity in Newly Industrialised Countries

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The Characteristics of Economic Activity in Newly Industrialised Countries Newly industrialised countries (NIC’s) are a group of countries (mainly in Asia and south America) that have attained a high level of industrialisation. These countries include Japan, South Korea, Singapore, Hong Kong and Taiwan, who have undergone rapid and successful economic transformation since the 1960’s. Three generations of NICs have been recognised, First Generation NIC’s for example South Korea, Singapore, Taiwan and Hong Kong, Second Generation NIC’s such as Malaysia and Thailand and Third Generation NIC’s such as India. One of the main characteristics associated with NICs is the idea of rapid industrialisation. There are two policies that are used in regard to industrialisation. They are: Export Oriented Industrialisation (EOI) and Import Substitution Industrialisation. South Korea, as an example of a First Generation NIC, had very low prospects after the Korean War of 1950-3. However from the 1960’s the economy took off again and South Korea started achieving rates of growth for the best part of four decades. All aspect of the quality of life improved and wages rose gradually. Life expectancy increased from 47 years in 1955 to 75 years in 2002. Hard work, rigorous schooling, state enforced austerity and imported technology transformed the economy and led to the country’s economic success. Industries were able to invest and expand tremendously due to state directed bank loans at a negative real rate of interest. This encourages more investment and gave incenti... ... middle of paper ... ...ey resource, while they were industrialising during the 50s and 60s. The Asian Tiger countries attracted a lot of investment from Japan, multinationals and trans-national corporations (MNEs/TNCs). It was found that it was more productive to move investment form Japan to other countries and other markets, as it would be cheaper. These companies found it a comparative cost advantage due to cheap labour. By diversifying to areas such as FMCG (fast moving consumer goods), they are increasing levels of wealth as these areas are more capital intensive and the goods are destined for export. There are many factors in the development of NICs. The main objective is to attract inward investment form other countries. Government intervention means that incentives to attract foreign trade are used, for example, tax reductions.

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