The Characteristics of Economic Activity in Newly Industrialised Countries

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...

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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.