Business in Asia - South Korea, Hong Kong And Singapores Economic Growth - Assignment Example

Business in Asia 3 Lecture 5: 1. Was entrepreneurship important in Singapore’s economic growth during the 1960’s and 1980’s? After the second world war, Singapore underwent a period of transformations in their political field. This culminated in the establishment of a policy on pro interventionism by the people’s action party. It formed the economic board for development that was tasked with the purpose of attracting foreign investment to the country. Development plans for their infrastructure were established to accommodate the foreign investors needs. The governments intervention measures on the entrepreneurs rates of saving helped bring about the fund for central providence (CPF). This brought a great deal of income for the government and a source of financing for their industries. The authorities also borrowed from the fund at a lower rate than their market rates so as to improve on their infrastructure. Entrepreneurship activities in the country were government dominated with their officials monitoring the global market and other opportunities of advancement. 2. What are the differences in both city states’ growth experience? What are the current policies towards government interventions? The differences in the two city states arise from the way their free markets encountered interventions by their respective governments. The city of Hong Kong experienced little intervention from their government in their free markets whereas the city of Singapore experienced considerable intervention from their government. The government of Hong Kong does not have influences on the wages payable to workers, concessions on capital investments, loans to industries, their central bank nor their neutral financial policies. Hong Kong’s economic success comes mainly from the system they practice of laissez faire that guarantees economic freedoms. Hong Kong has a variety of small scale enterprises, various forms of subcontracting, imitation of products that leads to a high success level among their entrepreneurs. Both economies have developed into export oriented countries and have become manufacturers of intensive labour products for the global market. The government of Singapore has many restrictions on their economy ranging from control of the population, sanitation, courtesy and the maintenance of buildings. 3. Is methodology important in estimating Total Factor Productivity Growth (TPFG)? Describe how TFPG has helped in the economic growth of Hong Kong and Singapore? According to Romer (1990), Hong Kong has a higher TPFG rate than Singapore since it has more educated workers. This is vital for the strengthening of their manmade capital and the attainment of comprehension within their communities. This therefore implies that methodology which comes from our understanding is vital in the estimation of the total factor productivity growth of a nation. The economic growth of Hong Kong has been driven by their citizens urge to acquire knowledge. This is unlike Singapore’s which has focussed on the acquisition of raw materials for production purposes. The government of Singapore has lagged behind because of relying on the accumulation of these production materials as their main force of economic growth in the long run periods. Singapore is a victim of their own politicians making. This is because their policies emphasized on producing goods which they had low productivity in instead of emphasizing on educating their labour force. Tutorial 5: A Tale Of Two Cities: Hong Kong And Singapore. 1. Why do you think people in Hong Kong appear to be more entrepreneurial than in other economies? The government of Hong Kong emphasizes on the policy of laissez faire and enforces a free market policy with little interventions from them. The country also has a favorable policy environment for public businesses. The governments charges a low rate of taxes, applies neither controls on tariffs, exchange, adjustments of prices nor legislations on their labor force. The government of Hong Kong also ensures that their population has stability within their communities. The people of Hong Kong have been able to create a competitive advantage over their counterparts in the global market by coming up with new ways of carrying out their activities and procedures. This inventions have brought success to the entrepreneurs within the country that has eventually resulted in the country’s economic success. Finally, the country’s industries have already been exposed to adequate competition in the past. This was before they eventually chose to become an export oriented industrial nation. 2. What role did entrepreneurs play in Hong Kong’s economic development? Due to the government’s facilitation policy of minimal intervention, the entrepreneurship sector flourished in the country. Private along with small business flourished as a result of this policy. The entrepreneurs in the country enabled the enhancement of their capabilities by entering into contracts with other foreign companies who in turn brought foreign exchange to their country. This move also made Hong Kong to become an international coordination centre for trade. They were also responsible for the creation of many industries that offered employment opportunities for the local people by copying and imitating ideas from others. The proprietors of various industries have also opened branches across many nations with the purpose of maintaining their profit margins. This enables in regulating the governments taxes as a result of their efforts. 3. In your opinion, what are some factors that led Singapore to economic success for the last few decades? The governments of Singapore has come up with interventions on various issues that aim at improving their country’s economy. Their formation of development boards that aim to attract investments from foreigners has greatly helped in bringing success to their economy. The government has also indulged in the production of corporations which a worth billions such as the Singapore airlines and SingTel. This corporations have helped in offering employment opportunities to thousands of people in the country while helping to generate income for other development activities. The productivities of their citizens have also been augmented by the use of legislations on employment and relations in industries(1968). This has helped in improving on the employment conditions being availed around their country. The government has also increased their control on their labour markets as a method of easing issues in businesses. These measures greatly help in increasing their labourers productivity along as the businesses. This is facilitated by the absence of issues such as strikes and demonstrations. Tutorial 7: Rise Of South Korea: Restructured And Recovered. 1. Analyze some of the probable factors that have resulted in South Korea’s “Miracle”. The miracle in the south Korean peninsula started in the year 1963. The country adopted policies that were oriented toward exports in the early 1960’s. The authorities of the country then devalued their currency so as to remain competitive and relevant in the world markets. The miracle was also facilitated by the charging of preferential taxes on the export industry that was booming. The hastened depreciation imposed on assets that were used in the export industry in the year 1975 also assisted in bringing about the miracle of the Korean economy. The exemptions of taxes and tariffs on inputs used to produce export commodities assisted the economy in increasing their foreign reserves. This move also helped in increasing their industries profitability’s thereby enabling them to expand their scope of activities. The government also eased the investors access of credit facilities with rates that were preferential being charged. The country’s borders were also made open to imports coming to the country. This move ensured that their industries never lacked inputs for production purposes. 2. Did the HCI Drive contribute to this success? According to my judgment after going through the notes, the HCI drive did not contribute to this success. This is because only the companies that got the governments support performed well. The HCI drive brought low growth rates of 7.2% from 1973-1982 in comparison to the 9.5% recorded between the years 1963-1973. The drive also brought a decline in the imports required by their manufacturing firms. After the ending of the HCI drive, there was a higher economic growth in the country as opposed to when the drive was on. This ending came about in the year 1979 and witnessed the coming of liberalization in the trade and fiscal industries. The ending of the HCI drive brought the preferential tax along with credit treatment offered to strategic corporations halt. The regulations imposed by the FDI also eased thereby helping firms and industries in increasing their profitabilities. 3. Using the Ricardo’s model of comparative advantage, explain how an open economy can bring benefits to the world. Ricardo’s model of competitive advantage suggests that beneficial and reciprocal trade activities do occur even in instances where a nation is efficiently involved in the production of almost all the commodities in the market. It also implies that the nations involved in trade activities should specialize in exporting the goods they have competitive advantages in. By specializing in the goods an economy has a competitive advantage in, open economy stands to benefit the world in various ways. The open economy will bring profits from trade, discipline in the market, gains in productive efficiencies and inducements to saving and investing to the people. This benefits will most definitely come as a result of there being freedom and less restrictions on the peoples trade activities. Tutorial 8. 1. What main liberalization policies did the Indian government introduce in the early 1990s? The main liberation policies that the Indian government came up with in the early 1990’s were aimed at making changes in the fields of industry regulation, international trade and foreign investments. The government of India abolished the regulations imposed on industries that restricted on entry and investments. The monopoly practiced in many sectors of the public service were also eliminated thereby allowing many entrants into the industry. They also abolished the licensing of imports on inputs and other principal goods. The importation of consumer products was also required to be licensed. The government also reduced their tariffs on various products thereby creating an enabling environment for their public. They also facilitated the rupees devaluation along with a reduction in controls on exports. Finally, the government abolished restrictions on foreign investment and allowed foreigners the chance to trade in their nation without facing many restrictions on their activities. 2. Why did they do it? What more needs to be done in your view?. The Indian government adopted liberalization since their previous policies that focused on interventions failed in the achievement of their intended objectives. Their government had also learnt a lot from the collapse of communism in the soviet republic. They had witnessed how economic reforms had brought a lot of success to the Chinese. The crisis in the balances of payments in the year 1991 that resulted from the deficits in their accounts throughout the 1980’s also facilitated the liberalization. The country experienced a great fiscal deficit and a decrease in their foreign reserves and decided on adopting the liberalization policies. With the downgrading of the country’s credit rating the country had to borrow under conditions of liberalization from the IMF and world bank. In my own view, the Indian government should pass legislations to protect investors from financial uncertainties they could face when trading in the country. Such a move will help in attracting ,more investors to the country and this will bring an increase in the foreign exchange reserves. This will eventually place the country in a globally competitive situation (Lecture 8 notes). 3. Give some comparisons between South Korea and India during their economic development. Both economies became export oriented in the 1960’s. The Korean republic also devalued their currency, the Won, at around the same period that the Indian regime was devaluing theirs. The Korean economy offered treatment of preferential taxes on profits made from exports whereas the Indian government was keen on imposing or abolishing the importation of inputs to their country. Access to bank credit facilities as automatically given at certain preferential rates to businesses in the Korean republic. In comparison to this acts, the Indian regime offered fiscal support to their companies that agreed to follow the liberalization policies set. The Korean republic has recently insisted on opening her borders to imports. The Indian government on the other hand, remains keen on developing her industries using their own resources with minimum imports. Tutorial 9: Asia’s dragon: china’s three decades of reforms. 1. Why were China’s economic reforms more successful than those in Russia and other Eastern European Countries? The Chinese economic reforms were more successful than those used in Russia and other Eastern European countries because of several reasons. Their reforms were instigated at the local level with the motives of decentralizing and sharing profits. This eventually led to an improvement in incentives and their resources which in turn resulted in the need for the proper allocation of resources. The government officials played the role of identifying opportunities for the purpose of taking advantage of their economic benefits. The country has seen a growth in private entrepreneurships with the emergence of input markets unlike in the other nations where the input markets are government controlled. The reforms also had a minimal impact in terms of the costs the government incurred in the transition of their economy. China’s banking system moved to a more market oriented approach that facilitated the economic changes. The Chinese have also opened up to a more free market. The Chinese have finally been successful due to their use of knowledge in managing private along with public entrepreneurship. 2. What other reforms, in your view, need to be carried out in order to sustain China’s good economic performance in the future? In order to sustain the good economic performance displayed by the Chinese authorities they need to relinquish their domination of their banking system. They should also come up with measures to counter the effects of the falling NPL(Non-Performing Loan) ratios. The Chinese government should also adopt better management strategies to counter the effects of the falling NPL’s. This should be done by hiring experts in the management of risks along with corporate governance. The government officials should apply internal controls that are effective along with efficient processes for carrying out business activities. This type of a move will greatly assist in augmenting the external investors confidence when carrying out business activities in the country. 3. How did the state-owned banks in China accumulate a high level of non-performing loans (NPLs)? What has been done to deal with the problem? The state-owned banks in china accumulated a high level of non-performing loans as a result of their officials poor experience and proficiency in managing risks and corporate governance. The banks also lacked effective controls to monitor their internal operations along with the processes of accounting for their resources. In order to solve this problem, the country’s central bank has moved in to manage the issue so as to augment the investor’s confidence in their economic system. The loans accumulated due to the low and artificial low interest rates being charged, lending policies that supported inefficient SOEs. The government has increased their bailouts of various falling banks and financial institutions as a measure of handling the problem. They have also made tremendous improvements in their banking operations so as to reduce this trend of rises in non-performing loans. The legislation on commercial banks of 1995 additionally enhances their independence and regulates their operations. Tutorial 10: Impact of Two Economic Crises: Asian Financial Crisis and Sub-Prime Crisis. 1. Do you think it reflected serious problems related to the nature of the Asian economies prior to the crisis or do you feel that most of the blame for the crisis was the result of external factors? The crisis in the Asian financial field reflected serious problems that were present in the continent prior to the crisis and was partly as a result of the external factors. This is because the major cause of the crisis was the governments intervention in their markets of foreign exchange. The respective governments allowed operations to proceed under pegged rates of exchange system along with easy fiscal policies. The issue of crony capitalism which involves the awarding of credit facilities to closely associated companies was guaranteed by banks sponsored by the governments. For example, Thailand’s government was closely politically linked to financial corporation’s within the country. This type of capitalistic activities brought a rise to the issues of mal-investments in the region. The occurrence of specified events affecting the global market such the export gloom that came by also attributed to the continents economic woes. 2. What lessons can be learned from it? What were the characteristics of the Asian Financial crisis and the US Sub-prime crisis of 2007? What were differences and similarities? The Asian financial crisis shows that the supervisors along with regulators in the financial fields require to be more active in the detection and elimination of excessively taking risks. They should also enable the detection of increases in the leverages of non-regulated entities to prevent the effects of a future crisis from having such a great impact. It also shows that there is a great need of external finances and debts to help the companies in growing financially. The fiscal markets should also be improved by the construction of better money and bond markets. The characteristics of the Asian fiscal crisis and the us subprime crisis of the year 2007 was a rise in their interest rates along with the falling of prices in various sectors such as housing. There was an increase in the number of losses for financial companies along with defaults in the repayment of loans. The similarities were that there was plentiful liquidity and a greater search for yields by fiscal lenders. The difference is that the sub-prime effects hit the housing sector of America whereas the effects on the Asian continent hit the fiscal lending markets (Impact of Two Economic Crises: Asian Financial Crisis and Sub-Prime Crisis, lecture 10). 3. Which Asian countries have been most struck by the 2007 crisis and why? Describe some of the effects of SPC on Asian economies. The countries of south Korea, Malaysia and Thailand have suffered the most adverse effects of the 2007 financial crisis. This is because these countries had very big external debts as they relied heavily on outside borrowings. These countries also had the greatest exposures to foreign currencies. The effects of the SPC on Asian countries was that the lending from the countries central banks would be on the decline. This was evident from the fact that most of them had lost their lending abilities. The countries in the Asian continent also made great exports to the American economy since they were manufacturing cheap products. It is this products that eventually brought inflation into America due to their high spending on the goods. Tutorial 11: Foreign Direct Investment in Asia. 1. Australia’s trade performance with Asia is not matched by business investments in Asia. The trade activities between Asia and Australia are facilitated by several factors. These include the higher rates of savings in several countries, sophistication in technological advancements and integration with purchasing and production regions. There are also low barriers to business across borders within the region thus facilitating an increase in their trade activities. The Australian investments in the region have been limited by the fact that the country’s within the region prohibit the creation and operations of industries that are foreign owned. There are also many restrictions imposed on foreign companies regarding their remittance of profits from their investments. The governments within the Asian region additionally provide many restrictions on the repatriation of capital owned by the foreigners. 2. What are some of the barriers to Australian investment in Asia? There are barriers in business across borders within the region thus facilitating an decrease in trade activities. The Australian investments in Asia are limited by the fact that the countries within the region forbid the creation and operations of industries that are foreign owned. There are also many restrictions imposed on foreign companies regarding their remittance of profits from their investments to their mother countries or other regions. The governments within the Asian region additionally provide many restrictions on the repatriation of capital owned by the foreigners. The region does not guarantee the economic freedoms of the investors who decide to bring their businesses there. Instead, these companies encounter many problems with issues in licensing and other restrictions that are imposed on their business activities. 3. Do you think having Free Trade Agreements will benefit Australia’s business investment in Asia? Yes, free trade agreements will benefit Australia’s business investment in Asia because of several reasons. These agreements will enable concessions to be made allowing for trade across regional borders which currently faces restrictions from the governments in the region. The agreements will also facilitate the ownership of industries by foreigners in these nations. They will additionally allow the remittances of profits to their mother country’s which will encourage the Australian authorities to increase their direct foreign investments to the region. The repatriation of capital invested in foreign countries by the Australian government will also be facilitated by the creation of free trade concessions. Finally, the creation of free agreements of trade will help to guarantee the rights of the Australian investors operating in these countries. This activities will benefit Australians business investment efforts by ensuring their profitability remains high at all times. 4. Using the Flying Geese Model, explain why FDI has been successful in Asia. The fling geese model suggests that the success of foreign direct investments into the region have been successful due to the economic advances set by Japan in the 1960’s. The Japanese adopted an export arrangement that led to economic advances of their country. Other countries in the region like Taiwan and Korea ended up copying the arrangements. This has seen the economic advances witnessed by Japan being replicated across various other countries. Japan is portrayed as the leading geese in this model of economic development. Development of the economy begins from one specific country and spreads to the other neighboring countries in sequence. The spread of the economic success in Japan followed by Korea and Taiwan eventually ended up spreading their effects to china after the opening of their economy in 1994. The model stipulates that a growth in the interdependence of markets will lead to a harmonious economic block for the region. Read More