The Little Dragons Growing Up
Like younger siblings who can't wait to emulate
their older brother, South Korea, Taiwan and Singapore
closely studied Japan as they clambered up the development
ladder. They had few natural resources and an abundance of
cheap labor. But their governments were aggressively
pro-business. Like Japan's leaders, South Korea's Park Chung
Hee, Taiwan's Chiang Ching-kuo and Singapore's Lee Kuan Yew
saw economic progress as their mandate for ruling. In South
Korea, Park exhorted his subjects, "To the sound of churning
machines, sweat!" They took him at his word; for many years
South Koreans said, "Work hard" to one another at the end of
a long day, instead of "Goodbye."
After Park took power in 1961, he decided to
concentrate all his country's resources on strategic
industries. "Wasteful" consumption was discouraged. Park
promoted exports even more single-mindedly than the
Japanese. When the owner of Yonhap Steel chose not to export
because he knew he would lose money, Park forced him to sell
his company at 10% of its value. Others prospered by winning
Park's favor. Chung Ju Yung, the founder of Hyundai, rebuilt
a bridge in Seoul that had been destroyed in the war for a
token won (less than 1¢). When Park decided South Korea
needed a shipyard, he ordered Hyundai to build it. Hyundai
is now one of the world's largest shipbuilders. Government
favoritism allowed a few large conglomerates, or chaebols,
to corner the economy, and Park rewarded them with licenses
and contracts. Today the Big Four - Samsung, Hyundai, the LG
Group and Daewoo - account for half the country's
exports.
Like South Korea, Taiwan was a keen student of the bends in Japan's road to prosperity. Consider entrepreneur James Liao's decision in 1979 to diversify from his roaring business as a producer of athletic shoes for companies like Nike to electronics manufacturing, an industry he knew nothing about. Liao was impressed by the growth of the computer business and figured Taiwan would soon be too expensive to serve as a base for manufacturing shoes, so he recruited bright talent to give his firm the technology and brains it lacked. Today, with sales of $700 million, Liao's ADI is one of the world's 10 largest producers of computer monitors.
Taiwan's businessmen and other members of the dynamic Overseas Chinese community increasingly play the role of economic integrator for the entire Pacific Rim. Instead of Nike, say, building a plant in Thailand, Taiwanese businessmen will do it, sending in managers from Taiwan. This creates demand back home_for components and machinery; last year more than half of Taiwan's exports went to other Asian countries and only 24% to the U.S. A decade ago, those ratios were the other way around.
Singapore, the most remarkable of city-states, has enjoyed confounding skeptics ever since 1965, when it was separated from Malaysia and cast off on its own. The country soon realized it badly needed an infusion of skills and technology. "We decided that the only way to provide employment and raise productivity," says Friedrich Wu, head of economic research at Development Bank of Singapore, "was to invite multinationals with open arms." The strategy paid off handsomely; production at foreign companies' local subsidiaries now accounts for a major share of the country's manufacturing. The transformation was swift, yet the government scarcely paused to celebrate an annual growth rate of about 8% in the '70s. In 1980 it set out to force wages up and push out labor-intensive industries in favor of better-paying industries like machine tools and electronics. "Singapore could not sit still and continue to produce clocks and watches," says Wu.
With a 1994 per capita income of $23,360, Singapore now ranks 12th highest in the world, and last year the economy grew 8.9%. It is a success story that has since prompted Prime Minister Goh Chok Tong to express some concern. "A whole generation of Singaporeans born after 1965 have known only growth and affluence," he said recently. "For them a crisis means an economic growth rate of 5%."
