FAJNZYLBER (1981) - Some Reflections on South-East Asian Export Industrialization

8/11/2019 FAJNZYLBER (1981) - Some Reflections on South-East Asian Export Industrialization

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C E P A L

Review

Director

R A U L P R E B I S C H

Technical Editor

A D O L F O G U R R I E R I

Deputy Secretary

G R E G O R I O W E I N B E R G

U N I T E D N A T I O N S

ECON OM IC COM MISSION FOR LATIN AMERICA

SANTIAGO, CH ILE / DECEM BER 1981


2/24

C E P A L

Review

Nu m be r 15 Santiago, Chi le Decem ber 1981

C O N T E N T S

D e v e l o p m e n t a n d e q u i t y . T h e c h a l le n g e of t h e 1 9 8 0s

Enrique V. Iglesias

7

P r o b l e m s a n d o ri e n t a t io n s o f d e v e l o p m e n t

CEPAL Economic Projections Centre

47

C o n s u m p t i o n i n t h e n e w L a t in A m e r i c a n m o d e l s

Carlos Filgueira

71

S o m e r e f l e c t i o n s o n S o u th - E a s t A s ia n e x p o r t i n d u s t r i a l iz a t i o n

Fernando Fajnzylber

111

T h e d e v e l o p m e n t s t ra t e gy a n d e m p l o y m e n t in t h e 1 9 80 s

Vctor E. Tokman

133

T h e c o n c e p t o f i n te g r a t i o n

Isaac Cohen Orantes

143

D i a lo g u e o n F r i e d m a n a n d H a y e k . F r o m th e s t a n d p o in t o f t h e p e r ip h e r y

Ral Prebisch

153

S o m e C E P A L p u b l i c a t i o n s 175


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C EPA L R EV I EW

December 1981

Some ref lect ions

on South-Eas t

Asian expor t

indust r ia l iza t ion

Fernando Fajnzylber

The successful export strategies of some

Sou th-Ea st Asian countries have bee n raised in

certain Latin American circles to the level of

veritable paradigms and it is held that our re

gion sho uld im itate these processes in order to

achieve high rates of growth of production,

employment, productivity and even real re

muneration. For this reason, it is of particular

interest to analyse the policies, institutional

ma chinery , and dom estic and international so

cial and political conditions within the frame

work of whic h the se cases have taken place.

Th e pr esen t article analyses some aspects

of the se pro cesses w hich show the complexity,

richness and heterogeneity that characterize

them and which m ake it clear that the lessons

that can b e draw n from them wh ile richer and

more valuable than those deriving from the

'popular' version generally disseminated in

Latin America, do not permit their imitative

applica tion in this region.

After the Introduction, section H of the

article gives a brief description of the main

economic parameters of the four countries in

question South Korea, Taiwan, Hong Kong

and Singapore. Section III examines the rela

tionship between the export and industrializa

tion policies, section IV raises some aspects of

protectionist and import substitution policy,

section V analyses the role which the State has

played in these strategies, and the last section

of the article sets these examples against the

international context in which they have oc

curred.

* U N I D O I n d u s t r i a l A d v i s e r i n M e x i c o .

_

I

I n t r o d u c t i o n

In the rap id indus t r i a l i za t ion which has t aken

p lace s ince the war , spec ia l a t t en t ion i s war

ran ted by the expor t - l ed indus t r i a l i za t ion ex

p e r i e n c e n o t o n l y o f J a p a n , to w h i c h n u m e r o u s

r e f e r e n c e s w e r e m a d e i n a p r e v i o u s s t u d y, * b u t

a l so o f Sou th Korea , Ta iwan , Hong Kong and

Sin gap ore , f i rs t ly beca use o f the im press iv e

ra t es o f g rowth a nd t rans fo rmat ion o f the s t ruc

t u r e o f p r o d u c t i o n w h i c h t h e s e c o u n t r ie s h a v e

ac h ie ve d in a b r i e f space o f t ime, and seco nd ly ,

b e c a u s e t h e s u c c e s s a c h i e v e d b y t h e m h a s b e e n

g e n e r a t i n g t h e b e l i e f t h a t t h e e x p e r i e n c e o f

t h e s e c o u n t r i e s f o r ms a n e x a mp l e w h i c h c o u l d

and shou ld insp i re the fu tu re indus t r i a l g rowth

of La t in Amer ica .

The v iew i s f requen t ly expressed in cer

t a in c i rc l es in La t in Amer ica tha t t he success o f

these p rocesses i s due f i r s t ly to the i r t o t a l

o p e n n e s s t o i n t e r n a t i o n a l t r a d e , a n d s e c o n d l y

to the ver y low l eve l o f pub l i c , i n t e rven t io n . In

coming to th i s conc lus ion , a complex se t o f

dif-

f e r e n t e x p e r i e n c e s i s t h u s r e d u c e d t o a c o n c l u

s i o n o f a n o r m a t i v e n a t u r e w h e r e b y t h e c o u n

t r i es o f La t in Am er ica nee d on ly e l im ina te th e i r

p r o t e c t i o n i s t s c h e me s a n d r e d u c e p u b l i c i n t e r

ven t ion to i t s smal l es t poss ib le express ion in

order to permi t the genera t ion o f success fu l

e x p o r t mo d e l s c o mp a r a b l e t o t h o s e o f S o u t h -

Eas t As ia .

As we p ropose to show in th i s s tudy , the

mys t i f i ca t ion impl i c i t i n th i s vers ion o f what

h a s h a p p e n e d i n t h e " N e w l y I n d u s t r i a l i z e d

Count r i es" (NICs) o f As ia i s par t i cu la r ly se r i

ous fo r tw o reason s . F i r s t ly , bec aus e i t p rev en t s

us f rom advancing in our unders t and ing o f the

fac to rs which rea l ly exp la in these ra t es o f

g r o w t h a n d c h a n g e , t h u s l o s i n g t h e o p p o r t u n i t y

o f t a k i n g a d v a n t a g e o f e x p e r i e n c e s w h i c h a r e

undoub ted ly va luab le bo th in the f i e lds o f po l i

cy an d o f ins t i tu t ion a l ma ch in ery . Sec ond ly ,

b e c a u s e n o t o n l y a r e r e c o mme n d a t i o n s ma d e

w hi ch c or re spo nd on ly to a l imi t ed ex ten t to the

* F e r n a n d o F a j n z y l b e r ,

The Industrial Dynam ic in

Advanced Econom ies and in Semi-industrialized Coun

tries, P a c i f ic T r a d e a n d D e v e l o p m e n t C o n f e r e n c e , 1 9 8 0,

Seou l , Korea , 1 -4 Sep tember 1980 .


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SOUTH-EAST ASIAN EX PORT INDUSTRIALIZATION /

Fernanda Fajnzylber

113

relative growth is also to be observed in the

case of the 'normal ' countries of Korea and

Ta iwa n, altho ugh starting from lower levels: in

1963 Korea had a per capita income eq ual to 9%

that of the United states, r ising to 20% by 1976,

wh ile in Ta iwan the increase was from 14% in

1963 to 24% in 1976. In both cases, these levels

of per capita income were lower than those of

Brazil and Mexico.

As regards industrial output, and consid

erin g exclusively th e market econom ies, i t may

be no ted th at in 1963 the industrial output of

th es e four countries w as equivalen t to 0.35% of

A basic but frequently overlooked element in

the strategies followed by these countries is

their fundamental choice of industrialization:

industrialization aimed at penetrating interna

tional markets, perhaps, but industrialization

never theless . The sus tained and pers is tent

dynamic effects which these strategies had in

terms of the generation of employment, raising

of the level of the skill of the labour force,

incre ased product ivi ty, higher real wages , and

generation of consensus regarding the impor

tance of technical progress are intrinsically

linked with the basic fact that these countries '

exp orts we re industrial products. If the volume

of foreign exchange generated by these strate

gies had originated in the export of natural

resources, which in any case these countries

lacked, i t is very doubtful whether the sus

tained effects mentioned above would have

been comparable. Consequent ly, i t i s not the

orientation towards exports

per se

which

generates these dynamic effects, but rather the

basic fact that the products exported, even

though involving a high content of imported

inputs, are the subject of local processing

which leads to the incorporation and dissemi

nation of the ' industrial outlook' into the local

pa t r imony.

The following il lustrate the magnitude of

the process of change exper ienced by these

eco nom ies as a result of the leading role played

the industrial output of the market economies

as a who le, wh ile by 1976 it had risen to

1.35%.

Over the same period, the share of Brazil and

Me xico ro se from 2.6% in

1963

to 3.9% in 197 6.

1

The interesting feature of this industrial

grow th is the fact that it was accom panied by an

impressive expansion of industrial exports, re

flected in the increase in the share of the ex

ports of manufactures of these four countries

within the world total

2

from 1.35% in 1963 to

4.0% in 1976. Over the same period, the share

of the industrial exports of Brazil and Mexico

incr ease d from 0.22% in

1963

to 0.92% in 1976.

by the impressive industrial growth which

character izes their exp er ience.

In the case of Korea, the product of the

industrial sector represented only 5% of the

national product in 1954 (see table 1). In 1978,

ho we ver , 24 years later, the share of the in dus

trial sector had risen to 32%, while that of the

prim ary sector had gone from

50 %

to 19%.

In Taiwan, the industrial sector accounted

for 10% of the p rodu ct in 1952, whe reas this

prop ortion had risen by 1979 to the im pressive

leve l of 42% , wh ile primary production we nt

do wn from 3 7% to 11% over the same pe riod

(see tabl e 2).

In the city-State of Singapore, which has

practically no agriculture, the industrial sector

rep res en ted 13% of the products in 1960 but

24% by 1979. Th is chang e was due p artly to a

relative decrease in the role of the primary

sector from 5% in 1960 to 2% in 1979, but to a

larger e xtent i t was due to the relative decrease

in the role of the services sector, which was

resp ons ible for 79% of the produc t in 1960 but

only 70% in 1979. The relative weight of the

services sector reflects the special character

istics of this internationa l trading and distribu

tion centre, as in the case of Hong Kong, thus

' O E C D ,

The Impact of Newly Industrialized Coun

tries,

1979.

Hhid.

I l l

Indu strialization and export strategies


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114

CEPAL REVIEW

N o.15 /

December

1981

Table 1

SOUTH KOREA: SECTORAL STRUCTURE OF PRODUCTION

Share in GDP (%) 1954 1955 1960 1965 1970 1975 1979

Primary

production

Manufacturing

Services

50.2

5.3

44.5

44.3

8.4

47.3

45.9

9.7

44.4

34.2

15.0

50.8

27.8

20.9

51.3

24.0

28.2

47.8

19.1

31.6

49.3

Source: Chong Hvun Nam, Trade and Industrial

Policiesand.

the Structure of Protection in Korea,Korea D evelopment

Institu te, 1980, p. 6.

T ab l e 2

T A I W A N : S E C T O R A L S T R U C T U R E O F P R O D U C T I O N

Share in GDP {%)

Primary

product ion

Manufacturing

Social

security

Services

1952

37.13

9.82

9.61

42.83

1955

33.72

14.40

10.47

42.86

1960

33.87

17.44

11.08

39.39

1965

28.30

20.01

12.26

40.15

1970

19.81

27.31

13.74

42.03

1975

15.76

30.54

15.56

40.66

1979

10.56

42.12

14.96

34.58

Source:

Kwo-Shu Liang and Ching-ing Hore Liang,

Trade Strategy and the E xchange Rate Policies of Taiwan,

National

Taiw an University and National Cheng chi U niversity of Taiwan, 1980, p. 40.

calling for a different form of analytical treat

m en t from that appli ed to the rest of the devel

opin g countries (see table 3).

W e can see, then, that the notable dynamism

displayed by the economies of these countries

in the pe riod after the war cannot be separated

from the explosive industrialization reflected

in th e foreg oing figures, so that it

is

of particular

importance to go more deeply into the special

features of this industrialization process.

A

cen

tral feature of this is the concentration of these

coun tries on the export of consum er goods with

a high import content and the relatively inten

sive use of labour. In the case of Korea, where

perhaps the most advanced stage of industrial

ization has bee n reached, it may be noted, when

comparing exports and imports of industrial

goods, that the consumer goods category gen

erates a significant trade surplus (almost US$ 6

billion in 1978), but this is not enought even to

offset the imports of intermediate goods, in

cluding fuels, while a further deficit of US$

2 400 million is generated in the capital goods

secto r {see tab le 4).

It is important to stress, however, that this

export strategy involving a high im port content,

together with th e growth of the domestic m arket

and its consequent import requirements, ex

plain why the trade balance of Korea shows a

syste m atic deficit from 1960 to 1979. It is worth

notin g that betw een 1960 and 1973 the expan

sion of domestic demand accounted for 73%o f

th e ove rall grow th of the ind ustrial sector.

3

This

structural deficit in the trade balance points to

the importance of external financing, particu

larly in the 1960s

:

a subject which w ill be refer

red to later.

If we compare the relative size of the defi

cit with t he volume of exports, we see that there

has been a significant improvement, because

3

Larry E. Westphal, "The Republic of Korea's Expe

rience with Export-Led Industrial Development",

World

Development, Vol. 6, No. 3,19 78, table 12,p. 366.


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SOUTH-EAST ASIAN EXPORT INDUSTRIALIZATION / Fernando Fajnzylber

115

Table 3

S I N G A P O R E : S E C T O R A L S T R U C T U R E O F P R O D U C T I O N

Sh are in G D P (%) 1960 1973

1979

Agr i cu l t u r e , f i sh i ng and hun t i ng

M a n u f a c t u r i n g

C o n s t r u c t i o n

C o m m e r c e

Others

Total

4.5

13.2

3.7

33.6

45.0

100.0

2.3

22.6

5.8

28.6

40.7

100.0

1.7

23.6

4.8

25.0

44.9

100.0

Source:

WongKum-Poh,

The Financing of'Trade and Developm ent in the ADC s: The Experience ofSingapore,

University

of Singap ore, 1980, p. 6.

Table 4

SOUTH KOREA: NET EXPORTS,BYCATEGORIES

(Thousands of dollars)

Ca tegor y 1972 1973

1974 1975 1976 1977 1978

Capital goods

Interme diate goods

Consumer goods

Total

-545 610 -727 097 - 11 52 465 -11 65 385 -701690 -126 2 903 -2 412 348

-105 9 929 -165 158 5 -3 005114 -3 425 210 -3 931559 -4 4917 54 -5 770 009

699 342 1339 795 1 761930 2 376891 3 506 336 4 657 036 5691961

-897 914 -1015252 2391478 -2193 418 1058 523 -764 081 -2 249 814

Source: Toshio Watanabe,An Analysis of Structural Dependenc e Be tween the Republic of Korea and Japan: Toward a

More Optimal Division of Labour,University of'Tsukuba, Japan, 1980, p. 11.

whereas in the 1960s the def i c i t was o f a com

parab le o rder o f magn i tude to the expor t s o f

goo ds an d serv ices , f rom 1972 the p rop or t ion

w en t dow n to 40% , and in the per iod 1976-1978

i t a m o u n t e d t o o n l y 6 % .

4

Co n c e n t r a t i o n o n t h e e x p o r t o f c o n s u me r

g o o d s a n d h i g h i m p o r t c o n t e n t a r e w e l l - k n o w n

fea tu res o f th i s g roup o f As ian coun t r i es , bu t

so m et h in g wh ich i s no t so o f ten me n t ion ed i s

the i r par t i cu la r k ind o f l i nk wi th Japan , wi th

which they have a re l a t ionsh ip c l ear ly d i f fe ren t

f rom tha t which they have es t ab l i shed wi th the

U n i t e d S t a t e s a n d E u r o p e . T h u s , c o n c e n t r a t i n g

once aga in on the case o f Korea , we no te tha t

w h e r e a s t h e s e c o u n t r i e s ' e x po r t s p e n e t r a t e s uc

cess fu l ly in to marke t s o f the Un i t ed Sta t es and

E u r o p e a n d g e n e r a t e a t r a d e s u r p l u s f a v o u r a b le

fo r the expor t ing coun t r i es , t here i s a

signif-

i can t (and in the case o f Korea , g rowing) t rade

def i c i t w i th Jap an . In 1970 Korea ' s def ic i t w i th

Japan was US$ 589 mi l l ion , bu t in 1978 i t

am ou nt ed to US$ 3 412 mi l l ion , equ iva le n t to

prac t i ca l ly twice Korea ' s t o t a l t rade def i c i t i n

that year and equal to 6% of i t s gross nat ional

p r o d u c t

5

I f w e ana lyse th e s t ruc tu re o f the t rade

r e l a t i o n s b e t w e e n t h e t w o c o u n t r i e s i n q u e s

t ion , we see tha t Japan has a favourab le t rade

ba lan ce in the ca tegor i es o f ma ch ine ry (22) ,

e l e c t r i c a l a n d e l e c t r o n i c e q u i p me n t ( 2 3 ) ,

t ran spo r t eq u ip m en t (24), bas i c meta l s (19) and

che m ica l p rodu ct s (14) , wh i l e the t rade ba la nce

is favourable to Korea in the branches of text i -

4

See Park Yung-Chul, Export Growth and the Balance

of Payments in Korea 1960-1978,

Korea University, 1980, p.

6.

5

Toshio Watanabe, An Analysis of Structural Depen

dence Between the Republic of Korea and Japan,Universi

ty of Tsuku ba, Japan 1980. p. 7. Pacific Trade and Deve l

opm ent C onferen ce, 1-4 Septem ber 1980, Seoul, Korea.


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C E P A L R E V IE W

N o .

15

/December 1981

les (9), foodstuffs (5) and yarns an d threa ds (8).

Textile products, together with yarns and

threads, represent 57% of Korea's exports to

Japan.

Cle ar specialization is to be observed even

in the trade relations within this branch, since

Korea mainly exports clothing, silk products

and cotton yarns, while importing capital- and

technology-intensive products such as syn

thetic fibres and garments made therefrom.

6

Th e second most importent branch of Korea's

exports to Japan is that of electrical and elec

tronic equipment, where a c lear tendency to

specialization connected with the 'technolog

ical den sity ' of these pro ducts is likewise to be

observ ed. This branch includes household ap

pliances, electronic components and electrical

machinery and equipment, Korea's speciality

being the export of such household appliances

and goods as radios, television sets, watches

and pocket calculators all labour-intensive

item s. In th e other two groups, the advantage is

on th e sid e of Japan. Eve n within the branch of

electronic components there is specialization,

since Japan is a net importer of batteries and

integrated circuits for which the production

technology is well known while it exports

semi-conductors .

In th e case of this sector, the specialization

reflects t he fact that the Korean enterprises en

gaged in these lines were developed on the

initiative of Japanese or United States enter

prises seeking to take advantage of the lower

cost of labour through subcontracting. This is

refelcted in the high coefficients of exports and

imports characterizing this branch in Korea:

th e ex por t coefficient rose from 50% to 63%

be tw ee n 1970 and 1977, while the import

coef-

ficient remained practically constant at around

6 1 % over the same period.

7

The magnitude of

Hhid,

pp . 4-8 .

nbid.

th e pr es en ce of foreign firms in this sector

is

not

typical of the industrial structure of Korea, for

whereas in manufacturing as a whole foreign

enterprises are estimated to be responsible for

15 %

of the total expo rts, in the case of the e lec

tronic sector it is estimated that if subsidiaries,

joint ventures and wholly foreign-owned sub

sidiaries are inclu ded these account for 54% of

the production and

7 2%

of the exports.

8

There are indications that similar vertical

links exist between Japan and the remaining

Asian N IC s, although in the case of these other

countries the coefficients of horizontal special

ization are estim ated to be lower.

9

This special

l inkage be twe en the Asian NICs and Japan is of

particular importance because it shows that,

from Japan's point of view, the relative loss of

markets in the United States and Europe caused

by the new exports of labour-intensive prod

ucts from these countries is offset by the indi

rect exports of capital goods and intermediate

produ cts of Japanes e origin incorporated in those

countries ' exports. The multiplier effect of

Korea's exports for the Japanese economy has

be en work ed out in quantitative terms, and this

has confirmed the view that the net result is

highly favourable for Japan.

10

This situation

would tend to change, however, in so far as

these countries manage to progress in their

production structure towards the metal manu

factures a nd m achinery and chemical branches,

where they have indeed made significant steps

forward. In the present circumstances of the

world economy and those foreseeable in the

short and medium term, however, it would ap

pear that at least the speed of this diversifi

cation is becomin g less marked.

&The Republic of Korea's Experience..., op. cit., p . 362.

9

An Analysis of Structural Dependence..., op. cit.

mbid.


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SOUTH-EAST ASIAN EXPORT INDUSTRIALIZATION /

Fernando Fajnzylber

117

IV

Sele ctive impo rt substi tution policy

Co n t r a r y t o w h a t i s s u g g e s t e d b y t h e ' p o p u l a r '

vers ions , t he t rade po l i cy fo l lowed by these

c o u n t r i e s h a s i n c l u d e d a b y n o me a n s

insignif-

i c a n t i mp o r t s u b s t i t u t i o n c o mp o n e n t , a n d t h i s ,

u n l i k e w h a t h a p p e n e d i n L a t i n A me r i c a , h a s

h a d a n e x t r e me l y s e l e c t i v e n a t u r e a t t h e s e c

to ra l l eve l which has been g radual ly chang ing

wi th t ime and adap t ing i t se l f t o the modi f i ca

t ions undergone by the sec to ra l p r io r i t i es o f

indus t r i a l po l i cy . Th i s carefu l and se l ec t ive

p r o t e c t i o n i s t p o l i c y u s e d b o t h t a r i f f a n d n o n -

t ar ifT m ec ha n i s m s , re in fo rc ing bo th wi th me a

sures regard ing access to the fo re ign exchange

marke t . The se l ec t iv i ty re fe r red no t on ly to the

iden t i f i ca t ion o f sec to rs , bu t even to tha t o f

en ter p r i se s , t he au thor i za t ion o f fo re ign ex

c h a n g e f o r i mp o r t s b e i n g c o n d i t i o n a l u p o n t h e

g e n e r a t i o n o f e x p o r t s i n c o r p o r a t i n g t h o s e i m

p o r t s ,

and thus invo lv ing the ex i s t ence o f in

s t i t u t i o n a l me c h a n i s ms p e r mi t t i n g p e r ma n e n t

c o m m u n i c a t i o n b e t w e e n t h e g o v e r n m e n t

a u t h o r i t i e s a n d t h e r e s p e c t i v e e n t e r p r i s e s .

As we sha l l s ee l a t e r , t h i s ' i n s t i tu t iona l '

d im en s io n , wi th d i f fe rences o f form and in

t en s i ty , i s p r es en t in a l l four na t iona l cases and

makes i t c l ear tha t t hey invo lve an ' i n t e rven

t ion i s t ' S t a t e in the mos t o r thodox Japanese t ra

d i t i o n .

In the case o f the p ro tec t ion i s t po l i cy o f

Korea , t he f i r s t e l ement which mus t be borne in

mind i s the fac t t ha t t he in fo rmat ion p rov ided

by th e leve l of tar iff pro tect i on is extr em ely

s k e t c h y , s i n c e " q u a n t i t a t i v e r e s tr i c ti o n s o n im

ports have been much more important than tari ffs

as ways o f p ro tec t ing impor t subs t i tu t ion in

K o r e a " .

1 1

In th e cour se o f the so -ca l led ' impor t

l ibera l i za t ion ' wh ich took p lace in 1967 , a

'b l ack l i s t ' was in t roduced , whose e f fec t was

tha t a l l t ypes o f impor t s no t l i s t ed there were

a u t o ma t i c a l l y a u t h o r i z e d .

T h e G o v e r n m e n t

li

Trade and Industriai Policies and the Structure of

Protection in Korea, C h o n g H y u n N a m , K o r ea D e v e l o p

m en t Ins t i t u t e , 1980 , p . 16 . Pac i f ic T rade and D eve lopm ent

C o n f e r e n c e , S e o u l , 1 9 8 0 ,

a n n o u n c e d t h e n u m b e r o f i t em s c o r r e s p o nd i n g

to res t r icted imports , i .e . , the black l is t , twice

a year. The cri ter ia for defining the i tems

inc lud ed in th i s b lack li s t we re fundam enta l ly

the ba lance-o f -payment s s i tua t ion and the

r e q u i r e m e n t s f or p r o te c t i o n o f d o me s t i c i n d u s

t r i e s .

Quan t i t a t ive res t r i c t ions were app l i ed

main ly to compet i t ive and 'non-essen t i a l ' o r

' l uxury ' impor t s , wh i l e impor t s o f non-compet i

t ive raw mater i a l s and in t e rmedia te goods were

a p p r o v e d a u t o ma t i c a l l y .

W he n th e sys t em of the 'b l ack l i s t' was

ad op te d in 1967 , appro x ima te ly 60% of the

1 312 ba sic im por t i tems (S ITC four digi ts)

w er e no t inc lud ed in the li s t and cons equ en t ly

rec e iv ed au tom at i c approv al ; 118 i t ems we re

to ta l ly p roh ib i t ed , whi l e 402 were sub jec t t o

var ious types o f res t r i c t ions such as quo tas

or requ i rement s fo r recommendat ions f rom the

Min i s t ry o f Indus t ry and Trade o r o ther

mi n i s t r i es . Betw een 1967 and 1978 , i . e. , i n the

c o u r s e o f o n e d e c a d e , th e i t e ms w h o s e i m p o r t a

t i o n w a s p r o h i b i t e d w e r e g r a d u a l ly t r a n s fe r r e d

to the res t r i c t ed impor t l i s t , t he p ropor t ion

of the to t a l number o f i t ems au tomat i ca l ly

a u t h o r i z e d b e i n g ma i n t a i n e d a p p r o x i ma t e l y

con s tan t . By 1977 , the p ropor t ion o f au toma

t i c a l l y a u t h o r i z e d i t e ms a m o u n t e d t o 5 2 . 7 % ,

c o m p a r e d w i t h 5 0 . 4 % i n 1 96 7 , a n d s u b s e q u e n

t ly , t ow ard s the en d o f 1978 , the p ropor t io n o f

au tomat i ca l ly approved i t ems rose to 64 .9%

(see t ab le 5 ) . In genera l t e rms , th i s shows tha t

at l eas t from th e po in t o f v i ew of the nu m be r

of i t ems o f f ree o r res t r i c t ed im por ta t ion

t h e r e w e r e n o s u b s t a n t i a l c h a n g e s i n t h e d e c a

de fo l lowing what was ca l l ed ' impor t l i bera l i

z a t i o n p r o c e s s ' . Co n s e q u e n t l y , i n o r d e r to ma k e

a s t r i c t e r appra i sa l o f the na tu re o f the p ro tec

t ion sys t em, i t wou ld be necessary to have in

fo rm at ion no t on ly on the l eve l s o f t a ri ff p ro tec

t ion bu t a l so on the var ious im por t con t ro l s , and

c o m p a r i s o n o f p r i c e s b e t w e e n t h e d o me s t i c

a n d e x t e r n a l ma r k e t s .

Table 6 shows the levels of effect ive pro

tect ion for 1978 in comparison with those


10/24

118

CEPAL REVIEW No .15 December 98

Table 5

SO U TH K O R EA : N O N -TA R IFF IMPO R T R ESTR IC TIO N S

1967 II

1968 I

II

1969 I

II

1970 I

II

1971 I

II

1972 I

II

1973 I

II

1974 I

II

1975 I

II

1976 I

II

1977 I

II

Prohibited

118

116

71

71

75

74

73

73

73

73

73

73

73

73

73

71

66

66

64

63

61

Restricted

402

386

479

508

514

530

526

524

518

570

571

569

556

570

574

592

602

584

579

580

560

Automatically

approved

(1)

792

810

756

728

723

708

713

715

721

669

668

670

683

669

665

649

644

662

669

669

691

Total*

(2)

1312

1312

1312

1312

1312

1312

1312

1312

1312

1312

1312

1312

1312

1312

1312

1312

1312

1312

1312

1312

1312

Deg ree of liberal

ization of imports

(%)

(3) = (l)/(2)

60.4

61.7

57.6

55.5

55.1

54.0

54.3

54.5

55.0

51.0

50.9

51.1

52.1

51.0

50.7

49.5

49.1

50.5

51.0

51.0

52.7

Source:

Chong Hvun Nam,

Trade and Industrial Policies and the Structure of Protection in Korea ,

Korea Developm ent

Institute

1980, p. 6.

"The classification of imports of goods was based on the SITC 4-digit codes up to 1970, but after that the BTN (CCCN)

4-digit codes were used.

es t imated for 1968 ( the es t imates of ef fect ive

p ro t e c t i on w er e ob t a i ned by u s i ng t he m e t hods

of Balassa and Corden) . This t ab le br ings out

var ious i n te res t ing features of the Korean

s chem e o f p ro t ec t i on i s t po l i cy ; t o beg i n wi t h ,

t he w e i g h t e d ave rage r a t e o f nom i na l p ro t ec

t ion for indus t r ia l ac t iv i ty as a wh ole rose f rom

1 4 % to 18% and th e ra te of ef fective pro tec t ion

from 1 1 % to3 1 % according to Balassa 's method

an d f rom 9% to 24% accordin g to Co rde n 's

m e t hod du r i ng t he pe r i od 1968 -1978 . A t t he

s am e t i m e , t he we i gh t ed ave rage t a r i f f p ro t ec

t i on w en t dow n f rom 54% t o 38% over t he s am e

pe r io d . Th is poin t s to the minor s igni f icance

which tar i f f pro tect ion seems to have had in the

case of Korea.

Se co ndl y , in the case of both nom inal and

effect ive pro tect ion , a l arger in ter-sectoral var i

a t ion i s ob ser ve d in 1978 than in 1968, wh ich

sugges t s that the d i scr iminatory nature of

s ec t o ra l p rom ot i on po l icy has bee n he i gh t ened .

Both nominal and effect ive pro tect ion tend to

be s m a l l e r fo r i n t e rm ed i a t e goods and h i ghe r

for cap i t a l goods and con s um er du ra b l es .

Thi rd ly , i t i s in teres t ing to note that in the

cas e o f Korea un l i ke wh a t hap pen ed i n La t i n

Am er i ca p ro t ec t i on has a m arke d b i as in

favour of the agr icu l tural sector , which has

be e n in te ns i f ie d in the l ast dec ade . In 1968, the

lev el of nom inal pro tect ion for the agr icu l tural

sec tor w as 17%, wh i le i t was 12% for the

m anu fac tur i ng sector ; in 1978, in cont ras t , i t

ha d r i se n to 55% for the agr icu l tural sector

w hi le i t was only 10% for the ma nufac tur ing

secto r . Th is ref lect s , as in the case of Japa n, the

pr ev al en ce of th e cri terio n of food self-suff 'i -


11/24


12/24

120 CEP AL REVIEW No.15 /December

1981

Table 7

T A I W A N : C H A N G E S I N T H E C L A S S I F I C A T I O N O F V A R I O U S

C A T E G O R I E S O F I M P O R T E D M A N U F A C T U R E S , 1 9 5 3 - 1 9 7 8

1953

1956

1960

1966

1968

1970

1972

1974

1975

1976

1978

Permissible

280

252

506

4.93

5 541

5 612

10860

12

645

12

688

12

846

15773

%

55.23

48.10

53.72

52,34

57.92

57.08

82.09

97.71

97.52

97.16

97.57

Controlled

185

241

381

395

3 770

4 030

2 365

293

318

362

375

Number o'items

%

36.49

45.99

40.45

41.93

40.05

40.99

17.87

2.26

2.24

2.74

2.32

Prohibited

28

25

33

36

191

190

5

4

4

13

17

%

5.52

4.77

3.50

3.81

2.03

1.93

0.04

0.03

0.03

0.10

0.11

Others

14

6

22

18

_

-

-

_

-

-

-

2.76

1.14

2.33

1.91

-

-

-

-

-

-

-

Total

507

524

942

942

9 412

9 832

13230

12942

13010

13

221

16 165

%

100.0

100.0

100,0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

Source: Kuo-Shu Liang and Ching-ing Hore Liang,Trade Strategy and the Exchange Rate Policies of Taiwan, National

Taiw an U niversity an d National Chengc hi University of'Taiwan, 1980, p. 40.

" T h e p r i n c i p l e w h e r e b y t h e d o m e s t i c

avai lab i l i ty of a product jus t i f i es cont ro l of

import s of s imi lar goods i s an important par t of

t h e Ta i w an p ro t ec t i on s y s t em , a s i n m any o t he r

d e v e l o p i n g c o u n t r i e s / '

1 4

The bas ic cr i t er ion used was that local

m a nufa c t u r es wh o des i r e d p ro t ec t i on m us t

show that the quant i ty and qual i ty of thei r

pr od uc ts w er e suff ic ien t to sa ti sfy dom est ic

demand and that the cos t of the imported raw

ma ter ia l s to ma nufa cture such produ cts local ly

did not exceed 70% of the to ta l cos t of produc

t ion . T he ex -works pr ice of the produc ts wh ose

i m p or t a t i on was r e s t r i c t ed cou l d no t exceed t he

p r i ce s o f com pe t i n g i m por t s by m ore t han 25%

in 1960. In 1964 th i s margin was reduced to

1 5 % , in 1968 to 10% , an d in 1973 to 5% .

V

T h e role of th e s ta te

Sta te act io n is pr es en t in al l four of the coxintries

ana l y s ed , a l t hough wi t h d i f f e rences o f i n t en

s i ty and involv ing d i f ferent forms of in terven

t ion . Ev en in the c i ty S ta tes of S inga pore and

Hong Kong , h i s t o r i ca l l y cond i t i oned t o p l ay a

ro l e a s cen t r e s o f i n t e rna t i ona l t r ade d i s t r i bu

t ion , there are c lear indicat ions that the pos twar

14

Kuo-Shu Liang and Ghing-ing Hore Liang.

Trade

Strategy and the Exchange Rate Policies of Taiwan,

Na

tional Taiwan University and, National Chengchi Univer

sity, Taiwan. 1980, p. 14. Pacific Trade and Development

Conference, Seoul, 1980.

indus t r ia l i zat ion s t ra tegy was the resul t not

only of the act ion of the in tern at ional ma rket

forces , but of the adopt ion of a s t ra teg ic de

ci s ion by ar t i cu la ted in ternal nucle i of the

res pec t i ve S t a t e s :

" I n S i ngap o re , t he Go vern m e n t p l ays a

key ro l e i n econom i c deve l opm en t . I t no t on l y

i den t i f i e s t he s ec t o r s wh i ch d i s p l ay p rob l em s ,

formulates su i tab le pol ic ies and grants the

nec es s a ry i nv es t m en t i ncen t i ves , bu t a l s o p l ays

a real par t in a wide range of economic act iv i

t i es . . . The pub l i c s ec t o r m akes a cons i de rab l e


13/24

SOUTH-EAST ASIAN EXPORT INDUSTRIALIZATION /Fernando Fajnzylber

121

co n t r ibu t ion to cap i t a l fo rmat ion . Of the to t a l

g ross domes t i c cap i t a l fo rmat ion i t i s respon

s ib le fo r be tween a quar t e r and a th i rd . "

1 5

In Hong Kong the p resence and ac t ion o f

the S ta t e re f l ec t t he ex i s t ence o f domes t i c

e n t r e p r e n e u r i a l n u c l e i w h i c h h a v e a n h i s t o r i

c a l c o mp o n e n t a s s o c i a t e d w i t h t h e l o n g p e r i o d

du r i ng w hic h th i s c i ty -Sta t e has p lay ed a s ign if i

can t ro l e in in t e rna t iona l t rade in t e rmedia t ion

re la t ions in As ia . Th i s componen t , d i s t i l l ed

over the space o f more than a cen tu ry , i s

a c c o mp a n i e d b y t h e c o n t r i b u t i o n i n t e r ms o f

e n t r e p r e n e u r i a l c a p a c i t y a n d s k i l l e d l a b o u r

w h i c h H o n g K o n g r e c e i v e s a s a c o n s e q u e n c e o f

the soc ia l t rans fo rmat ions t ak ing p lace in

Ch ina . In the words o f Tzong-B iau L in and

Y i n - P i n g H o :

"The infras t ructure is a legacy of his tory.

H on g Ko ng 's hun dr ed years o f por t ac t iv i ty

prov ided the c i ty wi th an ex tens ive phys ica l

a n d c o mme r c i a l i n f r a s t r u c t u r e : h a r b o u r a n d

warehous ing ins t a l l a t ions , va luab le t rade l inks ,

and wide exper i ence in t rad ing . Al l t h i s ,

toge ther wi th i t s e f f i c i en t bank ing , insu rance

and sea t ranspor t sys t ems , have c rea ted an eco

no m ic s t ruc tu re whic h i s ex t rem ely su i t ab le fo r

the d ev e l op m en t o f expor t trade in the l igh t

ma n u f a c t u r e s w h i c h a r e t h e f u n d a me n t a l e l e

m en t in i ts p res en t g rowth . I t i s per fec t ly t rue

to say tha t Hong Kong 's expor t i ndus t ry was

st imulated in the f i rs t p lace by the great f low of

l a b o u r , c a p i t a l a n d e n t r e p r e n e u r s f r o m Ch i n a

in the late 1940s and early 1950s. During this

period, a group of industr ial is ts arr ived from

S h a n g h a i w h o s e c a p i t a l a n d e n t r e p r e n e u r i a l

c a p a c i t y i mme d i a t e l y b r o u g h t a b o u t a n e x p a n

s i o n o f t h e t e x t i l e i n d u s t r y , w h i c h s p e a r h e a d e d

the f i rs t s tage in the industr ial izat ion of Hong

Kong after the war. Moreover, the big f low of

i mm i g r a n t s f r om C h i n a m o s t of t h e m y o u n g ,

indus t r ious and sk i l l ed prov ided a p rac t i ca l ly

u n l i m i t e d n u m b e r o f w o r k e r s i n r e l a t io n to t h e

leve l o f ec ono mi c ac t iv i ty then ex i s t ing . Unl ike

mos t o f the economies which have an excess o f

l abour , Hong Kong has a l abour fo rce which

^The Financing of Trade and Developm ent in the

ADCs: The Experience of Singapore. W ong Kum-Poh , Uni

ver s i t y o f S ing apo re , S inga pore , 1980 , p . 9 . Pac i f ic T rade

a n d D e v e l o p m e n t C o n f e r e n e t : . S e o u l . 1 9 8 0 .

do es n ot , as is usu al ly the ca se, com e from th e

agr i cu l tu ra l sec to r , bu t f rom immigra t ion . "

1 6

Th e fo rego ing ind ica tes tha t t he success ful

indu s t r i a l i z a t ion o f the se two c ity -Sta t es , Ho ng

Kong and Singapore , goes fa r beyond any ques

t ion o f be in g a mi r acu lo us resu l t o f the app l i ca

t ion oflaissez-faire, and confi rms the idea that

in o rde r to und ers t an d thes e p rocesses i t i s nec

essary to g ive due weigh t to the respons ib i l i t y

a s s u me d i n t h e m b y e n d o g e n o u s g r o u p s i n a

fo rm of soc ia l o rgan iza t ion genera ted in par

t i cu la r h i s to r i ca l cond i t ions , whose charac te

r i s t i cs mus t no t be over looked .

The fo rego ing de ta i l s regard ing the evo lu

t ion of protect ionis t pol icy in the case of

Ta iw an re f l ec t i n tu rn the ex i s t enc e of a p ro tec

t ionis t pol icy and an industr ial s t rategy wel l

d e f i n e d b y t h e G o v e r n me n t a mb i t , a mo n g t h e

main resu l t s be ing the re l a t ive d ivers i f i ca t ion

observed in indus t r i a l p roduct ion and expor t s

in the co urse o f the per iod , in wh ich g row ing

propor t ions o f p roduct s o f the chemica l , i ron

and s t ee l , and sh ipbu i ld ing indus t r i es a re to be

ob se rv ed . I t wo uld b e di ff icul t , if not impossi

b l e , to try to exp lain this divers i f icat ion towa rds

cap i t a l - in t ens ive sec to rs (pe t rochemica l s ) and

sec to rs mak ing in t ens ive use o f sk i l l ed l abour

and t echno logy (such as sh ipbu i ld ing) as a

m er e au tom at i c re f l ec t ion o f the sys t em of st a t ic

c o mp a r a t i v e a d v a n t a g e s a n d p r e s s u r e s b y t h e

advanced coun t r i es , wh ich in ac tua l fac t wi l l

themselves be a f fec ted by th i s indus t r i a l d iver

s i f i ca t ion o f Ta iw an . W hat i t is wi shed to s t res s

is that the industr ial s t rategy of Taiwan, as in

the other cases , i s due to a s ignif icant extent to

th e po l i t i ca l dec i s ion o f dom es t i c econ om ic

and soc ia l agen t s which came toge ther in the

def in i t ion o f the s t ra t egy fo rmula ted by the

Sta t e .

The case of Korea cal ls for special at ten

t ion , s inc e i t i s t he case which has bee n he ld up

perhaps mos t f requen t ly in La t in Amer ica as an

e x a m p l e o f t h i s n e w p a r a d i g m b a s e d o n o p e n

ing up to the in t e rna t iona l marke t and min imi

zat ion of the role of the State.

In a p re v iou s paragra ph i t was mad e c l ear

K

' Tzong-B ia i i L in and Yin-P ing Ho, Export Oriented

Growth and Industrial Diversification in Hong Kong, T h e

C hines e Univer s i ty o f Hong Kong , 1980 , p . 11 . Pac i f i c

T r a d e a n d D e v e l o p m e n t C o n f e r e n c e , S e o u l , 1 9 8 0 .


14/24

122

CEPAL REVIEW No . 15/December 1981

how far the pro tect ionis t pol icy appl ied by

Ko rea wa s f rom the im age of i t wh ich has be en

p ro j ec t ed r ecen t l y i n La t i n Am er i ca .

A f i rs t express ion of the act ive par t i c ipa

t io n of th e pub l ic se ctor in the des ign of the in

du s t r i a l s t ra tegy i s to be s ee n i f we analys e th e

p l ann i ng s chem e pu t i n t o p rac t i ce i n Korea i n

1 9 6 2 .

The fi rst plan (1962-1966) had as i ts cen

t ra l object ive s the prom ot ion of the ex pans io n

o f s t r a t eg i c i ndus t r i e s , s t r eng t hen i ng o f t he

eco no m i c i n f r as t ruc t u re o f t he coun t ry , and

fu r t he r i ng i n pa r t i cu l a r of t he g rowt h o f p roduc

t iv i ty in the agr icu l tural sector .

The s econd p l an (1967 -1971) concen t ra t ed

on th e prom ot io n of the in tern al ar t i cu la t ion of

the indus t r ia l s t ructure and the s t imulat ion of

i ndus t r i a l expo r t s .

The th i rd p lan (1972-1976) had as i t s cen

t r a l ob j ec t i ves t he dev e l op m e n t of t he eng i

nee r i ng i ndus t ry and heavy i ndus t ry , a s we l l

a s i m pro ve m e n t o f t he ba l ance -o f -paym en t s

pos i t i on .

1 7

In o rde r t o i l l u s t r a t e t he em i nen t l y s e l ec

t ive nature of the indus t r ia l s t ra tegy and the

we i gh t exe r t ed by i n t e rna l dec i s i ons i n de f i n

i ng t he ro l e wh i ch ex t e rna l agen t s have p l ayed

in the indus t r ia l i zat ion of Korea, i t i s worth

exam i n i ng t he c r i t e r i a app l i ed i n e s t ab l i s h i ng

ru l e s on t he p res e nce o f fo re ign i nves t m en t .

T h e sectora l def in i t ion s fixed by the For eign

C ap i t a l Inducem en t Ac t t o r egu l a t e t he p res

en ce o f fo re i gn i nves t m en t a re de t a i l ed b e l ow

(see tab le 8) .

Apar t f rom i t s character of sectoral se lec

t i v i t y , d i r ec t i nves t m en t has p l ayed qu i t e a

m arg i na l ro l e com pared wi t h ex t e rna l i ndeb t

ednes s , and wi t h i n t he l a t t e r l ong - t e rm i ndeb t

ednes s has p redom i na t ed , t hus con f i rm i ng t he

ap pra i sa l that th i s i s a case of an indus t r ia l d e

ve l opm en t s t r a t egy p rope l l ed by i n t e rna l

agents . Except in the two years 1972-1973,

w he n d i r ec t i nves t m en t r ep res en t ed 12 . 3% o f

to ta l lo ng- term cred i t , i ts share in the res t of the

ll

The Republic of Korea s Experience..., op. cit.; Trade

and Industrial Policies..., op. cit.; Hon i l Lee , Industrial

Redeployment in Korea, S ep tember 1979 ; Pattern of

Growth and Changes in Industrial Structure of Korea,

1953-1973, Hak Chu ng Choo , Work ing P ape r 7506 , Korea

D e v e l o p m e n t I n s t i t u t e , 1 9 7 5 .

pe r io d 1968-1978 was belo w 10%, and in 1976-

1978 i t w en t dow n to 3 .3% (see tab le 9) .

Al though no sys temat ic informat ion i s

ava i l ab l e on t he r e l a t i ve we i gh t o f fo re i gn en

terp r i se s in th e indus t r ia l sector of thes e coun

t r i e s , the indicat ions regard ing thei r share in

indus t r ia l expor t s sugges t that , except in the

case of S inga pore , the i r re la t ive prese nce i s l ess

m ar ke d than in Lat in Am erica . If w e bea r in

mind the fact that in the South-Eas t As ian coun

t r i e s t he re has bee n a de f i n i t e and we l l -de f i ned

pol icy , as i l lus t ra ted ear l i er in the case of

Korea, of pr imar i ly t ak ing advantage of the

exp or t poten t ia l of the foreign enter pr i se s and

t o s om e ex t en t kee p i n g t he dom e s t i c m arke t fo r

na t i ona l g roups , i t m ay be conc l uded t ha t t he

sha re of foreign e nter pr i s es in to ta l indus t r ia l

product ion wi l l t end to be less than the share in

expor t s . In Lat in America , in cont ras t , the share

offoreign enterpr i ses in expor t s could be a su i t

ab l e a pp rox i m at e m eas u re o f t he i r we i gh t in

t o t a l i ndus t r i a l p roduc t i on .

B ear i ng i n m i nd t hes e cons i de ra t i ons and

th e info rmat ion g iven in t ab le 10 , i t may b e

conc l uded t ha t t he r e l a t i ve i m por t ance o f

dom es t i c en t e rp r i s es i n t he i ndus t r i a l p roduc

t ion of Korea, Taiwan and Hong Kong i s very

m arked l y g rea t e r t han i n t he s em i - i ndus t r i a l

i zed count r ies of Lat in America . This apprai sal ,

which d i f fers f rom the 'popular ' image d i ssemi

na t ed i n La t i n Am er i ca , i nd i ca t e s pe rhaps one

of th e spe cia l features of the Asian mo del ,

wh i ch , m oreover , r ea f f i rm t he ' J apanes e ' i n s p i

ra t ion behind thei r indus t r ia l s t ra tegy: the

dom i nan t cen t r a l i n f l uence and l eade r s h i p o f

the nat ional indus t r ia l sector and i t s duty and

abi l i ty to def ine s t ra teg ic opt ions for penet ra t

i ng i n t e rna t i ona l m arke t s and t hus c rea t i ng , by

dom es t i c e f fo r t s , t he ' com para t i ve advan t ages '

of th e fu ture . This w ou ld take us a very long

w ay f rom the k ind of mo del in wh ich coun t r ies

a re c on ver t ed i n t o pas s i ve ob jec t s o f t he i n t e r

na t i ona l m arke t fo rces and r enounce t he i n t e r

nal creat iv i ty and potent ia l for change provid

ed by the indus t r ia l sector .

T he be s t know n exp res s i on of t he pub l i c

act ion of the Korean S tate i s the vas t and

ge ner ou s r an ge o f expo r t i ncen t i ves , e s pec i a l l y

in clu di ng the fo l lowing: ( i) access to subs id

iz ed financing for inp uts , f ixed inv es tm en t and

ex po r t act iv i t i es ; (i i) exe mp t ion f rom indi re ct


15/24

SOUTH-EAST ASIAN EXPORT INDUSTRIALIZATION

/Fernando Fajnzylber

123

T a b l e 8

S O U T H K O R E A : S E C T O R A L R E G U L A T I O N O F F O R E I G N P R E S E N C E

1. P E R M I T T E D F I E L D S

A . Export industries

I n d u s t r i e s w h i c h a r e r e q u i r e d t o e x p or t t h e i r e n ti r e p r o d u c

t i o n , u n l e s s t h e G o v e r n m e n t p e r m i t s t h e c o n t r a ry :

( a ) Fo od p roce s s ing (p r epara t ion and p r es erva t ion o f 'mea t,

etc. )

( b ) P r i n t i n g a n d p u b l i s h i n g

(c) Mi n in g and ex t r ac t ion (mi l l s and as s oc ia t ed indus t r i es )

(d) Sy nth et i c res ins (plas t ic ma ter ials , plas t ic fi lms , etc. )

( e ) Glas s p rod uc t s ( l i quor bo t t l es , imi t a t ion pear l s , e tc . )

( t ) C h em ica l p rod uc t s (co lo r an t s and in t e rm edia t e s , z inc

ox ide p igment s , e t c . )

( g) L e a t h e r p r o d u c t s

(h ) R u bb er p rod uc t s ( b i cyc le ty r es , vee-be l t s , e tc . )

( i) C h em ica l fe r t i l ize r s (u r ea , com poun d f e r t il i ze r s)

( j) Me ta l p rodu c t s ( door locks , e l ec t rop la t ing and g ild ing)

(k ) Ma chi ner y (hea te r s , bo l t s , r i ve t s , e t c .)

(1) Pho togr aph ic and op t i ca l a r ti c l es ( op t ica l l ens es , s pec

t ac l es and b inocu la r s )

(m) T ra ns p or t eq u ip m en t (b i cyc le par t s , ax l es and tr ans

mis s ions , e t c . )

(n ) E lec t r i ca l and e l ec t ron ic a r t i c l es ( r ad io , t e l ev i s ion ,

v ideo , aud io , e t c . )

( o ) F u r n i t u r e

(p ) Ot he r s (p i anos , o rgans , e t c. )

(q ) Tour i s m.

B .

Import substitution industries

I n d u s t r i e s a i m e d a t r e p l a c i n g i m p o r t s a n d , e v e n t u a l ly , e x

p o r t i n g :

( a ) Ha nd m ad e f ib r es (v is cos e and r ayon f ib r es )

(b ) Pa per and pa pe r p rod uc t s ( chemica l pu lp )

( c ) C h em ica l p roduc t s ( e thy len e g lyco l , pap er fo r fi lms

a n d s e n s i t i v e p a p e r )

(d) Bas ic me tals ( i ron an d s teel cas t ing s , etc. )

( e ) Me ta l p ro duc t s ( d rum s , s pec ia l e l ec t rop la t ing , e t c .)

(f ) Ma ch in ery (wate r t u rb ines s , gas o l ine motor s , e t c . )

(g ) E lec t r i c i ty and e l ec t ron ics ( e l ec t r i c motor s , genera to r s ,

etc. )

(h ) T ra ns p or t (mar in e eng in es , bu i ld ing o f meta l s h ips ,

etc. )

2.

R E S T R I C T E D F I E L D S

A. Prohibited by law in the public interest

( a ) C igar s

( b ) P r o c e s s i n g

(c) W ater s upp ly

(d) C o mp ani es es t ab l i s hed wi th the J apa nes e r epa t r i a t ion

fund

Restricted by law

( a ) Min ing

(b) Avia t ion

(c) F i s h ing and p roce s s ing

(d) Mar i t im e t r ans por t

Prohibited under the industrial policy

( a ) G e n e r a t i n g p l a n ts a n d d i s t ri b u t i o n

(b) R a i lways

(c) Gas s up p ly

(d) Coas tal f ishing

Prohibited in order to protect domestic enterprises

( a) W igs and f a ls e eye las h es

( b ) P l y w o o d

B. Others

T e x t i l e s

(a) Si lk fabr ics an d

tsumugi

f inishes

(b) Non-woven f abr i cs

( c ) Kim onos and f in i s hes

(d) S pe cia l fabr ics and f inishe s

( e ) C olo ran t s and f in i s hes

M e t a l p r o d u c t s

( a) F a r m i m p l e m e n t s

I ron and s t ee l

P r imary i r on and s t ee l

C h e m i c a l s

B a s i c p e t r o c h e m i c a l s

R e f i n i n g

B as ic o i l

( a ) Au tom obi l e motor s

(b) M otor par ts

( c ) B rake s ys t em

(d) C lu tch s ys t em

(e) E lec t r i c a l a r t i c l es

T r a n s p o r t a n d s t o r a g e

W a r e h o u s e s


16/24

T a b l e 9

S O U T H K O R E A : L O N G - T E R M F I N A N C I A L M O V E M E N T S

(Millions of dollars)

N e t l o n g - t e r m

c a p i t a l

P u b l i c a n d

c o m m e r c i a l l o a n s

D i r e c t i n v e s t m e n t s

C o m m e r c i a l c r e d i t

P o r t f o l i o

i n v e s t m e n t s

O t h e r s '

Total

C r e d i t

101.6

68 .6

5.4

31 .0

0.9

105 .9

1 9 6 0 - 1 9 6 3

%

64.8

5 .1

2 9 . 3

0.8

100 .0

D e b i t

66 .3

2.7

0.4

1.2

4 .3

%

62.8

9.3

27 .9

100.0

C r e d i t

1171.4

1363.8

221 .1

214 .6

12.1

1812.6

1972-1973

%

75.2

12.3

11.8

0.7

100.0

D e b i t

463 .8

10.9

115.0

51 .5

641 .2

%

72.3

1.7

17.9

8.0

100.0

C r e d i t

2124 .7

2234 .6

185.7

645 .0

19.0

80 .0

3164 .3

1974-1975

%

70.6

5.9

20 .4

0.6

2.5

100.0

D e b i t

622 .5

2 8 . 1

349 .4

39 .6

1039.6

%

59.9

2.7

33 .6

3.8

100.0

C r e d i t

4 8 5 3 . 3

6630 .4

290 .4

1541 .7

186.2

230 .8

8 8 7 9 . 5

1976-1978

74 .7

3.3

17.4

2 .1

2.6

100.0

D e b i t

1935 .8

8 2 . 5

1657 .7

3 5 3 . 2

4 0 2 9 . 2

%

4 8 . 0

2.0

4 1 . 1

8.8

100.0

Source: Park Yung-Chul,Export Growth and the Balance of Payments in Korea, 1960-1978,Korea University, 1980, p. 6.

"Includes frozen loans, commitments to international organizations, fund covering transactions between head offices and foreign branches, bank

deposits, and advance paym ents for imports.


17/24


18/24

126

CEPAL REVIEW No.15 /

December 1981

na l p ro du c t s how s a dec l i n e f rom 85% in 1963

to 78% in 1975. At the same t ime, the share of

e n t r e p r e n e u r i a l i n c o m e i n t h e p r o d u c t r o s e

from 6.4% in 1 963 to 10.9% in 1975.

2( )

Wi th

rega rd t o t he connex i on be t ween t he expo r t

pol icy and th i s regress ive d i s t r ibut ion of inco

m e ,

W on t ack Hong conc l udes t ha t t he m a i n

exp l ana t i ons a re as fo l l ows :

"F i rs t ly , the fact that expor t act iv i t i es en

j oy ed b i g s ubs i d i es m ea ns t ha t a cons i de rab l e

ren t m us t have been c rea t ed fo r t hos e pe r s ons

wi t h s pec i a l en t r ep reneu r i a l t a l en t and capac

i ty for expanding expor t s . Secondly , the fact

t ha t t he Governm en t r e s t r i c t ed t he a s s i gnm en t

o f s ubs i d i es t o a l i m i t ed num ber o f en t r ep re

neu r s i n o rde r t o t ake advan t age o f econom i es

o f s ca l e a l s o m eans concen t ra t i on o f wea l t h ,

wh i l e t he p re fe ren t i a l t ax s y s t em a i m ed a t g i v

i ng i nce n t i ve s t o en t r ep r ene u r s t o r e t a i n and

reinves t prof i t s , together wi th the ins igni f icant

l eve l o f t he i n he r i t a nce t axes l ev i ed , m ean s t he

pe rpe t ua t i on o f t h i s concen t ra t i on o f wea l t h .

S in ce in th e 1970s appro xima tely 25 % of to ta l

g o v e r n m e n t e x p e n d i t u r e w a s d e v o t e d t o g e n e

ra l adm i n i s t r a t i o n , 30% t o de fence , 25 % t o in

ve s t m en t ac t iv i t i e s a i m e d a t econom i c g rowt h ,

and t he r e s t t o s oc i a l deve l opm en t expens es

(p r i nc i pa l l y p r i m ary e duca t i on ) , i t m ay be s a id

i t has nev er bee n t he Korean Gov ernm en t ' s a i m

t o i m prove i ncom e d i s t r i bu t i on o r i nc reas e

pu bl ic w el fare act iv i t i es on the bas i s of a

sys tem of t axes and f i scal expendi tures . In

ot he r wor ds , i f ec ono mi c factors such as the

g rowi ng p ropo r t i on o f i ncom e i n r e s pec t o f

p ro f i t s have accen t ua t ed t he de t e r i o ra t i on o f

in co m e di s t r ib ut io n in the 1970s , the sys tem of

t a x e s a n d g o v e r n m e n t s p e n d i n g h a s n e v e r e m

ba rk ed on any ne w effor ts to reve rse th i s

t r e n d . "

2 1

In the cases of Taiwan and Hong Kong too ,

for w hi ch informa t ion i s avai lab le , we note an

inc re as e in real wa ges in sp i te of the wea k t rade

union act iv i ty . In the case of Hong Kong, the

G o v e r n m e n t d o e s n o t a p p l y a n y re g u l a ti o n s re -

a'Table 10.

2

Trade, Industrial Grow th..., op. cit.,

p. 3.

gard i ng m i n i m un wages , and t r ade un i on ac t i v

i ty appea r s t o be ex t r em el y s ke tchy .

22

W i t h r ega rd t o Korea , t he we l l -known

s t udy by W es t pha l no t es :

"W here t he governm en t has i n t e rvened i n

l abo u r m a rke t s i t has genera l l y bee n t o coun t e r

org an ize d la bou r force which as a resu l t i s not a

power fu l i n t e res t g roup . "

2 3

In Ta iw an t he un i t cos t of l abour appe ars to

ha ve r e m a i ne d cons t an t o r even gone down i n

the 1960s , beginning to grow in the fo l lowing

d e c a d e .

2 4

Although no preci se informat ion i s avai l

a b l e ,

i t may be assumed that in v iew of the

ind ex es of grow th of prod uct iv i ty in Ta iwa n a

s i m i l a r phenom enon t ook p l ace t he re t o t ha t

obs e rved i n Korea , where t he g rowt h o f r ea l

wages and r eg res s i ve i ncom e d i s t r i bu t i on t ook

place s ide by s ide . F rom the poin t of v iew of

s oc i a l t en s i ons , even l eav i ng as i de t he q ues t i on

of t he m a ch i ne ry o f r ep res s i on , concen t ra t i on

o f i ncom e pa ra l l e l w i t h g rowt h o f r ea l wages

aga i n s t a back g rou nd o f gene ra l i zed expec t a

t ion s of eco no mi c grow th is abso rbed re la t ively

eas i l y . The s i t ua t i on changes , however , when

(as appears to have taken p lace in Korea in the

se co nd half of th e 1960s) a si tuat io n of full e m

p l o ym en t i s r eac hed w h i l e a t t he s am e t im e t h e

p ros pec t s fo r g rowt h de t e r i o ra t e . The s i m u l t a

ne ou s ex i s t ence o f a s l owl y g rowi ng ex t e rna l

m arke t , p res s u res due t o g rowi ng t r ade un i on

act iv i ty and the coming to the surface of the

s oc i a l p rob l em s accum ul a t ed and kep t covered

up d u r i n g t he pe r i od o f g rowt h p robab l y go a

l ong way t owards exp l a i n i ng t he po l i t i ca l

con f l i c ts ob s e rv ed i n Korea i n r ece n t ye a r s . T he

topic of the ef fect s caused by the ent ry of th i s

long cycle of expans ion in to the recess ive

phas e wi l l be r e s um ed when we ana l y s e t he

i n t e rna t i ona l con t ex t i n wh i ch t he i ndus t r i a l i z

i ng en t r ep ren eu r i a l ac t i on o f t he S t a t e t ook p l a

ce i n t hes e coun t r i e s .

^Export Oriented growth, op. cit.,p . 9.

23

T/teRepublic of Korea's Experience, op. cit.,p. 375.

'^Trade Strategy and the Excha nge Rate..., op. cit.,

p. 41 .


19/24

SOUTH-EAST ASIAN EXPOR T INDUSTRIALIZATION /Fernando Fajnzylber

127

V I

The in t e rna t iona l con tex t

I n p r e v i o u s p a r a g r a p h s s t r e s s h a s b e e n l a i d o n a

se t o f in t e rna l fac to rs which appear to have

p l a y e d a d e t e r mi n i n g r o l e i n t h e r a p i d e c o

n o m i c g r o w t h e x p e r i e n c e d b y t h e s e c o u n t r i e s

af t e r the war : t he indus t r i a l i za t ion e f fo r t o f the

S t a t e , e x p r e s s e d t h r o u g h t h e s u b o r d i n a t i o n o f

the f in anc ia l sph er e to the ob jec t ive o f indus

t r i a l g ro wth ; the def in i t ion o f sec to ra l p r io r i t i es

a n d i n t e g r a l e c o n o m i c p o l i c ie s i n s u p p o r t o f t h e

s e l e c t e d b r a n c h e s ; t h e c l e a r a r t i c u l a t i o n w i t h

a n e n t e r p r e n e u r i a l s e c t o r h a v i n g t h e w i l l a n d

d e s i r e t o s e c u r e i n d u s t r i a l i z a t i o n ; t h e p a s s i v e

a t t i t u de o f th e l abo ur fo rce and the f rag i li ty o f

t r a d e u n i o n o r g a n i z a t i o n s , w h i c h i s e x p l a i n e d

bo th by po l i t i ca l and rep ress ive fac to rs and by

t h e h i g h d e n s i t y o f p o p u l a t i o n w i t h lo w p r o

duct iv i ty in the in i t i a l s t ages ; and the des ign

an d c l ear u t i l i za t ion o f a mas s ive po l i cy o f t ra in

ing l a bo ur . I n the cases o f the c i ty -Sta t es of

H o n g K o n g a n d S i n g a p o r e , t h i s i n d u s t r i a l i z a

t i o n w a s c o m p l e me n t e d w i t h t h e t r a d it i o n a l en

t r e p r e n e u r i a l c o m p e t e n c e a n d e x p e r i e n c e i n

the f i e lds o f t rade and f inance .

T h e s e i n t e r n a l f a c t o r s w e r e s t r e n g t h e n e d

an d s t im ula ted by a cer t a in in t e rna t ion a l

c o n t e x t , w h i l e b o t h e c o n o mi c a n d g e o p o l i t i c a l

c o n s i d e r a t i o n s a c t e d i n t h e d i r e c t i o n o f d e c i d

e d l y s t r e n g t h e n i n g i n d u s t r i a l g r o w t h o r i e n t e d

t o w a r d s i n t e r n a t i o n a l ma r k e t s .

In the economic f i e ld , we have seen in a

s t u d y

2 5

re fe r red to ear l i e r how the rap id g rowth

w hi ch wa s a fea tu re o f the per io d a ft e r the w ar

f a v o u r e d t h e a c c e l e r a t e d g r o w t h o f p r o d u c t i v

i ty , i n t ens i f i ca t ion o f in t e rna t iona l t rade , and

c o n s e q u e n t l y a l s o o f c o m p e t i t i o n b e t w e e n t h e

d e v e l o p e d c o u n t r i e s , w h i c h i n i ts t u r n h a d p r o

j e c t i o n s o n t h e i n t e r n a t i o n a l i z a t i o n o f i n d u s

t r i a l p roduct ion , wi th a p rogress ive increase in

t h e r e l a t i v e e x p e n s i v e n e s s o f l a b o u r w h i c h

s t i mu l a t e d t h e s e a r c h f o r e l e me n t s t o n e u t r a l

i z e t h a t t e n d e n c y , a m o n g t h e m t h e c o n s t r u c t i o n

of expor t p l a t fo rms in coun t r i es wi th cheap and

25

Fajnzylber, The Industrial Dynamic..., op. cit.

' d i s c i p l i n e d ' l a b o u r . T h i s f a c t o r o f " d e ma n d "

t h e n e n c o u n t e r e d a f u n c ti o n a l r e s p o n s e in t h e

in te rna l fac tors o f the As ian NIC s , wh ose en do

ge no us dy nam ism found a p rop i t ious f i eld in

t h e m a r k e t s o f t h e d e v e l o p e d c o u n t r i e s a n d e s

p e c i a l l y t h e U n i t e d S t a t e s a n d E u r o p e . T h i s

w a s a p e r i o d d u r i n g w h i c h t r a d e w a s l i b e r a l

i zed , p r inc ipa l ly in the t a r i f f f i e ld , and where

G A T T d i d n o t r e a l l y w o r r y t o o mu c h a b o u t t h e

e x p o r t s u b s i d y p o l i c i e s a p p l i e d in th e d e v e l o p

ing cou n t r i es , o r the me asur es o f p ro tec t ion in

spec i f i c sec to rs . T he in t ens i f i ca t ion o f com pet i

t i o n b e t w e e n d e v e l o p e d c o u n t r i e s , t h e in

crease in the cos t o f l abour in those coun t r i es ,

an d the g ene ra t io n o f fo rms o f ma rke t ing

t h r o u g h b i g c h a i n s o f s u p e r ma r k e t s f o u n d a

s t r ict ly funct ional response in the efforts of the

As ian coun t r i es to indus t r i a l i ze and expor t , and

t h e i r c o n c e n t r a t i o n o n c o n s u me r g o o d s . A t t h e

s a me t i me , t h e p r o f o u n d i n d u s t r i a l c h a n g e s

go ing on in Japa n , whic h pe rm i t t ed i t t o b r in g

abou t d ras t i c changes in i t s i ndus t r i a l and ex

por t s t ruc tu re , moving f rom labour- in t ens ive

p r o d u c t s t o p r o d u c t s ma k i n g i n t e n s i v e u s e o f

t ec hn o lo gy and cap i t a l , found in the exp ans ion

of the As ian coun t r i es an exped ien t to permi t i t

to offset i t s loss of compet i t iveness in labour-

i n t e n s i v e p r o d u c t s , b y c h a n n e l l i n g t o t h o s e

coun t r i es the cap i t a l goods requ i red fo r the i r

domest ic and export -oriented industr ial growth.

T h e c o n s i d e r a t i o n s o f a n e c o n o mi c n a t u r e

w h i c h a p p l y t o t h e d e v e l o p i n g c o u n t r i e s i n g e

nera l were accompan ied , in the case o f the

As ian coun t r i es , by cons idera t ions o f a geopo l i

t i c a l n a t u r e . T h u s , f o r w e l l - k n o w n g e o g r a p h

i ca l and h i s to r i ca l reasons th i s g roup o f coun

t r i es p l a ye d an impor tan t ro l e in the ideo log ica l

and mi l i t a ry conf ron ta t ion be tween Eas t and

Wes t in the per iod fo l lowing the war . In add i

t ion to the s t r i c t ly log i s t i c aspec t s connec ted

wi th the ex i s t ence o f mi l i t a ry bases , t he eco

n o mi c a n d mi l i t a r y s t r e n g t h e n i n g o f t h e s e

c o u n t r i e s a l s o b e c a me a n e s s e n t i a l o b j e c t i v e .

In the conf ron ta t ion wi th Ch ina , a dec i s ive ro le

w a s p l a y e d b y T a i w a n a n d H o n g K o n g , a n d t o a


20/24

128

C E P A L R E V I E W N o . 1 5/

December

98

l ess ex tent S ingapore , whi le in the case of the

con f ron t a t i on wi t h Nor t h Korea and t he Vi e t

nam conf l ic t an important ro le was p layed by

S ou t h Korea .

In the cases of both Taiwan and Korea the

econom i c a i d p rov i ded du r i ng t he 1960s p l ay

e d an im po rtan t funct ion in that i t p ro vide d a

so un d bas i s in the cr i t i ca l phas e of the g es ta t ion

o f t hes e i ndus t r i a l i za t i on m ode l s . As a l r eady

noted , the t rade def ic i t in the 1950s and the

ea r l y 1960s r ea che d a cons i d e rab l e l eve l , and i t

was preci sely a t th i s t ime that Uni ted S ta tes a id

ca r r i ed ou t a dec i s i ve func t ion :

"Taiwan was the benef ic iary of a s t rong a id

pro gra mm e. I t was ass igned a to ta l of US$ 144 4

m i l l i o n i n t he pe r i od be t w een 1951 and 1965 ,

wh i ch i s equ i va l en t t o t en do l l a r s pe r i nhab i

t an t p e r yea r . Th i s a s s i s t ance p l ayed an i m por

ta n t ro le in the t ask of cont ro l l ing inf la t ion a t

th e be gi nn in g of the 1950s . Mo reove r , if i t had

not been for Uni ted S ta tes a id , the t rade def ic i t

o f Ta i wan wou l d have been a f ac t o r capab l e o f

s e r i ous l y l i m i t i ng t he coun t ry ' s econom i c de

ve l op m en t up t o t he ea r l y 1960s. Un i t ed S t a te s

a i d ove rcam e t h i s bo t t l eneck by i nc reas i ng t he

fo re i gn exchange r e s ou rces and p rov i d i ng s up

po r t fo r t he i m por t a t i on o f i nd i s pe ns ab l e i npu t s

w h i c h s e rv ed as a com pl em en t to t he dom es t i c

l abou r fo rce and o t he r com ponen t s o f i nves t

m en t . U p to 1951, the sha re of Un i ted S ta tes a id

i m por t s i n t o t a l i m por t s r em ai ned over 30%,

a l t h o u g h s u b s e q u e n t l y i t w e n t d o w n r a

p i d l y . "

2 6

With regard to Korea, a s imi lar s i tuat ion

w a s o b s e r v e d :

"Korea ' s r e l a t i ons h i p wi t h t he Un i t ed

S t a t e s obv i ou s l y i nc re as ed i ts fo rei gn ex change

e a r n i n g s t h r o u g h e x p e n d i t u r e s s t e m m i n g f r o m

th e s ta t ion ing of UN forces in Korea and , dur ing

t he w ar i n V i e t n am , f rom o f fs ho re p rocu rem en t

by th e U ni t ed S ta tes . As indic ated in t ab le 6

under ' r ece i p t s f rom governm en t t r ans ac t i ons ' ,

m i l i t a r i l y r e l a t ed expend i t u res ( t he s um o f t he

t wo co m p on en t s s hown) i n t he pas t accoun t ed

for a siz ab le fract ion of Kor ea's foreign ex

c h a n g e e a r n i n g s . "

2 7

The same author , in se t t ing out the con

c l u s i ons o f h i s we l l -known s t udy , h i gh l i gh t s

mbid.,

p. 3.

21 The Republic of Korea's E xperience, op. cit., p , 36 1.

t h e e n d o g e n o u s e l e m e n t s a m o n g t h e c o m p l e

m en t a ry f ac t o r s :

"The m os t obv i ous e l em en t was t he l eve l

of foreign ass i s tance dur ing the 1950s and ear ly

1960s , wh i ch c on t r i bu t ed t o bu i l d i n g t he i nf ra

s t ruc t u re fo r s ubs equen t g rowt h . "

2 8

An oth er analys i s of the balance-of-pay-

m en ts s i tua t ion of Korea s ta tes :

"F ro m t he ear ly 1950s , af ter the Korean

War, unt i l the mid-1960s , the t rade def ic i t , in

c l u d i n g i nv i s i b l e i t em s , was genera l l y covered

t h rough fo re i gn a i d and dona t i ons . In t h i s pe

r iod the inf low of capi ta l , whether shor t or long

t e rm , was ve ry s l i gh t. "

2 9

As regards the geopol i t i cal importance of

t he s e co un t r i e s an d i ts connex i on wi t h t he f ie ld

of t rade, i t may be of in teres t to quote a s ta te

m en t r ega rd i ng Hong Kong wh i ch s ays :

"O ne o f t he r eas ons why t he Un i t ed S t a t es

d i d no t t ry t o app l y m ore p res s u re t o Hong

Kong dur ing the 1960s wi th regard to l imi ta

t ions in the ques t ion of t ex t i l es was that the

Un i t ed S t a t e s needed t he i n t e l l i gence s t a t i on

wh i ch was u s e d to kee p t he P eop l e ' s R epub l i c

o f C h i na und er s u rve i l l ance . '

, 3

The econom i c and geopo l i t i ca l cons i de ra

t ions w hic h te nd ed to favour the pol icy of ex

por t indus t r ia l i z at ion of thes e count r ies are

i l l u s t r a t ed by t he m a ny cas es of l en i ency wi t h

wh i ch t he Un i t ed S t a t e s app l i ed t r ade r egu l a

t ions to these count r ies . Thus , in the speci f ic

f ie ld of the appl ic at ion of cus tom s classi f ica

t i o n s ,

t he m os t no t ewor t hy exam pl e a re t hos e

co nn ec te d w i th cases of c lass i fi cat ion of shoes

as rub be r s hoes o r non - rubb er s hoes , ya rn a s

cot ton yarn or synthet ic yarn , and te lev i s ion

s e t s a s a s s em bl ed o r s em i -as s em bl ed : a l l op

t ions wi th deci s ive tar i f f impl icat ions .

By wa y of i l lustr at io n, let us take the case of

foo t wear :

mbid., p.375.

2 i,

P ark Yung-Ch i l l , Export Growth and the Balance of

Payments in Korea, 1960-1978, Korea Univ ersi ty , 1980,

p .

3 . P ac i f ic Trade and Deve lopmen t Confe rence , S eou l ,

1980.

3 ( )

D . Yof'fie and R. Keohane, Responding to the 'New

Protectionism': Strategies for the Advanced Developing

Countries of the Pacific Basin, S tan fo rd Un ive rs i ty , Un i ted

S ta te s , 1980 , p . 12 . P ac i f ic Trade and De ve lo pm en t Confe

rence , S eou l , 1980 .


21/24

SOUTH-EAST ASIAN EXPOR T INDUSTRIALIZATION

/Fernando F ajnzylber

129

" I n

1976 the

K o r e a n s e x p o r t e d

to the

U n i t e d S t a t e s 44 mi l l ion pa i r s of n o n - r u b b e r

s h o e s

and

s t a t e d

in

Janu ary 1977 that thei r to tal

e x p o r t c a p a c i t y for the y e a r was 60 mi l l ion

p a i r s .

The

U n i t e d S t a t e s t r ie d

to

l o w e r

the

total

a c h i e v e d by K o r e ain 1976 and in fac t reduced

t h e l e v e l o f t h e K o r e a n q u o t ato 33mi l l ion pa i r s

fo r the y e a r e n d i n g in J u n e 1978. U s i n g the

var ious c l auses tha t permi t t ed g rea te r f l ex ib i l i

t y , h o w e v e r ,

the

K o r e a n s a c t u a l l y ma n a g e d

to

e x p o r t58mi l l ion pa i r s o f shoesin 1977 ."

3 l

T h e r e

are

a l s o ma n y e x a mp l e s

of

l en iency

o n the p a r t of the Uni t ed Sta t es towards the

A s i a n c o u n t r i e s w i t h r e g a r d

to the

evas ion

of

v a l i d r e g u l a t i o n s . An impor tan t case is tha tof

t r a n s s h i p m e n t , w h i c h s e e m s

to be

par t i cu la r ly

s i g n i f i c a n tin thet ex t i l eand footwear sectors :

" W i t h r e g a r d

to

t ex t i l es , c lo th ing

and

foot

w e a r ,thec l as s i cwayo f ge t t ing r oundthe quota

h a s b e e n t r a n s s h i p me n t . Bu y i n g f a l s e d o c u

m e n t s in H o n g K o n g , for example , cos t s on ly

o n e - t h i r d of the a mo u n t t h a t it would cos t to

a c q u i r e l e g i t i ma t e q u o t a s .

T he

goods

can

then

b e t r a n s p o r t e d in b u l k to I n d o n e s i a or Sri

L a n k a , w h i c h h a v e

no

q u o t a s ,

and can be

n e w l y

l a b e l l e d b e f o r e b e i n g s e n t on to the U n i t e d

S t a t e s . T r a n s s h i p m e n t i m m e d i a t e l y b e c a m e

m u c h in e v i d e n c e a f t e r the app l i ca t ion of the

me a s u r e s r e g a r d i n g f o o t w e a r . T a i w a n c o mp a

n i e s s e n t f o o t w e a r c o mp o n e n t s to Hong Kong

to

be

a s s e mb l e d t h e r e , w i t h

the

resul t that

H o n g K o n g ' s e x p o r t s of foo twear increased by

2 2 . 5 % i n l 9 7 8 . "

3 2

A n o t h e rway ofe v a d i n g e s t a b l i s h e d t r a d e

r e g u l a t i o n s

is the use of

th i rd coun t r i es

to

n e u

t r a l i z e the res t r i c t ions spec i f i ca l ly p l aced on

c e r t a i n s u p p l i e r s :

"As theyno l o n g e r h a v ethe oppor tun i tyto

expor t syn the t i c t ex t i l es ins t ead

of

cot ton

be-

c a u s e of the n e g o t i a t i o n of the mul t i f ibres

a g r e e m e n t s , T a i w a n , K o r e a

and

H o n g K o n g

ha-

b i t u a l l y e x p o r t b a t c h e s of such text i leto c o u n

t r i es l i ke

the

P h i l i p p i n e s

or

e v e n J a p a n , w h e r e

t h e w o r k ofm a n u f a c t u re is c o m p l e t e dand the

p r o d u c t s

are

t h e n s e n t

to the

Uni t ed Sta t es . "

3 3

T h e c o n s i d e r a t i o n s of an e c o n o mi c and

g e o p o l i t i c a l n a t u r e a l r e a d y me n t i o n e d a p p e a r

^bid.,y>. 15.

Klbid.,p. 17.

33/fcii/.,

p. 18.

t o h a v e p l a y e d a s ignif icant rolein the re l a t ive

i n d i f f e r e n c e s h o w n

by the

Uni t ed Sta t es

in ac-

c e p t i n g t h e s e s i t u a ti o n s :

" I n ma n y c a s e s , the evas ion of cus toms

r e g u l a t i o n s

was

e n c o u r a g e d

or

t ac i t ly appr ove d

b y the U n i t e d S t a t e s .At one s t ageof the Viet

n a m war, l a r g e r s h i p me n t s t h a n t h o s e p e r mi t

t e d w e r e e a s i l y a c c e p t e d , b e c a u s e d o me s t i c

p r o d u c t i o n was l e s s t h a n d e ma n d . The factof

a l lowing cer t a in p rov i s ions

to be

e v a d e d

may

have sa t i s f i ed some of the l eg i t imate com

p l a i n t s

of

c o u n t r i e s s u b j e c t

to

res t r ict ions ,

w h i l eat the s a me t i me ma i n t a i n i n gthe integri

ty

of the

p r o t e c t i o n i s t r g i me . Mo r e o v e r ,

the

U n i t e d S t a t e s has n e v e r put in to p rac t i ce an

ef fec t ive sys t em

of

sanc t ions .

The

h ighes t

a m o u n t p a i d by an i mp o r t e r for i l legal ly in-

f r i n g i n g

a

q u o t a

is US 10 000,

w h i c h

is not a

v e r y i mp o r t a n t sum c o mp a r e d w i t h the p o t e n

t ial profi ts ."

3 4

T h e i m p o r t a n c e of th i s in t e rna t iona l con

t e x t

in

e x p l a i n i n g

the

'As ian mi rac le ' became

e v i d e n t p r e c is e l y w h e n ,in the1970s, th is in ter

n a t i o n a l c o n t e x t u n d e r w e n t c h a n g e s .

The re-

c e s s i o n in the d e v e l o p e d w o r l d was project

ed d i rec t ly in to

the

s p h e r e

of

in t e rna t iona l

t r a d e , not o n l y t h r o u g h the e m e r g e n c e of p ro

t e c t i o n is t t e n d e n c i e s

in

cer t a in coun t r i es ,

but

a l s o t h r o u g h the c o n t e n t of the in t e rna t iona l

t r a d e n e g o t i a t i o n s

in

G A T T . F r o m

the

early

1 9 7 0s o n w a r d s , t h e r e b e g a nto be concern over

expor t subs id ies , p ro tec t ion po l i c i es , 'pub l i c

s e c t o r p u r c h a s i n g m e c h a n i s m s ' as an e l e m e n t

o f d o me s t i c p r o t e c t i o n , and in mo r e g e n e r a l

t e r m s ,

the

n e e d

for the

N I Cs a mo n g w h o m

t h e l e a d i n g r o l ewasp l a y e dby the As ian cou n

t r i e s

to

g ran t rec ip roc i ty

to the

d e v e l o p e d

c o u n t r i e s in t rade re l a t ions , which main ly af-

f e c t e d e x p o r t s u b s i d i e s

and

p ro tec t ion

of the

d o me s t i c ma r k e t . D u r i n g t h e s e y e a r s ,the main

i n s t r u m e n t s

of

th i s 'p ro tec t ion i sm ' fo rmula ted

b ythe d e v e l o p e d c o u n t r i e s w e r ethe 'vo lun tary

e x p o r t r e s t r a i n t s '

(VER) and the

'o rder ly mar

k e t i n g a g r e e me n t s ' ( O MA ) , i n t e n d e d ma i n l yto

g e t r o u n d

the

mos t - favoured-

FAJNZYLBER (1981) - Some Reflections on South-East Asian Export Industrialization

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Transcript of FAJNZYLBER (1981) - Some Reflections on South-East Asian Export Industrialization