Before concluding and recommending appropriate lessons for Bangladesh it is imperative to highlight principal features of economic success of the Tiger countries so that it can serve as lessons for other South Asian developing countries including Bangladesh. This can be done through a comparative growth study1 to show as to why the other regional countries which had almost similar growth rate in the sixties failed to achieve the economic growth as witnessed by Tiger economies.
So recommendation for a country is important
The South-East Asian region is an area of great diversity, containing within it a bewildering confusion of environments, cultures/ languages, religion’s and economic systems.
The region includes world’s most successful economies and the process of economic development has grown from a low-income level during the past twenty-five years.
Economically this is the fastest growing area in the world, and tf16 rise of South-East Asia, specially the Tiger economies is one of the major forces shaping the international economic systerf1 in the later half of the twentieth century.
The universal process of internationalization of economic life in Tiger countries finds its expression in the emergence and growth of tendencies towards economic cooperation among the developing countries of the region. This basically progressive phenomenon is in harmony with the interest of newly free Tiger states struggling for economic independence and strives to utilize the advantages of international division of labour for this purpose.
The growth of regional economic development in the Tiger countries is extremely complex and contradictory in nature. The existence of many deep seated economic and political contradictions in the region is responsible for the limited progress in the initial stages and extremely slow acceptance and carrying out of regional projects of economic cooperation. Therefore the process of economic understanding is going ahead much faster on a sub-regional level, as also on the basis of the already existing economic groupings of the type of the ASEAN.
The stepped up efforts for economic growth among the Tiger countries in the region is a reaction to the neo-colonial policy of the imperialist countries, and aggravation of the monetary crisis of the world capitalist system in the 70s when these countries experienced economic shock and were left alone to handle the country and financial challenges. In their struggle against colonial heritage, neo-colonialism and imperialism and in their efforts to ensure an independent economic future for themselves, these countries took upon regional economic cooperation as the most effective means of defending their national interest collectively.
In the sphere of production, the best scope for interaction among the Tiger countries seems to be in the creation of joint export oriented industrial enterprises, in the conduct of joint research work aimed at increasing the productivity of labour in agriculture, in the joint exploitation of water resources and in undertaking transport projects. Harmonization of production and investment programmes of private and state sectors, in the economies of Tiger countries, played a significantly positive role in the growth of infra-regional exchange and in the development of the process of economic integration on the whole.
However, despite the considerable economic interaction achieved in the spheres of industry and transport, among the Tiger countries during the first 30 years of their independent existence, there are reasons to believe that in future the process of this understanding will grow more.
It is wellknown that South-Asian economies have grown at a much slower pace than those in East and South-East Asia2. Nevertheless, table 23 presents a comparative picture of the growth rate of gross domestic product (GDP) over two decades, to give a perspective on the differential performance. Some salient points to be noted are :
a. The growth rate in East and South-East Asian economies appear to have somewhat decelerated during the period 1981-1990. To some extent, this may be natural consequence of the increasing maturity of those economies. At the same time, the growth performance in South-Asian economies appears to have slightly improved during the same period, compared with the preceding decade. In consequence, there has been some narrowing of the performance gap of the two groups of countries.
b. The higher growth performance of East/South-East Asian economies has been underpinned by a much
higher level of investment than in South Asia. Moreover, countrary to popular presumption, the high
level of investment has been largely financed by domestic savings, rather than inflow of foreign capital.
In fact, by the 1980s, East Asian economies had already become net exporters of capital, and in the
South-East Asian economies’ saving investment, gap had hecome very narrow. In contrast, South Asian
economies generally continue to have much greater reliance on foreign capital to finance their investment.
c. Given the fact that South Asian countries will face increasing competition from many other developing
countries in matter of access to foreign capital, a clear policy implication is that South Asian countries will
have to substantially augment their domestic savings. With this perspective in mind, the following paras will help conclude some of the policy elements that supposedly underline South-East Asian Tiger countries’ economic success may be deemed appropriate as lessons, for economic development for South Asian countries like Bangladesh.
The most outstanding features of the Tiger countries’ growth have been the institutional and structural changes that accompanied the rapid economic growth and imparted the resilience that served these economies well in a rapidly changing and increasingly uncertain world economy. Although the Tiger economies have been fortunate in being helped by the favourable initial conditions, these countries did give priority to the desired demographic and structural transformation. Thus one major lesson for the other developing economies, is the need to hasten the pace of demographic and structural transitions. The unfinished business of transformation, a matter of highest priority, relates to measure like asset redistribution (including land reforms) and an accelerated programme of human resource development, which would ensure equality of access to economic opportunity and social mobility. Another key lesson of the success of Tiger economies, has been that growth can become sustainable only when it is broad-based and involves not only the stake of the few main beneficiaries of development, but of the people at large.
The development strategy of the Tiger countries focussing on the urban middle class and rural elite has failed largely because of its inability to generate growth momentum, sufficient to capitalize on the economies of scale and external effects of development. The import substitution strategy in these countries was almost exclusively centred on this narrow, though politically powerful and articulated social base. Although in the short run India’s economic growth is plagued by many supply bottlenecks. Nonetheless the economy’s main problem is demand inadequancy, rather than global supply constraints, the middle-income growth strategy built on import substitution in consumer durables, did not succeed in India mainly because, it had very weak spin-off effect on the rest of the economy, which has poor inter-sectoral linkages and because of its anemic impact on India’s vast unemployment problem. In the case of Pakistan, while large labour outflows and associated inflow of remittance (chiefly from the Gulf region) helped to generate a slightly better growth performance, its less diversified industrial structure and unskilled human resource development record, do not hold out strong protect for long-term sustainable growth.
In regard to the Tigers’ experience on the role of foreign capital inflow, considered by some to have been a critical element in their pursuit of export-led growth, the lessons will have to be modified in view of the changed international economic environment. It seems unlikely that the combination of concessionary capital inflow which are anyhow dwindling fast, and direct foreign investments can, by themselves, prove adequate for providing the basic foundations for inculcating good management, and injecting new capital and modern technology into the enterprises. Much greater reliance will have to be placed on domestic institution, initiatives such as effective government interventions, more efficient and well-structured public enterprises, and greater stress on R and D and technology adoption. The market forces alone cannot be expected to discipline all firms, many of which remain bent on rent-seeking. Neither can lower wages due to anti-inflationary policies, devaluation and shock therapy be expected to generate an entrepreneurial class able to compete effectively in international market. These economies’ experience seems to point towards a more carefully crafted synergy between macro-economic fundamentals and industrial policy. With a strategic proactive role of the state, rather than towards the standard policy packages, flowing from orthodox free market paradigms.
The lesson of Tiger countries’ economic growth speaks that these countires were facilitator and promoter of the activities of the private sector, with whiclx it nurtured a close relationship by undertaking public expenditures which tried to “crowed in” rather than “crowed out” private investment. Above all, by pursuing an intelligent well-monitored industrial policy, along with public investments in human resource development, it facilitated the growth of a strong inter-linked industrial base, which generated employment, and improved income distribution. The macro-economic policies, used in conjunction with industrial policy, encouraged high rates of savings and capital accumulation, often by transferring large surpluses from rent-seeking activities to more productive use.
Among other striking lessons of economic growth of these countries are the flexibility in policy making, and in adaptation to the changing international environment. This capacity for responding to emerging changes is generally lacking in other developing countries, where policy makers usually become wiser after the events and take some pride in their capability for adhoc crisis arrangement.
Another important area in which the South-East Asian experience provides instructive lessons to other regional developing countries is that of technology development, adaptation and transfer. It forms an important ingredient of the success story. While the experience in this field as in others is quite diverse, two salient common aspects deserve to be emphasised ; first relates to the efforts continuously raising productivity through progressive technological up gradation, beginning with relatively simple technology. Secondly improvements in the quality of labour force through investment in education and human resource development.
Finally, a common perception about the South-East Asian Tiger countreis’ success hinges round the availability of cheap labour. The lesson from Tiger economies is not simply that in order to be successful in the competitive export market, the developing countries need to lower their wage rates, but also to raise productivity by employing more technology and capital, which may involve subsidizing capital in selected industries, and by investing in human resource development.
Recommended Lessons for Bangladesh
Through this study certain common principles have been indentified in all the South-East Asian Tiger countries. While the exact policy mix and institutional arrangements used to implement such principles differed accross these countries for Bangladesh, recommendations are framed under the following broad headings :
a. Sound Economic Policy :
1. providing a stable political environment and pro-investment macro-economic policies to sustain the investors’ confidence;
2. provide both general and specific investment incentives by using measures to create reasonable high profits ; and
3. disciplining entrepreneurs by closing off channels for unproductive investments and capital flight and restricting luxury consumption.
b. Export :
1. initially promoting traditional export (primary commodities and labour-intensive industries) to maximize foreign exchange receipts to buy capital goods that embody more advanced technologies ;
2. promoting more demanding industries identified on a number of criteria (e.g. productivity growth potential, conformity with domestic technological capabilities, demand prospects) through the creation, manipulation and timely elimination of rents ; and
3. upgrading through strategic integration with the international economy, using the disciplinary power of international markets alongside measures of export promotion and using FDI.
c. Strong Network and Accountability :
1. promoting an independent economic bureaucracy, including a network of agencies at the sectoral level;
2. establishing strong links between industrial firms and the financial sector in ways to promote productive investment; and
3. ensuring a very high accountability level.
d. Support Measures :
1. supporting small-scale producers both in the rural and industrial sectors through targeted public investment, subsidized credit and appropriate advisory services.
2. supporting and upgrading by linking small producers to large firms and public research institutes ;
3. access to land, (through land reform) credit and other inputs allowed for growth with poverty alleviation;
4. efforts at population control must continue. Attention should not be focussed only on the quantitative aspect of population, the qualitative dimension should also be handled imaginatively and sensitively;
5. food security needs to be given high priority in all programmes of development; and
6. achieving universal primary education and high adult literacy for better and sustained economic growth for future.
The outlook for the future will be bright if simultaneous action is initiated and carried out along the many fronts that call for urgent attention with total commitment, dedication and discipline. In fact, this can be seen as a major challenge to Bangladesh’s creative rationality.