By Eva Cheng
Asia's export growth plunged across the board last year, hitting also the so-called "tiger" economies. Advocates of the "Asian miracle" theory claimed the causes were short term, and played down any structural problems. Then, early in the recent speculative attacks on Asian currencies and stocks which started in July, they insisted that Asia's "fundamentals" remained sound. Now they are not so sure.
Exports last year of the earlier tigers — South Korea, Taiwan, Hong Kong and Singapore — grew on average only 4.8%, a far cry from the 21% in 1995 (or the average of 15% since 1988).
South-east Asia's export growth last year — the bulk of which was accounted for by Malaysia, Indonesia and Thailand — was 5.6%, compared to 22.8% a year earlier. China's inched up only 1.5%, after 24.9% the year before.
High export-driven growth was the basis of the "miracle" theory.
The Asian Development Bank, a key advocate of the miracle story, appears lost as to why export growth dropped so sharply. In its Asian Development Outlook 1997 and 1998, other than a hotchpotch of conjunctural factors most of which it avoided pinning down, it identified two common causes: the "temporary" plunge in prices of electronic products, and the decline in Asia's "comparative advantage" of low wages. It got neither point right.
The big drop in the prices of electronics certainly hurt Asia's export earnings, but the problem can be temporary only if these prices have a reasonable prospect of reviving. With so many developing countries competing for such exports, that prospect is not realistic.
The low wage advantage argument fails to address why export growth plummeted also in south Asia, where wages remained at rock bottom.
The ADB urged the tigers to upgrade to capital- and technology-intensive products. Insufficient profits will prompt capital to move on, but do the capital-intensive alternatives exist?
The industrialised countries have been treading this path for centuries, after achieving the critical initial capital accumulation by plundering what is now the Third World. Expectations that the latecomers can start from scratch on production technology, in competition with them, is wishful thinking.
But use of prevailing technology, the private property of existing producers, comes only at a high price. Royalties have to be paid, and will be strictly policed by the World Trade Organisation, which the rich countries dominate. The technology gap will be maintained.
Markets
Sales remain the critical question. For the last few decades, the industrialised world has had the capacity to produce a lot more than it can sell, or what the rest of the world can afford to buy.
An individual country's solution is to increase its own share. The US, Japan and the European Union — the "triad" — are the key blocs in competition, and Asia is a key battleground.
They compete not only in the sale of goods and services, but also as providers of capital.
To contain the communist movement in Asia, especially post-1949 China, the US flooded South Korea and Taiwan with "aid" — US$13 billion and US$5.6 billion respectively between 1945 and 1978. They were top recipients of US aid until the 1980s, accounting for 8-12.5% of the US's world aid budget during the period.
Together with technological assistance and market access, such capital gave the two economies an important head start in industrialisation. It added to the substantial industrial basis already laid by Japanese colonialism.
These two countries also became a cheap support for Japanese industry, supplying materials and parts, a market for Japanese capital goods and technology and an outlet for Japanese capital — as loans or direct investment.
Production "needs" associated with the Korean War and Vietnam War added important impetus to this process.
The rest of Asia followed suit. But from the late 1970s, South Korea's heavy industries ran into increasing problems as Japan, feeling the competitive pressure, become reluctant to sell its technology.
All tiger economies need to import crucial parts for their industries. Import growth last year plunged similarly to exports — to 5.6% from 1995's 22.9% for the four east Asian tigers and to 8.2% from 28.4% for south-east Asia. For many years, high export growth was matched closely by high import growth.
All tiger economies relied on the key imperialist economies, especially the US and Japan, for exports. Despite some diversification in recent years, the US remained the single biggest market for all four east Asian tigers in 1995, with an average share of around 20%.
Ten years ago, Hong Kong exported 30.8% of its goods to the US, South Korea 35.6% and Taiwan 15.5. In 1995, Hong Kong relied on the triad for almost 43% of its exports (from 47% in 1985), South Korea 45% (from 61%), Singapore 40% (from 41%) and Taiwan 45% (from 32%).
The dependence is more serious for the newer tigers. In 1995, 63.5% of Indonesia's exports went to the triad (from 74% in 1985), 48% of Malaysia's (from 51%), 50% of Thailand's (from 51%). The Philippines' reliance on the triad dropped from 88% to 69% over the same period. South Asia's dependence on the triad was even heavier.
From the 1970s, the US began to limit Asian exports. Textiles and garments were key items targeted, despite the US's "free trade" rhetoric, through the use of the Multi-Fibre Agreement and bilateral weapons such as Section 301.
Deficits
South Korea, Singapore and Hong Kong suffered a trade deficit in most recent years. Taiwan is an exception. South-east Asia's trade deficits ballooned from 1991's US$4.6 billion to last year's US$21 billion, about half of which was caused by Thailand.
Singapore's and Hong Kong's current accounts were brought to a surplus by non-trade income, which includes interest and dividends. These balances directly linked to the two city economies' role as financial centres, providing crucial infrastructure for capital movement in and out of the region.
Hong Kong thrived on China's huge needs and Singapore on Malaysia, Indonesia and other neighbours. This is not a role readily repeatable, certainly not a model for development.
South Korea, the biggest by far of the east Asian tigers, has long suffered a deficit in its trade and current accounts, which reached US$15 billion and US$23.7 billion (5% of GNP) respectively last year. Its outstanding debt climbed to US$49.3 billion in 1993, absorbing 7.2% of export income (down from the 15% required in 1988).
Though Indonesia's and Malaysia's trade was in surplus in recent years, theirs and Thailand's current accounts were increasingly in the red for the last decade (except the late '80s for Malaysia).
Thailand's current account deficit last year was US$14.5 billion, Indonesia's US$8.9 billion and Malaysia's US$5.8 billion. These shortfalls were equivalent to 8%, 4% and 6.3% of GNP respectively. Outstanding external debts were US$78.5 billion, US$120 billion and US$29 billion. Eleven per cent of Thailand's exports last year went to support debt, 34% of Indonesia's and 6% of Malaysia's.
On paper, more than 40% of most tiger economies' GDP comes from industry, and a comparable share from services. But apart from their structural dependence on the imperialist centres, many of these industries are agriculturally based, and are similarly vulnerable. Thailand's canned seafood and pineapple, and rubber and forestry products of Malaysia and Indonesia are examples.
Tourism and real estate (much inflated by speculation) were a substantial part of the services income of many tigers.
Foreign capital, in whatever form — loans, direct investment or "hot money" in financial assets or property — helps little to stabilise the Asian economies. Some tigers started to export capital, but this is no more than a multiplication of the structure of dependency around the imperialist core.
This is crippling dependence, a far cry from the "miracle" tale of catching up with the west through industrialisation and high growth.
Is there a way out from this dependence? The imperialist countries are trying hard to make sure there isn't.
They created the World Trade Organisation two years ago as their main tool, much expanded from the General Agreement on Tariffs and Trade, to ensure that their products, services, technology, capital and "intellectual property" can have their way in the Third World. The International Monetary Fund and the World Bank are subsidiary weapons, to quick "fix" the economies when things get out of hand, as recently happened in Thailand and Indonesia.