Growth Centres in South East Asia in the Era of Globalization
The success of the earlier generation of the newly industrialized countries (NICs) in Asia in achieving and maintaining high domestic growth rates has been followed, in' more recent years, by rapid growth in domestic output, foreign trade and capital inflows in South East Asia. As happened with the earlier groups of NICs, the relative success of second-generation NICs in Asia has opened up a debate on the sources of such strength. The issue has assumed a greater degree of significance in view of the divergent experiences of countries that have liberalized and opened up their domestic ecotiomy. For example, the Southern Cone countries of Latin America have experienced severe problems in managing their external accounts, in spite of a reasonable rate of domestic economic growth—in contrast to Far East and South East Asian countries, which had a much better performance record during the years of trade and financial opening up. It is, however, important not to ignore the possibilities of financial upheavals, actual as well as potential, that often lie embedded in these processes. While mainstream economics and the dominant school of policy-making have both emphasized the unique role of the market in ensuring growth via efficiency, sceptics have drawn attention to the parallel role of the State in resource allocation, distribution, demand generation and price stability. Looking beyond developing countries, the performances of the industrialized nations convey a similar discordant note, recalling their record of financial booms and busts associated with low growth.
In this paper we attempt an analysis of the growth performances in South East Asia during the last jdecade, an episode which has gained a lot of significance with the ongoing debate on the implications of policy reforms in developing countries, including those of capital account convertibility. Section I explains the recent pattern of global capital flows in the direction of the developing areas, indicating a concentration of both foreign direct investment (FDI) and portfolio flows in some countries. These include, as part
* Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi.
Social Scientist, Vol. 24, Nos. 11-12, November-December 1996