The East Asian Miracle is a report created by the World Bank Group in 1993 about 8 countries in East Asia – Japan, South Korea, Taiwan, Hong Kong, Singapore, Thailand, Malaysia, and Indonesia – because of their economies’ impressive growth between 1965 and 1990.
Why is it called a miracle?
In these eight countries, real per capita GDP rose twice as fast as in any other regional grouping between 1965 and 1990 and five times faster than Sub-Saharan Africa. What made it more impressive was the fact that they had significant reduction in poverty and income inequality simultaneously.
The essence of the miracle? Rapid growth with equity.
The developmental and economic transformation policies taken by the government of the respective countries made this miracle possible. Let’s look at the main components or policies of this miracle in these 8 High-Performing Asian Economies (HPAEs).
The HPAEs were committed to more equitable income distribution to share the prosperity and growth among its people. The policies encouraged rapid capital accumulation by making banking systems more reliable and encouraging domestic savings. For example, in Japan, low tax rates led to rise in personal savings and private investment. The agricultural policies required modest taxes – supporting productivity, as it was their main source of income during the ‘80s.
These HPAEs kept price distortions in check – by maintaining a good inflation rate to attract foreign direct investments (FDI). Sound development policies to attract FDI were undertaken and multinational corporations were provided with a positive business environment by maintaining a consistent and hassle-free legal and regulatory structure. For example, Japan nurtured giant conglomerates such as Samsung, LG etc. which created local employment and transfer of knowledge.
Moreover, they focused on export-oriented industrialization and targeted key industries and built a growth ecosystem around these industries in which they had competitive advantage. For example, South Korea targeted six strategic industries – steel, machinery, non-ferrous metals, shipbuilding, electronics, and petrochemicals to accelerate export earnings.
However, the most important policies were the ones that invested in human capital. Every HPAE focused on universal primary schooling and better primary and secondary education. This increased their skilled labor force and allowed the countries to quickly adopt to changing technology while moving up the value chain in manufacturing from labor to capital and knowledge-intensive industries.
These policies laid the foundation of macroeconomic stability and development of human and physical capital which allowed these countries to achieve this miracle.
The lessons for Bangladesh?
Lack of power accountability and monitoring in the local level is hindering development. Bangladesh needs to identify capable leaders and spur competition among them for growth and development.
Bangladesh needs better exchange rate management where overvaluation of the currency has to be corrected as part of any future currency crisis in the post-Covid recovery phase.
Bangladesh needs to focus on development of domestic economies to increase domestic consumption. For example, the SMEs contribution in our country is almost 25% of the GDP, and 86% of industrial employment. Therefore, policies favoring the growth of SMEs should be adopted.
Human capital investment is the key to implement shared growth with equity- more investment on trained and skilled labor force is necessary for development. Good public health and quality education system at all levels must be ensured.
The time has come for Bangladesh to move up the value chain in manufacturing- from labor to capital and knowledge-intensive industries. This will attract FDIs along with increased income of the population.
Present Scenario of Bangladesh
Bangladesh is ranked 168th out of 191 countries in the World Bank Ease of Doing Business Index. This shows how much we lag behind than other countries in terms of both domestic business environment and attracting FDIs – apparent in the decision of 5 Japanese MNCs to not invest in Bangladesh when it was an option.
However, things are not all bad in Bangladesh right now.
In 2019, HSBC predicted that Bangladesh would be the 26th-largest economy in the world, by 2030. Two-third of our homogenous population is young – mostly under 25 – a young workforce who are quickly skill-able and adaptive to technologies.
Moreover, Bangladesh is quickly moving to a high-value, knowledge-intensive society, beyond just focusing on apparel manufacturing. Last year 12 industrial robots and 4 ships were exported to Korea and India respectively. Also, according to the Oxford Internet Institute, Bangladesh has the second largest pool of online workers in the world.
Bangladesh is also urbanizing fast with over 110 million internet subscribers. Rapid urbanization, with increasing consumption of electricity and more than 30 million middle class citizens, is a huge market to attract FDIs. Bangladesh Government is also trying to offer a liberal investment regime by planning on establishing 100 Special Economic Zones.
The main problem however, is that these policies are being taken in Bangladesh 30-40 years after they had already been implemented in those eight ‘Miraculous East Asian Economies’.
The writer is a bright Mind from Institute of Business Administration (IBA), University of Dhaka.
World Bank. (1993). The East Asian miracle: economic growth and public policy. World Bank Group. World Bank
Bangladesh is booming – and its future looks even brighter. (2019, October 4). World Economic Forum. World Economic Forum
By 2030, Bangladesh will be the 24th largest economy. Here’s how ICT is driving that growth. (2019, October 2). World Economic Forum. World Economic Forum