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EXPLAIN AND DESCRIBE THE CHARACTERISTICS OF ECONOMIC ACTIVITY IN NEWLY INDUSTRIALISED COUNTRIES

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Introduction

EXPLAIN AND DESCRIBE THE CHARACTERISTICS OF ECONOMIC ACTIVITY IN NEWLY INDUSTRIALISED COUNTRIES (20 MARKS) Newly industrialised countries (NIC's) are a group of countries (mainly in Asia and south America) that have attained a high level of industrialisation. These countries include Japan, South Korea, Singapore, Hong Kong and Taiwan, who have undergone rapid and successful economic transformation since the 1960's. Three generations of NICs have been recognised, First Generation NIC's for example South Korea, Singapore, Taiwan and Hong Kong, Second Generation NIC's such as Malaysia and Thailand and Third Generation NIC's such as India. One of the main characteristics associated with NICs is the idea of rapid industrialisation. There are two policies that are used in regard to industrialisation. They are: Export Oriented Industrialisation (EOI) and Import Substitution Industrialisation. South Korea, as an example of a First Generation NIC, had very low prospects after the Korean War of 1950-3. However from the 1960's the economy took off again and South Korea started achieving rates of growth for the best part of four decades. ...read more.

Middle

Another example of economic activity to gain success would be to lower the percent of the manufacturing workforce and also try to eliminate foreign competitors by lowering prices of their exported goods. An example of Second Generation NIC's is Malaysia. The country has earned its status as an Asian Tiger on the basis of its successful transition from dependence in the 1960s and 70s on primary product exports, to manufactured exports in the 1990s (where over 80% of exports were manufactured goods). One of the factors that affected this manufacturing growth was cheap labour. During the 1970s, increasing personal prosperity in MEDCs fuelled the growth of the consumer society, which in turn accelerated the demand for a wide range of goods. Progressive improvements in transport reduced the inconvenience and costs associated with long distances between markets and company headquarters. This led to a higher proportion of manufacturing processes to be farmed out to factories in LEDCs. While the explanation for manufacturing growth should always be firmly placed on low costs of production in Malaysia, cheap labour alone is never enough to explain industrial growth. ...read more.

Conclusion

The first generation of NICs, the Asian Tigers, developed industry based on a lot of cheap labour and labour intensive production on the traditional industries e.g. textiles, clothing, and leather. They had high populations due to immigration, therefore cheap labour was a key resource, while they were industrialising during the 50s and 60s. The Asian Tiger countries attracted a lot of investment from Japan, multinationals and trans-national corporations (MNEs/TNCs). It was found that it was more productive to move investment form Japan to other countries and other markets, as it would be cheaper. These companies found it a comparative cost advantage due to cheap labour. By diversifying to areas such as FMCG (fast moving consumer goods), they are increasing levels of wealth as these areas are more capital intensive and the goods are destined for export. There are many factors in the development of NICs. The main objective is to attract inward investment form other countries. Government intervention means that incentives to attract foreign trade are used, for example, tax reductions. ...read more.

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