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

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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. All aspect of the quality of life improved and wages rose gradually. Life expectancy increased from 47 years in 1955 to 75 years in 2002. Hard work, rigorous schooling, state enforced austerity and imported technology transformed the economy and led to the country’s economic success.  Industries were able to invest and expand tremendously due to state directed bank loans at a negative real rate of interest. This encourages more investment and gave incentives to expand. It is important for a country to be competitive within the world market in order to achieve and also maintain a high volume of exports. South Korea was victorious in doing so and grew from $33 million to 1960 to $206 billion in 2000.

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        Huge business conglomerates, known as chaebol, dominated the South Korean economy and in 1997 the top four (Hyundai, Daewoo, LG and Samsung) accounted for over half of the country’s exports. The exporting success of the chaebol encouraged them to diversify and when growth rates were high, such diversification was seen as a sign of strength. The main objective that South Korea adopted to be successful was to invest heavily and copy the developed world’s technology. This was a way of producing wealth. More and more South Korean companies moved production to China to take advantage of lower costs for example ...

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