Assignment Statement: The opportunities in Asia (South East and South Asia) are huge and so are the challenges

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 Group members:                MMM385 – BUSINESS IN ASIA

Lam Nguyen Le (900410097)        

Quang Hai Duong (900024567)

DEAKIN UNIVERSITY

MMM385- BUSINESS IN ASIA

Assignment Statement: ‘The opportunities in Asia (South East and South Asia) are huge and so are the challenges’

Submitted by

Lam Nguyen Le – 900410097

Quang Hai Duong – 900024567

Due date: Wednesday 20th April 2011

Word count: 2,500

Introduction

Last three decades, Asian economies were in prosperous era with an extremely rapid growth.  The reasons are the huge population and rich material sources as well as the importance role of the government in the economy. However, the collapse of financial systems in Thailand in 1997 and expanding to other Asian countries after had pushed the Asian economies into a recession era. However, with some changes in economic structure and policy responses, those countries have reformed into new development time. In addition, Asian economies still has under the impact of global financial crisis which started from US that slowdown the growth of whole area. However, overcoming all these crises, Asian countries still growth and develop rapidly and given more opportunities for foreign investors, especially from US and Europe. Therefore, this research essay is given a critical analysis of the major structural transformation of Asian countries after the Asian financial crisis in 1997 and the recent developments including the Global Financial Crisis. The objective of this part is to explain structural transformations in terms of the state, businesses, labour relations and regional integration and how those transformations creates opportunities and challenges for western businesses. Finally, the specific opportunities and challenges will be discussing in the second parts. It will introduce more detail about what western investors will have and face in the potential market like Asia.

STRUCTURAL TRANSFORMATION OF THE ASIAN ECONOMIES

The structural transformation of the State:

At the time we called “East Asian Miracle”, development state has been played an important role in the rapid development of the East Asian economies. For instance, it provides access to loans, allocates the resources, introduce the high entry barriers for foreign companies and so on. In the case of East Asia, during the financial crisis, the disadvantages of development state have recognized. The government had intervened too much in the economy and particularly in the private sectors. As Krugman (1997) had pointed “the biggest lessons from Asia’s troubles are not about economics, it is about government”.

In reality, the popular of cronyism and corruption, the factors have made a contribution to the crisis was caused by the extensive intervention of the State in all business sectors. As a result, the crisis is the crucial reason to change the relationship between government and the private sector. Therefore, the developmental state had been deleted and replaced by the conventional capitalist economy. In this style, instead of supporting the economy, the State left everything to the private sectors with the attitude of self- reliance, however, the state still keep the role as the policy maker and implementer. For example, the state would subsidize partly for some major industries and also introducing the low tariff barrier to attract more foreign direct and indirect investors to the country. Besides, it is given opportunities for domestic companies expand their knowledge in order to enter the global market. During the global financial crisis from 2006-2008, it had a huge impact to Asian economies, especially is trade exports. However, the major Asian economies still keep sustainable and growth faster after this crisis. The key to this economic recovery was the government’s economic intervention. For example, the Malaysia’s government have introduced the economic stimulus packages about RM67 billion to support the domestic economy. It also helped the foreign manufacturers in Malaysia maintain their businesses stably.

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The structural transformation of the business: 

During the Asian crisis, the weakness of government financial support to domestic conglomerates has been recognized. It is the close relationship between large conglomerates and banks. Moreover, the poor governance of banks has led to a huge amount of nonperforming loans from conglomerates. As the result, most of conglomerates had a massive debt and could not pay. Finally, those conglomerates went to bankruptcy or collapsed such as Daewoo and Salim. In addition, with the globalization trend was developing quickly in some major Asian economies, the business structure required some changes. There ...

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