PROTECTIONIST STRATEGY IN THE DEVELOPMENT
OF KOREA, TAIWAN AND SINGAPORE?
as viewed by Lichauco
What explains the
three countries' dependence on trade?
Korea and Taiwan are like Japan:
scarce in natural resources and,
thus, heavily dependent on external sources for food and raw
materials. Singapore is a small country
and consequently a small market.
Although outward-looking, the three countries have been protectionists,
according to Lichauco.
I.
KOREA
President Park
Chung Hee supposedly realized that the relatively barren soil of Korea would
never produce the wealth needed to finance modernization. He saw that Korea's
future is in industry and exports and
was encouraged by US advisers. (9 January 1969 issue of FEER)
"...when South
Korea's late President Park Chung Hee decided to build an integrated iron
steeel plant in 1968, the World Bank opposed the idea as uneconomical, risky
and bound for disaster. But in the next two decades, the state-owned Pohang
Steel Company (POSCO) grew to be the fifth largest in the non-communist world
and one of the most efficiently managed. (1 April 1988 issue of Manila Bulletin
from Agence France-Presse):
US asked Korea to
lower tariff on 261 industrial products and lift various import barriers on 66
agricultural and other items (4 May 1988 issue of Manila Chronicle/dispatch
from Associated Press).
When the government
decided to put up the machine, engine and car industries, one of the steps they
took was to ban the importation of these items (8 June 1972 of Manila Times)
in 1971, the South
Korean government began setting up a chain of 29 electronics plants either
wholly owned or done in partnership with private business.
stock market is
closed to foreigners (Asian Wallstreet Journal, 21 June 1986; NE p. 98).
foreign banks are
not allowed to borrow from the public (1981 September INSIGHT MAGAZINE, Hong
Kong based).
II.
TAIWAN
government's direct
role in industry ranges from banking to shipbuilding, steel and fertilizer
production. In some of these industries it maintains monopoly position; in many
others it salso support price-setting cartels. Foreign exchange flows and
foreign investments are strictly controlled. Imports are severely restricted.
Customs duties run as high as 60% and provide almost a fifth of government
revenues. (30-31 August 1986 issues of International Herald Tribune)
One of the first
steps that the Taiwan government was to withdraw from the GATT (an
international organization founded to eliminate trade barrier). In its first
year of establishment, she proceeded as Japan did during the latter's pioneering
years of industrialization, to establish state corporations which
organized, owned and operated
industrial ventures. The state established, among others, a monopoly on the
liquor and tobacco industries which are now a major source of government
revenues.
State-owned
enterprises and government monopoly on liquor and tobacco represented more than
70% of total government revenue. (4 June 1984 issue of the Asian Wall Street
Journal; in RP capital revenue is 1.8% of gov't total revenue), p. 91 NE.
Taiwan focused on
heavy industries in 1971. She launched
her first integrated steel mill in
1977. (Even as early as 1971, even before her heavy industries had been fully
established, manufactured goods already constituted 78% of Taiwan's exports.
the stock market is
closed to foreigners (Wallstreet Journal, 21 June 1986)
Severe restrictions
on foreign banks: foreign banks are not to open additional branches and not
allowed to accept savings deposits for a period longer than 6 months (FEER 25
April 1985)
withdrew from the
IMF in 1980
III. SINGAPORE
although projected
as practitioners of free trade, this is said to be misleading because the city-state describe herself as a socialized economy where government is
extensively involved as proprietor, entrepreneur and manager of commercial and
industrial enterprises (Singapore's
non-tax revenue is 38.8% of total government revenue in 1990 compared to RP's
12.9%)
if Singapore
conducts her trade with comparative absence of restrictions on trade, this is
because the city is too small to support large industries. Her current population of 3 million is only
40% of Metro Manila.
THE
CHALLENGE: VERIFY THE ASSERTIONS ABOVE
AND DRAW LESSONS FOR ADVANCING RP'S DEVELOPMENT