Four Asian Tigers

Figure 1 above shows the growth of the Four Asian Tiger economies of Singapore, Hong Kong, Taiwan and South Korea between 1960 and 2020. All four have been growing at an annual output growth rate of more than 6% annually.⁴ What's most important though, is that this growth rate has been sustained over the whole period. Singapore had the highest growth rate, well outpacing the other three tigers from 1970 onward. This gap in the growth rate between Singapore and the other three countries has further widened between 2000-2020 with the exception of a large dip post Financial Crisis 2008. Hong Kong, Taiwan, and South Korea have largely maintained the relative gaps between their corresponding growth rates.

Four Asian Tigers History

To appreciate their feat of economic development, a brief look at the "beginning" of the story might be useful.

In the case of South Korea, the country had emerged from the devastating aftermath of the Korean War in 1953 and experienced yet another turbulent event in the form of a coup by General Park Chung-hee in 1961. Singapore was recently kicked out of Malaysia and faced an uncertain economic future as a new small city-state.

The government ruling Taiwan had recently moved to the island after a defeat in the Chinese Civil War. There were occasional ongoing military hostilities between Taiwan and the Chinese mainland. Hong Kong also had a tumultuous time - the then-British colony had been a hub for re-export trade between mainland China and the rest of the world. However, mainland China was placed under an embargo for its role in the Korean War which effectively stopped the re-export trade that Hong Kong had been relying on.

In the early 1960s, all four economies were facing uncertain economic prospects and were looking for ways to shift their economies so that they could be on track for fast economic development. All four economies began to industrialize in the 1960s with heavy state involvement. While there is some debate regarding what contributed to the successes of the Four Asian Tigers, it is widely recognized that export-oriented policies, an emphasis on education, and a stable macroeconomic environment supported their growth.

Asian Tigers Development Strategies

There have been some debates on what development strategies have led to the success of the Asian Tigers. There is the "neoclassical view" which attributes their success to the governments playing a limited role and letting the market do its wishes.²

This view has been criticized by others as being factually incorrect. They point to the fact that the governments in South Korea and Taiwan have promoted selected sectors of the economy. South Korea set targets and provided financial incentives for the heavy and chemical industries, and Taiwan used public investments in manufacturing to support exports. The governments also used interest rates to guide investments in their preferred sectors.²

While most would agree that all four Asian Tigers had pursued export-oriented and industrial policies to different extents. These took very different forms in practice. For example, the smaller economies of the four - Hong Kong and Singapore - had made credits available to the export industries. On the other hand, South Korea and Taiwan took a more heavy-handed approach in directing subsidized credits to specific industries. The effects of industrial policies in these economies remain the subject of heated debate.³

There is consensus in some areas regarding the Asian Tigers' development strategies. There is wide agreement on these governments' good performance in maintaining macroeconomic stability. Namely, these governments did well in managing budget deficits, inflation, foreign debt, and stable exchange rates.³

Scholars and commentators would also agree that governments in these economies place a strong emphasis on education. In particular, they invest in the primary and secondary levels where the social rates of return to education are higher and where public investment is needed the most due to the large positive externalities.³

Characteristics of the Asian Tigers

Let's summarize some of the common characteristics of the Asian Tigers here.

All four Asian Tigers had high levels of physical and human capital by the end of the 1960s. The latter was thanks to public investment in education, particularly in primary and secondary education. The high levels of physical capital can be attributed to more complicated factors. In South Korea and Taiwan, the governments used financial incentives or public investments to promote investments in certain industries. Singapore and Hong Kong promoted investment in the export industries in general by making credits available to these industries.

All four economies had maintained their macroeconomic stability well in terms of their budget deficits, inflation, foreign debt, and exchange rates. This was true prior to the 1997 Asian financial crisis.

Factors that Contributed to Rapid Industrialization in the Asian Tigers

Besides government policies, many point out that other factors also contributed to rapid industrialization in the Asian Tigers. These include cultural and geographic factors.

The propensity to save more rather than consume is a common cultural factor across the Asian Tigers. High savings rates have enabled a large amount of investment in physical capital. Likewise, government investment in education is also reflected in the cultural emphasis on education in these places. This has contributed to the build-up of human capital.

Geographic factors have also played a role. All four economies are in proximity to global shipping lanes and have access to natural harbors which enable the low-cost transportation of goods to and from far-flung places. This is an important factor in these economies' industrialization stage.

Because the rapid economic growth of the Asian Tigers came after the rapid growth of Japan and preceded the period of rapid growth in the wider region, most notably the growth of mainland China. These factors are also cited as common factors that contributed to the economic growth of the wider region.