Prepared by Wong Chan-Yuan

Four developments defined the East Asias economic miracles. 1. Japan 2. Successful catching-up industrialization in Newly Industrialized Economics (NIEs) 3. Extraordinary episodes of high growth in SEA countries 4. Reform of socialist economy such as China (with recent emerging economy such as Vietnam).

From agriculture and primary commodities dependent to manufacturing based and export driven economies, and then progressing to postindustrial knowledge-based economies. Their economy did suffer in the early 1950s. Many military and political conflicts had hindered the potentials for development. See Kohli, A. (2009), National versus Dependent capitalist Development: Alternate Pathways of Asia and Latin America in a Globalized World, St. Comp. Int Dev. 44(4), pp. 386-410.

In the current stage of development, the trends are towards growth in hightechnology investments, high-technology industries and more highly-skilled labour.

How have these economies managed to achieve such a phenomenal growth in industrialization in only a few decades? How do the states promote industries successfully and fostered the growth of indigenous firms as vehicle for effective technological learning and industrialization?

Chang (2003, p.113) defined industrial policy as a policy designed to organize, coordinate and affect particular industries to achieve outcomes that are perceived by the state to be efficient for the economy as a whole. Industrial policy attempts to change the economic structure over and beyond what the market is able to do by inducing the private sector agents into new activities that they do not have interest in entering under free market situation. The efforts are directed towards particular industries, firms, regions, groups in the labor market.

These efforts provide an avenue for firms or industries to capture learning, monitoring and Schumpeterian rents for their own benefits. In many newly industrialized economies, science and technology policies are always integrated with industrial development plans to favour promising industries to move-up the production value chain and develop industrial science and technology. The development of industrial science and technology may suffer if the state fails to systematically organize and plan their industrial policy. Therefore, science and technology policies without the element of industrial planning will lose their sense of purpose and will be fragmented from the production structure of the economy.

Justman and Teubal (1991) present an analysis and survey of the structural perspective to economic growth and development. The authors conclude that, at nodes of structural change, the growth process may be punctuated by periods of discrete shifts in resource allocation and growth acceleration rather than being smooth, and that market failures may be pervasive due to problems of human capital accumulation, critical mass and discrete choice among alternative paths growth. Thus successful growth may require an adequate industrial and technological policy, particularly at nodes of structural change

Infant Industry support aims at assisting new firms in less developed countries to acquire production, management, and other expertise that will enable them to compete with firms in industries that already exist in developed countries. Temporary protection of such an infant industry can be justified by the presence of one out of two possible market failures: inefficient capital markets, in which young firms find it hard to borrow against potential future earnings; and the existence of positive externalities generated by early entrants to infant industry, such as external economics of scale, and knowledge spillovers.

Moreover, other system failures related to the institutional setting, market structure, and governance issues could become important in the process of industry emergence.

Industrial Policy consists of the following four fields: Policies aiming to alter the industrial structure- intervenes in the pricing of raw materials and manufactured products, thru financial and tax incentives to protect and nurture infant and other specified industries Policies to promote technological development and supply market information, thereby preventing the market failures Policies to improve economic utility by intervening in specific industrial organizations (regulating industrial structure) by licensing anti-depression cartels to avoid excessive competition or to avoid over capacity, organizing mega-mergers to achieve economies of scale, etc. Policies to promote provincial companies (often SMEs) or transfer of industries to outlaying regions, introduction of energy saving systems etc.

Legislation or government measures to support a particular industry for a specific period Administrative guidance Maintenance of basic infrastructure Special tax measures to targeted industries Government subsidies Government financing (such as national development banks)

Teubals HTP Framework

How about talents (critical mass for technological take-off)?

Key Technological Learning Processes for the Five Generic Technological Capability Development Routes

Generic Technological Capability Development Strategies of Latecomer Firms from Late Industrializing Economies

South Korea: Winner picking cum stageskipping model Taiwan: Evolutionary Targeting and pathcreating model SEA: Path-following with Newly AgroIndustrializing model China: Mixed-mode model

Kim, L. (1998) Crisis Construction and Organizational Learning: Capability Building in Catching-up at Hyundai Motor, Organization Science, Vol. 9, No. 4 (Jul. - Aug., 1998), pp. 506-521 Kim, L.(1999) Building technological Capability for Industrialization: Analytical Framework and Korean Experience, Industrial and Corporate Change, 8, 1, 111-136.