When speaking of economic growth in Asia, the prospects for a rising economy in the region are numerous. The countries that comprise the ASEAN – Association of Southeast Asian Nations (ASEAN), have been experiencing rapid economic growth with some of them achieving what many economists term as “the Miracle of the East.” What is behind this miracle? This article will discuss some of the determinants and prospects for economic development in the region.
ASEAN countries are emerging from the past experiences of military rule and political turmoil. In these times of economic revival, ASEAN countries are enjoying stronger investor confidence, a stronger workforce, more domestic refinancing and enhanced international trade. The relatively open economy in terms of foreign direct investment (FDI) has contributed much to this success. As a result, there is an increasing attraction for companies to invest in ASEAN countries.
There are two types of economic systems – free-market and centrally planned. Growth in Asia has depended much on the ability of governments to attract investment and spur economic activity. A successful economic system facilitates competition and makes it easier for businesses to operate successfully. The two types of economies – free-market and centrally planned – share some common determinants. The nature of the legal framework, the level of corruption and the ability of the state to provide public goods and services determines the type of economic system that will emerge in any country. The countries that have a highly developed but imperfectly transparent legal framework are more likely to experience economic liberalization – an opening for private players in the economy – than countries with highly developed but less well-functioning institutions.
A successful Asian economic model relies on high levels of foreign direct investment, flexible exchange rates and rapid inflow of external financing. Asian countries are beginning to develop higher education systems that make it easier for skilled workers from other countries to perform well at work. They are also making efforts to diversify their industries – by training and employing young people from other countries.
While infrastructural development and improved internal procedures to help Asian countries like India to develop faster, they face certain barriers. Poor road and rail infrastructure hinder freight and air traffic. The infrastructures of developed countries are generally modernized – but not to the same extent as those of developing countries. Poor infrastructural development and inadequate housing facilities – including schools, apartments and offices – add to the costs of doing business in Asia. As a result, companies often struggle to locate markets and attract and retain the best workers.
The location and composition of an economy have a major impact on its growth potential. The two most important economic factors are population and land availability. A large amount of land is required to sustain a population of over a hundred million people. Asia's biggest economic hurdle is the lack of land. Development requires an adequate supply of property to meet the needs of its residents. Another constraint is that most people live in slums, rural areas and the peripherals . . . . . . of major cities.
The economic policies of an Asian country depend on considerations similar to those of its counterparts in the developed world. Policy makers in Asia have to balance national interests against those of domestic consumers. Asian governments have been successful in creating a resilient economic framework in which market forces and private sector investment play a key role. Reforms and changes in tax rules and regulation have helped Asian economies to achieve economic stability and economic growth. However, these changes are not without risks.
Economic growth will depend largely on domestic factors such as policy frameworks, access to capital, education and health services, infrastructure, technological advances and competitiveness. Asian governments are also working towards creating a more liberal, free-market system to encourage economic growth. A key determinant for realizing any long term Asian economic goal is the ability of governments to address the issues of over-heating, excessive savings, deflation and budget deficits.