Economic Development in Asia

Chapter 1 –Introduction and Overview

 Economic Development in Asia
• Interest in economic development has expanded from the post
war era up to the new millennium.
• The recent economic history is noticeable by an “economic
miracle” that cross for several decades followed by the
financial or economic crisis.
• Although, there are still problems of widespread poverty, and
inequality despite gaining significant economic progress.
 Economic Development in Asia
• The East Asian miracle is a showcase of development up until
the Asian crisis.
• It has achieved significant economic growth and development
during the post war era.
• The development pocess began with Japan. And then
followed by South Korea, Singapore, Taiwan, and Hong kong.
• Economic Growth in these Newly Industrialized Economies
(NIE’s) or “Asian Tigers” average to 8% prior to the Asian
Economic Crisis.
• Asian crisis created a number of questions about the continued
viability of a rapid growth profile for the region.
 Economic Development in Asia

• WHAT IS THE ASIAN ECONOMIC CRISIS? HOW DID

IT AFFECT US?
 Economic Development in Asia

• The Asian financial crisis, also called the "Asian Contagion,"

was a sequence of currency devaluations and other events that
began in July 3, 1997 and spread through many Asian markets.
The currency markets first failed in Thailand as the result of
the government's decision to no longer peg the local currency
to the U.S. dollar (USD). Currency declines spread rapidly
throughout Southeast Asia, in turn causing stock
market declines, reduced import revenues and government
upheaval.
 The Asian Financial Crisis
• As a result of the devaluation of Thailand's baht, a large
portion of East Asian currencies fell by as much as 38 percent.
International stocks also declined as much as 60 percent.
Luckily, the Asian financial crisis was stemmed somewhat due
to financial intervention from the International Monetary Fund
(IMF0 and the World Bank. However, the market declines
were also felt in the United States, Europe, and Russia as the
Asian economies slumped.
 BREAKING DOWN the Asian
Financial Crisis
• As a result of the crisis, many nations adopted protectionist
measures to ensure the stability of their currencies. This often
led to heavy buying of U.S. treasury, which are used as global
investments by most of the world's sovereignties. The Asian
crisis led to some much-needed financial and government
reforms in countries such as Thailand, South Korea, Japan and
Indonesia. It also serves as a valuable case study
for economists who try to understand the interwoven markets
of today, especially as it relates to currency trading and
national accounts manager.
 BREAKING DOWN the Asian
Financial Crisis
• As mentioned above, the IMF intervened, providing loans to
stabilize the Asian economies — also known as “tiger
economies” — that were affected. Roughly $110 billion in
short-term loans were advanced to Thailand, Indonesia, and
South Korea to help them stabilize their economies. In turn,
they had to follow strict conditions including higher taxes and
interest rates, and a drop in public spending. Many of the
countries affected were beginning to show signs of recovery
by 1999. 
 Lessons from the Asian Financial
Crisis
• Many of the lessons learned from the Asian financial crisis can
still be applied to situations happening today and can also be
used to help alleviate problems in the future. First, investors
should beware of asset bubbles — some of them may end up
bursting, leaving investors in the lurch once they do. Another
possible lesson is for governments to keep an eye on spending.
Any infrastructure spending dictated by the government could
have contributed to the asset bubbles that caused this crisis —
and the same can also be true of any future events. 
 Difference between development
economics and other branches of
economics
• Economic Development concentrates on economies that have
low per capita incomes.
• It considers the experience of industrialized countries in
Europe, North America, Japan, and Australia/New Zealand in
analyzing the process of economic growth.
• Development Economists use analytical tools in growth
theory, macroeconomics, microeconomics, and labor
economics to name just a few.
Measuring Growth & Development
• Economic Development is a broader and much more
encompassing view than economic growth, and relates to
levels of social and humanitarian achievement and income
distribution, as well as narrow measure of per capita
income.
• It is economic growth with accompanied improvement in
peoples quality of life.
 New Approaches to Measuring
Economic Development
• Human development index (HDI) - is a summary measure of
achievements in three key dimensions of human development:
3 Dimensions:
• Long and Healthy life
• Knowledge
• A decent standard of living

The HDI is the geometric mean of normalized indices for each of

the three dimensions.
 New Approaches to Measuring
Economic Development
• Healthy life expectancy – Measures the expected number of
years to be lived in full health.
 New Approaches to Measuring
Economic Development
Green GDP
- assesses the impact of environmental
degradation in the development experience.
 Summary

• Uniqueness of the Asian development progress (Asian

Miracle Economies).

• Indicators of economic growth and development.