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BUSS1005 Middle East Asian Tigers and Economic Growth Lessons Case Study Paper


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Business Economics- BUSS 1005-CW2-Spring -19-QP In Semester Individual Assignment – Spring 2019 Case Study Module: Business Economics (BUSS 1005) Level: 5 Max. Marks: 100 Duration: 4 Weeks (Weightage: 35%) Instructions:   There are three questions to be attempted based on the case study and a proposal to be submitted. The weightage of the answer is clearly indicated below each question. The Asian Tigers and Economic Growth Lessons The Asian Tigers or Asian Dragons is a term used in reference to the highly free and developed economies of Hong Kong, Singapore, South Korea, and Taiwan. These nations and areas were notable for maintaining exceptionally high growth rates (in excess of 7 percent a year) and rapid industrialization between the early 1960s and 1990s. By the 21st century, all four had developed into advanced and high-income economies, specializing in areas of competitive advantage. For example, Hong Kong and Singapore have become world-leading international financial centers, whereas South Korea and Taiwan are world leaders in manufacturing information technology. Their economic success stories have served as role models for many developing countries, especially the Tiger Cub Economies. Despite a World Bank report crediting neoliberal policies with the responsibility for the boom, including maintenance of export-led regimes, low taxes, and minimal welfare states, institutional analysis also states some state intervention was involved. The World Bank report acknowledged benefits from policies of the repression of the financial sector, such as state-imposed below-market interest rates for loans to specific exporting industries. However, it also pointed out free trade and less government spending were the driving force. As a result, these economies enjoyed extremely high growth rates sustained over decades. Other important aspects include major government investments in education, non-democratic and relatively authoritarian political systems during the early years of development, high levels of U.S. bond holdings, and high public and private savings rates. However this is highly debated, and many have argued that industrial policy had a much greater influence than the World Bank report suggested. BUSS 1005-CW2- Spring -19-QP Business Economics- BUSS 1005-CW2-Spring -19-QP A period of liberalization did occur, and the first major setback experienced by the Tiger economies was the 1997 Asian financial crisis. While Singapore and Taiwan were relatively unscathed, Hong Kong came under intense speculative attacks against its stock market and currency necessitating unprecedented market interventions by the state Hong Kong Monetary Authority, and South Korea underwent a major stock market crash brought on by high levels of non-performing corporate loans. As a result and in the years after the crisis, all four economies rebounded strongly. South Korea, the worst-hit of the Tigers, has managed to triple its per capita GDP in dollar terms since 1997. Overview Prior to the 1997 Asian financial crisis, the growth of these four Asian tiger economies (commonly referred to as, ‘The Asian Miracle’) has been attributed to export oriented policies and strong development policies. Unique to these economies were the sustained rapid growth and high levels of equal income distribution. A World Bank report suggests two development policies among others as sources for the Asian miracle: factor accumulation and macroeconomic management. By the 1960s,levels in physical and human capital amongst the four countries far exceeded other countries at similar levels of development. This subsequently led to a rapid growth in per capita income levels. While high investments were essential to the economic growth of these countries, the role of human capital was also important. Education in particular is cited as playing a major role in the Asian miracle. The levels of education enrollment in the four Asian tigers were higher than predicted given their level of income. By 1965, all four nations had achieved universal primary education. South Korea in particular had achieved a secondary education enrollment rate of 88% by 1987. There was also a notable decrease in the gap between male and female enrollments during the Asian miracle. Overall these progresses in education allowed for high levels of literacy and cognitive skills. The creation of stable macroeconomic environments was the foundation upon which the Asian miracle was built. Each of the four Asian tiger states managed, to various degrees of success, three variables in: budget deficits, external debt and exchange rates. Each tiger nation’s budget deficits were kept within the limits of their financial limits, as to not destabilize the macro-economy. South Korea in particular had deficits lower than the OECD average in the 1980s. External debt was nonexistent for Hong Kong, Singapore and Taiwan, as they did not borrow from abroad. While South Korea was the exception to this as their debt levels during 1980-1985 was quite high compared to their GNP ratios, it was sustained by the country’s high levels of export. Exchange rates in the four Asian tiger nations had been changed from long-term fixed rate regimes to fixed-but-adjustable rate regimes with the occasional steep devaluation of managed floating rate regimes. This active exchange rate management allowed the 4 tiger economies to avoid exchange rate appreciation and maintain a stable real exchange rate. BUSS 1005-CW2- Spring -19-QP Business Economics- BUSS 1005-CW2-Spring -19-QP Export policies have been the de facto reason for the rise of these four Asian tiger economies. The approach taken has been different among the four nations. Hong Kong, and Singapore introduced trade regimes that were neoliberal in nature and encouraged free trade, while South Korea and Taiwan adopted mixed regimes that accommodated their own export industries. In Hong Kong and Singapore, due to small domestic markets, domestic prices were linked to international prices. South Korea and Taiwan introduced export incentives for the traded-goods sector. The governments of Singapore, South Korea and Taiwan also worked to promote specific exporting industries, which were termed as an export push strategy. All these policies helped these four nations to achieve a growth averaging 7.5% each year for three decades and as such they achieved developed country status. 1997 Asian Crisis The 1997 Asian financial crisis had an impact on all of the four Asian tiger economies. South Korea was hit the hardest as its foreign debt burdens swelled resulting in its currency falling between 3550%. By the beginning of 1997, the stock market in Hong Kong, Singapore, and South Korea also saw losses of at least 60% in dollar terms. However, four Asian tiger nations recovered from the 1997 crisis faster than other countries due to various economic advantages including their high savings rate (except South Korea) and their openness to trade. 2008 Financial crisis The export oriented economies of the four Asian tiger nations which benefited from American consumption, were hit hard by the financial crisis of 2007-2008. By the fourth quarter of 2008, the GDP of all four nations fell by an average annualized rate of around 15%.Exports also fell by a 50% annualized rate. Weak domestic demand also affected the recovery of these economies. In 2008, retail sales fell 3% in Hong Kong, 6% in Singapore and 11% in Taiwan. As the world recovers from the financial crisis, the four Asian tiger economies have also rebounded strongly. This is due in no small part to each country’s government fiscal stimulus measures. These fiscal packages accounted for more than 4% of each country's GDP in 2009. Another reason for the strong bounce back is the modest corporate and household debt in these four nations. A recent article published in Applied Economics Letters by Financial Economist Mete Feridun of University of Greenwich Business School and his international colleagues investigates the causal relationship between financial development and economic growth for Thailand, Indonesia, Malaysia, the Philippines, China, India and Singapore for the period between 1979 and 2009, using Johansen cointegration tests and vector error correction models. The results suggest that in the case of Indonesia, Singapore, the Philippines, China and India financial development leads to economic growth, whereas in the case of Thailand there exists a bidirectional causality between these variables. The results further suggest that in the case of Malaysia financial development does not seem to cause economic growth. BUSS 1005-CW2- Spring -19-QP Business Economics- BUSS 1005-CW2-Spring -19-QP Cultural basis The role of Confucianism has been used to explain the success of the Four Asian Tigers. This conclusion is similar to the Protestant work ethic theory promoted by German sociologist Max Weber in his book The Protestant Ethic and the Spirit of Capitalism. The culture of Confucianism is said to have been compatible with industrialization because it valued stability, hard work, and loyalty and respect towards authority figures. There is a significant influence of Confucianism on the corporate and political institutions of the Asian Tigers. Confucianism was taught in Singaporean schools until the 1990s. Confucian seminars were offered by South Korean companies like Hyundai for company management. Prime Minister of Singapore Lee Kuan Yew advocated Asian values as an alternative to the influence of Western culture in Asia. This theory was not without its critics. There was a lack of mainland Chinese economic success during the same time frame as the Four Tigers, and yet China was the birthplace of Confucianism. During the May Fourth Movement of 1919, Confucianism was blamed for China's inability to compete with Western powers. Territory and region data 1.Demographics Country or territory Area km² Population Population density Population of capital city per km² Hong Kong 1,104 7,219,700 6,540 7,219,700 Singapore 710 5,399,200 7,605 5,399,200 South Korea 100,210 50,423,955 503 10,140,000 36,193 23,386,883 646 2,688,140 Taiwan 2.Economy Country or territory Hong Kong Singapore South Korea Taiwan GDP GDP PPP GDP Exports Imports GDP PPP nominal per Trade nominal millions of millions of millions of per capita capita millions of millions of USD USD USD (2011) USD USD USD (2011) USD (2011) (2011) (2011) (2011) (2011) 246,941 354,272 34,049 49,342 944,800 451,600 493,200 266,498 314,963 49,270 59,936 818,800 432,100 386,700 1,163,847 1,556,102 23,749 31,753 1,084,000 558,800 525,200 504,612 886,489 21,591 37,931 623,700 325,100 298,600 BUSS 1005-CW2- Spring -19-QP Business Economics- BUSS 1005-CW2-Spring -19-QP 3. Quality of Life Country or territory Human Development Index Global Well Being Index (2014) (2010), % thriving Hong Kong 0.891 (15th) 19% Singapore 0.901 (9th) 19% South Korea 0.891 (15th) 28% Taiwan 0.882 ( 22nd) 22% Answer The Following Questions : Question 1 Discuss the differences and similarities between economic growth and economic development, highlighting the aspects indicating Asian Tigers development with appropriate illustrations from the case context. (30 marks) Question 2 Discuss the Free Market Economic Policy, highlighting the extent to which the Asian Tigers have benefited from Economic freedom of their countries in a bid to attain a high export drive. (30 marks) Question 3 “For a nation to attain internationally competitive status, it is required to have suitable trade policies in place. Industrial growth is a key to attaining macro-economic objectives and improving the standard of living of a country.” With appropriate examples, discuss the arguments in favour of Protectionism. (40marks) BUSS 1005-CW2- Spring -19-QP Business Economics- BUSS 1005-CW2-Spring -19-QP Important Instructions 1. In-text Citations and Referencing In answering these questions, students must draw on appropriate academic literature and theoretical perspectives in order to fully support their response. In-text citations and corresponding references are mandatory for all the tasks. 2. Word Limit - Total words count should not exceed 2500 words (plus or minus 10 %). - 5 % of the marks obtained will be deducted if the report exceeds the word limit. 3. Report Structure should contain;  Cover page, which indicates title, names of students, name of instructor and date of submission;  Table of contents;  Introduction, which briefly describes the objective of the report and structure of the report;  Discussion, description of the main points with proper citations and references;  Conclusions that reveal main findings regarding each point;  References using Harvard Style 4. Report Format The report should be done in Word, font size 12, font style Times New Roman, text color black, colors can be used ONLY in appendices; main body of the report should be black and white. 5. Report Submission and penalty for late submission Report should be submitted through Moodle on time, any delay in submission will lead to deduction of 5% of the marks obtained for each day up to a maximum of one week. 6. Formative Feedback Feedback will be provided only on the proposal submitted. Submitting the individual assignment for the formative feedback will not be entertained. However, students are requested to contact the instructors for any queries related to assignment any time during the assessment period. BUSS 1005-CW2- Spring -19-QP Business Economics- BUSS 1005-CW2-Spring -19-QP 7. Viva Upon the discretion of the faculty, students may be called for the viva. Failing to appear for VIVA or to respond to the questions asked during VIVA may lead to fail in the assessment. 8. Plagiarism Policy As per MEC policy, any form of violation of academic integrity will invite severe penalty. Plagiarized documents, in part or in whole, submitted by the students will be subject to this policy. A. First offence of plagiarism a) A student will be allowed to re-submit the assignment once, within a maximum period of one week. However, a penalty of deduction of 25% of the marks obtained for the resubmitted work will be imposed. b) Mark deduction: When the work is resubmitted, the marking will be undertaken according to the marking criteria. In compliance with this policy, the 25% deduction is then made on the marks obtained. For example, in an assessment that carries a maximum of 50 marks, suppose a student were to obtain 30 marks for the resubmitted work, the final marks for that assessment will be 22.5 (after deducting 25% of the marks actually obtained for the resubmitted work). c) Period of resubmission: The student will have to resubmit the work one week from the date he or she is advised to resubmit. For example, if the formal advice to resubmit was communicated to the student on a Sunday (latest by 5 pm), the student will have to resubmit the work latest by next Sunday 5 pm. d) If the re-submitted work is also detected to be plagiarized, then the work will be awarded a zero. e) Resubmission of the work beyond the maximum period of one week will not be accepted and the work will be awarded a zero. B. Any further offence of plagiarism a. If any student is again caught in an act of plagiarism during his/her course of study (either in the same module, same semester or in any other semester), the student will directly be awarded zero BUSS 1005-CW2- Spring -19-QP Business Economics- BUSS 1005-CW2-Spring -19-QP for the work in which plagiarism is detected. In such cases, the student will not be allowed to resubmit the work. C. Guidelines a) Type 1: In case plagiarism is detected in any component or part submission (submitted at different times) of one assessment (assignment), the deduction in marks will be applicable for the whole assessment (assignment), even if only the component or part submission alone needs to be resubmitted. b) Type 2: In case plagiarism is detected in a group assessment, all students of the group will be considered as having committed an act of plagiarism irrespective of whether plagiarism is on account of the act of all or a few or only one member. The policy will then be applied to all students. c) Type 3: Combination of Type 1 and Type 2: In case plagiarism is detected in any component or part submission (submitted at different times) of a group assessment (assignment), the deduction in marks will be applicable for the whole assessment (assignment), even if only the component or part submission alone needs to be resubmitted. All students of the group would be considered as having committed an act of plagiarism irrespective of whether plagiarism is on account of the act of all or a few or only one member. The policy will then be applied to all the students of the group. d) Type 4: Variation of Type 1 and Type 2: In cases where the assessment consists of components or part submissions that could be a group assessment component (e.g. group assignment) and an individual assessment component (e.g. individual reflection), the following will be applicable: 1. If plagiarism is detected in the group assessment component, all students of the group will be considered as having committed an act of plagiarism, irrespective of whether plagiarism is on account of the act of all or a few or only one member. The policy will then be applied to all students of the group. In such cases the group assessment component will be resubmitted as per the policy. 2. If plagiarism is detected in the individual assessment component, the individual assessment component will be resubmitted as per the policy. The policy will then be applied to that student alone. BUSS 1005-CW2- Spring -19-QP Business Economics- BUSS 1005-CW2-Spring -19-QP 3. In both cases (a) and/or (b), the deduction in marks will be applicable for the whole assessment (assignment). D. Amount of similar material a) The total amount of similar material in any form of student work from all sources put together should not exceed 30% (including direct quotations). b) The total amount of quoted material (direct quotations) in any form of student work from all sources put together should not exceed 10%. c) The total amount of similar material in any form of student work from a single source should not exceed 7 percent. However, cases having a similarity of less than 7 percent in such cases may still be investigated by the faculty depending on the seriousness of the case. d) If faculty member find enough merit in the case of a student work with a similarity (with a single source) of more than 7 percent as not a case of plagiarism, the faculty member should provide detailed comments/remarks to justify the case. BUSS 1005-CW2- Spring -19-QP Business Economics- BUSS 1005-CW2-Spring -19-QP 9. Mark Allocation Evaluation Criteria Marks Allotted Brief and clear description about the objectives of the assignment and structure of the report 5 Proposal Question 1 Introduction Economic Growth Discussion. 30 and Economic Development Question 2 Free market Policy Question 3 Protectionism and roles to an economy 20 35 Conclusion Reflecting on each findings of the study 5 Format of the Report (Cover page, table of content, font size and style, alignment of the report and Harvard style used in referencing) Total Marks 100 ***Please note that MARKS awarded are provisional until approved by the Exam Board Note: 40 % of marks cannot be given for this task if the answer is not supported with at least one appropriate citation and corresponding references from appropriate sources. There should be a minimum of 7 and/ or more citations from relevant sources to get 70% of marks in this task. Based on the depth and clarity of arguments and evidence of wide reading and research, 80 % or more can be cons ...
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Question 3
Protectionism is a policy in economics where a country put down some measures that
promote local industry. It is a situation where domestic industries are being protected from external
competition derived from foreign countries. There are several methods of implementing
protectionism policies, and each of them has several advantages. The plans include tariffs, quotas,
government subsidies and any other way that can inhibit import and promote export.
Quotas are one of the protectionist policy. It is the limitation placed on the amount or
quantity of import. It limits the number of goods that are imported from the external countries and
therefore encourages the consumption of the locally produced products.
Tariffs are the imposition of tax on the goods imported. Similarly, it also demoralizes the
number of products being imported by raising the import duty tax which then makes the goods
imported expensive.
Government expenditure such as an incentive to local industries is also another way of

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