Human Development Report 2013 - UNDP

Having weathered theAsian financial crisisin 1997, Indonesiatoday stands out foreffectively managingits commodity exports• Republic of Korea. When the Republic ofKorea and some of the other East Asianeconomies went through a phase of moderateimport substitution for consumergoods, they did not protect domestic producersof capital goods. 70 Even when theywere ambivalent about FDI in the 1980s,they chose to import technology underlicensing agreements and to develop linkswith multinational firms. The goal was tobuild indigenous capabilities for the longhaul by borrowing and assimilating foreigntechnologies.• Thailand. Thailand’s manufacturing prowesscontinues to strengthen through the country’sparticipation in international productionnetworks. In 2009–2010, its exportsof parts and components—notably in theautomotive and electronics industries—werevalued at $48 billion, a quarter of its merchandiseexports. The government is keen toestablish Thailand as the “Detroit of Asia”,not only a cluster for logistics, but also ahigh-tech hub that forges research collaborationamong firms, universities and the publicsector. 71• Malaysia. Malaysia’s pre-eminence in theelectronics industry began in the early daysof the international division of labour, withits courting of multinational companies fromcountries in the North. Free trade zones,established primarily for manufacturing electronicgoods, 72 helped the country developrapidly between the 1970s and the 1990s.Today, however, Malaysia’s economy is seento be in a “middle-income trap”, no longerable to compete with low-cost productionin neighbouring countries and lacking theskills for high-end tasks in global productionnetworks. 73 The government’s own advisorycouncil is concerned that a slowdown in FDIinflows could affect the prospects for graduatingto high-income status. 74 Malaysia’s goodrecord in secondary education does not seemto have produced a strong enough base foran innovation-driven economy: Malaysia’sfuture progress is hampered by inadequateresearch and development capacity and a lackof design and process engineers and technicaland production workers. 75• Indonesia. In the 1990s, to avoid the highcosts associated with aspects of protection,Indonesia and some other East Asian countriesestablished export processing zones,bonded warehouses and duty drawbacksystems—all requiring a competent bureaucracy.When countries felt they lacked thatcapacity, they resorted to unconventionalapproaches. For a period Indonesia evenprivatized its customs administration. 76Having weathered the Asian financialcrisis in 1997, Indonesia today stands outfor effectively managing its commodityexports. 77Piggybacking on niche productsOne option for smaller economies is to tap intoworld markets for niche products. The choiceof successful products is not accidental; it isoften the result of years of state support andfacilitation that build on existing competenciesor the creation of new ones.• Chile. With active support from the state,Chilean firms have had major success inexpanding exports of processed agriculturalfood and beverages and forestry andfish products. For example, in the 1960s,there was substantial public research anddevelopment in the cultivation of grapesfor wine production. There has also beena long history of subsidized plantations inforestry, and the state has made major effortsto turn the wood, pulp and paper, andfurniture cluster into a major export industry.78 Similar support from a nonprofitcorporation, Fundación Chile, has helpedmake the country’s commercial salmoncultivation one of the most prolific in theworld. 79• Bangladesh. Bangladesh took advantage ofmarket distortions in world apparel trade. 80But without the initiative of its entrepreneurs,it could easily have squandered theopportunity. In 1978, the Desh Companysigned a five-year collaboration agreementwith Daewoo, a Korean company, that connectedBangladesh to international standardsand a network of apparel buyers. Daewootrained Desh employees in production andmarketing in the Republic of Korea. Withina year, 115 of the 130 trainees had left Deshto start their own garment export firms. 81 By2010, Bangladesh’s share of world apparel76 | HUMAN DEVELOPMENT REPORT 2013