Newly Industrialised Countries (NICs)

First Phase: A key element in the process of globalisation has been the emergence of newly industrialised countries (NICs) – they have undergone rapid industrialisation since the early 1960s. When TNCs looked for areas where labour and other costs were lower, the countries of east Asia were targeted.

 

Japanese TNCs were among the first to seek new areas for their operations and it was logical that they should look at their less developed neighbours, particularly South Korea and Taiwan. These countries, along with Singapore and Hong Kong, became collectively known as the Asian Tigers. The advantages of these countries for the development of manufacturing industry were:

 

Ø  A reasonably well developed level of infrastructure such as roads, railways and ports.

Ø  Relatively well educated populations with existing skills.

Ø  Cultural traditions that revere education and achievement.

Ø  Good geographical location – Singapore for example is situated between the Indian and Pacific Oceans.

Ø  Government support for example offering low interest rates on bank loans.

Ø  Less rigid laws and regulations on labour, taxation and pollution than TNCs’ parent countries, allowing more profitable operations.

 

As the economies of NICs grew, large indigenous firms began to grow, helped by the economic climate and government aid. The ‘chaebols’ (huge business conglomerates) of South Korea, helped by the government, were able to expand.

 

Second Phase: As the economies of these NICs grew, wage levels and the cost of operating within these countries began to increase. As a result Japanese, US and European TNCs looked for a second generation of countries that could support their operations. Such areas had recent improvements in both physical and human infrastructures but wage levels that were still low. At the same time, companies that had grown in the original NICs, such as the ‘chaebols’ of South Korea, also began to move routine manufacturing tasks to their neighbours, such as Malaysia and Thailand.

 

Third Phase: In recent years, both China and India have emerged as targets for foreign direct investment (FDI) by TNCs. Since 1990, both countries have shown rapid and sustained economic growth. China’s growth is the fasted experienced by any country, at one time averaging a real per capita growth of more than 10% a year. China is now the world’s second biggest economy behind the USA overtaking Japan in 2010.