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9.5: Patterns of Economic Development in East and Southeast Asia

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    The 21st century has largely been marked by economic development across East and Southeast Asia. Economic geographers don’t just ask “Where is economic development occurring?” but also “Why is economic development occurring in some areas and not others?” In East and Southeast Asia, economic growth has largely resulted from regional and global trade. However, development is not spread evenly across the region and economic inequalities still persist.

    Global connections have been the principal driver of economic success in East and Southeast Asia. Trade connections have emerged between the countries in this region and the larger Pacific Rim, referring to the countries that border the Pacific Ocean. Many of these countries are members of the Asia-Pacific Economic Cooperation (APEC) which promotes free trade across Asia and the Pacific. In Southeast Asia, the countries of the region formed the Association of Southeast Asian Nations, or ASEAN (Figure \(\PageIndex{1}\)). The organization aimed to promote political security, economic growth, and social development among member countries.

    Figure \(\PageIndex{1}\): Map of ASEAN Member States (Derivative work from original by ASDFGH, Wikimedia Commons, Public Domain)

    In China and Japan, histories of relative isolation gave way to an embrace of globalization and global trade. Although China’s government is communist, it has allowed more free-market-oriented economics in areas known as Special Economic Zones, or SEZs. Located in coastal Chin, SEZs have special incentives to attract foreign investment (Figure \(\PageIndex{2}\)). Other capitalist shifts have occurred, such as allowing United States-based supermarkets and restaurants to open locations. The SEZs, as well as other special development areas in China, have functioned as growth poles, which are areas that have attracted economic development in the region. In 2010, China displaced the United States as the global leader in manufacturing.

    Figure \(\PageIndex{2}\): Map of China’s Special Economic Zones (© Alan Mak, Wikimedia Commons, CC BY 2.5)

    Broadly, foreign direct investment has been a key driver of China’s economic success. In 2017, China was the second most attractive company for foreign investors, behind the United States, with over $136 billion in foreign direct investment flowing. China has increased outward flows of FDI from $5.5 billion in 2004 to over $125 billion in 2017. Hong Kong is the primary destination for Chinese foreign direct investment, but substantial sums also flow to countries in Africa as well as Australia, where China is the largest trading partner. Within Southeast Asia, China is now the top investor in Myanmar and has increased foreign direct investment in Singapore.

    While China and Japan remain the largest economies in the region, other areas have experienced high rates of economic growth. The Four Asian Tigers (Hong Kong, Singapore, South Korea, and Taiwan) experienced rapid industrialization and economic development led by export-driven economies, low taxes, and free trade. Some have also theorized that the Confucian work ethic complemented the process of industrialization. Each country has developed a distinct specialty and maintains a competitive advantage in that area. For example, South Korea is known for its manufacturing of information technology, while Hong Kong is a leading financial center.

    Much of the economic growth of the Asian Tigers as well as Japan has come from the export of value-added goods. When countries export raw materials, their economic benefit is limited. When these raw materials are made into something useful, value is added and the product can be sold for a higher profit. Generally, lumber is quite cheap. When the lumber is made into a dining table, it has a much higher value. China has traditionally exported relatively low value-added goods. However, in 2016, the Chinese government announced a shift to higher value-added products like transportation technology and telecommunications.

    Southeast Asia has benefited from its key geographical position as the entrepôt, a French term meaning a commercial center of trade, for the rest of Asia. The Strait of Malacca is the main shipping channel between the Pacific Ocean, and the Indian Ocean and a key transportation gateway (Figure \(\PageIndex{3}\)). Around one-quarter of all the world’s exported goods travel through the strait each year.

    Malaysia’s economic success as an entrepôt is exemplified by its Petronas Towers in Kuala Lumpur, which were the tallest buildings in the world from 1998 to 2004. Indonesia has the largest economy of Southeast Asia, exporting primarily to Japan, Singapore, the United States, and China. Singapore has the highest GDP per capita in the region, again owing to its key geographical position.

    Figure \(\PageIndex{3}\): Map of the Strait of Malacca (U.S. Department of Defense, Public Domain)

    One lingering issue has been crony capitalism, the notion that the success of a business depends on its relationship to other businesses and the state. A politician might have an old friend in the manufacturing industry, and give the friend a government contract with beneficial terms. In 1997, a financial crisis that started in Thailand spread throughout the Southeast Asia region was, in part, blamed on the business dealings of corrupt politicians. Indeed, several countries rank high on an index of corruption perception, as shown in Figure \(\PageIndex{4}\). Some political scientists have expressed concern that the communist countries will continue to embrace capitalism when it is politically beneficial rather than as part of a broader and more transparent economic system.

    Figure \(\PageIndex{4}\): Map of Index of Perception of Corruption by Transparency International, 2017 (© Transparency International, CC-BY-4.0-DE)

    Economic development is not spread evenly throughout the region. By most estimates, North Korea remains the poorest country in the region with an estimated GDP per capita of just $1,300 in 2016. Mainland Southeast Asia, with the exception of Thailand, remains relatively poor. Cambodia, Laos, Myanmar, and Vietnam all have GDP per capita of less than $8,000 as of 2018 and remain far less well off than their more developed neighbors in the region.

    Where economic growth has occurred, it is often confined to an urban area which can drive up population densities as people move to the city in search of work. In Indonesia, the island of Java is very densely populated while other surrounding islands are relatively sparse. The Dutch colonizers and later the Indonesian government, in an effort to reduce poverty and overcrowding, created a policy of transmigration seeking to relocate people to the less densely populated islands. This program has been controversial, and the indigenous people who inhabit the surrounding islands see the program as a threat to their way of life.

    In some cases, uneven distribution of economic development has led to both interregional and intraregional migration as people move in search of economic advancement. China has seen a significant amount of rural to urban migration. Around 11 percent of the entire country’s population migrated from rural to urban areas in 2009 and most of them are young adults. Many of China’s migrants are part of a floating population, which refers to members of a population who reside in an area for a period of time but do not live there permanently. Around 50 million Chinese reside overseas, mostly in Southeast Asia. Thailand has the largest population of overseas Chinese, and Chinese also represent the majority ethnic group in Singapore.

    Long before colonization, East and Southeast Asia was a realm of global economic influence, from the Chinese empire to the trade routes of Southeast Asia. As some countries of the realm have moved toward political stability and economic growth, others have remained in a state of political and economic turmoil. Tourism could bring some of these countries an economic boost, but the prospect of tourism in countries with government instability is limited. Although countries like Laos, Myanmar, and Cambodia currently have some of the world’s smallest economies, they are some of the fastest-growing in the world. Improvements in agricultural and natural resource development combined with a stable political infrastructure could expand the economic strength of the region.

    Pacific Rim:

    refers to the countries that border the Pacific Ocean

    Association of Southeast Asian Nations:

    an international organization that seeks to promote political security, economic growth, and social development among member countries in Southeast Asia, also known as ASEAN

    Special Economic Zones:

    a special region in China where more free-market-oriented economics are allowed, also known as SEZ

    Growth poles:

    a cluster within a region that has attracted economic development

    Foreign direct investment:

    the control of a business in one country by a company based in another country, also known as FDI

    Asian Tigers:

    refers to Hong Kong, Singapore, South Korea, and Taiwan which have experienced rapid industrialization and economic development led by export-driven economies, low taxes, and free trade, sometimes also called the Four Asian Tigers

    Value added goods:

    a raw material that has been changed in a way that enhances its value


    a French term meaning a commercial center of trade

    Floating population:

    members of a population who reside in an area for a period of time but do not live there permanently

    9.5: Patterns of Economic Development in East and Southeast Asia is shared under a CC BY-NC-SA license and was authored, remixed, and/or curated by LibreTexts.