Economic Growth in East Asia After the Financial Crisis: Prospects for Taiwan, Malaysia, and South Korea
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Over the past five decades, the countries of East Asia have achieved extraordinary economic growth rates. In just a single generation, these countries have successfully transformed themselves from isolated peasant economies to high-performing economies that play key roles in the international marketplace. Economists have called this rapid growth the 'East Asian Miracle.' However, some economists have recently argued that the development models of the East Asian countries are flawed and cannot produce high growth rates for much longer. The financial crisis of 1997-98 crippled the East Asian region and revealed numerous structural weaknesses within these economies. These weaknesses left them extremely vulnerable to such a crisis and will likely hinder future economic growth. Although these economies have adopted several reforms since the crisis, their future remains uncertain. In this paper, I focus on three East Asian countries: South Korea, Malaysia, and Taiwan. I examine the structural weaknesses that left them so vulnerable when the crisis hit and discuss challenges that lie ahead. I also investigate what these economies can learn from each other to help maintain growth in the years to come. I find that Korea must continue its reform process and allow for greater competition among firms. Taiwan should allow more foreign direct investment and encourage venture capital funds. And Malaysia needs to focus on greater diffusion of technology in the economy and greater technology absorption from other countries.