The Lessons of East Asian Development and Alternative Development Strategies for Hainan

by K. C. Yeh


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This Note examines the development experiences of South Korea, Taiwan, and Hong Kong to derive lessons that may aid in designing development strategies relevant to Hainan's policy decisions. It focuses on long-range problems that these three economies and Hainan all face, the policy options open to them, the methods that have been used, and both the positive and negative results of their policy reforms. The primary reasons for the success of South Korea, Taiwan, and Hong Kong were: (1) all three adopted development strategies that were outward oriented, market driven, export promoting, and based on internal economic liberalization; (2) their export-led growth was based on export of labor-intensive manufactures, which required industrialization from the very beginning; (3) all had high rates of investment; and (4) all had a relatively small government and a policy focus on perfecting the infrastructure that permitted entrepreneurs to work efficiently. Substantial efforts are necessary to develop Hainan's soft infrastructure, to devise policies to neutralize the disincentives caused by trade restrictions and overvalued exchange rates, to maintain tight control of fiscal and monetary policies, and to make necessary investments in research and development.

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