TNAG-1880-FCO40-2671-Student-demonstrations-and-internal-political-situation-in-C-1989 — Page 49

6)

7)

10

b. Technological advancement in the NIES

In the past, low wage levels and the considerably longer

working hours in Asia were seen as the essential element of

the NIES comparative advantage. This explanation, however,

becomes less and less tenable, as the NIEs run chronically short of skilled and unskilled labor, resulting in real wage

increases averaging 4-7% during 1980-86 in the NIES (other

than Hong Kong).

As the Japanese example however convincingly shows, the Asian

NIES don't have to face a loss in their overall comparative

advantage provided they move the basket of their products

rapidly up the technological ladder. Thus, over the last

decade, the NIES' role in the international division of labor

has changed dramatically. Their rapid shift away from labor-

intensive low-skilled activities towards higher value-added,

skill-intensive manufactures of high-tech products is the response to real wage increases beyond those of their competitors. 6) Furthermore, as this shift has to occur faster than in other countries it explains the process of technological catching-up since the early 1980s.

This movement is actually supported by activist technology-de-

velopment policies throughout the NIES (with the exception of

Hong Kong). Common features notwithstanding, the members of the group have chosen distinctly different avenues to promote technological upgrading of their product and process mix. 7)

What distinguishes the Asian economies in this process mainly from other developing countries is the observance of an

As their real wages rise rapidly the NIES themselves come un- der mounting pressure from the neighboring lower income coun- tries, the "next generation" of NIES, which have started to make their export inroads onto the markets of the NIES, in sectors like intermediate products, textiles, footwear etc.

South Korea has supported the "Chaebol"-model. Taiwan is fostering indigenous medium and small-scale firms. Singapore allies herself with multinational companies. Hong Kong is relocating labor-intensive operations in China's special economic zones.