D.
Economic Liberalizations
The foregoing analysis points to major structural changes in Pacific Asia which
enhance regional interdependence. However, the structural changes would not be made
possible without policy changes of governments, such as economic liberalization in many
Asian economies.5 In the 1980s, economic liberalizations have been going on in
three major directions. According to chronological order, they are: (1) trade
liberalizations, (2) financial liberalizations and (3) privatization and relaxation of
controls over foreign capital.
Trade liberalization started as early as 1980 (in Indonesia and Malaysia). It consists
mainly of the opening up of domestic markets via the reduction of import tariffs. Asian
countries opened their markets partly because of the adverse effects of protectionism
on local productivity and competitiveness, and partly because the industrialized
economies (DCs) pressurized them to do so.
Financial liberalizations mainly refer to the privatization and deregulation of the
banking sector, such as the freeing of interest rate control, the relaxation of foreign
exchange control and the removal of entry restrictions for banks. Hong Kong and
Singapore have always been liberalized and internationalized financial centres. Recent
developments in the two economies have been related to the tightening up of supervision
over financial institutions. Privatization of banks have been going on in Singapore. The
financial systems of Taiwan and South Korea have, for a long time, remained rather
restrictive. Banks were government owned, entry to the banking sector was restricted
and interest rates were controlled by the central bank. Nevertheless, extensive policy
change occurred in recent years to relax foreign exchange control and to internationalize
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