TNAG-2597-FCO40-3785-Appointment-of-Chris-Patten-as-new-Governor-of-Hong-Kong--Ap-1992 — Page 36

financial services, although the governments were still reluctant to free interest rates.

By 1992, South Korea will have little or no foreign ex change control. The change of financial policy in Taiwan will make it possible for the economy to supplement Hong

Kong as the second financial centre in the South China Economic Zone.

It is noteworthy that since 1988, considerable attention has been placed on the

deregulation of capital movement, with the prime objective to attract FDI (Table 7).

This move reveals the desire of the Asian countries to continue their internationalization

strategy. Furthermore, the governments have probably realized that relative to financial

aid, FDI if managed properly, is a more effective means for the economies to attain

long term, self-sustaining growth.

Economic liberalization is a major factor contributing to Asia Pacific restructuring and integration. The economic linkages that liberalization policy can generate are indeed extensive and deep-rooted. First, the development of intra-regional trade and investment

is only possible in a liberalized and deregulated Asia. Similarly, the formulation of

economic growth zones would only be realized if economies in the region are highly de-

regulated. Second, since restrictions on capital movement are significantly removed,

capital and therefore technology can be shared and to a less extent constitute the major

scarce factors of production in the region. Countries would be able to take off one after

another, and region-wide production capacity could be increased. Third, via the

liberalization of capital movement, Asian countries can produce according to their

comparative advantage. Accordingly, specialization can develop and productivity

enhanced.

E.

Investment in Physical Infrastructure

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