Asian Essay

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Asian Financial Institutions and Markets

The Asian financial markets can be compared to the economic philosophy of mercantilism, which is regulated commerce to produce a favorable balance of trade. Governments regulate production techniques to ensure the quality of exports, and in general, subsidize production in their exporting industries. Tariffs can be high on imported manufactured goods and low on imported raw materials. The state exercises much control over economic life in these environments, chiefly through corporations and trading companies. Production is carefully regulated with the object of securing goods of high quality at a low cost, thus enabling the nation to hold its place and wealth in foreign markets.
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To achieve this purpose, it focused its policies mainly on export expansion moving its emphasis from import substitution. The result was considered quite successful for economic growth.

The success of the expansion was due primary to three factors. The first was a favorable international economic environment, which saw total world imports expand. This boom in imports reflected the fact that the industrialized economies had not yet erected import barriers against exports from developing countries and were active importers of cheaper goods from countries such as Korea. A second significant factor was the Korean government’s policy of promoting exports. The government introduced a number of fiscal and financial incentives. A third factor was Korea’s abundant and highly productive labor force. This gave Korea a strong comparative advantage in producing labor intensive products and provided the impetus for the notable expansion for exports (Chowdhury 51).

In addition to inflow of foreign capital, the government faced allocation of capital with using its financial system. The loan decisions of commercial banks were heavily influenced by political interference. Loan decisions in Korea mostly were affected by political interference rather than bank themselves until recent time. In the economic development, the government’s creation of
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