Globalisation, Liberalisation, and Equitable Growth: Lessons from Contemporary Asian Experience

Since the beginning of the 1980s the less developed countries (LDCs) have been getting integrated with the global economy at a rapidly accelerating rate. The impetus for the process came from the need to make adjustment in the unsustainable imbalance in the external account that most of these countries experienced in the aftermath of the oil shocks of the 1970s and the declining demand for their exports due to the recession in the OECD countries during the 1980s. Many of these countries had to subject themselves to structural adjustment programmes at the behest of the multilateral donor agencies, led by the World Bank and the International Monetary Fund, who emphasised the urgency of reforming the protectionist trade regimes of these countries. Simultaneously, these countries came to realise the inefficiency of resource use fostered by their past strategy of import-substituting industrialisation (ISI) characterised by a trade and investment regime that enshrined overvalued exchange rates, quantitative import controls, high and non-uniform rates of effective protection, discrimination against export and strong impediments to foreign direct investment. The reform programme that these countries gradually implemented during the 1980s and the early 1990s dismantled many of the components of the ISI strategy. The extent of dependence on quantitative import controls was sharply curtailed. The exchange rate came to be increasingly determined by market forces. The rates of tariff were brought down. The discrimination against exports, relative to import substitutes, was reduced. There was also a sharp reduction in restrictions to which foreign direct investment had been subjected in the past.