More Asian Geese Ready to Fly

IMF Blog, March 22, 2010

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Concept first conceived by Japanese economist Kaname Akamatsu in the 1930s as an explanation for East Asian industrial development.
Model hierarchy described:
- Lead goose: Japan.
- Second tier: South Korea, Taiwan Province of China, Singapore, and Hong Kong SAR.
- Following tier: ASEAN countries such as Indonesia, Malaysia, the Philippines and Thailand.
- More recent additions to the flock: China and India.
Mechanism:
- As the “lead goose” lost its comparative advantage, it shifted from labor-intensive production to more capital-intensive activities.
- Labor-intensive activities moved to nations further down the hierarchy (example: textile industry abandoned in Japan, later by South Korea and Taiwan).
- Trade and investment linkages from geese ahead help countries further down the chain to “take off” and become the next growth drivers.
Historical/contextual note:
- Akamatsu’s model is little known in the West despite fame in Japan; it was later used as intellectual underpinning for Japanese imperialism during the war.

Despite the sharp downturn globally in 2008, for most of 2009 Asia as a whole recorded higher growth than the rest of the world.
The region is described as currently leading the global recovery.
IMF projection: Asia will grow about 7 percent annually.

Major contributing factors:
- Bold stimulus policies undertaken in China.
- China’s pattern of vertical integration in manufacturing.
- Demand for natural resources and capital goods created by China (“the Middle Kingdom”) and by India.
Regional and global effects:
- These developments have had a domino effect regionally and globally, creating trade and investment linkages and greater Asian integration.
- Formation of North-South economic linkages means wider benefits accrue beyond Asia.

Countries identified as preparing for economic takeoff:
- Cambodia, Laos and Nepal.
Characteristics and prospects:
- Per capita income levels may be low as yet, but these countries are viewed as the next emerging economies.
- Their populations are expected to provide the next large market of middle-class consumers.
- These countries are described as having huge potential.
Preconditions for realizing potential:
- Sound macroeconomic policies.
- A robust financial sector.
- These are necessary preconditions but not sufficient alone.

IMF objective: encourage and support countries as they prepare to “take flight.”
Specific action:
- The Fund organized a one-day conference in Hanoi, Vietnam, for 22nd March, targeted at developing countries in Asia.
- Conference focus: examining the impact of the global financial crises on these developing countries and identifying the conditions which will raise these countries to the next level of development.
IMF stance (quoting Masato Miyazaki, IMF mission chief for Vietnam):
- “even if we do nothing, these countries will move up the ladder [of development], of that is no doubt. But what we (at the IMF) want to do is to give the right kind of support and advice. Whenever they turn to us, we stand ready.”
Concluding sentiment:
- The IMF expresses pleasure at the prospect of seeing “another goose fly.”

Source: More Asian Geese Ready to Fly — Anoop Singh, March 22, 2010