Four Asian Economic Architects
Turkey, India, Taiwan and Malaysia can be placed in the category of the
countries that have been able to move from an unfavorable to a favorable
status in the path of development over the past half a century. The common
denominator of the experience of these countries in the path of development
is presence of policymakers who can be described as the architects of
economic development. Selection of these policymakers who enjoy both
domestic acceptability and international reputation, in addition to
elimination of friction caused by political conflicts, has increased
acceleration of development under the influence of the power derived from
financial and technical assistance of international institutions.
Distinguished scientific backing, willingness to remove economic
constraints, internal bargaining power, international relations, defendable
executive experience in domestic or international economic institutions,
sensitivity to run hard copies and refusal to reduce the level of demands to
implement bad alternative programs can be considered as the common
denominator of personal characteristics of these policymakers.
Moreover, a review of the experiences of these countries will show that
support of the establishment, the opposition and the social body can be
considered the prerequisite and the most important environmental components
within which economic miracles have occurred. The following report takes a
glance at the experiences of development in the aforementioned four
countries and describes the characters of the architects of development.
A review of the experiences of the countries which have taken an upward
trend in the corridor of development over the recent decades bespeaks a
common story. One of these common characteristics is the presence of
policymakers who have changed and modified pathogenic trends and have been
able to initiate the path towards development in their countries.
A review of the development trend in Turkey, India, Taiwan and Malaysia will
show that the denominator of these policymakers is the common traits which
can be interpreted as the traits of development architects. Development
planners in these countries have administered the affairs by reliance on
accumulated executive experience and academic expertise and by taking
advantage of the support of the government and backing of the social body
and domestic opposition have been able to pave the way for economic miracle
in their countries.
The miracle doers of the development path in these countries have not only
been able to attract domestic support in the course of development by using
the background and power of political bargaining, rather by using their
international relations they took advantage of the support of international
technical and financial institutions. Moreover, a survey of the acceleration
experience in the development corridor shows that the overall political
support and redesigning foreign policy based on economic needs have been
other axes that have rendered great help to the economic architects in
sketching and implementing the development map. This report by referring to
the development experience in some Asian countries has outlined the
components of development architects.
Development of Turkey’s Economy under Kemal Derviş
Kemal Derviş has been named as the great architect of Turkish economy. In
the early months of 2001 he was appointed the minister of finance. Derviş
who took the helm of the Turkish economy by reliance on 22 years of
activities in the World Bank, in the early stage of his ministerial
responsibility was faced with great challenges. The gravity of Turkey’s
problems in the late years of the 20th century and the early years of the
21st century was so much that experts described it the most serious crisis
of modern economy in Turkey. But the former WB member, in the light of
political support of (the then prime minister) Bulent Ecevit and the
international relations he had developed at the time of his activity in the
WB, could save the ailing Turkish economy and with the help of a three-year
reform program brought the economy back to a healthy state.
In 1990s the ailing Turkish economy experienced high inflation rates. In the
concluding years of 1990s the inflation rate exceeded 120 percent. In the
early years of the 21st century, Turkey was entangled with a full-fledged
forex crisis. In the second half of the 1990s, the value of the national
currency dropped from eight cents to about one cent. In 2001 the value of
one US dollar reached to about 1.650 million Turkish liras. Reform of the
forex system in 2002 up to 2005 in that country led to the introduction of
the new Turkish lira in 2005, bringing the value of one US dollar close to
3.4 liras. In the early years of the 21st century, the volume of the Turkish
government debt was over 70 percent of the gross domestic product (GDP). But
the program to control government’s expenditure resulted in a 20% drop in
the volume of government debts between 2001 and 2006.
Plan for Overall Containment of the Crisis
Although the Turkish government due to excessive debts had been warned by
international institutions that it would not receive any more loans, the
international relations and lobbying of the then finance minister of Turkey
led to the receipt of $16 billion in loans from the World Bank. This
provided Ankara an opportunity to undergo a reform program of international
institutions and quickly come out of the unfortunate status of 2000 and
In less than nine months, Kemal Derviş succeeded in bringing down Turkey’s
inflation of 70 percent to a one-digit figure. He believed that one of the
most important roots of economic problems in Turkey was its increasing
budget deficit. For the same reason, in the first step of the plan he
implemented the reform plan to cut government’s expenditures. Sensitivity of
Derviş in reducing Turkey’s costs was so much that he had to order the
salary of government employees to be cut by 15 percent after saying: “I am
forced to make a decision for which I would never forgive myself.”
At the time of accepting the post of minister of finance offered by the then
prime minister of Turkey, Derviş adopted a plan on severe contractive
policies and set one condition: The authorities must stand against protests
by the business associations, guilds and unions. The then PM introduced
Turkey’s reform plan as priority for execution by his government.
Furthermore, the Turkish Parliament which followed the same line of thinking
by the prime minister undertook the responsibility of legal support for
Turkey’s reform plans. Also through his bargaining power, Derviş succeeded
for the first time in bringing in uniting the leftist and moderate parties
in Turkey for the solution of the country’s economic dilemma.
Kemal Derviş was a graduate of the London School of Economy (LSE) and
Princeton University and had rich scientific backing. In the meantime, he
had unique executive backing due to his performance in the World Bank. He
managed to turn the Turkish ailing economy into one of the most fast growing
economies in the development corridor.
Among the measures he took to save the Turkish economy mention can be made
of the following:
Increasing the independence of institutions in monetary policymaking
Ceding large state companies to the private sector
Institutional reform with an aim of increasing the role of the market in the
Reconstruction of the structure of state-owned banks
Reducing the burden of the public sector in the economy
Increasing the independence of the Central Bank
Creating relative advantages in the field of trade, banking and public
Introducing modern technology and knowledge for generating more revenues
Cutting the inflation rate
The overall support of the then Turkish PM and Parliament for the reform
plan, along with active and realistic foreign policy were levers which
rendered great help to Derviş in removing obstacles on the way of
sustainable development in the country. The 2.3 percent increase in the per
capital GDP, reducing the inflation rate from above 70 percent to about 7
percent, dropping unemployment rate to 2 percent and increasing flexibility
of the financial system against financial crisis were only part of this
legacy in the quick development period in the Turkey’s economy.
Manmohan Singh: The Father of Indian Reform
Manmohan Singh was sworn in as the finance minister to former premier P.V.
Narasimha Rao’s government, which assumed office in June, 1991. At this
point, the Indian economy was still functioning according to the Nehruvian-socialist
agenda, which, with the external debt pegged at 23 percent of Gross Domestic
Product and internal public debt amounting to 55 percent of the GDP, wasn’t
faring too well for the country. Due to its functioning as a quasi-welfare
state along with the existence of the license ‘raj’ – the elaborate system
of licenses, regulations and accompanying red tape that was required to
establish and run businesses in India between 1947 and 1990 – Indian
employment rates had gone down to a negative. There was minimal economic
growth, and the manufacturing sector was in bad shape.
The fiscal deficit was eight percent of the GDP, the account deficit stood
at 2.5, wholesale price inflation had risen up by a good 13 percent and
retail inflation went even higher up the bend by a whopping 17 percent. The
Foreign Exchange Reserves standing at a low rs 2500 crores, was nearly 75
percent lower than what it was prevailing a year before, in 1990. To put it
short, the economy was crippled, and there was a desperate need for a new
set of norms that would change this.
However, it took the vision and resilience of one man who knew his job to
change the whole face of the Economy. Singh had an extensive background in
Business, Economics and Globalization, having obtained a doctorate in the
same from Oxford University, with a stint in the United Nations for three
consecutive years and another stint as an advisor in the Ministry of Foreign
Trade. He also held the post of Reserve Bank governor (1982-1985) as well as
chief economic advisor (1972-1976) and planning commission head (1985-1987).
But Singh was more than the credentials on his resume. He was tasked with
scheduling the first budget that the new Rao government would release, in
less than a month from his ascent into the central body. After evaluating
the situation, Singh realized what the Indian economy needed desperately – a
shift to economic liberalization and a strategic end to the ‘license raj’.
He started with a two-step devaluation program in collaboration with the
Reserve Bank of India (RBI), which was initially devalued against major
currencies by nine percent and then brought down to eleven percent two days
later. This naturally gave a boost to trade and dealings with the
The next thing he did was to get the RBI on board to mortgage India’s gold
holdings with the Bank of England in four tranches, so that it could avail
the necessary financial assistance it would provide. He did this in lieu of
a similar action that the State Bank of India had undertaken earlier,
selling 20 tons of gold to the Union Bank of Switzerland, for which they had
received about $200 million. Keeping in mind the incessant demand and value
for gold, this seemed to be a strategic route to gain resources.
Dr. Mahathir: The Architect of Modern Malaysia
Malaysia is a country with a total landmass of 330803 square meters
separated by the South China Sea into two similarly sized regions,
Peninsular Malaysia and East Malaysia (Malaysian Borneo).
Most of the executive power of Malaysia is concentrated in the executive
branch of the government. Most of the 27 million population of Malaysia
prior to 1981 were busy in forests and villages with cultivation of banana,
pineapple and rubber or fishing. During those years the poverty prevailing
over the society and the per capita income of minus $100 had made life so
hard for the people until in 1981 a surgeon by the name of Mahathir Mohamad
came to their rescue.
Mahathir who held positions such as parliamentary deputy, minister of
education and deputy prime minister in his political record became the
fourth chief executive of Malaysia in 1981. With the coming to power of
Mahathir Mohamad, one of the most important forces of friction in the path
of development of Malaysia, namely the destructive political discord, gave
its place to concentration on Malaysia’s development.
During his long years in office, he literally transformed the economy with
the setting up of ambitious industrial goals which include the formation of
heavy industries, national car projects and Multimedia Super Corridor
projects. The North-South Highway was also completed during his tenure.
He grew the economy and was an activist for developing nations, garnering
a following with his leadership, especially in some African countries. He
resigned as prime minister in 2003.
As the country’s longest serving PM, Dr. Mahathir had a significant impact
on the economy, culture and government of Malaysia. He won five consecutive
elections and served for 22 years as the top political leader in the
Under him, Malaysia experienced rapid economic growth. He began privatizing
government enterprises, including airlines, utilities and
telecommunications, which raised money for the government and improved
Malaysia had the fastest growing economy in Southeast Asia in the 1970s and
80s. In the 1970s, Malaysia was a young country with dependence on exporting
raw materials such as timber, rubber, tin and palm oil. In 1970, commodities
accounted for 70 percent of Malaysia’s exports, while manufactured goods
accounted for less than 30 percent.
Resource-based industries in Malaysia have included rubber, timber, tin,
palm oil, cocoa, silica, sand and clay. In the 1970s, Malaysia had a
significant unemployment problem. Young workers lined to get jobs on rubber
and palm oil plantations.
One of his most significant infrastructure projects was the North-South
Expressway, a highway that runs from the north to the south of the
peninsula, which transformed the way Malaysians travel and work.
From 1988 to 1996, Malaysia was having 8% of economic expansion. He released
an economic plan — The Way Forward, or Vision 2020 — asserting that the
country would be a fully developed nation by 2020.
He helped shift the country’s economic base away from agriculture to
manufacturing and exporting, and the country’s per capita income doubled
from 1990 to 1996.
To say that Tun Dr. Mahathir’s decisions, when prime minister, had affected
Malaysians from all walks of life, is not an overstatement.
Mahathir also greatly expanded the number of secondary schools and
universities throughout the country, and enforced the policy of teaching in
Malay rather than English. This had the effect of creating a large new Malay
professional class. It also created an unofficial barrier against Chinese
access to higher education, since few Chinese are sufficiently fluent in
Malay to study at Malay-language universities. He also greatly expanded
educational opportunities for Malay women – by 2000 half of all university
students were women.
Tourism, Development Bridge of Malaysia
The not so high income of $900 million from Malaysia’s tourism industry
along with special potentials of this industry, served as an incentive to
encourage Mahathir to further concentrate in this field. To this end, he
turned Japanese military garrisons which had remained in Malaysia since the
World War II, into tourism sites equipped with different recreation, sports
and cultural facilities so that Malaysia would become a venue for holding
international car racing, horse riding and water games. He also made Kuala
Lumpur the main seat for the Asian Football Confederation. With such
measures after a period of 10 years the revenue of tourism industry
increased by more than 10 times amounting to over $34 billion in recent
In 1996, with a growth rate of 46 percent in comparison with the previous
years in the electricity and electronic industry, Malaysia became an
exporter of electricity and electronic appliances. Mahathir, by ordaining
transparent rules and precise regulations, opened the doors to foreign
investors and by founding the Petronas giant company in the Kuala Lumpur
Twin Towers laid the foundation of the securities market with a daily
transaction of 2.9 billion dollars. Establishment of the world’s largest
Islamic university is another step taken for the attraction of domestic and
foreign scientific elites from throughout the world, especially the Islamic
states. Mahathir transferred a poor country with per capita income of $100
into a country with per capita income of $1600 and increased investment from
$3 billion to $98 billion and exports to an impressive figure of $200
The Man behind ‘Economic Miracle’ in Taiwan
The International Monetary Fund in a survey of ups and downs in Taiwan’s
economy in recent decades has considered the process which has been taken in
the economy of the country as an example of an economic miracle. Many
experts have named “Kwoh-Ting Li”, a Chinese economist, as the architect of
this great miracle.
The father of Taiwan’s economic miracle who between 1955 to 1976
consecutively served in the two key positions of finance minister and
economy minister by adopting and implementing efficient economic policies
managed to turn Taiwan’s economy which was previously a small-scale
traditional economy based on agriculture into one of the most powerful
economies of the world in the field of technology and communications.
In 1950, Taiwan with an average annual income of less than $1,000 stood
lower than countries like Ghana, Peru and Morocco and was one of the
relatively poor countries in South East Asia. The country’s policymakers
after the defeat in the battle of China decided to compete with their
northern neighbor at least in economic terms.
For this reason, a set of corrective measures led by Kwoh-Ting Li was placed
on the agenda of policymaking. Li also took the responsibility of compiling
the long-term development plan in Taiwan. Perhaps it could be said that one
of the most important factors for Taiwan’s success in implementing reformist
economic policies is the feeling of the common need that had taken shape
among policymakers of the country.
With the coming to power of Li who was spending the early years of his
graduation from the prestigious University of Cambridge, a change in look at
the development took shape among the Taiwanese policymakers. This change in
look manifested its effect in the change in the deterrent force caused by
political conflicts to the driving force resulted by the participation of
Taiwan’s political parties and the citizens on the path of development.
In the first step, Li took measures for amending territorial laws and
stimulating Taiwan’s economy towards industrialization through supporting
small enterprises with early returns. Then, in cooperation with other
Taiwanese policymakers he took measures for making public education
mandatory for all people at elementary level. Parallel to these measures,
the then government of Taiwan provided the necessary ground for economic
acceleration through development of economic infrastructures such as the
Taiwan freeway platform.
Taiwan, which is now being discussed as a model for economic growth, at that
time modeled development policies in the United States and for this reason
while there was not an accepted concept for free economy in nearly half of
the world countries, policymakers of this country in 1960s approved the law
for liberalizing the economy and implemented it step by step.
Experts believe that implementation of the following were among the most
important policies that under the leadership of Li could increase the per
capita income over 2.3 times in less than 20 years:
Very high rates of savings and investment
Composition of constructive foreign influence and transmittal of business
ideas from Japan and the United States
Effective strategy for public industrialization
Liberation of human energy and creativity through open market
Economic boom of 1960s resulted by the Vietnam War
Strategy of growth based on exports in the period of rapid economic growth
in early 1960s
Direct assistance of the United States and use of the country of the aid for
making investment and not for consumption
Work ethics and production attitude of Taiwan work force
Leap towards creating enterprises for the powerful local islanders who were
looking for an opportunity to make progress
Necessity for economic development as a defensive matter against the attack
by the People’s Republic of China
economy made an increase of 7% per year during 1960 to 1970 which was faster
than the growth of any other countries. This growth rate was realized only
in the light of convergence of the Taiwanese policymakers with the reform
programs of a prominent economist.