Comparative Case Studies

The current module completes the cycle of your study of Development Economics.With the case studies herein presented, you can now see the concrete translation of theoretical models and materials into actual experience of countries undergoing and committing to different paths to development.Study each one and answer the guide questions provided at the end of each case.

Strictly speaking, the classification offirst, second and third world countries is applied in the following context.First world countriesrefer to developed capitalist countries exemplified by US, Great Britain and France,second world to developed socialist economies exemplified by China and Russia and third world countries by developing economies in Asia and Africa where Philippines is classified under.

For purposes of proper contextualization, all sample country case studies included are those located in Asia.Taiwan for first world; People's Republic of China for second world and the Philippines for a third world economy.

The Case studies are borrowed from the book authored by Michael P. Todaro and Stephen C. Smith entitled "Economic Development".

A first world country in Asia:Taiwan

Republic of China(Taiwan): Geographic, Social and Economic Indicators

Capital :Taipei

Area:35,981 sq. km.

Population(Annual Growth

Rate: 0.8%(2000)

GNP per Capita:$17,232(2000)

GNP per Capita(Ave Annual

growth rate :6%(1990-2000)

Agriculture as share of GDP:3%(2000)

Exports as share of GDP:38.3%(2000)

Infant mortality rate(per

1,000 live births:6.9(2000)

Illiteracy rate(age 15+):6%(1998)

Life expectancy:76.5

Taiwan represents a classic example of a small island country integrating itself into the world economy through international trade.The enormous success of this export-oriented economy is attributable to its energy, its educated and industrious workforce, the close collaboration between its public and private sectors, and its strategic geographic location during the cold war which generated considerable U.S. foreign aid.

Formally known as the Republic of China, Taiwan is an island in the western Pacific Ocean between the East China Sea and the South China Sea.It is almost 36,000 square kilometers in size, with a population of 27.1 million.

The island of Taiwan is separated by less than 100 miles of water from Mainland China.Taiwan has been seen as a prototype for other developing nations because of its great success in generating rapid economic growth with relatively low income inequalities.

Along with other successful Pacific Rim nations(South Korea, Singapore, Hongkong) Taiwan is today viewed as a Newly Industrializing Country(NIC).

Taiwan has come a long way from the very poor economic conditions that prevailed at the time the Nationalist Chinese administration took over from Japanese rule in 1945.Over the past half century, Taiwan has changed from an agricultural to an industrialized economy.Foreign investment, mostly from overseas Chinese, the United States, Japan, and Western Europe, helped introduce modern labor intensive technology to the island in the 1960's, the emphasis has changed from the production of light industry consumer goods for export to more sophisticated heavy industry and technology-intensive products.

In the decade 1973-1982, the Gross Domestic Product rose at an annual average of 9.5% in real terms.During the recession following the 1973 oil embargo, Taiwan managed to overcome the slump in demands for its industrial exports by adopting a successful economic stabilization program.

Ten major infrastructure projects were launched to stimulate economic activity.Taiwan's economic planners hoped that the sharp increase in investment for these major projects, coupled with revived demands for the island's exports, would establish a basis for continued prosperity.

The authorities also encouraged foreign investment as a way to help finance the island's efforts to move away from light, labor intensive export-oriented industry to more capital intensive production for export and for import substitution.

Taiwan's continued success in the 1980's was based on ashift in industrial structure toward one that is more capital-intensive and more energy-efficient. Its economic policy makers wanted their export industries to account for 80% of GDP by 1990.Among the major new sectors developed by the Taiwan industrial effort, the most important were electronics and information processing, precision istruments, and machinery, high technology material sciences, energy sciences, aeronautical engineering and genetic engineering.

In the 1990's, Taiwan focused on high-tech sectors, especially computing, as much of its more labor-intensive production was moved across the straits to mainland China.

Foreign trade has been the major factor in Taiwan's rapid growth.The value of trade roughly tripled in each five-year period since 1955 and increased nearly sixfold between 1975 and 1990.Taiwan's exports have changed from predominantly agricultural commodities to 90% agricultural goods, especially notebook computers, scanner motherboards, and PC monitors where it holds the lion's share of world markets.

Imports are dominated by raw materials and capital goods, which account for more than 90% of all imports.Taiwan, however, must rely on imports to meet more than 75% of its energy needs.Despite this import dependence, Taiwan's continuing export success and its attractiveness to foreign investors(especially from Japan and the United States) during the 1980's enabled it to generate large trade surpluses and build up considerable foreign exchange reserves during the 1990's.

As a result, when the Asian currency crisis hit in 1997, Taiwan was able to withstand the shock better than any other East Asian economy.In fact, while most other Asian nations were in recession, Taiwan experienced a 5% GDP growth rate in 1998, the fifth highest in the world.Throughout Taiwan's drive toward developed country status, interactions with customers in other countries have been key, Taiwan's firms received much valuable training and other technical knowledge from U.S. firms in exchange for competitive pricing.

The success story of Taiwan's economic development can also be traced to a number of factors.These include an early land-reform program with emphasis on raising agricultural productivity so that Taiwan became self-sufficient in rice production; effective utilization of its educated, hardworking and highly productive labor force through the initial adoption of labor-intensive light manufacturing for export markets; a judicious balance and cooperation between the public and private sectors; a sound financial system in which credit was carefully allocated to leading export industries despite the existence of financial repression(low interest rate ceilings); and most important, a realization that rapid economic growth and greater economic equality were congruent and not conflicting objectives.

In November 2001, both Taiwan and China joined the WTO.The only major doubt over Taiwan's drive to soon achieve developed country status is its strained relations with China, which still considers Taiwan a renegade province, and has set the absorption of Taiwan as its top foreign policy objective.

1^st Task, answer the following questions from within the context of Taiwan's case:

1.Proponents of free trade, primarily developed country economists, argue that the liberalization of trading relationships between rich and poor countries(the removal of tariff and nontariff barriers) would work toward the long-run benefit of all countries.Under what conditions might the removal of all tariff and other impediments to trade work to the best advantage of developing countries? Explain.

2.What factors - economic, political or historical- do you think will determine whether of not a particular developing nation is more or less dependent on international exchange?Explain your answer, giving a few specific examples of different less developed countries.

A second world country in Asia:People's Republic of China

People's Republic of China: Geographic, Social and Economic Indicators

Capital:Beijing

Area:9,600,000 sq.km.

Population:1.26 billion(2000)

Population(average annual

Growth rate):1.1%(1990-2000)

GNP per capita:US $3,940(2000)

GNP per capita(average annual

Growth rate):3.2%(1990-2000)

Agriculture as share of GDP:16%(2000)

Exports as share of GDP:23%(2000)

Life expectancy at birth:70

Under age 5 mortality rate

(per 1,000 live births) :37(1999)

Child malnutrition(underweight)16%(1992-1997)

Females as share of labor force45%(1997)

Illiteracy rate(age 15+):17%(1999)

Human Development Index:0.714(medium)(1999)

The People's Republic of China, as it is formally known, is located in Eastern Asia and is the third largest country in the world in terms of total area(after Russia and Canada).However, two-thirds of China's area is mountainous or semidesert; only about one-tenth is cultivated.

Fully 90% of the people live on 16% of the land.China's population is by far the largest in the world.In 2000, it was estimated at 1.26 billion people and growing at a rate of 12.5 million a year.This annual population growth rate has dropped by nearly 44% from 2.3% in 1973 to 1% in 2000.

If current fertility rates remain unchanged, China's population will reach 1.6 billion in 2025 and 2 billion by 2050.The Chinese government is calling for a target family size of three and has introduced incentives to limit the number of children per family to one or two.The one child family would bring about zero population growth by the year 2010, when total population will be around 1.4 billion.

When the People's Republic was established in 1949, China's economy was characterized by severe dislocations from decades of war and inflation.The new government's immediate concerns were consolidation of power, restoration of public order, and elimination of widespread unemployment and starvation.

Most of these problems were resolved by 1952.In the following year, the Chinese decided to remold the economy, using Soviet central planning as a model.They reduced state investment in agriculture and centered their first five-year plan on the rapid buildup of heavy industry, especially that relating to national defense.A large number of facilities were imported from the Soviet Union and installed with the aid of Soviet technicians.

China's economic growth since 1957(5.7% per annum) has been considerable, but political turmoil, poor planning, and natural disasters have prevented it from achieving higher levels of development.The experiments of the so-called Great Leap Forward(1958-1960) - rural collectivization, elimination of wage incentives, backyard steel plants, and great leeway for local initiatives - led to the deaths of 15 to 30 million people due to the resulting famine, and plunged China into a depression in the early 1960's.

Compounding these domestic difficulties was the withdrawal of Soviet assistance and technicians in August 1960 as the Sino-Soviet dispute worsened.Beijing responded by emphasizing "self-reliance" and a greater share of its investment was redirected toward agriculture.After a brief period of growth, politics - this time the Cultural Revolution and its aftermath (1966-1976) - again wreaked havoc with the economy, injecting ideology into economic planning, disrupting foreign trade, and virtually shutting down educational and training facilities.

In 1975, Premier Zhou Enlai outlined a new set of economic goals designed to elevate China to the status of a front-rank economic power by the year 2000.This multistaged effort, now known as the Four Modernizations program, was aimed at rapidly accelerating production in agriculture, industry, science and technology, and national defense.In 1976, the death of Chairman Mao Zedong, the arrest of the Gang of Four, and the gradual establishment of a new government under Deng Xiaoping and Hua Guofeng sharply reduced the role of ideology in Chinese policy.The stage was set for a more pragmatic look at the political and economic problems the country faced.

China's commitment to the Four Modernizations was reaffirmed in 1978 at the Fifth National People's Congress, where a 10-Year plan assigned a major role to massive imports of complete plants and technology from the West.By the end of 1978, China has signed contracts committing itself to foreign purchases totaling $7 billion.

Since 1978, the fundamental premise of China's economic policy has been that consumer welfare, economic productivity and political stability are indivisible.Emphasis has been on reising personal income and consumption and introducing new productivity, incentive and management systems.

A controversial reform package aimed at reducing the role of central management in favor of a mixed, planned marker economy was introduced at the third session of the Fifth National People's Congress in August 1980and endorsed in the sixth five-year plan.

Key elements were promulgation of agricultural reforms (including long-term leases on land and permission for farmers to specialize in cash crops and to engage in non-agricultural activities), self-management rights, introduction of greater competition in the marketplace, easing of the tax burden on nongovernment enterprises, and facilitation of direct contact between Chinese and foreign trading companies.

The reforms produced great successes.National income and agricultural and industrial output all grew at 10% compound rates during the 1980's and 1990's.Peasants' per capita real income doubled; urban dwellers' per capita real income increased by half.China became self-sufficient in grain production; rural industries boomed and accounted for 23% of agricultural output, helping absorb surplus labor in rural areas. Industrial reforms increased the variety of light, industrial and consumer goods available.

The leadership demonstrated its ability to adjust to economic pressures by adopting a variety of fiscal and administrative measures. The result of these policy changes and measures of central direction and local initiative was the creation of a hybrid economy, which the Chinese call a socialist commodity system influenced by market mechanisms.

Some of the success represented a recovery from the economically disastrous Cultural Revolution period. Some scholars, such as Thomas Rawski, have argued that China's growth statisticssince 1998must be greatly exaggerated, given other available information about the economy.Nevertheless, without question, China represents the most important development success story of the past two decades.

But economic reform and the introduction of a more market-oriented economy also brought with it rising inflation(which reached 21.7% in 1994, the highest since Communist rule began in 1949), increased crime and corruption, declining agricultural output, greater unemployment, and widening income and regional disparities.While the coastal areas boom, inland areas are facing stagnation and economic decline. There are estimates that up to 100 million impoverished rural peasants are without viable jobs and that there may be as many as 300 million rural workers scouring towns and cities in search of employment in coming years. In urban areas, the dismantling and sale of hundreds of inefficient and unprofitable state-owned industries promises to throw many more millions of workers into the already long lines of the unemployed.

On the political front, the economic reforms of the 1980's occurred without the concomitant political reform as cries for greater democratic participation began to be sounded.Unfortunately for both the Chinese people and their economy, the harsh repression that culminated in June 1989 in the Tiananmen Square massacre set back the pace of political reform and social progress.Much will depend on how the issue of political democracy and economic reform is resolved, particularly with respect to Hongkong, which was formally reincorporated into China on July 1, 1997.If it is resolved successfully, China will resume its inexorable march toward the top rank of of the world's economic powers.

If not, China will likely remain a country of enormous potential but limited progress.The eyes of the world will be on China to see what lessons can be learned for other market-oriented developing nations governed by authoritarian regimes.

2^nd Task, answer the following questions from the context of PROC's development experience.

1."The world population problem is not just a matter of expanding numbers but also one of rising affluence and limited resources.It is as much a problem caused by developed nations as it is one deriving from developing countries".Comment on this statement.

2.List and briefly describe the principal causes of high population growth in developing countries and the major consequences.

3.Outline and comment briefly on the various policy options available to developing countries in their attempt to modify or limit the rate of population growth.

A third world country in Asia: The Philippines

The Philippines:Geographic, Social and Economic Indicators

Capital: Manila

Area:300,000 sq. km.

Population(annual growth :2.2%(1990-2000)

Rate)

Agriculture as share of GDP :17%(2000)

Exports as share of GDP:53%(1999)

Under age 5 mortality rate:41(1999)

Child Malnutrition:30%(1992-1997)

Females as share of labor force37%(1997)

Illiteracy rate(age 15+):3%(1999)

After two decades of sluggish economic growth resulting in part from government mismanagement, misrule, and misconduct, the Philippines appeared to have reversed course in the 1990's.Under the leadership of President Fidel Ramos, the economy was transformed in the 1990'sfrom the stagnation and economic cronyism of the kleptocratic Ferdinand Marcos regime that ended in 1986 and the disappointing economic performance of the successor government of Corazon Aquino.Through a judicious combination of market reforms and state intervention along the lines of the Asian Tiger model, the economy began to pick up steam.

By 1996, it was growing by more than 7% a year, the fastest growth rate in decades.But then, the 1997 Asian currency crisis hit, and the Philippines was dragged into the vortex of Asia's downward spiral, with its currency depreciating by almost 30% and its GDP growth rate declining to 1.6% in 1998 and 2.1% in 1999-2000, less than the population growth rate.

The Republic of the Philippines consists of 7,107 islands located in the South China Sea northeast of Malaysia.The majority of Philippine people are of Malay stock, descendants of Indonesians and Malays who migrated to the islands thousand s of years ago. The most significant ethnic minority group is the Chinese, who have played an important role in commerce since the ninth century, when they first came to the islands to trade.As a result of intermarriage, many Filipinos have some Chinese and Spanish ancestry.Americans and Spaniards, a legacy of the colonial era, constitute the next largest alien minorities in the country.

The Philippines' overall population density is over 250 per square kilometre, but it is greater in central Luzon.Manila, the capital and largest city, has a metropolitan population of over 10 million.It is expected to grow to 15 million by 2015.

The annual population growth rate, about 3% in the 1960's, fell by the end of the 1970's to about 2.4%, from which it has fallen only slightly over the last quarter century.

The Philippine economy grew rapidly after World War II.The pace slowed in the 1950's and early 1960's with real gross national product rising about 5.3% annually from 1955 to 1965.Expansionary monetary and fiscal policies in the late 1960's spurred renewed real GNP growth, which despite erratic fluctuations, reached 10% in 1973.

The Philippines was hit hard by the debt crisis and experienced a severe economic recession in 1984-1985, during which the economy contracted by more than 10%.From 1986 to 1996, the Philippine economy grew more steadily, but was still burdened by high levels of poverty, widespread unemployment, a large government deficit, low levels of savings and investment, and a massive external debt of $462 billion in 1996.An Islamist insurgency in Mindanao and other southern islands has also added to instability and sapped confidence.

Industrial production is centered on processing and assembly operations for food, beverages, tobacco, and rubber products; textiles, clothing and footwear; pharmaceuticals; paints; plywood and veneer; paper and paper products; small appliances and electronics.Heavier industries are dominated by the production of cement, glass, industrial chemicals, fertilizers, iron and steel, and refined petroleum products.

The industrial sector is concentrated in the urban areas, especially in the Manila region, and has only weak links to the rural economy.Inadequate infrastructure, transportation, communication, and especially electrical power inhibit faster industrial growth.

The government is seeking to revitalize the economy by encouraging both foreign and domestic investment and by restoring free market forces, selling off its state monopolies, lifting the tariff barriers that protected inefficient industries, and reducing the size of public sector deficits.

Foreign trade is of great importance to the Philippine economy, with exports accounting for 42% of 1996 GDP.The United States has traditionally been the Philippines' largest trading partner, taking about 35% of Philippine exports and providing about 1% of imports.However, in recent years, trade with other Pacific Rim countries has grown as a proportion of the Philippines' total trade picture.

Major Philippine exports include semiconductors, garments, coconut products, sugar, bananas, coffee, minerals, and forestry products.Major imports include petroleum, material for electronic equipment manufacture, transport equipment, iron and steel, chemicals, textiles, and grains.Very recently, however, there has been a rapid growth in exports in the high-tech sector.

Despite its recent growth, the Philippines still faces severe economic challenges.It must attempt to raise incomes for the large share of its population who still suffer from debilitating poverty.It must try to create jobs for a rapidly expanding labor force(increasing at an annual rate of 4.5%)where unemployment and underemployment still exceed 30%.Finally, it must try to reverse the ecological deterioration of its heavily populated rural sector while paying off its burdensome foreign debt.

Performance Task #3- Answer the following questions briefly but adequately using as background the Philippine experience.

1.Why do you think many developing countries like the Philippines were convinced of the necessity of development planning?Were the reasons strictly economic? Comment.

2.There is much talk today about the failure of development planning in the Philippines.List and explain some of the major reasons for plan failures.Which reasons do you think are the most important? Explain your thinking.

Submit your written output on or before the 15^th of January 2021 to my email a..r@csu.edu.ph

MODULE 4

Comparative Case Studies

The current module completes the cycle of your study of Development Economics. With the case studies herein presented, you can now see the concrete translation of theoretical models and materials into actual experience of countries undergoing and committing to different paths to development. Study each one and answer the guide questions provided at the end of each case.

Strictly speaking, the classification of first, second and third world countries is applied in the following context. First world countries refer to developed capitalist countries exemplified by US, Great Britain and France, second world to developed socialist economies exemplified by China and Russia and third world countries by developing economies in Asia and Africa where Philippines is classified under.

For purposes of proper contextualization, all sample country case studies included are those located in Asia. Taiwan for first world; People's Republic of China for second world and the Philippines for a third world economy.

The Case studies are borrowed from the book authored by Michael P. Todaro and Stephen C. Smith entitled "Economic Development".

A first world country in Asia: Taiwan

Republic of China(Taiwan): Geographic, Social and Economic Indicators

Capital : Taipei

Area : 35,981 sq. km.

Population(Annual Growth

Rate : 0.8%(2000)

GNP per Capita : $17,232(2000)

GNP per Capita(Ave Annual

growth rate : 6%(1990-2000)

Agriculture as share of GDP: 3%(2000)

Exports as share of GDP : 38.3%(2000)

Infant mortality rate(per

1,000 live births : 6.9(2000)

Illiteracy rate(age 15+) : 6%(1998)

Life expectancy : 76.5

Taiwan represents a classic example of a small island country integrating itself into the world economy through international trade. The enormous success of this export-oriented economy is attributable to its energy, its educated and industrious workforce, the close collaboration between its public and private sectors, and its strategic geographic location during the cold war which generated considerable U.S. foreign aid.

Formally known as the Republic of China, Taiwan is an island in the western Pacific Ocean between the East China Sea and the South China Sea. It is almost 36,000 square kilometers in size, with a population of 27.1 million.

The island of Taiwan is separated by less than 100 miles of water from Mainland China. Taiwan has been seen as a prototype for other developing nations because of its great success in generating rapid economic growth with relatively low income inequalities.

Along with other successful Pacific Rim nations(South Korea, Singapore, Hongkong) Taiwan is today viewed as a Newly Industrializing Country(NIC).

Taiwan has come a long way from the very poor economic conditions that prevailed at the time the Nationalist Chinese administration took over from Japanese rule in 1945. Over the past half century, Taiwan has changed from an agricultural to an industrialized economy. Foreign investment, mostly from overseas Chinese, the United States, Japan, and Western Europe, helped introduce modern labor intensive technology to the island in the 1960's, the emphasis has changed from the production of light industry consumer goods for export to more sophisticated heavy industry and technology-intensive products.

In the decade 1973-1982, the Gross Domestic Product rose at an annual average of 9.5% in real terms. During the recession following the 1973 oil embargo, Taiwan managed to overcome the slump in demands for its industrial exports by adopting a successful economic stabilization program.

Ten major infrastructure projects were launched to stimulate economic activity. Taiwan's economic planners hoped that the sharp increase in investment for these major projects, coupled with revived demands for the island's exports, would establish a basis for continued prosperity.

The authorities also encouraged foreign investment as a way to help finance the island's efforts to move away from light, labor intensive export-oriented industry to more capital intensive production for export and for import substitution.

Taiwan's continued success in the 1980's was based on a shift in industrial structure toward one that is more capital-intensive and more energy-efficient. Its economic policy makers wanted their export industries to account for 80% of GDP by 1990. Among the major new sectors developed by the Taiwan industrial effort, the most important were electronics and information processing, precision istruments, and machinery, high technology material sciences, energy sciences, aeronautical engineering and genetic engineering.

In the 1990's, Taiwan focused on high-tech sectors, especially computing, as much of its more labor-intensive production was moved across the straits to mainland China.

Foreign trade has been the major factor in Taiwan's rapid growth. The value of trade roughly tripled in each five-year period since 1955 and increased nearly sixfold between 1975 and 1990. Taiwan's exports have changed from predominantly agricultural commodities to 90% agricultural goods, especially notebook computers, scanner motherboards, and PC monitors where it holds the lion's share of world markets.

Imports are dominated by raw materials and capital goods, which account for more than 90% of all imports. Taiwan, however, must rely on imports to meet more than 75% of its energy needs. Despite this import dependence, Taiwan's continuing export success and its attractiveness to foreign investors(especially from Japan and the United States) during the 1980's enabled it to generate large trade surpluses and build up considerable foreign exchange reserves during the 1990's.

As a result, when the Asian currency crisis hit in 1997, Taiwan was able to withstand the shock better than any other East Asian economy. In fact, while most other Asian nations were in recession, Taiwan experienced a 5% GDP growth rate in 1998, the fifth highest in the world. Throughout Taiwan's drive toward developed country status, interactions with customers in other countries have been key, Taiwan's firms received much valuable training and other technical knowledge from U.S. firms in exchange for competitive pricing.

The success story of Taiwan's economic development can also be traced to a number of factors. These include an early land-reform program with emphasis on raising agricultural productivity so that Taiwan became self-sufficient in rice production; effective utilization of its educated, hardworking and highly productive labor force through the initial adoption of labor-intensive light manufacturing for export markets; a judicious balance and cooperation between the public and private sectors; a sound financial system in which credit was carefully allocated to leading export industries despite the existence of financial repression(low interest rate ceilings); and most important, a realization that rapid economic growth and greater economic equality were congruent and not conflicting objectives.

In November 2001, both Taiwan and China joined the WTO. The only major doubt over Taiwan's drive to soon achieve developed country status is its strained relations with China, which still considers Taiwan a renegade province, and has set the absorption of Taiwan as its top foreign policy objective.

1st Task, answer the following questions from within the context of Taiwan's case:

1. Proponents of free trade, primarily developed country economists, argue that the liberalization of trading relationships between rich and poor countries(the removal of tariff and nontariff barriers) would work toward the long-run benefit of all countries. Under what conditions might the removal of all tariff and other impediments to trade work to the best advantage of developing countries? Explain.

2. What factors - economic, political or historical- do you think will determine whether of not a particular developing nation is more or less dependent on international exchange? Explain your answer, giving a few specific examples of different less developed countries.

A second world country in Asia:People's Republic of China

People's Republic of China: Geographic, Social and Economic Indicators

Capital : Beijing

Area : 9,600,000 sq.km.

Population : 1.26 billion(2000)

Population(average annual

Growth rate) : 1.1%(1990-2000)

GNP per capita : US $3,940(2000)

GNP per capita(average annual

Growth rate) : 3.2%(1990-2000)

Agriculture as share of GDP : 16%(2000)

Exports as share of GDP : 23%(2000)

Life expectancy at birth : 70

Under age 5 mortality rate

(per 1,000 live births) : 37(1999)

Child malnutrition(underweight) 16%(1992-1997)

Females as share of labor force 45%(1997)

Illiteracy rate(age 15+) : 17%(1999)

Human Development Index : 0.714(medium)(1999)

The People's Republic of China, as it is formally known, is located in Eastern Asia and is the third largest country in the world in terms of total area(after Russia and Canada). However, two-thirds of China's area is mountainous or semidesert; only about one-tenth is cultivated.

Fully 90% of the people live on 16% of the land. China's population is by far the largest in the world. In 2000, it was estimated at 1.26 billion people and growing at a rate of 12.5 million a year. This annual population growth rate has dropped by nearly 44% from 2.3% in 1973 to 1% in 2000.

If current fertility rates remain unchanged, China's population will reach 1.6 billion in 2025 and 2 billion by 2050. The Chinese government is calling for a target family size of three and has introduced incentives to limit the number of children per family to one or two. The one child family would bring about zero population growth by the year 2010, when total population will be around 1.4 billion.

When the People's Republic was established in 1949, China's economy was characterized by severe dislocations from decades of war and inflation. The new government's immediate concerns were consolidation of power, restoration of public order, and elimination of widespread unemployment and starvation.

Most of these problems were resolved by 1952. In the following year, the Chinese decided to remold the economy, using Soviet central planning as a model. They reduced state investment in agriculture and centered their first five-year plan on the rapid buildup of heavy industry, especially that relating to national defense. A large number of facilities were imported from the Soviet Union and installed with the aid of Soviet technicians.

China's economic growth since 1957(5.7% per annum) has been considerable, but political turmoil, poor planning, and natural disasters have prevented it from achieving higher levels of development. The experiments of the so-called Great Leap Forward(1958-1960) - rural collectivization, elimination of wage incentives, backyard steel plants, and great leeway for local initiatives - led to the deaths of 15 to 30 million people due to the resulting famine, and plunged China into a depression in the early 1960's.

Compounding these domestic difficulties was the withdrawal of Soviet assistance and technicians in August 1960 as the Sino-Soviet dispute worsened. Beijing responded by emphasizing "self-reliance" and a greater share of its investment was redirected toward agriculture. After a brief period of growth, politics - this time the Cultural Revolution and its aftermath (1966-1976) - again wreaked havoc with the economy, injecting ideology into economic planning, disrupting foreign trade, and virtually shutting down educational and training facilities.

In 1975, Premier Zhou Enlai outlined a new set of economic goals designed to elevate China to the status of a front-rank economic power by the year 2000. This multistaged effort, now known as the Four Modernizations program, was aimed at rapidly accelerating production in agriculture, industry, science and technology, and national defense. In 1976, the death of Chairman Mao Zedong, the arrest of the Gang of Four, and the gradual establishment of a new government under Deng Xiaoping and Hua Guofeng sharply reduced the role of ideology in Chinese policy. The stage was set for a more pragmatic look at the political and economic problems the country faced.

China's commitment to the Four Modernizations was reaffirmed in 1978 at the Fifth National People's Congress, where a 10-Year plan assigned a major role to massive imports of complete plants and technology from the West. By the end of 1978, China has signed contracts committing itself to foreign purchases totaling $7 billion.

Since 1978, the fundamental premise of China's economic policy has been that consumer welfare, economic productivity and political stability are indivisible. Emphasis has been on reising personal income and consumption and introducing new productivity, incentive and management systems.

A controversial reform package aimed at reducing the role of central management in favor of a mixed, planned marker economy was introduced at the third session of the Fifth National People's Congress in August 1980and endorsed in the sixth five-year plan.

Key elements were promulgation of agricultural reforms (including long-term leases on land and permission for farmers to specialize in cash crops and to engage in non-agricultural activities), self-management rights, introduction of greater competition in the marketplace, easing of the tax burden on nongovernment enterprises, and facilitation of direct contact between Chinese and foreign trading companies.

The reforms produced great successes. National income and agricultural and industrial output all grew at 10% compound rates during the 1980's and 1990's. Peasants' per capita real income doubled; urban dwellers' per capita real income increased by half. China became self-sufficient in grain production; rural industries boomed and accounted for 23% of agricultural output, helping absorb surplus labor in rural areas. Industrial reforms increased the variety of light, industrial and consumer goods available.

The leadership demonstrated its ability to adjust to economic pressures by adopting a variety of fiscal and administrative measures. The result of these policy changes and measures of central direction and local initiative was the creation of a hybrid economy, which the Chinese call a socialist commodity system influenced by market mechanisms.

Some of the success represented a recovery from the economically disastrous Cultural Revolution period. Some scholars, such as Thomas Rawski, have argued that China's growth statisticssince 1998must be greatly exaggerated, given other available information about the economy. Nevertheless, without question, China represents the most important development success story of the past two decades.

But economic reform and the introduction of a more market-oriented economy also brought with it rising inflation(which reached 21.7% in 1994, the highest since Communist rule began in 1949), increased crime and corruption, declining agricultural output, greater unemployment, and widening income and regional disparities. While the coastal areas boom, inland areas are facing stagnation and economic decline. There are estimates that up to 100 million impoverished rural peasants are without viable jobs and that there may be as many as 300 million rural workers scouring towns and cities in search of employment in coming years. In urban areas, the dismantling and sale of hundreds of inefficient and unprofitable state-owned industries promises to throw many more millions of workers into the already long lines of the unemployed.

On the political front, the economic reforms of the 1980's occurred without the concomitant political reform as cries for greater democratic participation began to be sounded. Unfortunately for both the Chinese people and their economy, the harsh repression that culminated in June 1989 in the Tiananmen Square massacre set back the pace of political reform and social progress. Much will depend on how the issue of political democracy and economic reform is resolved, particularly with respect to Hongkong, which was formally reincorporated into China on July 1, 1997. If it is resolved successfully, China will resume its inexorable march toward the top rank of of the world's economic powers.

If not, China will likely remain a country of enormous potential but limited progress. The eyes of the world will be on China to see what lessons can be learned for other market-oriented developing nations governed by authoritarian regimes.

2nd Task, answer the following questions from the context of PROC's development experience.

1. "The world population problem is not just a matter of expanding numbers but also one of rising affluence and limited resources. It is as much a problem caused by developed nations as it is one deriving from developing countries". Comment on this statement.

2. List and briefly describe the principal causes of high population growth in developing countries and the major consequences.

3. Outline and comment briefly on the various policy options available to developing countries in their attempt to modify or limit the rate of population growth.

A third world country in Asia: The Philippines

The Philippines:Geographic, Social and Economic Indicators

Capital : Manila

Area : 300,000 sq. km.

Population(annual growth : 2.2%(1990-2000)

Rate)

Agriculture as share of GDP : 17%(2000)

Exports as share of GDP : 53%(1999)

Under age 5 mortality rate : 41(1999)

Child Malnutrition : 30%(1992-1997)

Females as share of labor force 37%(1997)

Illiteracy rate(age 15+) : 3%(1999)

After two decades of sluggish economic growth resulting in part from government mismanagement, misrule, and misconduct, the Philippines appeared to have reversed course in the 1990's. Under the leadership of President Fidel Ramos, the economy was transformed in the 1990's from the stagnation and economic cronyism of the kleptocratic Ferdinand Marcos regime that ended in 1986 and the disappointing economic performance of the successor government of Corazon Aquino. Through a judicious combination of market reforms and state intervention along the lines of the Asian Tiger model, the economy began to pick up steam.

By 1996, it was growing by more than 7% a year, the fastest growth rate in decades. But then, the 1997 Asian currency crisis hit, and the Philippines was dragged into the vortex of Asia's downward spiral, with its currency depreciating by almost 30% and its GDP growth rate declining to 1.6% in 1998 and 2.1% in 1999-2000, less than the population growth rate.

The Republic of the Philippines consists of 7,107 islands located in the South China Sea northeast of Malaysia. The majority of Philippine people are of Malay stock, descendants of Indonesians and Malays who migrated to the islands thousand s of years ago. The most significant ethnic minority group is the Chinese, who have played an important role in commerce since the ninth century, when they first came to the islands to trade. As a result of intermarriage, many Filipinos have some Chinese and Spanish ancestry. Americans and Spaniards, a legacy of the colonial era, constitute the next largest alien minorities in the country.

The Philippines' overall population density is over 250 per square kilometre, but it is greater in central Luzon. Manila, the capital and largest city, has a metropolitan population of over 10 million. It is expected to grow to 15 million by 2015.

The annual population growth rate, about 3% in the 1960's, fell by the end of the 1970's to about 2.4%, from which it has fallen only slightly over the last quarter century.

The Philippine economy grew rapidly after World War II. The pace slowed in the 1950's and early 1960's with real gross national product rising about 5.3% annually from 1955 to 1965. Expansionary monetary and fiscal policies in the late 1960's spurred renewed real GNP growth, which despite erratic fluctuations, reached 10% in 1973.

The Philippines was hit hard by the debt crisis and experienced a severe economic recession in 1984-1985, during which the economy contracted by more than 10%. From 1986 to 1996, the Philippine economy grew more steadily, but was still burdened by high levels of poverty, widespread unemployment, a large government deficit, low levels of savings and investment, and a massive external debt of $462 billion in 1996. An Islamist insurgency in Mindanao and other southern islands has also added to instability and sapped confidence.

Industrial production is centered on processing and assembly operations for food, beverages, tobacco, and rubber products; textiles, clothing and footwear; pharmaceuticals; paints; plywood and veneer; paper and paper products; small appliances and electronics. Heavier industries are dominated by the production of cement, glass, industrial chemicals, fertilizers, iron and steel, and refined petroleum products.

The industrial sector is concentrated in the urban areas, especially in the Manila region, and has only weak links to the rural economy. Inadequate infrastructure, transportation, communication, and especially electrical power inhibit faster industrial growth.

The government is seeking to revitalize the economy by encouraging both foreign and domestic investment and by restoring free market forces, selling off its state monopolies, lifting the tariff barriers that protected inefficient industries, and reducing the size of public sector deficits.

Foreign trade is of great importance to the Philippine economy, with exports accounting for 42% of 1996 GDP. The United States has traditionally been the Philippines' largest trading partner, taking about 35% of Philippine exports and providing about 1% of imports. However, in recent years, trade with other Pacific Rim countries has grown as a proportion of the Philippines' total trade picture.

Major Philippine exports include semiconductors, garments, coconut products, sugar, bananas, coffee, minerals, and forestry products. Major imports include petroleum, material for electronic equipment manufacture, transport equipment, iron and steel, chemicals, textiles, and grains. Very recently, however, there has been a rapid growth in exports in the high-tech sector.

Despite its recent growth, the Philippines still faces severe economic challenges. It must attempt to raise incomes for the large share of its population who still suffer from debilitating poverty. It must try to create jobs for a rapidly expanding labor force(increasing at an annual rate of 4.5%) where unemployment and underemployment still exceed 30%. Finally, it must try to reverse the ecological deterioration of its heavily populated rural sector while paying off its burdensome foreign debt.

Performance Task #3- Answer the following questions briefly but adequately using as background the Philippine experience.

1. Why do you think many developing countries like the Philippines were convinced of the necessity of development planning? Were the reasons strictly economic? Comment.

2. There is much talk today about the failure of development planning in the Philippines. List and explain some of the major reasons for plan failures. Which reasons do you think are the most important? Explain your thinking.