Japan and the Economic Miracle: “Shark Tank”-Who Will Be the Next Asian Tiger?

Kevin Dockery- Fred J. Page High School, Franklin, TN

AP Human Geography- 9th grade

Learning Objectives/ Standards- From the College Board: AP Human Geography Course Description:

Students will analyze economic development as a process that varies across space and time. Students will analyze the causes and consequences of international trade. Students will analyze and understand why some East Asian economies developed at a rapid rate in the mid to late 20th century.

Time required: Two, 55 minutes class periods (three class periods may be possible for assigning groups, conducting research as a group, and presenting proposals to the panel)

Materials required- Laptops for students to conduct research on their group’s country

Procedure- The teacher will provide content instruction on post- World War II Japan and its economic revitalization, focusing on the many reasons Japan achieved rapid economic development from the 1950’s through the 1980’s. The instruction will focus on human and environmental factors, both advantages and disadvantages, faced by Japan as it recovered from the effects of World War II. The lesson will also focus on the Four Asian Tigers (or Dragons as they are sometimes called): Singapore, Taiwan, South Korea and Hong Kong. These “Tigers” followed Japan’s example and achieved rapid economic development.

At the conclusion of the lesson students will be placed into 5 groups of 4-5 students per group. (If needed groups may be comprised of more than 5 students). Four students will be chosen at random to serve as “sharks”- investors on a panel who will judge each group’s presentation.

Each group will be assigned a country in East, Southeast, and Central Asia that is experiencing economic growth and development in recent years. The countries to be assigned are Thailand, Vietnam, Indonesia, Malaysia, and Mongolia. Students will conduct research as a group on each of their assigned countries, evaluating their country’s situation as it pertains to economics, politics, geography and other advantages and disadvantages. They are encouraged to seek information using a variety of sources to evaluate their country’s situation. Based on the information compiled students will develop a business plan, a short 5 minute presentation to deliver in front of the “Shark Tank” panel with the goal of being chosen as the “Next Asian Tiger.” The teacher will also serve as a moderator and assist both the Shark Tank panel as well as each group in guiding them through the process.

While each group is developing their presentation the four “sharks” will meet as a group to develop a series of questions to ask each group after their presentation. The questions should focus on each country’s advantages, disadvantages, how they hope to overcome disadvantages to develop economically, why they feel they are the next booming economy, etc. Members of the panel will develop questions for each group to determine whether or not they should receive funding in order to fuel development. The goal for each group is to impress the “Shark Tank” panel and win the competition. Students must be creative in assessing their country’s advantages and disadvantages in order to convince the Sharks they are ready for economic development.

Summation/assessment- After completing the “Shark Tank” procedure all students will be assigned the following article on Vietnam and will answer the questions upon completing the reading. They are to analyze and evaluate Vietnam’s situation as compared to Japan’s economic rise in the 1950s and beyond.

The New Asian Tiger?

Ten Things You Didn’t Know About Vietnam’s Rise

By Marco Breu and Richard Dobbs

From “Foreign Policy magazine, February 24, 2012

It’s clear that much has changed in Southeast Asia since the Vietnam War. Over the past 25 years, Vietnam has transformed itself. In 2007, Vietnam became a full-fledged member of the global economic community through its membership in the World Trade Organization. It has become a magnet for foreign investment and is evolving rapidly from an agricultural economy to one focused on higher-value manufacturing and services. But if Vietnam wants to sustain its remarkable growth, it will need to boost labor productivity in the industrial and service sectors in the years ahead. Here are 10 takeaways from the McKinsey Global Institute report “Sustaining Vietnam’s Growth: The Productivity Challenge.”

1. Vietnam has grown more rapidly than any other Asian economy except China.

Vietnam, a country once ravaged by war, has been one of Asia’s economic success stories over the past quarter-century. Ever since the Communist Party introduced reforms known as “DoiMoi” (“Renovation”) in 1986, the country has reduced barriers to trade and opened the economy more widely to private business. During this period, the economy has expanded faster than any other Asian economy except China’s, posting annual per capita GDP growth of 5.3 percent. This growth has continued in the face of the 1990s Asian financial crisis and the recent global economic downturn (the economy grew 7 percent per year from 2005 to 2010) — a more robust record than many other Asian economies can boast.

2. Vietnam is moving out of the paddy fields.

Vietnam’s economy no longer revolves around agriculture. In fact, agriculture’s contribution to the country’s GDP has been cut in half from 40 to 20 percent in just 15 years, in a much more rapid shift than we have observed in other Asian economies. A comparable transformation took 29 years in China and 41 years in India. Over the past 10 years, agriculture’s share of national employment has dropped by 13 percentage points, while the share of workers employed in industry has risen by 9.6 points and in services by 3.4 points. This shift of workers from agriculture to industry and services has made a powerful contribution to Vietnam’s economic expansion because of the large differences in productivity between these sectors. As a result, agriculture’s share of GDP has fallen by 6.7 percentage points while industry’s share has risen by 7.2 percentage points over the past 10 years.

3. But Vietnam is a leading global exporter of pepper, cashews, rice, and coffee.

Vietnam is the world’s leading exporter of pepper, shipping 116,000 tons of the spice in 2010, and has led the world in exports of cashews for four years in a row. The country is also the world’s second-biggest exporter of rice after Thailand and second only to Brazil in exports of coffee, which have nearly tripled in just four years. Vietnam ranks fifth in the world in the production of tea and sixth in exports of seafood such as catfish, cuttlefish, shrimp, and tuna.

4. Vietnam is not “China+1.”

Rising labor costs in China have already spurred some factory owners to shift production to Vietnam, which has an abundance of low-wage labor. The trend has fueled talk among many CEOs about Vietnam becoming Asia’s next big platform for manufacturing exports — a smaller version of China, or China+1. But Vietnam is very different from China in two respects. First, Vietnam’s economy is driven more by personal consumption than China’s is. Consumption by households accounts for 65 percent of Vietnam’s GDP — an unusually high share in Asia. In China, by contrast, consumption accounts for just 36 percent of GDP. Second, while China’s rapid economic growth has been fueled by manufacturing exports and extraordinarily high levels of capital investment, Vietnam’s economy is much more balanced between manufacturing and services, which each accounting for approximately 40 percent of GDP. Vietnam’s growth has been broad-based, with competitive niches across the economy. Over the past five years, output in the industry (including construction, manufacturing, mining, and utilities) and service sectors has grown at comparable annual rates of about 8 percent.

5. Vietnam is a magnet for foreign investment.

Vietnam is on most lists of attractive emerging markets for foreign investors. Surveys by Britain’s trade and investment department and the Economist Intelligence Unit have consistently ranked Vietnam the most attractive emerging-market destination for foreign direct investment (FDI) after the BRIC quartet of Brazil, Russia, India, and China. Registered FDI flows into Vietnam increased from $3.2 billion in 2003 to $71.7 billion in 2008 before falling during the global recession to $21.5 billion in 2009.

Here, again, Vietnam diverges from China. Nearly 60 percent of FDI in China has been poured into labor-intensive manufacturing, compared with only 20 percent in Vietnam. In the latter case, much of the remaining investment has found its way to mining, quarrying, and oil and gas extraction (40 percent) and real estate (15 to 20 percent), reflecting rapid growth in Vietnam’s tourism industry. The number of foreign tourists coming to Vietnam has risen by one-third since 2005.

6. Vietnam has more advanced road infrastructure than the Philippines or Thailand.

Vietnam has begun to make significant investments in infrastructure. Many visitors to Vietnam still view the country’s roads as pretty basic. But, for its stage of economic development, Vietnam has been adding road infrastructure at quite a rate. Its road density reached 0.78 kilometers per square kilometer in 2009, which is higher than the road density in the Philippines or Thailand, both economies that are further on in their development than Vietnam is. That same year, electricity networks covered more than 96 percent of the country. New container ports such as those in Dung Quat and CaiMep and airports such as those in Da Nang in central Vietnam and Can Tho in the Mekong Delta region have improved connections with the rest of the world.

7. Vietnam’s young generation is going online.

Vietnam’s population is young, well-educated, and increasingly online. Mobile subscriptions in Vietnam grew nearly 70 percent per year between 2000 and 2010 compared with less than 10 percent per year in the United States in the same decade. By the end of 2010, Vietnam had 170 million telephone subscribers, of which 154 million had mobile subscriptions. At 31 percent, Internet penetration in Vietnam is much lower than in other Asian states such as Malaysia (55 percent) and Taiwan (72 percent). But this is changing rapidly. Broadband subscriptions in Vietnam increased from 0.5 million in 2006 to around 3.8 million in 2010, the same year that 3G subscriptions hit 7.7 million. Once the telecom infrastructure catches up, mobile and Internet use is likely to explode. Already, 94 percent of Vietnam’s Internet users access news online. More than 40 percent of users access the web every day.

8. Vietnam is becoming a top location for outsourced and offshore services.

Vietnam already employs more than 100,000 people in the outsourcing and offshore services sector, which today generates annual revenues of more than $1.5 billion. Several prominent multinational corporations have established operations in Vietnam, including Hewlett-Packard, IBM, and Panasonic. In fact, the country has the potential to become one of the top 10 locations in the world in this sector, due to its relatively large pool of young college graduates (universities send 257,000 young men and women into the workforce each year) and relatively low wages. A software programmer in Vietnam can be employed for less than 60% of what it costs to hire one in China, while data-processing and voice-processing agents in Vietnam cost 50% less to employ than their counterparts in China.

Outsourcing and offshore services in Vietnam could produce annual revenues of between $6 billion and $8 billion a year, much of it export-oriented — as long as there is sufficient demand and Vietnam ensures that it can satisfy that demand. This sector could become an engine of job creation in urban areas, employing an additional 600,000 to 700,000 people by 2020 and contributing 3 to 5 percent to Vietnam’s GDP growth.

9. Vietnamese banks are lending at a faster rate than their Chinese, Indian, or ASEAN counterparts.

Total outstanding bank loans in Vietnam have increased by 33 percent per year over the past decade — a stronger growth rate than those recorded in China, India, or any Association of Southeast Asian Nations (ASEAN) country. By the end of 2010, the value of outstanding loans had reached an estimated 120 percent of GDP, compared with only 22 percent in 2000. Although this may be evidence of new dynamism in the Vietnamese economy, oiled by an expanding banking system, the worry is that an associated rise in non-performing loans could trigger significant economic distress in Vietnam (as it has elsewhere) and force the government to intervene in the financial sector to protect depositors, the banking system, and, ultimately, taxpayers.

10. Vietnam’s demographic dividend is waning.

Between 2005 and 2010, an expanding pool of young workers and a rapid shift away from agriculture generated two-thirds of Vietnam’s growth. The other one-third came from enhanced productivity. But now the first two drivers of growth are weakening. Official statistics predict that growth in the labor force will decline to around 0.6 percent a year over the next decade, compared with annual growth of 2.8 percent from 2000 to 2010. And it seems very unlikely that the transition from farm to factory can continue at anything like the speed we have seen in the recent past. Productivity improvements will therefore need to pick up the slack if Vietnam is to maintain its historical growth rate. More precisely, labor productivity growth in the service and manufacturing sectors will need to accelerate by more than 50 percent from 4.1 percent annually to 6.4 percent if the economy is to meet the government’s target of 7 to 8 percent annual growth by 2020. Should that productivity boost not materialize, Vietnam’s growth would likely decline to between 4.5 and 5 percent annually. At that pace, Vietnam’s GDP in 2020 would be 30 percent lower than it would have been had the economy continued to grow by 7 percent each year. Vietnam has many intrinsic strengths — a young labor force, abundant natural resources, and political stability. If it acts decisively to head off short-term risks and pursues a productivity-led growth agenda, it can enter a second wave of growth and prosperity.

Questions- Vietnam: The New “Asian Tiger?”

  1. Vietnam became an emerging world economic power in 2007 when it joined what supranationalist organization?
  1. What is the Vietnamese Communist Party’s “DoiMoi” (“Renovation”)?
  1. A good sign of a maturing economy is the transition from the majority of people working in agriculture to more working in manufacturing and service jobs. In just 15 years agricultural contribution to Vietnam’s GDP went from ______% to ______%. How long did it take China to achieve this? ______years India? ______years
  1. Even though Vietnam is rapidly transitioning from an agricultural society, it is still a major exporter of many natural resources. They are the world’s leader in exports of ______, and has led the world in exports of ______for the past 4 years. Vietnam is second only to Thailand in ______exports and second to Brazil in exports of ______.
  1. Rising labor costs have caused many factory owners to shift production from what country to Vietnam in order to take advantage of lower labor costs?
  1. Foreign investment is on the rise in Vietnam. In what 5 areas is Vietnam seeing significant foreign investment?
  1. What 3 specific type of infrastructure improvements have led to rapid economic development in Vietnam?

A.

B.

C.

  1. Explain how the specific demographics of the Vietnamese population has contributed to its rapid economic growth:
  1. Why are broadband Internet subscriptions and mobile phone subscriptions good indicators of economic progress in Vietnam?
  1. Why are companies like HP, IBM, and Panasonic beginning to outsource more jobs to Vietnam?
  1. An increasing number of bank loans is a good sign of economic growth as it normally means new companies are seeking loans to open businesses and invest in a country. However, what problem does the article say might be created by this trend?
  1. What prediction does the author make about Vietnam’s economic productivity and what factor(s) will determine if Vietnam will be able to continue on its current path of economic development?