Essay-disadvantage of being a NIC outweighs the benefits

‘The disadvantage of being a NIC outweighs the benefits.’ Discuss. [25]

NIC’s (newly industrialised countries) developed since the 1950’s such as some of the Asian tiger economies e.g. Hong Kong, South Korea and Taiwan. The term NIC refers to countries where industrial production had grown sufficiently for it to be a major source of national income. There are other economies that have industrialised such as Brazil and some include recently industrialising economies such as China, India and Malaysia, these are countries that have industrialised since the 1990’s.  Economic growth is due to global shift of manufacturing industries since the 1950’s and service sector BPO since the 1990’s by TNC’s as well as considerable entrepreneurial activities by the home population. The benefits and disadvantages of this can be economic, environmental, political and social.

The growth of a diversified industrial base as an economy like Taiwan’s moved from Primary export orientated industrialisation (PEOI) based on agricultural products and low value products such as toys and textiles often as a result of TNC investment by companies such as Nike to SEOI (secondary export orientated industrialisation) of products such as TV’s with Taiwan being the biggest producer by the 1970’s. Since the 1980’s, Taiwan diversified into IT with Taiwanese companies such as ACER and Foreign direct investment (FDI) from TNC’s such as HP and Sony. Taiwan’s GDP rose from $120 in 1950 to $8000 by 1980 and $32000 in 2012.

This rapid growth of wealth in a NIC led to a growth of a middle class exceeding 300 million in India creating a positive feedback loop and a multiplier effect for the economy. This economic wealth also means a country’s infrastructure improves particularly in special economic zones (SEZ’s) such as Bangalore in India. For example a 10 km fly over was developed to connect EPZ’s to Bangalore and 12 arterial roads were also created as part of the Transport infrastructure master plan. In 2008 Bangalore International airport was completed which has the capacity of 500 million passengers annually. An elevated metro system was also created for people to travel North to South and East to West, the metro system has a capacity of a million passengers a day.

On the other hand there are many economic disadvantages. Economic benefits are partly offset by the cost of infrastructure developments required to attract TNC FDI, coupled with the low or non existent taxes paid by these organisations. House prices in major cities such as Bangalore start to rise for example a decent sized family apartment costs 7000 rupees in 1977 but the same house now costs over 5000,000 rupees. TNC’s also have a unpredictable nature meaning they will shift their locations when they lose their economic rationale e.g. Nike moved from Taiwan in the 70’s to Vietnam and China in recent years. ST Microelectronics demonstrates TNC’s fickle nature. ST Microelectronics offshored their back end manufacturing work to Singapore because they had cheap labour, land etc. However in the 1980’s and 1990’s ST Microelectronics shifted some of…