It's A Myth: First World Countries Self-Industrialized and Only Opened to FDI, After They Succeeded

The Straits Times

As the battle for economic charter change goes on, another lie often spread: "First world countries, first industrialized by themselves, before they opened their economy to FDI." I'm seeing it ironically on Facebook. I tell them, "If you hate foreigners so much, why don't you get out of the Internet?" Some of them give replies like, "We're not hypocrites for badmouthing FDI on Facebook. We're simply forced to use imported equipment because foreigners unfairly own the means of production (read rebuttal here)." When I ask for their sources, they give sources like people from Bayan Muna (Nation First), the League of Filipino Students, the IBON Foundation, Kabataan Partylist (Youth Partylist), the Alliance of Concerned Teachers (ACT), and maybe even the Catholic Bishops' Conference of the Philippines (CBCP). Most of these sources (not all) are the favorite sources of those going against badly needed economic cha-cha. 

I bought the book From Third World to First by the late Lee Kuan Yew to gain more insights. Some people on Facebook even called LKY a dictator. It may also be because of sentimentalism over the late Flor Contemplacion's "wrongful execution". Migrante International, another favorite source of those going against economic charter change, keeps using Flor's death as an excuse. Migrante hasn't only tried to defend Flor as innocent (never mind the Philippine justice system has wrongfully convicted people too) but also every guilty Filipino on death row. Back on topic, I read through LKY's book and I would prefer to listen to the old grandpa himself, than the other old grandpas (like Atty. Hilario G. Davide Jr.) or the likes of Atty. Teodoro "Teddy" A. Casiño of Bayan Muna, Rep. Raoul A. Manuel of Kabataan Partylist, or  Jose Enrique A. "Sonny" Africa of the IBON Foundation.

Can such people actually refute LKY's statement in his book From Third World to First:

Our job was to plan the broad economic objectives and the target periods within which to achieve them. We reviewed these plans regularly and adjusted them as new realities changed the outlook. Infrastructure and the training and education of workers to meet the needs of employers had to be planned years in advance. We did not have a group of readymade entrepreneurs such as Hong Kong gained in the Chinese industrialists and bankers who came fleeing from Shanghai, Canton, and other cities when the communists took over. Had we waited for our traders to learn to be industrialists we would have starved. It is absurd for critics to suggest in the 1990s that had we grown our own entrepreneurs, we would have been less at the mercy of the rootless MNCs. Even with the experienced talent Hong Kong received in Chinese refugees, its manufacturing technology level is not in the same class as that of the MNCs in Singapore. 

With that in mind, I'd listen to Kishore Mahbubani over Davide any day. Mahbubani grew up seeing Singapore become a third-world country to a first-world country. Mahbubani's credibility rose when he built the Lee Kuan Yew School of Public Policy (LKYSPP) at the National University of Singapore (NUS). Meanwhile, all Davide did was talk more than prove more. Davide's statements can be easily disproven not just by what Mahbuban said. Mahbubani's statements are rooted not just from his experience but also the results of his experience. The world saw Singapore rise from third world to first. What about the Philippines? It's been 30+ years since the 1987 Constitution, and more than 30+ years of the Filipino First Policy. One can keep arguing about the late Benigno Simeon "Ninoy" C. Aquino Jr.'s success (read here). However, rejecting change because of past successes is definitely detrimental to businesses (read here).

Based on what LKY said, he never waited for Singaporeans to "progress" before he opened up the country to international trade. Instead, LKY opened up his country to international trade while it was still poor. Some argue that LKY only did what he did because of Singapore's lack of natural resources. However, guess what? Communist Vietnam is rich in natural resources and it opened up to FDI. The late Nguyen Duy Cong aka Do Muoi followed the same path as the late Deng Xiaoping. Both Nguyen and Deng opened their Communist states to FDI, while both countries were still poor. Both got advice from LKY. The Philippines should be quoting LKY on economy, not just quote him about the Marcoses. If President Ferdinand R. Marcos Jr. would listen to LKY's advice, I'd salute him even if I didn't vote for him!

LKY also said this about Vietnam when it came to contact with foreigners, in his book From Third World to First:

In fact, the Vietnamese had made progress. As a result of more contacts with foreigners and greater information on the market economy, ministers and officials had better understanding of the workings of the free market. Greater street activity, more shops, foreign businesspeople, hotels--these were all signs of prosperity in Ho Chi Minh City and Hanoi.  

Vietnam didn't become rich first then opened up to foreigners. Instead, Vietnam opened up to foreigners while it was still poor. Nguyen followed the path of Deng using Doi Moi (read here). More FDI are preferring to invest in Vietnam instead of the Philippines. Yes, that's happening even when its current General Secretary To Lam shamelessly ate gold steak in London (read here). Global Asia says this of Vietnam's rise to power:

FROM ISOLATION TO PROSPERITY

 

By the mid-1980s, the development model Vietnam had borrowed from the former Soviet Union and its East European allies had revealed numerous flaws and was proving outmoded. On the political and diplomatic front, tense relations with China, the heavy burden of Vietnam's troop presence in Cambodia and strict sanctions imposed on it by the US placed Vietnam in a difficult bind. On the one hand, the country was blocked from cultivating new relations with other countries; on the other, it had become ever more dependent on the Soviet Union for political support and economic and military assistance. 

The turning point came with a dramatic reduction in Soviet economic and military assistance after the mid-1980s and the economic hardship this caused. For the sake of the country's survival, Vietnam's leaders were forced to adopt economic and political reform, or Doi Moi. In essence, Doi Moi in its early stages was focused mainly on the removal of self-imposed barriers to progress and the utilization of various market-oriented measures, including liberalization of the domestic market, encouragement of foreign direct investment, or FDI, and the private sector, and reduction in subsidies to state-owned enterprises (SOEs).

These steps quickly brought positive results. From a country faced with perpetual food shortages, Vietnam in 1989 for the first time exported 1.4 million tons of rice. It has since remained a rice exporter. In 2008, it exported 4.7 million tons, becoming the world's second largest rice exporter after Thailand. Indeed, Vietnam's exports were instrumental in stemming the threat of a severe international food crisis in early 2008.

What impresses most, however, is the continuous high economic growth rate that Vietnam has recorded in the 20 years since the introduction of Doi Moi. Vietnam recorded average annual economic growth of 6.5 percent over that period, one of the highest rates among developing countries. And with annual per capita income of $1,000 in 2008, Vietnam was removed from the list of the world's least developed countries. The high economic growth rate in turn helped reduce Vietnam's poverty rate from 70 percent in the mid-1980s to 37 percent in 1998 and 19 percent in 2007.

Deng opened China to the world when China was poor. Deng started all the reforms while China was poor. China didn't have to wait to be "rich" before it did business with foreigners. Deng went to America and told the Americans, "China is open for business." Here's what Facts and Details says of Deng's reforms:

• During the 1980s there was a gradual process of economic reforms, beginning in the countryside, where there was a limited return to a market economy for farm goods. The reforms were very effective and the economy in the countryside began to prosper. As the rural standard of living rose, reforms of the more complex urban economy began. In the mid-1980s, China began to move away from a socialist system of central planning to a market economy. Around the same time, China began to open its economy to the outside world and to encourage foreign investment and joint ventures between China and foreign companies. [Source: Junior Worldmark Encyclopedia of the Nations, Thomson Gale, 2007]
• Under Deng, pragmatic leadership emphasized economic development and renounced mass political movements. At the all-important December 1978 Third Plenum (of the 11th Party Congress Central Committee), the leadership adopted economic reform policies that included expanding rural incentives to generate income there, encouraging experiments in the market economy and reducing central planning. The plenum also decided to accelerate the pace of legal reform, culminating in the passage of several new legal codes by the National People's Congress in June 1979. [Source: Countries of the World and Their Leaders Yearbook 2009, Gale, 2008]
• According to the “Worldmark Encyclopedia of Nations”: “In 1980, Zhao Ziyang, a protégé of Deng Xiaoping, replaced Hua Guofeng as premier, and Hu Yaobang, another Deng protégé, became general secretary of the CCP while Hua resigned as party chairperson (a position which was abolished) in 1981. The 1980s saw a gradual process of economic reforms, beginning in the countryside with the introduction of the household responsibility system to replace collective farming. Reforms of the more complex urban economy included, with varying degrees of success, reforms of the rationing and price system, wage reforms, devolution of controls of state enterprises, legalization of private enterprises, creation of a labor market and stock markets, the writing of a code of civil law, and banking and tax reforms. Part of the policy to open up to the outside world including the establishment of Special Economic Zones. [Source: Worldmark Encyclopedia of Nations, Thomson Gale, 2007]

Mao tried to industrialize China on its own and failed. Phan Van Dong also tried the same approach. Vietnam was so poor after reunification. Fortunately Nguyen was pragmatic and knew that he had to do something. Neither Deng or Nguyen decided to "well let's wait until our countrymen" became better at business. Instead, they opened up to FDI while their country instead of the self-industrialization route.

Simple common sense will show why self-industrialization fails. Did North Korea become better than South Korea after that? Some may want to blame South Korea. Did Venezuela become a superpower through their isolationist policies? Some may still keep blaming the USA after that. Instead, by trying to "do everything themselves"--they have failed miserably. As said, asking for professional help should never be mistaken for overdependence on other people.