In the 1960s and early 1970s, in a global environment of greatly expanding world trade, a first generation of “newly industrialized” countries emerged. These were developing countries that had experienced rapid growth associated with a surge of manufactured goods exports. After 1973, sluggish world economic activity slowed the growth of exports from developing countries for both nonfuel primary goods and manufactures. This contributed to a resurgence of export pessimism and a growing concern that such an environment, combined with the more protectionist mood in industrial countries, would all but preclude developing countries repeating such export success. In fact, however, in 1970-79 a different group of 12 developing countries expanded their exports of manufactured goods even more rapidly than had the original newly industrialized group, selling the traditional products—textiles, apparel, and small electrical goods—in the same markets in the industrial countries.
Using United Nations trade data, the growth rates of exports of manufactured goods were compared for 59 developing countries (no newly industrialized countries were included). The growth rates were calculated for current export values, due to a lack of adequate disaggregated price de flators. While this affected comparisons across periods, it is unlikely to have affected the comparison across countries for a given period, as the commodity composition of their exports was broadly similar. In 1970 and 1979 these 59 countries accounted for about one third of the manufactured exports of all developing countries, excluding the newly industrialized.
The Fund and China in the International Monetary System
Papers of a colloquium, jointly sponsored by the People’s Bank of China and the International Monetary Fund, held in Beijing in October 1982
The Evolution of the International Monetary System and the Changing Role of the Fund
by Azizali Mohammed
The Framework for Policymaking in the Fund
by Leo Van Houtven
The Current World Economic Situation and the Problem of Global Payments Imbalances
by Wm. C. Hood
Some Comments on the Current Economic Situation in the West
by Hong Junyan
The Chinese Economy and Its Role in the World
by Luo Yuanzheng
Fund Programs for Economic Adjustment
by Manuel Guitián
Collaboration Between the Fund and the World Bank
by P.R. Narvekar
The SDR—An Introduction
by Wm. C. Hood
The SDR—Its Evolution and Prospects
by R.J. Familton
The Role of the Fund in Developing Countries
by A. W. Hooke
Price: US$10.00 (cloth)
International Monetary Fund, Publications Unit, Box A-102, Washington, DC 20431 USA
At least 12 of the 59 countries achieved export growth rates between 1970 and 1979 above not only those of the 59 but also those of the newly industrialized group (Table 1). It is further notable that the volume of their exports, though only 6.9 percent of exports from all non-newly industrialized developing countries in 1970, had by 1979 risen to 24 per cent. While this faster growth implies that other exporters (including some of the newly industrialized) were losing relative market shares, the expansion was not at the expense of either group of developing countries in an absolute sense, both of which had positive export growth over the period.
|Manufactured exports||Average growth rates|
|(In millions of U.S. dollars)||(In per cent)|
How much did the weakening of industrial country markets between 1973 and 1975 affect these countries’ exports? Export growth did decline after 1973 for all developing countries, and perhaps somewhat more for the group of 12 than for the newly industrialized countries. This conforms to recent findings (by the Organization for Economic Cooperation and Development and others) that the latter generally (and the more outward-looking economies specifically) reacted best to the oil price rises of 1973-74. Nevertheless, the growth rate of exports from the newly industrialized countries remained well below that of exports from the group of 12 in 1975-79.
It is apparent that several of the group of 12 had had outstanding export growth rates before the 1973-75 slowdown; in 5, however, the initial export base at the beginning of the decade was miniscule, ranging from US$4 million to $15 million, and only 2 had exports near $100 million—Malaysia and the Philippines. High growth from a low initial base need not be remarkable, especially in that early period when world markets were very dynamic. However, it is remarkable that well above average growth rates in exports from the group of 12 were sustained during the 1973-75 slowdown and further into the last half of the 1970s.
The top seven exports for the newly industrialized group and the group of 12 for 1970 and 1979 show that both were exporting much the same products (Table 2. Five of the top seven were the same for both groups: clothing, textile yarns and fabrics, electrical machinery, nonmetal mineral manufactures, and miscellaneous manufactures. This fact contradicts frequently voiced fears that industrial country markets for these items were saturated by the newly industrialized group.
|Newly industrialized countries1|
|Clothing (15.95)||Clothing (13.93)|
|manufactures (11.95)||machinery (12.21)|
|and fabrics (10.89)||equipment (9.97)|
|machinery (8.75)||and fabrics (8.88)|
|equipment (7.11)||machinery (8.42)|
|machinery (6.85)||manufactures (7.06)|
|manufactures (6.08)||Iron and steel (6.99)|
|Share of total manufactured exports|
|Group of 12 new exporters2|
|Wood and cork||Textile yarns|
|manufactures (18.24)||and fabrics (23.40)|
|and fabrics (16.31)||Clothing (15.64)|
|manufactures (11.74)||machinery (7.42)|
|Wood and cork|
|Iron and steel (8.30)||manufactures (7.27)|
|Fertilizers (5.90)||and compounds (6.65)|
|manufactures (4.40)||manufactures (6.27)|
|Leather, and fur||Miscellaneous|
|manufactures (3.64)||manufactures (6.17)|
A comparison of the most important exports also reveals some advances in trading strengths very much along the lines predicted by comparative advantage. By 1977, the newly industrialized group was relying less on its traditional labor-intensive exports (clothing, textiles, and miscellaneous manufactures) and more on engineering products requiring somewhat higher inputs of skills and technological sophistication (transport equipment, nonelectrical machinery, and iron and steel).
The group of 12 appears to be following with a lag of five to ten years. In 1970, it was already relying on textiles, clothing, and miscellaneous goods for 31 per cent of its nonmanufactured exports, though it was still strongly oriented to exports of resource-based manufactures, such as wood products, fertilizers, nonmetal mineral manufactures, iron and steel products (of a crude sort), and leather products. By 1979, the three traditional manufactured exports accounted for 46.5 per cent of the total, the resource-based items had declined in rank, and the share of more sophisticated engineering goods (such as electrical machinery) had risen substantially. The new exporters are indeed following along the same path of rapid export growth that newly industrialized countries had earlier.
The same markets
The general pattern of market destinations for the manufactured exports was very similar for the group of 12 and the newly industrialized group, and increasingly so as the decade wore on (Table 3). The most important markets, in order of priority, were industrial countries, developing countries excluding the newly industrialized group, the newly industrialized group, capital-surplus countries, and centrally planned economies.
|Industrial countries||Capital-surplus countries||Newly industrialized countries (NICs)||Developing countries (excluding NICs)||Centrally planned economies|
Between 1970 and 1979, the importance of markets in the industrial world increased and, despite the slowdown in economic activity there, that of capital-surplus markets increased sharply (though from a low base); the share of exports going to the newly industrialized group fell slightly, and that of the other developing countries fell markedly. The relative shift toward industrial countries in a period of rapid export growth corroborates the conclusion of a recent Bank study of trade among developing countries, that more export-oriented economies tend to trade less with other developing countries and more with industrial ones. (See World Bank Staff Working Paper No. 479, Trade Among Developing Countries: Theory, Policy Issues, and Principal Trends.) The much higher share of exports from the group of 12 going to the newly industrialized group may be an important early sign of opening opportunities there for other developing countries, as they advance beyond their initial comparative advantage in traditional labor-intensive products. This remains to be verified by more precise data on the types of products imported by the newly industrialized group.
To digress briefly, the relative export success of the group of 12 new exporters does not imply the same relative success in growth of income. In fact, in 1970-79, their annual average per capita income growth rate was 3.2 per cent, compared with 3.1 per cent for all middle-income developing countries, and 4.1 per cent for the newly industrialized group. However, in at least two of these countries, Cyprus and Jordan, economic performance was adversely affected by political developments, and the average for the remaining 10 is considerably higher at 3.7 per cent. Furthermore, for many of these countries the truly outstanding period of export performance was after the 1975 recession, when their average per capita incomes grew at 3.6 per cent, compared with 2.7 per cent for all developing countries and 3.9 per cent for the newly industrialized group.
To explain adequately the export success of these 12 countries would require a separate study investigating the economic, social, and political circumstances of each of the cases. While this task is beyond the scope of this note, a brief discussion may be useful.
One of the characteristics that appears to make the group of 12 new exporters different from other countries is their marked growth, which has been discussed, and their investment effort, which was higher than average. Ten of the countries expanded their investment in 1970-79 more quickly than the 7.8 per cent per annum average growth rate of the middle-income developing countries. Only Colombia and Peru had rates below this average, but at least in Colombia there was a great deal of excess industrial capacity in the early 1970s. These countries were evidently expanding the supply capacity of manufactures—and exports—quite rapidly.
A supply-side stimulus is not, of course, enough: the export products must be internationally competitive, and the trade policies of these countries appear to have played a significant role in achieving this. Although, as has been pointed out, the group of 12 did not have free trade according to World Bank regional studies, they generally pursued progressively more open trade policies. Jordan, for all practical purposes, was an open economy. Two countries, Colombia and Uruguay, had particularly dramatic shifts in their policies, moving in 1967-75 and 1972-74, respectively, toward promoting exports. A similar reorientation—though perhaps less sharp—occurred for Morocco in 1976, Sri Lanka in 1977, and Cyprus in 1973-74. These policies led to increased capacity utilization, rationalization of the cost structure, and an increased competitiveness reflected in export growth. Malaysia, the Philippines, Thailand, and Tunisia also seemed to follow an outward orientation, even if for them it is less easy to identify a clear period of such policy shifts. Only Indonesia stands out as a counter-example. It was more closed than the others and seems to have become even more restrictive about 1975.
Some special demand conditions also contributed to the export performance. Jordan and Cyprus, for instance, profited a great deal from the boom of the capital surplus markets, which took 73 per cent and 34 per cent, respectively, of these countries’ exports in 1979.
Thus, the evidence of successful export performance during the 1970s (despite some of the obvious inadequacies in the way it was measured) does quite clearly show that countries other than the traditionally successful developing country exporters can and have followed the same path. While it does appear that the group of 12 did somewhat better in terms of per capita income growth than other developing countries, they did not grow as rapidly as the newly industrialized countries; the link between rapid growth of manufactured exports and rapid growth of income seems by no means automatic.
This brief note has not attempted to explain in any depth why these 12 did well in exports and others did not. But it has been demonstrated that there is indeed some cause for optimism on the export prospects of developing countries other than the traditionally newly industrialized ones. Indeed, there is a temptation to hypothesize that export “booms” always recur, though at varying levels, in the best of times (the 1960s) as well as in the worst of times (the late 1970s). Can they also recur in such uncertain times as the 1980s?
Announcing the single most useful reference on the external debt of 101 developing countries
WORLD DEBT TABLES 1983 Edition
Send Now For Your Copy of This Indispensable Strategic Planning Tool.
Clip and mail this convenient coupon to:
World Bank Publications, P.O. Box 37525, Washington, DC 20013, USA or
World Bank Publications, 66, avenue d’léna, 75116 Paris, FRANCE
An Essential Guide for:
country risk analysts
banking resources/ econometrics firms
research libraries and centers
university graduate schools of business and departments of economics and foreign trade
…and all those interested in the global system of trade and payments