Newly Industrialised Countries (NICs) are the ever-growing group of countries which have seen the fastest economic growth over recent years. The rise of NICs such as Malaysia, South Korea, which is the biggest shipbuilding nation followed by China and Japan, has greatly increased the international division of labour. However the main Research and Development sector remains within the parent countries. During early development of NICs, TNCs from developed nations utilised the cheap workforce and outsourced their manufacturing into NICs. This is because they originally attracted a lot of inward investment such as FDI from TNC’s which originated from MEDCs.
The reasons were that NICs had a large labour force which worked for cheap wages. The other factors of production are also very inexpensive and act as an incentive to these multinational companies like the Korean firms Samsung and Daewoo; capital like machinery due to the cheap available raw materials, low-priced land for building factories, friendly government legislations, and reduced import and export tariffs.
The manufacturing industry was first to move and so the NICs became more focused on the secondary sector while the source countries (MEDCs) became tertiary sector economies. This is a disadvantage for most of the MEDCs as they will face periods of structural unemployment where the unskilled workers who could only do manufacturing work will be unable to find jobs. The NICs will have reduced unemployment since a lot of jobs will be made available; requiring low levels of work based skills. On the other hand, due to the lower costs of production for the TNCs, they will be able to sell products for cheaper prices and so this will benefit the global economy. It will also benefit the NICs as they will face increased demand for their services and their population would face glowing job prospects. After a while, the NICs tend to become countries where TNCs originate from. Examples of this could include “TATA” from India which operates in many sectors such as communications and information technology, engineering, energy, consumer products and chemicals.
TATA are now trying to move out of India as it is becoming increasingly expensive to operate in the country. They are moving to other developing countries such as Brazil and Mexico who are now considered as NICs themselves. According to Rostow’s model, we can see that most NICs will go through the stages of specialisation and industrialisation after which they will start to not rely on investment and imports from other countries. The Asian tigers have already gone through the stages. However, due to their rapid economic growth many NICs developed a relatively unstable economy.
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