ABSTRACT
In most post-hoc analysis, Southeast Asia’s economic crisis of 1997–98 appears over-determined by a combination of poor domestic governance and volatile international capital flows. Though the financial turmoil was preceded by a regional export slump, the structural dimensions of the crisis were largely overshadowed and are far less clear. Did the crisis point to a decline in Southeast Asia’s structural competitiveness, or worse, expose the region’s FDI-led industrialisation as lacking any real local foundations? Well before the crisis, critical observers noted that Southeast Asia’s vigorous manufactured export growth rested on a weak local base of technological capabilities (Yoshihara 1988). Heavy dependence on imported technology is natural, indeed essential, for late industrialising economies, which typically develop technical mastery in cumulative stages that involve local innovation only after extended periods of production-based learning (Amsden 1992; Kim 1997). Even allowing for the evolutionary nature of latecomer technology development, however, Southeast Asia’s aspiring NICs lagged in building capacities to adapt and improve imported technologies. Locally owned enterprises concentrated in labour-intensive and resource-based industries; few ventured into own-design or own-brand manufacturing. Whether deliberately or because their host economies lacked ‘absorptive capacity’, multinational corporations (MNCs) generated few technology spill-overs to the local industrial structure, even as they deepened their regional investments.
