The nexus between national government initiatives and private sector expertise is often seen as the locus where the success of many Asian countries is decided. However, economics, like politics, always has a local base. Sub-national governments, which are often given minor roles in expert analyses of national development, are therefore necessarily important players in this equation. Despite the lack of financial might, a state such as Penang, can make effective use of its many local advantages.
From the successful development of Korea’s steel and shipping industries to Israel’s software cluster, and from the US’s semiconductor giants to Japan’s automobile empire, the “visible hand” of government has been involved, and due credit is now being given them.
These heroes – when sung – tend to be powerful national governments with deep pockets and strong control over trade, fiscal and monetary policy. Using mechanisms such as protection from international competition, subsidies, providing specialised infrastructure, and even imposing financial penalties for low performance, they have managed to make their private sectors competitive.
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