風箏模型之國家發展策略應用：以印度為例

全文

(1)國立高雄大學經營管理研究所碩士論文. An Application of Kite Model for National Development Strategy: The Case of India 風箏模型之國家發展策略應用：以印度為例. 研究生：鍾曉芳撰指導教授：鄭育仁博士. 中華民國一 O 一年九月.

(2) Acknowledgement This thesis has been possible with the relentless support of some wonderful people in my life. I take this opportunity to extend my warmest thank you and heartfelt gratitude to them. My deepest gratitude to Dr. Cheng Yu-Jen, as my thesis guide he has dedicated his precious time and expertise to help me improve the overall structure and content my thesis, his inputs and attention to details throughout the development of this thesis is invaluable. Dr. Cheng not only imparted academic teachings to me but also imparted wisdom on how to become a better person in life. I also thank Dr. Tung and Dr. OuYang for their guidance and suggestion during my thesis defense, they helped make this article more complete. To the professors who taught me during my two years in National University of Kaohsiung, and to my seniors in University, Liang Wen-Han, Hsu Po-Pin, Lo Ching-Lung and Chen Wei, for their help and support during my tenure in Taiwan, I thank them from the depth of my heart. The experiences that I gained in these past few years, the challenges that I had to overcome made me more matured and look at life from different perspectives. I am grateful to the support of Jose, Saket, Neha and Manish, their constant motivation and unshaken belief in me has made me grow and become a better person. My friends who shared in my tears and laughter, walking along with me all along the way, mere words cannot express my gratitude to the Almighty Lord for bringing such wonderful people to my life. There is no adequate way in which I can express my gratitude and love for my beloved family, especially to my dear parents, my brother Te Chieh and sister Lee Fong. A very special thank you to them, it is their faith and constant support in every endeavor I dare to undertake, that makes me dare to dream. I gift this thesis to all my dear family and friends who held my hand and walked along with me all through the way.. i.

(3) An Application of Kite Model for National Development Strategy: The Case of India Advisor: Dr. Cheng, Yu-Jen Institute of Business and Management National University of Kaohsiung Student: Chung, Hsiao-Fong Institute of Business and Management National University of Kaohsiung Abstract This article develops a “Kite Model” to discuss the economic emergence of a country. Emphasizing on the competitive attributes of a country, the “Kite Model” provides a blueprint that can guide a country in her journey towards progressive solid economic development and growth. With the changing patterns and in economic development and growth around the world, it is no surprise that countries and governments across the world are aiming towards progress and growth of the country’s economy by building upon and maintaining the nation’s competitive advantage, creating wealth, and increasing the standard of living. The “Kite Model” is set up by referring to reviews and evaluations of past researches on national competitiveness and global changing economic development patterns. This article identifies, determines, and integrates the various key factors as well as describes the dynamics that will enable a country to become a rising economy in the global front. This will provide guidelines for countries with regard to the national development strategies for sustained economic development and growth. The “Kite Model” may enable proactive governments to better understand economic. ii.

(4) development patterns and catch available opportunities to boost the country’s economy. The “Kite Model” may contribute significantly by assisting governments in the planning and implementation of national economic development policies and strategies. This article is elaborated in the later part where the “Kite Model” will be applied to the case of India. Keywords: Kite Model, Economic Development and Growth, National Development Strategy.. iii.

(5) 風箏模型之國家發展策略應用：以印度為例指導教授:鄭育仁博士國立高雄大學經營管理研究所學生:鍾曉芳國立高雄大學經營管理研究所. 摘要本文發展了“風箏模型”來討論一個國家經濟的崛起。“風箏模型”著重於國家競爭力的屬性，提供一個可以指引國家逐步走向穩固經濟發展和成長旅程的藍圖。隨著世界經濟發展和成長型式的轉變，各國政府競相建立及維護國家競爭優勢，走向國家經濟發展及成長，以創造財富並增加國民生活水平。本“風箏模型”係參考過去對國家競爭力和全球經濟發展型式轉變的研究而建立，本文辨識、釐定且整合各種影響國家發展的主要因素，並描述可以使一個國家在全球競爭前沿崛起的動態歷程，為國家持續經濟發展和成長的策略提供指引。本“風箏模型”有助於積極的政府更加瞭解經濟發展型式和掌握有利的機會，以提升國家經濟，因此，本文可為各國政府在規劃和實施國家經濟發展政策和策略時給予重要的協助。最後，本文以印度為個案，詳細描述“風箏模型”在國家發展上的應用。. 關鍵字：風箏模型、經濟發展與成長、國家發展策略. iv.

(6) Contents Chapter 1 Introduction. 1. 1.1 Research Background. 1. 1.2 Research Motivation and Objectives. 2. 1.3 Research Procedure. 4. 1.4 Contributions. 5. 1.5 Structure of the Article. 5. Chapter 2 Literature Review. 7. 2.1 National Development and Growth. 7. 2.2 Competitive Advantages. 12. 2.3 Pattern of Economic Development. 14. Chapter 3 The Kite Model. 16. 3.1 The Framework of the Model. 16. 3.2 The Components of the Kite Model. 17. Chapter 4 The Dynamics of the Kite Model. 30. 4.1 Operation of the Kite. 30. 4.2 Priorities and Staging. 35. Chapter 5 The Case of India. 38. 5.1 The Current Indian Scenario. 38. 5.2 The External Environment of India. 52. 5.3 Application of the Model to India. 54. Chapter 6 Conclusion and Discussion. 63. References. 66. v.

(7) List of Figures. Fig 1. Research Procedure. 4. Fig 2. Basic Framework of Kite Model. 17. vi.

(8) List of Tables. Table 1: Summary of “Kite Model” Basic Framework. 29. Table 2: India Macroeconomic Summary, 2006-07 to 2011-12. 39. Table 3: Top Three Populous Country in the World - Year 2011. 40. Table 4: Number of Literates and Illiterates among India's Population Above 7 years 41 Table 5: India Religious Composition. 43. Table 6: Growth of Telephone in India. 44. Table 7: India Road Network and Density of National Highway Distribution. 45. Table 8: Indian Railway Network (gauge-wise). 46. Table 9: Indian Railway Traffic Volume. 46. Table 10: Indian Power Sector at a Glance. 47. Table 11: Power Supply Position for 2012-13. 47. Table 12: India Top 10 Total Trade Partners for Year 2011-2012. 50. vii.

(9) Chapter 1 Introduction 1.1 Research Background It has been observed that prior to World War I, the world economic power rested in the hands of few European nations. After World War II, the United States of America emerged as a major nation. The trade expansion of western capitalist countries to different parts of the world led to the economic development of less developed countries. The world economy has gradually started shifting towards Asia. Different countries and different regions have different characteristics, the proportion of these characteristics varies and the combination of their set weight shapes the unique endowments of the countries and regions. These unique endowments when applied appropriately may contribute to the advantage of the nation. To obtain maximum benefit from the limited endowments, we find the presence of international trade, products of one country complementing the wants of nations in other countries or regions. This is especially so for the developing countries where economic development has always been a major issue to be addressed. Like in the case of China and India, the rapid industrialization, export of manufactured goods, the human resource of these two countries have caught the attention of nations over the world. Over the course of time, some countries have emerged to be economically stronger and developed than other countries. Today we find that different countries have different levels of economic development, the global economy can be broadly categorized into developed, developing, emerging and underdeveloped economies. Though majority of the economic wealth lies with the developed nations, however, it has been observed that in their drive towards promoting capitalism, western capitalist countries turned their attention to other. 1.

(10) Asian countries like Japan, Korea, Taiwan, Hong Kong, and Singapore, resulting in rapid economic growth of these countries. Series of development in recent times signified the advancement of developing nations through stages of homogenization with industries from advanced nations. With globalization and liberalization, less developed countries like the Asian Tigers and BRICS (Brazil, Russia, India, China and South Africa) countries emerged and an increasing trend in the economy development and growth of these countries are observed. Post 2008 global financial crisis, following a bounce back from 2009 the pace of global economic recovery has been slowing down in 2011. World Gross Domestic Product (GDP) is expected to grow by 3.1 percent in 2011, compared with 3.9 per cent in 2010. Although the economic slowdown will affect developed and developing countries, the growth rates remain much higher in the developing economies (nearly 6.3 percent) than in the developed ones (around 1.8 percent).1 Strong growth prospects and relatively high yields are attracting flows into emerging markets while sluggish activity and damaged financial systems continue to depress flows between advanced economies. The economic growth in major advanced economies is relatively modest, with depth of recession reaching only 3 percent in 2010 while many emerging and developing economies have seen robust growth, reaching more than 7 percent in 2010.2 This brings to our attention that now is an era of opportunities for countries to rise above its existing economic state and progress further in its economic development and growth.. 1.2 Research Motivation and Objectives To become a rising economy in the global front, a country needs to consider the national development strategies to be adopted for improving economic development and growth. For 1. 2.. United Nations Conference on Trade and Development, 2011, Trade and Development Report. International Monetary Fund, 2011, World Economic Outlook.. 2.

(11) governments to better understand the world economic development patterns and hold on to the available opportunities that can boost the country’s economy, an attempt is made to understand and analyze the pattern of world economic development to discover the next economic trend. In view of the economic trend and development progress, this research aim to integrate studies on various drivers that will contribute significantly in the formulation and implementation of national strategies and policies of a country. A “Kite model” is set up in this article whereby with identification of certain key factors and its integration, significant contribution can be offered in the planning and implementation of national economic development policies and strategies of a country. The dynamics of the model and its application can be further elaborated with the case of India. The objectives of this article are as follows: 1. Create a model to guide or assist a country in its economic development. 2. Find out the factors that determine the competitive advantage of a country in this global era. 3. Understand the patterns of world economic development and find out the opportunities available for developing countries. 4. Analyze the next economic trend and find out factors that will enable a country to become the next leading country in the global front. 5. Provide suggestion for countries with regard to adopting strategies for sustained economic development and economic growth. 6. Assist governments of developing countries in formulation of national economic development strategies. Based on Kaname’s “Flying Geese Theory”, Porter’s “Diamond Model”, and Rugman’s “Double Diamond Model”, this article try to develop a new model – the “Kite Model” – and applies it to current global economy. For further illustration, the model will be applied to the case of India.. 3.

(12) 1.3 Research Procedure Select research topics. Survey relative literatures. Propose research objectives and problems. Design and modify the model. Is the model sufficient to describe and explain the objectives and problems?. No. Yes Create the Model and apply to the case of India. 1. Arrange the research outcomes 2. Consolidate, conclude and discuss the outcome of the model. Complete the thesis. Fig 1. Research Procedure. 4.

(13) 1.4 Contributions The completion of this article may provide significant contribution to certain emerging economies in successfully developing their economy and help in the formulation of a country’s national development policy. The result of this article may contribute significantly in enabling proactive governments to better understand the world economic development patterns and catch available opportunities to boost the country’s economy. It provides a source of reference for governments and assists them in planning and implementation of national economic development policies and strategies, which may propel the country’s economic development and growth. The “Kite Model” developed in the article serves to act as a guideline or blueprint for governments. Accordingly, based on the specific unique circumstances and conditions of respective countries, further modifications and adaptations can be made by the countries as required. It can be further applied in empirical studies related to a country’s national competitiveness or economic performance. Finally, the contribution of the “Kite Model” is elaborated and more clarity related to the model dynamics are provided by demonstration in the case of India.. 1.5 Structure of the Article The rest of this article is organized as follows. In the second chapter, literatures on the flying geese paradigm, competitive advantage and national development strategies are reviewed and discussed. To have a better understanding of the prevailing global economic and development trends, materials and reports related to the world economic development and growth are collected and analyzed. The model framework is discussed and a comparison is made with other model and theory in the third chapter. Chapter four elaborates the. 5.

(14) dynamics of the model and the interactions of the elements are discussed while in the fifth chapter the model is applied to the case of India. The sixth chapter is the conclusion and discussion.. 6.

(15) Chapter 2 Literature Review In this chapter, past studies related to topics of national development and growth, competitive advantages, and patterns of economic development are reviewed. This enabled the better understanding and further analysis of why certain countries are more economically developed than other countries, the changing patterns of development and the prevailing trends are observed.. 2.1 National Development and Growth The flying geese theory was first proposed by Japanese economist Akamatsu Kaname in the late 1930s. It explained the development trajectories of less developed countries and the alternating periods of free trade and protectionism that characterizes the world economy (Cumings, 1984). It is a general principle of development and refers to a situation, where along the road of development less advanced countries pursue the more advanced countries by adopting the industries of advanced countries (Kaname, 1956). Kaname’s flying geese theory is often used as a frame of reference for further conceptual elaborations and empirical explorations (Ozawa, 2001). In the 1930s, Kaname suggested that the diffusion of new products and technologies begins with import into less industrialized countries. When industries move from country to country, “homogeneous industries" are established and the structure and degree of backward linkage will replicate that of the more advanced source countries. When techniques and capital goods are imported, the process of local capital goods industries developing export capabilities and interstate trade conflicts become more common, it follows a wild geese flying pattern of successive appearance of import, domestic production, and export (Bernard and Ravenhill, 1995).. 7.

(16) The flying geese theory was presented as a way of aiding development. It explains how an undeveloped country can become developed relatively quickly by adopting suitable labour intensive industries from more developed countries. It produces first for the home market, but starts to export as soon as the industries have grown strong enough (Korhonen, 1994). Kaname (1956) in his flying geese theory, categorized countries into leading countries (advanced industrialized countries) and follower countries, newly rising countries are considered to be in a middle category. The leaders are followed by other industrialized countries in an orderly fashion based on the level of industrial sophistication and respective levels of development. The simple hierarchy is similar to the position of geese flying in the “V” formation and is not fixed for any length of time. While the leaders become tired they drop back, the strong follower countries will advance to the vertex of the formation, hence the relative position of countries changes over time. There is a general consensus about the direction of movement and a competitive relationship exists in the group (Korhonen, 1994). According to Kaname (1962), historical economic growth pattern shows that the growth in the Asian countries is brought about by advancement of the Western European countries towards the East. Where most of the Asian were colonized by the European countries, there was exchange of Asian goods for European industrial products after the industrial revolution. Asian countries became a source of raw materials and primary goods for the European nations. Capital and techniques from European countries infiltrated Asia, and basic infrastructure gradually developed. With inflow of European capital to developing countries, modern industries developed. With the import of capital goods from advanced countries and consumer goods produced in developing countries, there was change in import structure. The flying geese theory was later expanded by Kojima (1973, 2000) and applied to FDI and transnational corporation led growth. Kojima (2000) stated that, in an open economy as host countries industrialize and go through industrial upgrading and learning, the type of FDI. 8.

(17) flowing from home countries changes towards higher skills and simpler activities will gradually flow out from relatively advanced host countries to newcomer host countries. Kojima (2000) developed a theoretical model called Kojima Model I, whereby the regional transmission of flying geese industrialization has been noted as an engine of economic growth in Asia. In 1962, Kojima predicted that East and Southeast Asia would become the economic success story of the world during the 1970s. With a goal of setting up a regional system in the Pacific area, to ensure stability and economic development in the region, Kojima combined the flying geese theory with integration theory. The economic development of East and Southeast Asia was led first by Taiwan and Hong Kong (1950s), followed by Singapore and South Korea (1960s) by Malaysia and Thailand (1970s), and by China and Indonesia in the 1980s. In the mid 1980s, many countries were faced with burgeoning current account deficits and increasingly serious debt problems. In Southeast Asia governments responded by removing disincentives to investor by providing assistance and tax holidays etc. Over the 1990s, as a result of the end of the cold war and the pulling down of the “Iron Curtain”, there was change in geopolitical structure and Europe underwent major changes. The distribution of income level also underwent major changes and labour intensive activities relocated to Asia (Bernard and Ravenhill, 1995; Kalotay, 2004). Prior to World War II, interdependence in East Asia peaked and then declined until the mid 1980s. It was speculated that this is leading to a new era of East Asian regional integration. A trend has developed towards increasing the comparative advantage of the New Industrialized Countries (NICs) and Association of Southeast Asian Nations (ASEAN) countries (Bernard and Ravenhill, 1995; Petri, 2006). The overview of East Asian interdependence suggests that changes in the region’s trading intensities are related to major political or economic developments. The positive. 9.

(18) results of flying geese development can be focused on and emphasized in connection with Asia’s phenomenal growth. Until the crisis of 1997, Asian economies have experienced dynamic economic development for the past three decades. During the pre-crisis period of Asia, Japan and the rest of Asia grew in tandem and in clustered regional prosperity. Close association between changes in industrial structure and related changes in the trade structure and the pattern of FDI was demonstrated in Asia’s success story. The regionally agglomerated growth of the “East Asian miracle”, the linkage between economic development, trade, and FDI can be explained by the flying-geese theory of economic development (Petri, 2006). Evidence presented by Cutler, Berri, and Ozawa (2003) from speeds of adjustment and analysis of multi-vector system providing insights into the push-pull nature of the market recycling phenomenon suggested that, it is the following geese that act to re-equilibrate the system and it reflected the capacity of the following geese to expeditiously take up the market evacuated by a lead goose. Lloyd (1996) by looking at regional economy pointed out that in line with the flying geese pattern, FDI has led to a relocation of productive activities among the countries in a region. Opening of economies has been a trigger for putting a country or regions on a higher long term growth path. Kalotay (2004) attempted to apply the flying geese metaphor to emerging foreign direct investment (FDI) patterns in Europe and the Mediterranean, he noted that European Union enlargement is an important policy development that affected FDI inflows to Central and Eastern Europe. Carolan, Singh, and Talati (1998) adopted time series pattern to analyze economically significant changes in the pattern of trade and confirmed a sequence of movement from Japan to the four tigers (Korea, Taiwan, Singapore and Hong Kong) and then to the remaining three East Asian economies (Malaysia, Indonesia, and Thailand).. 10.

(19) Schrank (2003) applied the flying geese theory to the export led industrial development regime on the Dominican Republic, and found that the Dominican experience suggests that East Asia's political economy conquered the North American markets due to their system of coherent, capitalist states that accepted their patron's offer by devaluing their currencies, educating their populations. Ozawa (2001) pointed out that Japan’s past miraculous growth is due to its dirigiste3 catch-up regime in the early postwar period. This flying geese catch-up regime built on an institutional set up by Ozawa (2001) was effective when combined with high level of education, human capital formation, technological absorption and adaptive innovations. Petri (2006) found that the drivers of East Asian interdependencies changes over time and with the help of gravity coefficient index, measured the evolution of the intensity of East Asia’s interdependency and found that prior to World War II the interdependencies reached a height and then declined until the mid-1980s. Ginzburg and Simonazzi (2005) used the framework of the flying geese theory to study the geographical change in comparative advantages of the electronic sector in East Asia, China and USA. They concluded that increasing interdependence in an integrated area, asymmetries and hierarchical order persist across the countries. Peng (2002) pointed out that the Asian crisis has resulted in profound changes in informal integration and with weak Japanese led production networks, the Japan dominated flying geese pattern is now being taken up by East Asian economies. Kim (2010) examined the changing industrial landscape of East Asia by focusing on eight core economic regions, and found that the flying geese model appears diminishing in the geo-economic context of East Asia. It was pointed out that the flying geese theory could provide useful explanations for changing inter-regional relations. It is found that regions with 3. Economic planning and control by the state. (http://www.merriam-webster.com/dictionary/dirigiste). 11.

(20) more capacity of innovation and knowledge generation are considered to have more influence than those regions with less capacity of innovation and knowledge generation.. 2.2 Competitive Advantages Some important determinants for a nation’s global competitiveness were suggested in the single diamond model (Porter, 1990). Further important extensions to Porter’s original model were offered in the generalized double diamond model of Rugman (1998). While the variables of Porter’s diamond model are useful terms of reference when analyzing a nation’s competitiveness, a weakness of Porter’s work is his exclusive focus on the “home base” concept. Applications of Porter’s home-based diamond require careful consideration and appropriate modification (Moon, Rugman, and Verbeke, 1998). Porter (1990) did not adequately consider the nature of multinational activities. In Porter’s single home-based diamond approach, a firm’s capabilities to tap into the location advantages of other nations are viewed as very limited. Brouthers and Brouthers (1997) found that Rugman’s double diamond and Dunning’s multiple diamond are superior to Porter’s Diamond in explaining the national competitive advantage of small countries. Kojima (2005) conceived two dissimilar types of competitive advantage patterns and found that the very essence of economic development is to diversify and upgrade product or trade structure toward capital-intensive product mix. As predicted by Coxhead (2007) in the ‘‘natural resource curse’’ hypothesis, countries could be exposed to a period of slow economic growth due to rapid resource depletion and reduced industrial growth. Padmore and Gibson (1998) presented a GEM model, which is a symmetrical. 12.

(21) framework that combined dimensions of Porter’s diamond competitiveness model with explicit accounting of infrastructure and markets that are important in a regional framework, for describing and assessing the strengths and weaknesses of industrial clusters from a regional perspective and suggested a good starting point for countries to develop or reconsider their economic development strategies. Oz (2002) applied Porter’s diamond framework to Turkey and tried to identify the competitive advantages. The findings showed that though some major areas like domestic rivalry and role of government contradicts Porter’s hypothesis, the diamond framework works in a developing country. Empirical analyses by Cho, Moon, and Kim (2008) with MASI methodology demonstrated the double diamond model as a comprehensive model that measures the competitiveness of countries. They found that countries differ in competitive structures from others and to enhance national competitiveness, they are required to employ either cost strategy or differentiation strategy. A novel framework on national competitiveness proposed by Pitelis (2009) explored the role of FDI, clusters and public policy, and national positioning strategies. For superior competitiveness and catching-up to the advanced economies, the emerging and transition economies could devise strategies related to FDI and clusters that are aligned to the respective competitive advantages and competitive positioning. Alessandrini, Fattouh, Ferrarini, and Scaramozzino (2011) computed comparative advantage indicators based on India’s trade flow data. Their analysis on the structure of India’s trade from 1990 to 2006 showed that reform policies have been instrumental in enhancing the international competitiveness of industries. Zhao, Watanabe, and Brown (2009) through qualitative data collection and analysis of. 13.

(22) Dalian Software Park in China, based on Porter’s diamond model found that, the success of industry cluster is based on institutional resources including strong efforts from government, the industry cluster encourages networks among firms, integrates into the international value chain of activities, and improves international reputation. Zhang, Zheng, Liang, Yue, and Wang (2011) analyzed the industries competitive in Qingdao and suggested strategies from aspects of government coordination, industry structure, enterprise core competitiveness, and brand economic that will provide important references for economy development of Qingdao and Shandong Peninsula. They pointed out that, competitiveness of the industrial clusters and economic development will improve with implementation of strategies for important industrial development that can accelerate industrial chain extension and industrial clusters development. Based on Porter’s model, Ketels (2003) discussed that competitiveness is a key issue for policy makers in many countries and regions. The changing nature of global competition has increased pressures on many locations to design sustainable strategies to support and improve prosperity, this has fuelled the growing importance of competitiveness. From past literatures and scholarly works it is seen that competitiveness will remain a focus area for policy makers in coming years. The debates among researchers on this topic and their effectiveness on factors supporting competitiveness will be critical in providing policy makers with effective analytical tools and concepts related to competitiveness.. 2.3 Pattern of Economic Development As the patterns of development progressed, the Asian region has become more integrated and interdependent. For maintaining economic growth, sound financial structure are required for trade and FDI are considered important engines of economic growth (Dowling and Cheang, 2000).. 14.

(23) Doner (1991) pointed out that, the Pacific Rim recorded impressive economic growth in the period between 1980s and 1990s, the expansion has been striking in the East Asian Newly Industrialized Countries (NICs) of Singapore, Hong Kong, South Korea, and Taiwan. Peng (2002) provided a systematic study of informal integration in East Asia that consists of regional production networks, ethnic Chinese business networks and sub-regional economic zones. The findings showed that an interrelated pattern of regional integration in East Asia has formed due to these three informal mechanisms. Lin, Liu, Pan, and Zhang, (2006) statistically measured the evolution of government development strategies and the economic institutions in China from 1950s to 1980s. They pointed out that, to sustain non-viable industry, government in less developed countries had to distort the economic institution, and nationalize resources. Iley and Lewis (2011) discussed that the global financial crisis would have been worse had it not been for Asia (excluding Japan). The crisis had accelerated the secular emergence of Asia, and led to a further decoupling of emerging markets from the developed economies, the signals showed that for the moment at least, Asia was leading the global economic cycle. From the above works of renowned scholars, it reveals that the world development pattern is now moving towards the East. Asian countries are in an optimal position to enhance and sustain progressive economic development and growth. The ultimate question lies in the fact that whether a country or region can bring this change to their advantage or not.. 15.

(24) Chapter 3 The Kite Model Based on Kaname’s “Flying Geese Theory”, Porter’s “Diamond Model”, and Rugman’s “Double Diamond Model”, this article creates a heuristic model – the “Kite Model” – from a country’s perspective. The factors that contribute to a country’s development and growth are described, assessed and integrated. The model captures the competitive and complementary determinants of a country that integrates and extends them with Porter’s diamond model. A single country that tries to emerge and hold a strong global position does not have an easy task, the regions and groups that the country is affiliated with will determine the country’s competitiveness to a certain extent. Countries are constantly aiming to increase their economic development and growth, one such method is by obtaining or creating a unique advantage in respect to other countries.. 3.1 The Framework of the Model The “Kite Model” is created to explain the current economic trend and how the integrations of various factors when applied to a country or region can help boost the economic development and growth of that country or region. The country or region is metaphorically represented by the “Kite”. The intricacies can be explained and understood with the simple explanation of the kite and its dynamics. It is to be noted that the framework is not a one-size-fit-all policy and it only serves to be a guideline or a blueprint for governments and based on the specific unique circumstances and conditions of respective countries, further adaptations may be required. Porter (1998) argues that nations are most likely to succeed in industry segments where the national ‘diamond’ is the most favorable. The diamond has four interrelated components: factor conditions, demand conditions, related and supporting industries, and firm strategy,. 16.

(25) structure, and rivalry along with two exogenous parameters namely the government and chance. In the “Kite Model”, the diamond’s four components are distributed to different elements of the kite.. Fig 2. Basic Framework of Kite Model. 3.1 The Components of the Kite Model The “Kite Model” is composed by the internal elements of the “Body”, “Frame”, “Wings”, “Tail”, and the “String”, to fly the kite, the external element of the “Wind” is also required. These six major elements are considered to be essential for a country’s economic development and growth.. 17.

(26) i. Body The “Body” represents territory of the nation or region, it acts as the interface on which the various kite elements will connect with each other, this is to say that all the other elements of the kite work and interact on this body. The body is the vehicle that receives and responses to the pressures of the internal elements and connects with the external wind. It is also an interface that absorbs the energy from the wind and distributes to the various elements of the kite, hence determining how the kite will fly.. ii. Frames The “Frames” of the kite are the platform required for every country to support its economic development. It shapes and makes the kite stronger. A country in its flight towards economic development and growth should have solid and concrete frame, a robust frame will support the kite body and allow the body to have the strength to bear the pressure from the other kite elements, thus leading to a steady flight. The “Frames” form a cross-shape comprising of (1) tangible horizontal frame and (2) intangible vertical frame. With a proper frame only can a country aim towards positive economic development and growth. Tangible consists of the infrastructure, power, oil and gas, port, road, rail, aviation, and telecommunication etc. Intangible is the human resources, human capital, demographic dividend, skilled manpower etc. Tangible Frame The tangible frame is the basic physical and organizational structures and facilities required for the operation and functioning of the society, economy or enterprise. Infrastructure: can be termed as a set of interconnected structural elements that provide a supporting framework to an entire structure of development.4 Infrastructure is considered. 4. Oxford Dictionaries (http://oxforddictionaries.com/definition/infrastructure). 18.

(27) necessary for the functioning of a nation and for maintenance of economic, cultural and social standards of a country. Infrastructure is a fundamental factor in the development of countries and regions and their investments have supported development and economic growth (Yamamoto and Talvitie, 2011). Good transport infrastructure is necessary for regional cooperation and integration, it also helps regions that are lagging behind to catch up with developed regions. For stimulating private investments and economic development financing alternatives, infrastructure is an essential condition (Nowotny, 2005). Intangible Frame A key factor to take into considerations when discussing on the economic development and growth of a country is, the population quality, the labour skills and its capital intensiveness. Human skills and resources: are crucial in determining the competitiveness advantage of a nation (Gugler and Brunner, 2007), they play a vital role in developing and sustaining competitive advantage (Vokić and Vidović, 2008). Literatures on growth indicated that human capital, education and technology progress are effective factors on economic growth. Empirical studies in the past present that natural resource abundance has an important role on economic growth in natural resource rich countries. Despite their abundance in natural resources, when countries ignore the development of their human resources and devotes less attention and expenditures to education, they may experience lower growth rates with respect to others that promote education (Behbudi, Mamipour, and Karami, 2010). Culture: is important for economic prosperity and growth (Williamson and Mathers, 2011). Culture is the customary beliefs, social forms, and material traits of a racial, religious, or social group.5. 5. Merriam Webster Dictionary (http://www.merriam-webster.com/dictionary/culture). 19.

(28) iii. Wings The “Wings” are the balancing mechanism, they are the passive elements that maintains the balance of the kite during its flight course. For maintaining and ensuring that the kite is balanced (1) International ties and (2) Internal consensus constitute these elements of the kite. International ties International ties are the country’s relations with other countries and regions, international organizations and bodies, relations like regional co-operations, treaties and agreements like FTAs etc. From the pattern of development and recent global trends international ties between countries and regions are on the rise. Since the 19th century, there has been the emergence of international organizations (governmental and nongovernmental). Global organizations and world institutions like the United Nations, World Bank, International Monetary Fund (IMF), formed to address issues of member countries. Regional organizations like European Union (EU), Council of Europe (CoE), Association of South East Asian Nations (ASEAN), Arab League, Economic organizations like Word Trade Organizations (WTO), Organization of Petroleum-Exporting Countries (OPEC), Organization for Economic Cooperation and Development (OECD) etc. were formed for members of a region or continent. Involvements with the international organizations comes with rewards and influences as well as certain limitations and controls. Like in the case of North American Free Trade Agreement (NAFTA) which was formed for the economic benefits of the member countries. Smaller countries like the Netherlands, Greece, etc gained more substantial influence through their international memberships in organizations like the UN and the EU. A formal regional economic grouping would also provide the economies in the region with a mechanism to deal with future regional and global economic crises more effectively. It could affect the future direction of trade relationship and bilateral relationship in region. For 20.

(29) example, a regional grouping would provide a safe haven for Northeast Asian economies. In Northeast Asia, the move toward a free trade zone will inevitably bring about significant implications for regional economics as well as regional politics in the region. Allied in a formal economic bloc, Northeast Asian economies would have closer economic ties among themselves and be more able to counterbalance growing protectionism and regionalism. Regional trade grouping would strengthen Northeast Asian economies' bargaining position in any future round of global trade negotiations under the WTO framework (Cai, 2001). The formation of a Northeast Asia free trade zone would present significant psychological and physical implications to ASEAN, it would push ASEAN to attempt to incorporate its own process toward a free trade area into Northeast Asia, thus integrating them into a unified process and create a larger free trade area in the West Pacific. International economic relations between two countries depend on a number of factors, like the import export relations, investment between the countries, agreements etc.. Trade is one important factor (bilateral trade and multilateral trade). Organizations like the World Trade Organization, IMF, UN have worked in conjunctions with governments in different countries. The creation of free trade zones has promoted free trade on a global basis. Implementation of various reforms measures and signing of free trade agreements has given immense opportunities to participating countries. It is natural that firms will be more likely to invest in countries or markets that share a cordial relation with their home country. The Greece crisis that came to light in 2010 revealed tensions among EU member states with regard to the desirability of close integration (Nelson et al. 2011). Aid dependency makes countries much less vulnerable to reductions when a crisis occurs (Allen and Giovannetti, 2011). Internal consensus Internal consensus is the harmony of general agreement and opinions in a country, like 21.

(30) political and social harmony etc. It is to be noted that over dependency on international relations may pose to be an obstacle in the path of economic development and growth of a country (Cai, 2001). It can be said that the global arena is a place for international trade. Countries and regions form alliances with others for mutual benefits. To have a better hold in the negotiation and position of world trade and international relations the internal consensus and international ties of a country needs to be well balanced.. iv. Tail The “Tail” forms the basic groundwork and foundation that will determine the angle of elevation for the kite and allow it to take the flight in the correct speed and direction. It allows an economy to rise up, develop and prepares itself for the economic surge. It is the suitable angle of elevation a country or nation has to seek that can allow it to take the flight towards its national development and growth. The foundation can be categorized into capital formation and resource stock. Capital formation is the public, private and foreign investment, debt inflow, domestic capital accumulation, while resource stock can be the buy-in and domestic endowments. Domestic endowments are the resources and endowments that a particular country possesses. It can be classified as land (natural) and capital (manmade). Since the mid-1980s Northeast Asia has witnessed accelerating economic integration among its economies, with rising intraregional trade and direct investment flows there had been concurrent deepening economic interdependence among the economies in the region (Cai, 2001) Firms: Firms and institutions in a particular cluster share four critical characteristics: proximity; linkages, interactions and critical mass; there needs to be sufficient number of. 22.

(31) participants present for the interactions to have a meaningful impact on companies’ performance. Clusters have become the focal point of many new policy initiatives in the last few years around the globe (Ketel, 2004). Competitive advantage appears to be strengthened when the transfer of property-based resources is complemented by that of knowledge-based resources, and when the transfer of internal, firm-specific resources is complemented by that of external, market-based ones (Zhan et al., 2008). In the context of Vietnam, (Zhan et al., 2008) empirically studied and examined the effects of resources acquisition from foreign partners and local market-based resources on the competitive advantage of international joint ventures in transition economies. Allen and Giovannetti (2011) advocated that, the right response to crisis would be to mobilize domestic resources. Although this will require functional institutions to offset the potential trade-offs between adverse short-term shocks and a long-term perspective. Financial and Institutional System: Institutions is an important factor based on which individuals operate to effect outcomes in politics and economics (Cameron, 2004). As witnessed in 1997 with the Asian contagion, a weak banking system in one country can easily pass its problems on to others. As nations become more globalized, their financial and commercial institutions are compared with others in different parts of the world, this will have an impact on the country’s ability to raise capital and their cost of funds, which in turn will have an impact on national economic development (MacDonald, 1998). Domestic endowments are mainly the resources and outputs that a particular country possesses. A country with absence of domestic endowments finds its task towards desired economic development and growth difficult. Different countries has certain domestic endowments, if applied in the appropriate direction can help the country’s economy soar.. 23.

(32) It is observed that developed countries use more natural resources than developing countries. Over consumption of resources may lead to its depletion and create an excess of demand over supply, thus tilting the balance of advantage towards countries that can exploit and provide these resources, like in the case of OPEC. Resources: come under domestic endowments, they may be tangible or intangible resources. Land and capital can also be categorized as resources. Land includes all natural resources from the site of production and sources of raw materials. Capital consists of man made goods or means of production (machinery, buildings, and other facilities) used in the production of other goods and services, paid in interest. Wise usage of resources can lead to economic growth, wealth creation, prosperity, quality of life and sustainability. Clusters: differ in many dimensions like the types of products and services produced, the locational dynamics subjected to, their stage of development, and the business environment surrounding them (Ketels, 2003). Porter (1998) defined clusters as “geographically proximate groups of interconnected companies and associated institutions in a particular field, linked by commonalities and complementarities”. As a leverage point for action, there has been growing interest in clusters, the absorptive capacity of firms in a cluster is greater than that of dispersed firms and hence we find that clustering is likely to increase the beneficial effects of FDI (Ketels, 2003). Foreign investments: Gugler and Brunner (2007) combined Porter’s approach with works accomplished by international business economists and confirmed that FDI can be a source of competitiveness and in particular the role of clustering on the absorptive capacity of the host state. Market and Investments: Market characteristics of transition economies serve as an imitation barrier turning property-based resources into sources of sustainable competitive advantage (Zhan et al., 2008). It has been noted that growing economic integration in. 24.

(33) Northeast Asia has been driven by market forces market forces (Cai, 2001).. v. String The “Kite” is tethered with a “String” that serves to govern and control the direction of the kite. It is the control mechanism that monitors and guides the kite body’s direction. With changes in one element, the string will have to monitor the interaction of the other elements and accordingly adjust them to allow a steady and smooth flight in the economic development and growth of the country. A country in its move towards economic growth needs adhere to certain controls and guidelines, governance and government regulations of the country play a decisive role in keeping the kite flying and in controlling the other elements. The “String” is considered as the policies and strategies that are used to govern a country, with respect to the country itself or to its external environment. Laws and regulations are also categorized under the string. .A country without any government finds the task towards economic development and growth tenuous and difficult. Countries are constantly working towards economic development and growth, but sometimes it is too rapid or too slow, that is to say the desired rate of economic development and growth is not achieved. Government is the essential part of every country and governance plays an important role in controlling the other elements. It is required to maintain the basic order of activities within a country. The effectiveness in the execution and implementation of policies and regulations is crucial in determining how fast and steadily the economy move towards the desired level of economic development and growth. Governance: “Governance" is what a "government" does. It is the act of governing and relates to decisions that define expectations, grant power, or verify performance. It consists of either a separate process or part of management or leadership processes. It is difficult to. 25.

(34) achieve good governance in its totality and very few countries and societies have come close to achieving it. However, to ensure sustainable human development, actions must be taken to work towards making it a reality. The World Bank defines governance as: the exercise of political authority and the use of institutional resources to manage society's problems and affairs. The Worldwide Governance Indicators project of the World Bank defines governance as “The traditions and institutions by which authority in a country is exercised”.6 Major donors and international financial institutions are increasingly basing their aid and loans on the condition that reforms ensuring "good governance" are undertaken. Good governance assures that corruption is minimized, views of minorities are taken into account and that the voices of the most vulnerable in society are heard in decision-making. It is also responsive to the present and future needs of society. It is participatory, consensus oriented, accountable, transparent, responsive, effective and efficient, equitable and inclusive and follows the rule of law. Kaufmann (2004) suggested strongly that governance and corruption is a major constraint to development, to investment climate, and to competitiveness of most emerging countries. Policies: Policies can be defined as the course or method of action selected in light of certain given conditions to guide and determine present and future decisions. It is the high-level overall plan that embraces general goals and acceptable procedures. This is especially so for the governmental body.7 The connection between government policies and economic growth has recently received considerable attention. Policies differ across countries and there is also significant variation over time within countries. We can consider policies to be a starting point for 6. United Nations Economic and Social Commission for Asia and Pacific (UNESCAP ) http://www.unescap.org/pdd/prs/ProjectActivities/Ongoing/gg/governance.asp 7 Merriam Webster Dictionary (http://www.merriam-webster.com/dictionary/policy). 26.

(35) government to take a course of action and it is used by the government to address wide range of issues that affects real life.8 Lack of persistence in policies is likely to decrease growth (Hopenhayn and Muniagurria, 1996). For economic development and growth, policies like investment protection and liberalization are necessary but not sufficient. FDI related policies should aim at attracting activities with high added value and provide incentives to firms to locate more elements of their value chain in the country. To maximize the benefits of FDI, policy-makers are required to achieve “strategic fit” between their objectives of enhancing competitive advantages, creating employment and their means, like the types of investment (Gugler and Brunner, 2007). The economic policy environment has to be right in order to stimulate firm managers to adopt more productive technologies and effective modes of organization. Attention needs to be paid to policies for assuring that competent and risk willing potential business leaders have access to what is needed to run businesses and the policy environment should nurture learning (Nelson and Pack, 1999). Regulations: It takes the form of legal restrictions promulgated by the government and regulation by industry. Regulations are often considered as an impediment to the firm’s profits, however, it also serves as a check on preventing overexploitation and protects the interest of the nation at large. Despite the fact that social preferences and conditions in low-income countries may be quite different from those in high income countries, we should remember that environmental standards were different in high income countries and low income countries, countries with stringent environmental regulations are less likely to attract foreign investments (Weinstein, 1996). 8. NDirect - What is government policy? (http://www.nidirect.gov.uk/what-is-government-policy). 27.

(36) vi. Wind When the “Wind” flows and impacts on the kite body, the necessary lift that makes the kite fly is generated. It produces the pressure that will allow the kite to build its momentum, just like the trend that is blowing the world today. It is the external force that directly influences the body and then is distributed to the other elements of the kite. This external force is comprised by the political, economic, social, and technological climate (PEST) that is exposed to a country or nation. These various components of the wind will have certain level of impact and influence on the kite’s body, the country with all the elements ready utilizes the opportunities of the wind to develop its economy. With all the conditions and requirements fulfilled by the countries or nations, what is lacking is the timing and decisiveness. To recognize this critical moment of flight towards progressive economic development and growth, it is important to have a clear view and understanding of the global changing economic pattern and the potentials that can be harnessed to increase the country’s competitive advantages. For the past three decades, diverging patterns of capital accumulation, profit rates, investment rates, capital productivity, and technological progress of China and India showed that China and India have followed very different growth patterns. Today, India faces the challenges of accelerating growth, while China faces the challenges of balancing the need to maintain a high growth rate to generate employment and the imperative to reduce it to cool the economy (Felipe et al., 2008). The Euro zone is currently experiencing one of the largest public debt and budget deficits in the world with Greece at the center of the crisis. To avoid default, three Euro zone member countries—Greece, Ireland, and Portugal—have borrowed money from other European countries and the IMF (Nelson et al., 2011). World development pattern has shown the rising trend of East Asian countries. Between 1960 and 1996, rapid growth in most Asian economies was accompanied by a major change. 28.

(37) in their economic structure, including shifts in firms’ size and specialization sectors. The changes were part of the fundamental components of the growth process (Nelson and Pack, 1999). The kite elements are the basic framework that a country has. The proper balance and control of the elements with external forces and optimizing interactions of the elements will help propel the economic development and growth. An overview and summary of the Model basic framework and key elements can be observed from the following Table 1.. Table 1: Summary of “Kite Model” basic framework S. No. Kite Elements. Emphasis. a.. Tangible. b.. Intangible. a.. International Ties. b.. Internal Consensus. 1. Frame (Support). Solid and Concrete. 2. Wings (Balance). 3. Tail (Foundation). Angle of Elevation. 4. String (Control). Response. 5. Wind (External Forces). Changes. 6. Body (Interface). Connection. 29. Direction.

(38) Chapter 4 Dynamics of the Model Countries are constantly working towards economic development and growth, but sometimes it is too rapid or too slow, that is to say the government’s desired rate of development and growth is not achieved. Government is the essential part of every country and governance plays an important role in controlling the other elements in its domain. For all the elements to work in tandem and integrate into the country’s development process as a whole, the body of the kite comes into the picture. As the interface where the elements connect and affect each other synergizing as a whole, the body links the other elements and balanced the influences of the elements.. To be. aware of the critical moment of flight towards progressive and sustained economic development and growth, it is important to have a clear view and understanding of the global changing economic pattern and recognize the potentials that can be harnessed to increase the country’s competitive advantages.. 4.1 Operations of the Kite To successfully enable the “Kite” to fly steadily in its path towards national economic development and growth, the government first has to observe the external “Wind”. Based on the observation and analysis on the wind, preparations are made to create a robust and strong kite.. i. Wind Absorber and Elements Connector The “Kite” constructed is required to have a solid body to play as a wind absorber and elements connector. Based on the characteristics of the kite’s body, the way the other elements interact with will also differ. Basically, the kite’s flight is under a dynamic balancing condition, to manage a dynamic balance, the interaction between the elements will constantly. 30.

(39) change. For all the elements to work in tandem and integrate into the kite’s preparation process as a whole, the body of the kite is important. To take its flight towards economic development and growth, it is crucial that the body should be able to withstand the energy absorbed from the wind, be the interface for all the kite elements and create the synergy that makes the whole kite effectively, steadily and smoothly.. ii. Robustness and Support The tangible and intangible “Frames” complement each other and form a cross shape to maintain a concrete body. Creating robust “Frames” will support and strengthen the “Body”, so that the body as the vehicle can bear pressures of the wind and will connect with the internal elements. A country needs to first build itself from within, in terms of its infrastructure, skilled human resources and good legal framework. With a strong framework a country becomes more robust and finds it more desirable to move forward. A country with expected positive growth in population will have the advantage of a younger work force, but if it has serious infrastructure problem in the education segment, this human resource will not be fully optimized to contribute to the developing economy. The education policy and its effective implementation in all strata of society will be crucial. In the case of China and India, the two leading nations with the highest number of population in the world. Due to the one child policy and increase in life expectancy of the country’s population, the demographic dividend of China is expected to decline in the near future. Whereas India’s demographic dividend of the younger population may turn out to be an opportunity as well as a challenge. The overall quality of the Indian higher education system is still well below global standards and yet to show significant sign of improving. For contributing to the national economic development and growth, these invaluable human resources are to be equipped with necessary skills. This is possible through education 31.

(40) investment, quality education opportunity, and proper implementation of the education policies and action plans.. iii. Angle of Elevation and Direction To have a solid frame is not sufficient if the kite does not have the correct angle of elevation. The kite is required to take flight with the right angle, this is determined by the “Tail” which is interconnected with the body of the kite. When the angle of elevation is too steep, it will lead to short term rapid economic growth and economy burnout in the long run, as a repercussion this will often be followed by the decline in the rate of economic development and growth. Despite global climate being favourable, when the angle of elevation is too flat, the economy is unable to grow as it does not have sufficient strength nor energy to take off. Every country and nation has certain specific comparative competitive advantages, some share it with other countries and nations, while some are exclusive to it. Appropriately tapping the resources (natural and non natural) and optimizing the competitive advantages of the nation is the key to the success of economic development and growth. It is observed that developed countries uses more natural resources than developing countries. Over consumption of resources may lead to its depletion and create an excess of demand over supply, thus tilting the balance of advantage towards country’s that can exploit and provide these resources, as in the case of the Organization of the Petroleum Exporting Countries (OPEC). Foreign investments play an important role in the overall development of a country’s economy. Foreign investments enable a country to achieve financial stability, growth and development. Foreign investments brings capital, knowledge and technologies which aids in contributing to the economic growth, it improves the infrastructure of a country, provides. 32.

(41) scope for technological development in a host country, and raises the standard of living of the general public of the host country.. iv. Balancing Mechanism To ensure that the kite is balanced during the course of its flight, the mutual dynamics of the “Wings” are to be well attuned. Over reliance on any of the two wings may lead to deviation in the path of flight and lead to disbalance of the kite, if not corrected on time this may sometimes have a fatal effect. A country is required to develop its infrastructure for better economic development and growth, for this it attracts foreign investors to partner with in the development projects, this brings in foreign capital and increases the employment level of the nation, thus leading to better economic development and growth. To attract foreign investments, many countries have changed their economic stance, opening and liberalization of closed economy and reforms of government speaks for this. Sound investment climate being crucial for economic growths, countries have adopted policies targeting at specific concessions, subsidies and grants etc. for attracting more investments. International governing arrangements and agreements like EU, NAFTA, FTA, etc. are formed to increase the attractiveness for more investments. This often provides greater security, investment guarantees and incentives for member countries and creates greater credibility for foreign investors to come to the country. The formation of international organizations like the OPEC, an intergovernmental organization created with an objective to co-ordinate and unifies petroleum policies among its member countries, is another example. This enables the member countries to secure fair and stable prices, take control of the petroleum industries and acquire a major status in the pricing of crude oil on world markets. Overemphasis on FDI and neglecting internal demand may have some negative. 33.

(42) consequences during the time of a foreign crisis. However, it is observed that many countries have also tried to restrict foreign investments, this is usually due to the sentiments of the nation and often also due to the concerns of an adverse foreign economic or political influence. Especially in developing countries with history colonialism and war, foreign investments are sometimes restricted due to fear of modern day colonialism and overexploitations of resources by foreign firms. Overemphasis on the international wing will lead to a slant of the kite’s flight and sometimes have an adverse impact on the kite. The same can be said if there is too much focus on the domestic wing of the kite. A balance needs to be maintained and over a certain period, when there tends to be an inclination towards one wing it will be essential for the string to monitor and ensure that the kite balance is maintained. To avoid deviation from its path of economic development and growth, the country or region will be required to take up certain corrective measures and actions to ensure that the two wings are balanced, so that it can soar effectively and smoothly.. v. Governance Mechanism The “String” is tied to the frames and as the control mechanism of the kite, it will monitor and guide the direction of the “Body”. The “String” monitors the interaction of the elements and accordingly adjusts them to ensure a steady and smooth flight for the kite. Only then when the “String” is pulled, the synergy will take place and the whole kite will fly. When this kite faces the wind, the necessary lift will be generated and allows the kite to generate its momentum. Development of infrastructure will facilitate the economic development and growth of a country, the government policies formulation and implementation will determine how this frame can become more solid and robust. The provision of incentives like income tax holiday, single window clearance and the likes will provide a more conducive environment to foreign 34.

(43) investors hence attracting FDI. In addition to natural resources, the government of resource rich countries can consider promoting other industries, like manufacturing industry and also use this resource to attract more foreign direct investments by providing favorable climate for foreign investors. For the implementation of the projects, conditions set by the government like employment of local persons in the construction and operation of the projects will boost the employment levels.. vi. External Force and Changing Factors When the “Wind” flows over and under the kite wings, the necessary lift that makes the kite fly is generated. It produces the pressure that will allow the kite to build its momentum, just like the trend that is blowing the world today. Recognizing and understanding the international political, economic, social, and technological trends, and applying it to strengthen the advantages will determine the rise or decline of a country’s competitiveness and pick up the momentum towards progressive development and growth. A country to allow economic growth needs to observe the external forces. It creates the kite and when his kite is ready it has to fly, the components or elements are mutually interactive. Good international political relations also facilitate trade, a country that is engaged in war tends to be unstable and acts as a deterrent to foreign investors. In this era of globalization, no country can operate in isolation, a country’s political, economic and social ties with other nations will reflect on the status of a particular country’s economic status and its development and growth prospects.. 4.2 Priorities and Staging In the operations of the “Kite”, the government first observes the wind and creates the. 35.

(44) kite, it constructs the body and uses the frames to strengthen, uses the wings to balance and the tail to adjust the angle of elevation. A critical point to be noted is the fact that countries and regions differs from each other. To successfully enable a “Kite” to fly steadily in its path towards national economic development and growth, the government has to prioritize its actions and implementation. As the global economic environment evolves, governments are required to be proactive and make necessary changes to align the respective country towards a more effective economic development and growth. This is done in the forms of policies and guidelines, adopting new strategies and their effective implementation, facilitating factors that will contribute in the steady flight of the kite. Whether to emphasize more on the current international relations or creation of a better internal consensus, building upon the existing frame of the nation, the most suitable development and growth strategies to be adopted whether incremental of drastic growth strategies, that will be based on the various elements of the kite and the characteristics of the body. The priorities are to be taken into account and this will be crucial in determining whether the kite will be able to successfully take off and maintain its flight. History has shown that countries have adopted various growth strategies, like in the case of China, since the open door policy and reforms in 1978, China's economic rise over the last three decades is considered an unprecedented "growth miracle" in history. It has indisputably become an important growth engine of the global economy and a leader in international trade and investment. China adopted an incremental growth strategy, whereby focus was there on particular sectors and region of the country. The large geographical area, varying culture, religion, climatic variation within the country actually are deterrent to simultaneous uniform growth of the Chinese regions and counties, especially when it came to implementing of uniform strategies and policies. The mushrooming of numerous Special Economic Zones. 36.

(45) (SEZs) and industrial clusters since the reforms are two important engines for driving the country's growth. Strategies adopted and implemented at the incorrect time may lead to downfall or deterioration in economic condition of a country or region. In the case of the Soviet Union, which shares political attributes similar to China, and comparable to China in terms of size and regions. Though the efforts of the Soviet Union government seems promising at the time of implementation, ultimately it proved to be uncontrollable and resulted in cascades of events that was eventually brought to an end with the dissolution of the Soviet Union. The breakup of the Soviet Union can be traced back to the introduction of wide ranging reforms by Gorbachev, then president of the Soviet Union. The intense pressure for rapid economic development and over emphasis on industry in the commitment of the authoritarian centralized government’s commitment to extensive growth ultimately resulted in the government losing control over its system. The Soviet collapse is one of the most powerful demonstrations showing that the system can disintegrate if the government is too keen on propelling the country’s economy. From past historical instances, it can be determined that no doubt one of the main focus and emphasis of countries and regions across the world is economic development and growth. This actually is a learning lesson for future governments to consider that in the quest for desired economic development and growth, the various elements and factors that will assist and contribute in the development and growth have to be considered. The control and governance must be in place to ensure that all other elements are in place and adjusted accordingly and during the preparation of the kite and fine tuning the elements in line with the global wind and trends. Since countries and regions differs from each other. To successfully enable a “kite” to fly steadily in its path towards national economic development and growth, the government has to prioritize its actions and implementation.. 37.

(46) Chapter 5 The Case of India The world economy has faced challenges in recent years, i) the sovereign debt crisis in the Euro zone, ii) widespread uncertainty injected by the political turmoil in Middle East, iii) rise in crude oil prices, and iv) overall gloom spread due to the Japan’s earthquake. The ground realities of the world cannot be ignored and the global crisis can be felt in countries across the globe. The entire world is treading with caution and is working on alleviating the economy from the problems on hand. In this chapter, the “Kite Model” is applied to the case of India. The first section introduced the current scenario of India. To increase and sustain its economic development and growth suggestions are proposed for India related to the elements of priority and staging.. 5.1 The Current Indian Scenario India is the world’s largest democracy. Over the past decade, the India’s integration into the global economy has been accompanied by impressive economic growth and its emergence as a global player. According to the IMF India's gross domestic product in purchasing power parity (PPP) terms at USD 4.46 trillion in 2011 made it the third biggest economy after the United States and China. There is tremendous opportunity for India’s growth, despite the prevailing mood of pessimism in the global economy. The Indian economy has been adversely affected by the global crisis, one of the major challenges of macroeconomic policymaking is managing growth. According to the Ministry of Finance, Government of India, India’s GDP growth is likely to decline to 6.9 per cent during the year 2011, indicating a slowdown compared to preceding years (refers Table 2).. 38.