capital may play the same role, even if domestic capital accumulation is not enough for such investment and local capitalists have not grown enough to carry out such investment. In that case, however, it would be necessary for the government to take appropriate measures for inducing foreign capital. The point in common for both Asian NIEs and ASEAN member countries is that they decided to accord preferential treatment toward foreign capital early on, and took measures for facilitating the introduction of foreign capital.

Taiwan concluded an agreement with the United States to encourage the introduction of American capital into Taiwan in June 1952. In July 1954, the government established an ordinance for facilitating foreign investment. It was to guarantee legal equality to foreign companies, in addition to income tax relief. In terms of taxation, foreign companies could enjoy greater privilege than local companies did. Then, in September 1963, Taiwan decided to adopt the single exchange rate system, intending to promote industrialization with foreign capital.

In the Republic of Korea, the government took preferential measures toward foreign capital in January 1959, but it did not work well due to the political disorder resulting from student riots which broke out just after the government decision. The government intended to foster industries for import substitution in its first five-year economic development program beginning 1962. At the same time, it implemented an emergency monetary reform by enacting an act for facilitating the introduction of foreign capital. At that time, Korea began to export labor-intensive industrial products such as plywood and wool sweaters as a national policy. Then, with emphasis placed on the development of heavy industries, the government enacted laws for fostering such industries as machinery manufacturing and shipbuilding.

The great difference between Korea and Taiwan lies on their attitude toward foreign capital. Korea placed stronger emphasis on loans and technology transfer from abroad than on direct foreign investment, intending principally to foster national capital. In contrast, Taiwan did not decline direct foreign investment. Despite such a difference, both countries have succeeded in industrialization pulled by a steady increase in exports.

The second important factor is entrepreneurship. Industrial groups in Korea have made it a rule to develop the whole gamut of industries. Almost all of these groups have tackled the development of heavy industries, competing with one another. They have tried to enter the international market in line with the competition in the domestic market. In Taiwan, entrepreneurship is found even among minor enterprises. They have increased productivity in consideration of export of their products, while introducing foreign capital.

ASEAN member countries have followed suit. Each of them has established a law for facilitating foreign investment, modeling upon Taiwan's foreign investment law, and accorded various privileges to foreign enterprises coming to do business there. Many companies which had been imported consumer durables from a foreign country have set up firms jointly with their foreign partners to manufacture these products. It is important to note that the government of these countries has put a curb on import, or raise the custom tariffs while giving privileges to foreign capital. Such a typical import substitution policy has helped them lay foundation for industrialization, resulting in growth of export-oriented industries.

It is said that most of Thai capitalists are overseas Chinese who merely own commercial