working, and it is farmers that must try a new type of farming. Fortunately, Asian NIEs and ASEAN member countries abound in workers and farmers having entrepreneurship.

Elimination of vested rights and appropriate development policies

The view that government policies have been distorted by landowners' behavior for rent seeking in Latin American countries may be regarded as established. In contrast, in Southeast Asian countries excluding the Philippines, the established landowners' class did not exist. In the Republic of Korea and Taiwan, the farm reform policy has helped farmers become independent and stimulated their will to work. In addition, it has triggered the democratization of the stock market, because the payment for land purchased from landowners were made by shares of state-run companies in these countries. As a result of the Japanese withdrawal from their territory, the bulk of vested rights disappeared, and offered chances to improve their own administration systems to the Korean and Taiwanese people. In the Republic of Korea, profits earned by underground business activities by making most of the affiliations with Japanese rulers have been confiscated. In Taiwan, those who came from the mainland China have taken the helm of administration amidst the mounting tension in their relations with the Chinese government. Through the administrative reorganization, vested rights of the old establishments were eliminated, resulting in a curb on landowners' rent seeking activities in later years.

As I have mentioned before, after the improvement in conditions in an earlier stage, the Republic of Korea and Taiwan have decided to introduce foreign capital earlier on, and then switched its policy for encouraging export-oriented industries. This is the first point worthy of note. The Korean government concluded an agreement with Japan to introduce Japanese capital in 1965, though it was harshly criticized as humiliating. Without this agreement, the Pohang steel mill would not have come into existence, and the Republic of Korea would not have been able to achieve sufficient industrialization. The foreign capital law of Taiwan has served as a model in ASEAN member countries.

The second point worthy to mention is that the two countries implemented a gradual deregulation of foreign trade while building up the domestic industry. A drastic policy like shock therapy would be effective if basic conditions enumerated by H. Myint are fulfilled. However, when the domestic production still remains insufficient, a lift of curbs on foreign trade would incur a danger of collapsing the domestic industry. In fact, sugar refining, textile, and other industries in Thailand crumbled after the conclusion of the Bowring Treaty by the then Thai government with Great Britain in 1855. In Korea and Taiwan, a smooth switch from industries for import substitution to export-oriented industries accompanying a gradual deregulation of foreign trade has paved the way for industrial development.

## Economic fundamentals as a pull

Foreign capital will not enter any country where conditions to accept it have not yet been established. The appreciation of the yen beginning 1985 stimulated Japanese companies to shift their production to foreign countries. This trend was accelerated by such an internal factor as a labor shortage. On the other hand, there are factors pulling foreign capital in Asian NIEs and ASEAN member countries. In these countries, economic fundamentals