to the change in their financial policies in the last 20 years. In the 1970's, in all of these countries, financial markets were under strict control by government through various policy measures under the so-called "low interest rate policy" and were combined with madated fund allocation $ ^{13} $ . In all nations, interest rate were under government control, and except for Taiwn, the real interest rates were continuously negative, which was a major cause of financial depression. Although the method was often on the scene, the degree of government intervention in the financial markets differed from country to country $ ^{14} $ .

In Korea some 70% of the total financial funds were under the direct and indirect control of government and were supplied to selected target industries which mainly consisted of large sized export oriented companies. In Taiwan, however, while all commercial banks were under the influence of government, government control over fund allocation was not as strong as in Korea. This is mainly because small and medium sized enterprises, which accounted for a major part of the Taiwanese economy and its export companies, were financed through unofficial markets. For ASEAN countries, while there were various types of government intervention measures and policy based lending schemes available, the extent to which these countries' governments actually influenced the fund allocation amongst industries was not so significant.

In the 1980's, financial policy in these countries drastically changed from a government interventionist policy to a “financial liberalization policy” $ ^{15} $ . In all NIEs and ASEAN nations, financial reform policies based on financial liberalization theory, initially advocated by McKinnon and Shaw in the 1970's, have been pursued by these governments. The main policy menus consisted of deregulation of controls over interest rates, business operations of financial institutions, foreign exchange transactions, etc $ ^{16} $ . Actually, under stable macroeconomic circumstances, it is observed that financial deepening has rapidly progressed in almost all countries since the late 1980's.

2.3 The Role of Foreign Capital in FWG Pattern Economic Development in NIEs and ASEAN Countries

NIEs and ASEAN nations have achieved their economic development using foreign capital as the source of extra funds covering the shortage of investment capital. For all countries, except Malaysia, the most important form of introducing foreign capital was long-term borrowings (see Figure 5). The second most important form of foreign capital was directed foreign investment, which fluctuated very widely and had different patterns for different countries. Indirect investment (i.e. portfolio investment) played a marginal role in the introduction of foreign capital, which has been increasing since the mid 1980's. For Malaysia, direct foreign investment had the major importance in mobilizing foreign capital, and indirect investment was also quite important form of importing foreign capital.

In Taiwan and Korea, where their second import substituting industrialization was achieved in the 1970's, foreign capital was imported mainly in the form of long-term borrowing. Interestingly, while in Taiwan direct foreign investment played an important role in its second import substituting industrialization, in Korea it played a quite limited role in the development of heavy industries $ ^{17} $ .

This reflects the different pattern of industrialization between Taiwan and Korea (see