An econ policy blog offers this interesting take on recent economic changes in Asia:

In late eighties, it looked obvious that Taiwan and Korea were doomed to stagnate as their high labor costs and strong currency could not sustain traditional export industries anymore. The embargo on China after 1989 saved them, as European investors and American investors pulled out of China, and Taiwan and Korean investors suddenly got the opportuniy to fill the vaccumm and became really good in outward FDI by serval years of learning-by-doing, before big U.S. multinational came back later finding that Koreans and Taiwaneses already built great local connections. The miracle story of four tigers is indeed a miracle in the sense that many small chance events do happen, and do change things dramstically.

But then again some exogenous factors accidentally made Korea gain upper hand recently. Although entering China almost at the same time as Taiwaneses, Koreans’ share were small because of they don’t have Taiwanneses’ language advantage, but then this natural disadvanatage forced Korean to upgrade their industries at home. In contrast, Taiwan investors are quite happy in tapping into the infinite cheap labor supply in mainland China and lost incentive to innovate. In the recent five years, however, Korea’s recoverry stun the world. Five years ago, Korean cars were jokes, now they are able to compete in high end. The scandel-riden Chaebol like Samsumg and Hyundai re-emerge in North America market selling sophsicated high end conumer electronics. In contrast, Taiwan is stilling doing OEM, still selling cheap computer products; ACER and Benq computers are more seen in Walmart.