Introduction: Sustaining Competitiveness in a Liberalized Economy
Abstract:Economic liberalization is a very broad term that usually refers to fewer government regulations and restrictions in the economy in exchange for greater participation of private entities. The arguments for economic liberalization include greater efficiency and effectiveness that would translate to a bigger market share for everybody. Most first world countries, in order to remain globally competitive, have pursued the path of economic liberalization: partial or full privatization of government institutions and assets, greater labor-market flexibility, lower tax rates for businesses, less restriction on both domestic and foreign capital, open markets, etc. In developing countries, economic liberalization refers more to further opening up of their respective economies to foreign capital and investments. Three of the fastest growing developing economies today; China, Brazil and India, have achieved rapid economic growth in the past several years or decades after they have liberalized their economies to foreign capital. Many countries nowadays, particularly those in the third world, arguably have no choice but to also “liberalize” their economies in order to remain competitive in attracting and retaining both their domestic and foreign investments. In the Philippines for example, the contentious proposals for Charter Change include amending the economically restrictive provisions of their 1987 constitution.
In a rigidly controlled economics, government-approved controls create barrier that allow companies to operate with relative freedom for direct competition. These controls coupled with assistance and subsidies create sources of competitive advantage for the companies, thus it is often criticized for its inefficiency (Vachani, 1997). The total opposite of a liberalized economy would be North Korea's economy with their closed and “self sufficient” economic system. North Korea receives hundreds of millions of dollars worth of aid from other countries in exchange for peace and restrictions in their nuclear program. Another example would be oil rich countries such as Saudi Arabia and United Arab Emirates, which see no need to further open up their economies to foreign capital and investments since their oil reserves already provide them with huge export earnings.