The Republic of Korea, Singapore, Hong Kong, and the ROC are now Asia's "Four Little Dragons." But who has the greatest chance to be tomorrow's "New Japan"

If the exchange rate reflects a nation's economic strength, then judging from recent exchange rate fluctuations, the ROC is the most qualified candidate.

Since the September 22, 1985 decision by the U.S., Japan, the United Kingdom, France, and West Germany to jointly intervene and force down the exchange value of the U.S. dollar up to October of this year, the Japanese yen has risen 62 percent against the dollar. At the same time the NT dollar has risen 31 percent while the currencies of the other three "Little Dragons" have fallen further behind.

The rise of the yen began fourteen years ago. Besides this recent period, the yen also sharply appreciated against the dollar in 1978 and 1980. In the process of these appreciations, Japanese business, in order to survive, continuously strengthened administration and management, weeded out uncompetitive industries, developed higher value-added products, and invested abroad. In this way they consolidated "Japan As No.1."

The ROC has huge foreign reserves, and an ever-increasing trade surplus, and in the past year or so, under pressure from the U.S. and a rising NT dollar, has closely followed in Japan's footsteps. From the example of Japan, is the rise of the NT not a chance for the economy to be "born again"?

"This is of course the direction in which we are working. But to judge from the Japanese example that the NT should continue to rise would be unfair. . ." says Vice-Director Yeh Wan-an of the Council for Economic Planning and Development.

In his analysis, during Japan's economic miracle in the 1950's, the world economic situation was good, the price of oil was low, they were able to transfer a lot of technology from the U.S., and they had no defense expenditures.

That ten years was enough to give Japan a chance to establish itself before the rise of the "Newly Industrializing Countries." For the ROC, as it now attempts to pare off weak industries and move to higher value-added products, there are many competitors at her side.

Thus, for example, Japan's move to more higher value-added products in the face of the most recent rise of the yen has opened up some market opportunities there. Though this naturally benefits the ROC, still, in competition with Singapore, Brazil, Thailand, and others, the ROC can only get part of the market.

Aside from this, says one economist, "At present the world economic situation is not good, trade barriers are everywhere; and add to this that each nation protects its technology more carefully--all these factors are less advantageous for us than they were for Japan."

Though the extent of the rise of the yen since September of 1985 (62 percent) has been twice that of the NT dollar (31 percent), the established competitiveness of Japanese products has lessened the shock on enterprises there.

One advantage lies in the product mix. Of current Japanese exports, 70 percent are machine industrial products, like computers, machine equipment, cars, etc. Many are products which are still sure to sell abroad. Another is that many Japanese exports are already high value-added and high profit. When costs go up, it is easier for the businesses to absorb part to retain competitiveness.

In addition, since exports amount to 50 percent of the ROC's GNP, compared to only 13 percent for Japan, the negative impact in the former of the recent currency fluctuations far exceeds that in the latter. Also, armed with a worldwide communications network, Japanese business can engage in currency dealings to minimize the damage caused by the rise of the yen. Because the ROC has long maintained strict currency controls, entrepreneurs have had neither the opportunity nor the experience to do the same.

Nevertheless, there are signs that ROC entrepreneurs will overcome every problem, and have already begun to follow the Japanese example: expanding the domestic market, strengthening management, pushing R&D, investing in Southeast Asia. As for currency manipulation, the government has recently relaxed exchange controls, and this has become a new focus of attention.

Americans say with reason, "Taiwan is next to Japan." If Japan can overcome its currency problems, then the ROC can, too. All that is needed is time.