(introduction...)

Embedded within the macroeconomic story is a story about the performance of agriculture. With the exception of Singapore and Hong Kong, the rapidly growing Asian economies have relied on agricultural prosperity as a stepping stone to industrial 12 modernization. In Japan, Taiwan (China), China, the Republic of Korea and even some of the Southeast Asian countries, such as Malaysia and Thailand, thriving agricultural sector contributed in four ways: It was a source of capital and surplus rural workers, which provided nascent industries with cheap labor.

Rising rural incomes created markets for manufactured goods and services, which in turn contributed to the early spread of small and medium-size enterprises (Park and Johnston 1995).

· Agricultural intensification and diversification into cash crops established forward linkages to processing industries, which became the nucleus of a diversified rural industrial system closely tied to the urban economy.

· An efficient, outward-oriented agricultural sector became, in some cases, a significant exporter of cash crops that brought in much needed foreign exchange. Or, after a period of gestation rural industry began to produce for overseas markets, capitalizing on their lower overheads and more competitive labor markets.

In all countries in which agriculture has played a handmaiden's role, exports and rural industry entered at a later stage of development. First agriculture had to be put on sound footing by raising land and labor productivity. Labor productivity can be increased by enlarging the cultivated area or by augmenting land quality. But because good land quickly becomes scarce in most countries, gains in land productivity are mainly derived from planting high-yielding hybrids, using more fertilizers and pesticides, and practicing better water management, especially by using pumps and mechanization that facilitates multiple cropping or helps shave seasonal labor constraints.