East Asia Development An Evaluation of the States and Markets of China, Japan, South Korea, and Philippines

Development in the eastern parts of Asia is marked by a considerable growth among the countries as observed in the economies of China, Japan, and South Korea. Most of the East Asian countries have moved towards constant industrial growth and implemented dynamic changes in the economies through the states and the markets, which are considered to be significant in the success attained by the countries. An observation worth noting is that, despite the success of its neighbors, Philippines remained as a developing country even after 100 years of independence from foreign colonization. A comparison of the roles that the states and the markets take in each of the four countries mentioned reveals the differences and similarities that contributed to the development, and underdevelopment, in East Asia.

The research paper focuses on the development in East Asia and the role that market and state plays. The body of the paper is divided into five sections, which correspond to a) analytical framework, b) Japans Iron Triangle, c) South Koreas development alliance, d) Chinas authoritarian State, and e) Philippines factors of underdevelopment. Each of the sections mentioned, aside from the analytical framework, utilizes relevant literature in order to demonstrate the role that markets and states take in relation to successful development among the countries mentioned. The researcher expects that the differences with regard to the roles of the states and markets are related to a number of factors related to the political, cultural, and social realms of the countries. Likewise, the roles taken are placed in constant critic because of its suitability to the economy of the country and the arguments against the existing responsibilities taken by the states and the markets.

Analytical Framework
The analytical framework for this study considers the elements of politics, culture, and society within the four countries. These three factors are among the many that could have an impact on the kind of role that the state and market would take. For the purpose of this paper, the researcher chose to examine only those which are seen to be important in relation to the experiences of the Japan, China, South Korea, and Philippines.

As shown in Figure 1 below, the social, political, and cultural variables within a country is a direct factor that affects the state and the market. Formally defined, politics is considered to be the process of resolving conflicts and deciding, as politics scientist put it in his classic definition, who gets what, when, and how (Schmidt, Shelley,  Bardes, 2009 1). In simpler terms, the term politics refers to the interplay of power and influence that is involved in the policy-making process of the State. The direction taken by politics in a country can determine the fate of the market to an extent where the outcomes of the policy-making process can alter the mechanisms of the market and the level to which the state can regulate or intervene in the affairs of the former.

Aside from politics, the society has another significant role in relation to the state and the market. The condition of the society, whether it is a conservative, liberal, and others, affects the activities of the market and the level of interaction among its agents. For example, in a society that lives on communism, the affairs of the market are restricted by common sharing and the agents of market are bound by the principles of communism. Likewise, discord within the society can have an impact on the efficiency of the market because of the lack of balance within the power relations in the country.

Lastly, the culture of the country acts as a determinant for the roles of the market and the state. In a research done by Hofstede, he found that there are four cultural value dimensions that can affect the organizations, which in this case can be extended to the market and the state for purposes of analysis. These cultural dimensions are a) individualism versus collectivism, b) power distance, c) uncertainty avoidance, and d) masculinity versus femininity (Wolfe, 1998 159). The adherence of a nation to any of the particular cultural value dimensions mentioned can greatly alter the structure of the market and the state in relation to the national culture.

At the center of politics, culture, and society are two circles corresponding to the spheres of state and market. In Figure 1 below, the market and the state are two separate entities that possess an area of commonality, which is shown through the overlap between the two circles. The market and the state are considered to be two different entities that operate within a nation. However, their independence is not absolute such that there are areas where the two overlap. For example, the state implements regulatory measures that inhibit or dictate the activities of the market. Likewise, the nature and affairs of the market can also have an impact on how the government responds to the activities of the market. For example, the local industries within a country can demand additional protection from the government especially during the initial stages of the industry or businesses within it. The government can respond through the promulgation of policies or loans that will allow the local industries to gain a stronger foothold and be able to compete with the larger players in the economy. Thus, it can be seen that both the market and the state has their own share of responsibility towards one another. The relationship between the two is seen to be two-way where both have certain areas that are shared. The interplay between the market and the state also influence the areas of politics, culture, and society in the form of development or underdevelopment.
Figure 1.
Analytical Framework for Understanding the
Role of Markets and States

Japans Iron Triangle
Japan is marked by a spur of economic growth that has started in 1962 and lasted until 1975, when it reached 100 per cent in terms of industrial production (Johnson 1982). By 1966, the industrial production of the country was already at half of what it was supposed to be in 1975 (Johnson 1982). The fast-paced economic growth in the country also faced recessions in the years 1956, 1965, and 1977 but it is shown that the government responded with innovative and creative solutions in order to combat the negative outcomes of these recessions (Johnson 1982). A great deal of literature dwells on the methods employed and the conditions that existed in Japan that allowed the country to achieve the Japanese miracle even after the devastation brought about by World War II. Nonetheless, the discussion of Johnson (1982) and Colignon and Usui (2001) shows that the relationship between the government and the private sector led to a successful developmental era for the country.

Johnson (1982) enumerates the possible explanations, provided in the literature regarding the Japanese miracle, that could have led to the success of the country today. Among these are a) the Keynesian policy implemented in 1930s by the Finance Minister at that time, Takahashi Korekiyo, b) the no-miracle argument where scholars and researchers from this field denied the existence of a miracle, and c) the three institutions that included the practices of lifetime employment system, the seniority wage system, and the enterprise unionism (Johnson 1982).  Nonetheless, a greater part of Japans success is attributed to its characteristic of being a developmental state. As opposed to the path of US, which took the figure of a regulatory state, Japan moved more towards collaboration with the market instead of just merely controlling it. A full state enterprise is not favorable for Japan as there are negative pitfalls related to corruption and bureaucratic inefficiencies (Johnson 1982). As a response, the developmental state in Japan patronized a cooperative relationship between the public and private sectors as an influence of the historical and cultural events that occurred in Japan, which is often referred to as the amakudari or the Iron Triangle. The interaction between the developmental state and the influence of the amakudari is contained in the argument of Johnson (1982 24), which states that most of the ideas for economic growth came from the bureaucracy and the business community reacted with an attitude of what one scholar has called responsive dependence. The functions of the government are oriented towards the promulgation of policies for economic growth to which the actors in the market, founded mostly among entrepreneurs, respond to in positive terms. The overlap between the market and the state in the case of Japan presents a relationship of mutual understanding and dependence between the two sectors. The mutual relationship between the two arises not because of economic reasons. Rather, the political realm within Japan dictates that there should be harmony between the state and the market in order to reap the benefits that can be derived from this relationship. The introduction of political reasons behind the emergence of a developmental state that is bound by the relationship of the private and public sector completes the equation for the iron triangle.

The iron triangle, or the amakudari, is translated as descent from heaven in relation to the time when the bureaucrats are employed under the emperor, an institution in the Japanese society that is often associated with the Gods (Colignon  Usui 2001). Later on, the senior bureaucrats moved from the public sector and joined the private businesses. The presence of former bureaucrats in the private businesses allowed for the networks of connections to be established between the two sectors. As a result, the elite, composed mainly of the top officials from the private and the public sector, controlled the policy of the government and consequently followed by the market. Through this, the market and the state are both able to dictate one another in a relationship that is perceived to be balanced and harmonious.

The existence of the amakudari paved the way for the existence of an overarching goal within the two important sectors of the country. As a part of the shared goal, the industrialization rationalization plan resulted to growth within Japan as the market and the state cooperated in improving efficiency and increasing growth within among the industries. The market moved towards identifying the best practices within the industries and the government served an active role in disseminating the best practices, with the purpose of minimizing the costs and increasing the levels of efficiency (Johnson 1982).

The roles of the market and the state in Japan can not be considered as one where either the private or public sector serves at the pleasure of the other. A great advantage seen for this kind of relationship between the public and private sector is that there is a greater chance for government to become involved in the affairs of the market without it being viewed disadvantageous for the operations of the market. The greater acceptance exhibited for the cooperation received from the government can lead to better policies as the public sector is able to step in the shoes of the private sector. The businesses serve as one of the primary actors that lead the economy of the country and it is necessary for the government to understand how it works for policies to become appropriate in the context of the problems being faced by the economy. In the case of Japan, the government is able to freely exercise its powers among the components of the market with only a certain degree of resistance from the businesses because of the integration of the goals from both sectors. Similarly, the market is able to utilize the resources and control of the government in order to create an enabling atmosphere for the market to be able to operate according to the goals they share with the government. More importantly, the shared vision of the Japanese market and state allowed for the government to steer the policies towards economic growth through the use of market forces. From the experience of the Japanese, having a shared goal gives the public and private sector a better chance at decision-making since the focus of the two are geared towards the same direction. In terms of policies, the businessmen and the government officials are able to see clearly through the same lens and allowed for decisions to be made faster as compared to when they exist as different entities with different purposes.

South Koreas Development Alliance
South Korea took a similar path to that of Japans Iron Triangle in order to achieve development in essentially the same period of growth noted for Japan. The strategy used by South Korea is termed as development alliance that involved a relationship between the state and the market. In this case, the government is represented by the bureaucrats and the market took the form of the chaebols. The chaebols are present in South Korea as the big businesses that play a significant role in the economy of the country.

The general concept of development alliance is that it is a coalition among different groups that is intended for the purpose of rapid industrialization within the country (McMichael 2004).  In certain areas, development alliance is considered as a centralized process that is concentrated on the urban dwellers as there is greater convenience seen in the provision of social services in urban areas in comparison to rural areas (McMichael 2004). Likewise, it is also used by the government as a source of political patronage that could lead to the manipulation of electoral support (McMichael 2004).

Hundt (2009) discusses the concept of development alliance in the Korean setting where the chaebols are generally considered as vehicles for plans related to economic development. In the 1980s, the chaebols have grown in strength and started to gain benefits at the expense of the state (Hundt 2009). In Korea, the general picture is that the power, within the limits of development alliance, goes back and forth between the private and the public sector. There are periods where the state gains more than, or at the expense of, the market and vice versa. Unlike the Japanese Iron Triangle, the relationship between the chaebols and the government are less collaborative.  Likewise, the government does not have as much interventionist approach in comparison to Japan.

Hundts (2009) examination of development alliance in Korea takes on five important elements a) bureaucracy, b) social pressure, c) national security, d) economic conditions, and e) globalization. First, the bureaucracy serves as the focal point of power in development alliance where the bureaucrats served as the connection between the chaebols and the state (Hundt, 2009). The dynamics of relationship between the chaebols and the bureaucrats is tied into a circular loop by the political elites, whom the chaebols consulted and are also influence by the bureaucrats through suggestions or responses for the issues that the chaebols may consult (Hundt, 2009). In effect, the political elites served as the bridge between the two and reinstated the influence of the bureaucrats among the chaebols.

Second, social pressure is also situated at the center of the government and the chaebols. Social pressures work in favor of businesses especially when there is a need for cooperation from the society. On the other hand, it can also be used by the government in order to attack businesses, especially for policies that are against the welfare of the businesses. The pressure from the public, from the experience of Korea, is used as a tool to go for or against the interest of either the market or the state. When the state needs support for a policy that is not in favor of the markets interest, the civil society enters the picture to create a balance between the two.

Third, national security has also played an important role in the success of development alliance in Korea. It can be remembered that Korea played a significant role during the Civil War that led to the attainment of Americas trust and support. The support from America  came through material resources, political support, and liberal market that allowed Korea to gain revenues from exports (Hundt 2009). The democratic ties established between the governments of Korea and America worked towards the advantage of the market. If the state adopted another course of action different from what it took during the Civil War, there is a possibility that the country will have a lesser chance in terms of trade with America.

Fourth, prevailing economic conditions at the time of the development alliance also helped as the state regained a share of its powers during the post-crisis period (Hundt 2009). The state is able to show that the market needs the intervention of the market through the industrial and financial restructuring needed after the economic crisis experienced by the country.

Fifth, the era of globalization shows that there is a lesser grip held by the state over the market as the businesses move towards international markets. As globalization reaches the country, the powers of the state remains at the national level while that of the market continue to grown in the international level (Hundt 2009). More chaebols are able to do business overseas and gain financial stability that can not be regulated or influenced by the state directly (Hundt 2009). Nonetheless, the state continues to serve as a mediator for the global and national economies by promulgating policies that place conditions related to foreign investments in selected industries.

In South Korea, the contributions of development alliance proved to be successful as the government continuously sought after the opportunities brought about by international trade. As a response to the opportunities presented by globalization, the state, under Chun Do-hwan, adopted a policy of development alliance with conglomerates (Lee 2000). In order to do this, the state utilized financial and fiscal motivations that would increase the investments of large businesses in industries that the state sees to have a great potential in terms of export (Lee 2000). The incentives came in the form of tax breaks and loans with rates that are generally lower than those offered in the market (Lee 2000).

In the experience of South Korea, it is noticed that the success of the chaebols are directly related to the success of the economy. In fact, the economic growth in the territory is attributed to the alliance of industrial powers and is said to rely on the market forces (Cheung 1998) As a result, the state creates policies that ensure the growth of the market despite the usual avoidance of the heads of state with policies that benefit the businesses (Lee 2000). The pro-business policies adhered to by the state generally move away from stringent fiscal and financial requirements for the businesses to avoid experiencing capital strikes that would have a significant impact on the state and the economy (Lee 2000). Likewise, the state receives great pressure from the businesses because of their participation in elections and political funding for the officials (Lee 2000). The list of businesses that became successful because of the development alliance in South Korea include Samsung, LG Group, and Daewoo Motor that invested in Hungary, Moscow, and Poland, respectively (Cheung 1998). The corresponding investments of the chaebols contributed to the growth of the countrys economy through its heavily reliance on the exports sector.

The development alliance formed in South Korea has interesting similarities and differences with the Iron Triangle of Japan. Both imply the roles of the markets and the states to be dependent upon one another based on cooperation and collaboration. However, the degree of cooperation between the state and the market in each of the countries are different. In Japan, the market and the state worked together to ensure that both are moving towards the achievement of shared goals. On the other hand, the cooperation in Korea entailed a symbiotic relationship where benefits derived from the relationship play an important role in the decisions made. Likewise, Korea displayed lesser hostility towards international trade than Japan (Hundt, 2009). While Japan implemented a closed-door policy, Korea has allowed globalization to reach its business sector and exploited the opportunities offered by exports and international trade. Aside from international trade, Korea also has lesser scope for ignoring social pressures in comparison to Japan. In this case, Korea is bound to respond to the social pressures exerted by the public and this affects the decisions and policies made by the market and the state. As for Japan, social pressures rank lower among the interest groups that affect the relationship between the market and the state.

America played a great role in the different paths taken by Korea and Japan, especially in terms of the extent to which they opened their doors to international trade. During the World War II, Japan and America disassembled their ties as nations and went against one another after the Pearl Harbor bombing. The series of events led Japan to distance its state and market from that of America. As a result, Japan closed its doors for international trade and focused on the local market and the industrialization of the country. Through this, the state worked more closely with the market in order to rebuild the nation during the aftermath of World War II that allowed for a healthier collaboration between the state and the market as they moved towards the completion of their shared goal. On the other hand, Korea enjoyed good democratic relations with America, which later proved to be helpful as Korean companies entered the global trade and prospered with the economic relationship formed with America. Thus, Korea gained more export advantage than that of Japan when it comes to trade with US and continued to advocate for a policy oriented towards exports. Through this, the market and the state gained respective shares of power and are able to influence the decisions of each one according to the power made available to them. From the experiences of Japan and Korea, their relationships with America during the time of war have played a significant role on their policies toward globalization and how the state and market responded to international trade.

Chinas Authoritarian State
China, often referred to as the sleeping giant, has awakened and started its journey towards economic development. The whole world became critical spectators to the economic success that the country is now enjoying. Through globalization, the manufacturing industry of China has bloomed by exporting goods throughout the globe. The low cost of labor in the country has become a competitive advantage for Chinese goods in the international market because it contributed towards lowering the price in comparison to the world rates. The economic success of the country, though rapid and instantaneous, owes much to the events that occurred decades ago. The policies that were promulgated before, under the Chinese Communist Party, helped in steering the state and the market towards its present-day status.

In the past, the state has structured its bureaucratic lines according to the organization of the CCP. The CCP, generally referred to as Party, has a great influence in the operations of the government, which includes the sphere of policy-making, implementation, and leadership. In most instances, the Party resolves the problems within the state through the leaders and the ideologies espoused through communism. As the Party controls the decision-making aspect of the state, the bargaining over economic reforms evidently passed through the respective leaders of the CCP instead of the government (Shirk, 1993). Most of the reforms related to the economy of the country required the support of the key leaders in the Party but problems started to exist in relation to their specialization. The members of the Party did not hold the appropriate economic background in order for them to make sound and appropriate decisions. In response to this, the Party allowed the bureaucracy to have a greater sense of control, which pushed them to exercise their powers in leading and managing (Shirk, 1993).

Nonetheless, the Partys contribution before and after the bureaucracys independence has remained valuable. First, the Party proposed goals for economic reform and pushed the government to comply with these goals (Shirk, 1993). The goals of the country, especially in relation to the economic sphere, are significant for formulating both short- and long-term plans for the government. As the bureaucracy depends on the Party for decisions, the imposition of a goal intended for economic reforms persuaded the bureaucracy to come up with policies that will push for development. According to Preston and Haacke (2003 188), it is the political leadership headed by ironhanded reformers of the authoritarian state that initiated Chinese economic reform. Without the pressure from the Party, the initial phases of economic reform would not have pushed through and the state remained without the economic strategies offered by the Party. Second, the Party allowed anyone from within or outside the bureaucracy to oppose the economic reforms implemented (Shirk, 1993). The opportunity for opposing the policies of the bureaucracy opens the doors for refinement and accommodation of interests from outside the state and the Party. Third, the Party served as the mechanism for removing the incompetent officials in the government and replacing them with appropriate personnel with economic backgrounds (Shirk, 1993). The Party has suffered from the inability to make sound judgments because of their lack of expertise. With their realizations of the need for economists who can plan and implement changes, they staffed the bureaucracy with the right people in order to achieve the goals that they have intended. The contributions made by the Party have shown that it served as the driving force behind the reforms but remained a bystander actively seeking change to provide an enabling environment. Nonetheless, it is still the authoritarian state that worked and implemented the strategies offered by the Party.

The state has enjoyed a strong locus of control over the society (Hui, 2005). It instigated reforms that are meant towards preparing the country for development and for initiatives towards development itself. The state developed the policies that regulated the market and enabled for the modern market society to exist (Hui, 2005). The state reformed the economy of the country through a dual approach implemented between 1978-1985 with a greater focus on the peasants (Hui, 2005). First, the state disallowed the peoples commune that led to the equal distribution of land among the peasants (Hui, 2005). Second, the state increased the prices for agricultural products and convinced the peasants to work with multiple products (Hui, 2005). The two approaches implemented are still related to the ideology found in communism where the peasants are placed in equal footing with other social classes.

In addition to this, the authoritarian state is also responsible for the policies that enabled the market to thrive in both the domestic and global markets. The state promulgated policies related to price adjustments for foreign currencies that enabled the country to gain a better advantage in exports. Likewise, it pursued a policy that encouraged the market to open up and participate in the international scene (Hui, 2005).

From the experience of China, it is mostly the state that dominated the market in order to gain economic development. The market had lesser influence over the state in comparison to Japan and South Korea. The presence of communism in China is considered as a factor that resulted to the difference between the role that the state and market played in the country. The ideologies of communism superseded because of the presence of a Party that ruled both the state and the market. The influence of the Party is the driving force that pushed the state to bring the much-needed economic reforms. The underlying political system in China, as brought about by the CCP, has created for a structure of the state that is not in equal cooperation with that of the market. Unlike Japan and South Korea, the dynamics of power is concentrated in the hands of the influential leaders in the state and the Party. There is less power given to the market in terms of influencing the policies of the state because of the presence of a larger entity that rests on the communist ideology. As a result, the market became a mere accessory to the economic reforms implemented by the state. There is a lesser degree of interaction in terms of decision-making between the two that made the state the primary actor in economic development.

Philippines Factors of Underdevelopment
The experiences of the last three countries discussed all entailed successful economic developments. The development towards economic growth all entailed efforts from the state and the market though there are significant differences in their relationship. The success achieved by the three countries is far from the kind of development experienced by the Philippines. The inability of the country to push towards economic growth, similar to that of its neighbors, poses the question of which factors affected the state and the market, which also stalled its ability to push towards a better economy.

The problem of underdevelopment in the country can be attributed to a number of social, economic, cultural, and political factors. However, the major constraint found is the inability of the state to become autonomous from the market. The bureaucracy is filled with individuals coming from the elite, which are also greatly influenced by their elite counterparts working in the market (Hutchcroft 1994). The leaders of the state are influence by the market through rent-seeking and corrupt practices that benefits both the market and the bureaucrats (Hutchcroft 1994). These corrupt practices are often in favor of personal interests held by the government officials and are not intended for public welfare. It also follows that the market is also controlled by the state through the need for personal connections inside the bureaucracy, which is very different from the formal regulatory functions of the government (Hutchcroft 1994). In effect, the success of the market depends on whether they have a strong connection with the officials of the government who can promulgate policies that are directed towards the welfare of their industry or who can make the processes faster. However, the influence of the business elites is still larger because of the presence of the members of the said class among the high-ranking positions in the government.

Rivera (1994) argues that, aside from the role that elites played in both the market and the state, the weakness of the state in protecting and promulgating policies for the market contributed to the failure of the economy to grow. Firs, there is no separation between the landlords and the merchants from the manufacturing class resulted to the inability of the country to push for industrial growth (Rivera 1994). The state failed to respond with the appropriate program for land reform in order to redistribute the wealth among the classes because of the need to protect the interests of the elites. It also happened that the landlord and merchants are present in the government, which made policy-making more difficult for the advantage of the economy. Second, the era of protectionism within the country focused the attention of the market towards the domestic market and missed the opportunity for exporting goods in the international market (Rivera 1994).

The impaired relationship between the state and the market can also be attributed to the historical and cultural roots of the country. Hutchcroft (1994) describes the historical underpinnings of the country and discusses the long period of Spanish colonization. The government during the Spanish time is the first national institution that managed the operations of Philippines as a country, which is different from the separate political institutions that existed prior to colonization. The kind of government that the Spanish adopted is one that is dependent on the hierarchical relationship between the Church and the State (Philippines Country Study Guide 2008). The parties who are able to show their allegiance to either of the institutions are given the favors that they need in order to fulfill their personal interests. Likewise, the values held by the Filipinos are adopted from their Spanish colonizers, especially through the influence of religion and the conversion of the Natives to become Roman Catholics (Nadal 2009). The longevity of the Spanish period in the country has a great influence in the subsequent years even after they interacted with other foreign countries (Tiongson 2004). Until the present time, the Filipinos still hold the values laid to them during the Spanish period that could affect the ability of the bureaucrats to manage the affairs of the state.

Indeed, the central theme of cooperation existed between the Philippine state and market. However, it has certain similarities and differences when compared with the experience of Japan and South Korea in terms of power dynamics and goals. In the Philippine experience, most of the power rests on the elite, which form a part of both the state and the market. A larger part of the influence rests on the elite class because they have the means to establish their connections inside and outside the realms of the bureaucracy in order for them to achieve their goals. More so, the sharing of power in the case of Philippines is bound by the personal interests of the elite, regardless of whether it is for the welfare of the society or not. Thus, the shared goal of the country leans towards the interest of the market than that of the state. In contrast, that of Japan and South Korea both showcased cooperative relationships between the market and the state but the interests of economic reform prevailed. Likewise, the balance of power allows the state to have a greater influence than the market.

Aside from this, the Philippines failed to take advantage of exporting goods to other countries, which is an opportunity that South Korea had during the time when the global market is ripe for international trade. However, it can be remembered that Japan also failed to open its domestic market to international trade but still succeeded. The difference between Japan and the Philippines is that the former focused on industrialization with the help of both the state and the market while the latter still had structural and political problems that made the efforts of industrialization a failure. Aside from this, the active role of the state in forming a partnership with the market ensured that industrialization from within is achieved according to the goals of the country.

Conclusion
Development in East Asia is marked by remarkable economic growths brought about by the strategies of the state and the market. The experiences of Japan, South Korea, and China taught valuable lessons in terms of the roles played by the state and the market in assuring the path towards economic growth. In contrast, Philippines have lagged behind the three countries in terms of economic development.

From the discussion above, the roles of the state and market in Japan is enveloped within the Iron Triangle that dictated the collaboration between the two. As for South Korea, the concept of development alliance allowed the state and the market to cooperate with one another as they placed their weight on one another to achieve both personal and national interests. Philippines also shared the same cooperative relationship exhibited by Japan and South Korea but the concentration of the power in the hands of the elite, together with the prioritization of personal interests, have led to a weak state that is unable to control the market and push it towards economic reforms. Lastly, China exhibited an authoritarian state the dominated the efforts towards economic development and used the market as a tool, instead of an active partner, towards achieving its desired end.

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