(FORTUNE Magazine) – IF THERE WERE OSCARS for nations, the ceremonies for newly industrializing countries might go like this: A corporate type from Singapore makes a formal speech about what an honor it is. Taiwan's man cries out, ''You really like me!'' South Korea's representatives stride four abreast to the podium, demanding, ''What took you so long?'' On his way home, Hong Kong's recipient trades the statue for stock in a textile company. In describing the national personalities involved, those fictional reactions tell you that the four old NICs are proud of their increasingly robust economic circumstances. Now listen to the way two emerging NICs, Malaysia and / Thailand, approach their newfound status. Says J. Jegathesan, whose job at the Malaysian industrial development authority is to attract foreign manufacturers: ''Please don't call us a NIC. Call us a struggling Third World country. To me, NIC is a bad three-letter word.'' Kukrit Pramoj, a former Prime Minister of Thailand, compares NIC culture with fast food: ''Mass- produced and without taste.'' He adds, with more than a touch of nostalgia, ''As a Thai, I don't want to see that happening here. I want to live as I always have, without the need for hustle and bustle.'' Clearly, for all the excitement of economic advance, Thailand and Malaysia are suffering pain with the gain. Kukrit might as well try to hold back the tide in the Indian Ocean as hold back progress. And Jegathesan, despite his ambivalence, knows that the point of his development work is to move Malaysia up the economic scale. In 1988, both countries achieved high annual growth rates -- 10.3% for Thailand and 8.1% for Malaysia -- that show no sign of slowing. Industrial output has passed that of agriculture. Per capita income is $1,850 a year in Malaysia and slightly more than $1,000 in Thailand. In Bangkok, the sprawling Thai capital, the figure is at least $2,800. South Korea roared past the $2,800 level in 1987. To U.S. and European companies, the emergence of these NICs means new markets in Asia -- and new competition. For Asia -- despite the dislocations growth causes -- it means a rising standard of living in a region still troubled with pockets of deep poverty. FOREIGN CAPITAL has flooded into Thailand like a monsoon -- much of it for labor-intensive industries such as shoemaking, apparel manufacture, and assembly of consumer electronics. Though U.S. companies once provided most of the cash, investors from Japan and Taiwan now dominate. Last year Thailand's board of investment, the agency that grants tax incentives to foreigners, approved direct investments of around $3 billion from Japan and $850 million from Taiwan. American projects totaled $680 million. For those U.S. companies with deep roots in Thailand, the booming local market has been especially rewarding. Colgate-Palmolive, which has been doing business there for 30 years, has reported annual sales gains of 30% for two straight years. Last year the company sold about $100 million of detergent, soap, shampoo, and toothpaste. Scott Paper, another longtime producer in Thailand, is so enthusiastic about the market for toilet paper and similar + products that it is doubling capacity. To meet current demand, Scott is importing paper from Canada -- and paying a 55% tariff. Much of Thailand's dynamism comes from enterprising local firms like Unicord Co., a food processor. When the company was founded 11 years ago, Thailand was way behind Japan in the world export market for canned tuna. Unicord started with used equipment from a Bumble Bee factory in Hawaii. Today it is Bumble Bee's largest supplier. Thailand has become the world's No. 1 canned-tuna exporter. The Thailand that Kukrit longs to preserve still exists. Nearly three- quarters of the country's 55 million people live outside cities -- many in small villages or in clusters of houses built on stilts along rivers and canals. In most Thai homes there is a small Buddhist shrine and often a picture of the revered King Bhumibol Adulyadej, who serves under a constitutional monarchy established in 1932. Surrounding the villages are endless fields of rice, tapioca, sugar cane, and other crops -- plowed, planted, and harvested in many areas by hand or with water buffaloes. Yet for all its seeming backwardness, agriculture is contributing to double- digit growth too. Last year Thailand was the world's No. 1 rice exporter. Moreover, a large portion of the manufacturing sector processes agricultural commodities into foodstuffs. ''Thailand hums when the farmers are making money,'' says Robert Bodden, chief of the U.S. embassy's foreign commercial service section in Bangkok. ''And right now they are making money.'' INDUSTRIAL DEVELOPMENT has been somewhat halting, partly because the Thais have never been sure how far, or fast, they ought to go. For years Thai economists debated whether the country should even try to build such capital- intensive industries as steel, autos, and chemicals. Despite such misgivings, the government has helped finance industrial development of a 75- mile stretch along the Gulf of Thailand. An alternative to congested Bangkok, the area includes huge petrochemical plants. Progress has come slowly because the Thai government does not order the country's biggest companies to carry out its plans. By comparison, says Anand Panyarachun, executive chairman of Saha-Union Corp., one of the country's few large conglomerates, the Korean government has been able to speed industrial development because of the heavy influence it has on private companies. But don't misunderstand. Anand isn't complaining; he and most Thai businessmen vastly prefer their government's ways. For anyone trying to do business in Thailand, the No. 1 problem is the country's deficiency in everything that comes under the heading of infrastructure. ''Aside from the Philippines,'' says an executive of a big American company, ''Thailand is the worst place to try to reach by phone. It can take hours.'' The port is frequently in chaos. Electricity is in short supply. Traffic in Bangkok is so bad that salesmen for Scott Paper, among many other companies, use motorcycles to thread through the bottlenecks. Says the U.S. embassy's Robert Bodden: ''What Thailand needs right now it will get five years from now.'' Malaysia has plenty of infrastructure, thanks in part to its colonial past. Unlike Thailand, which never had colonial masters, Malaysia was ruled by the Portuguese, the Dutch, and then the British, who held on until 1957. The nation that ultimately resulted included Singapore, the island city at the southern tip of the Malay Peninsula. Singapore became independent in an acrimonious split in 1965. But colonialism also left Malaysia with a legacy that makes governance difficult. The British recruited thousands of Chinese in the mid-19th century to mine tin and then brought in Indians to work the rubber plantations. Those waves of immigrants transformed what had been a land of ethnic Malays, steeped in the Muslim faith, into a multiracial, multireligious society that remains highly segregated -- and contentious. To the Western eye, Malaysia is a fascinating mix of colors and customs: Indian women draped in brightly painted saris, the traditional Hindu robe; Malay women, their faces unseen behind the purdahs worn by many Muslims; a Chinese funeral procession, the men with sack-cloth headbands followed by women and children wearing hoods. YET BEHIND THIS extraordinary diversity are deeply entrenched differences in economic power. The Chinese, who make up about a third of the country's 17 million people, have prospered as traders and merchants as they have in Thailand and other parts of the region. In Thailand, though, they are considered Thais first and Chinese second, if any distinction is made. In Malaysia it's the other way around. Indigenous Malaysians -- known as bumiputras, or sons of the soil -- are a slight majority. They are also the poorest ethnic group by far. For the past 20 years, the government has supported policies intended to improve their welfare. Companies are strongly encouraged to reflect demographics in their work forces. Bumiputras often get preferential admission to universities and receive special consideration in applying for bank credit. While the policy has broad support from business, some managers think it slows development by holding back the most dynamic parts of the economy. Even so, Malaysia might have become a NIC long ago had it more aggressively marketed what it has to offer. The country can rightfully boast of first-rate roads and telecommunications and a well-educated work force that generally has a good command of English -- thanks to the British. Until recently, Malaysia mostly waited for outsiders to discover these virtues. ''It did irritate them to see the Thais getting all that foreign investment,'' says a Western government official. But, he adds, they have been reluctant to go out and do the hard sell. ''No one will ever catch me saying anything bad about Thailand or Indonesia or Singapore,'' says J. Jegathesan, the development official. ''It demeans me.'' Lately, though, the word on Malaysia has been getting out. A brutal recession in 1985 and 1986 forced the government to step up its quest for foreign manufacturing investment to reduce dependence on commodities like rubber and crude oil. Even a diplomatic fellow like Jegathesan now lets a little implied criticism creep into his pitch. ''You can make the cheapest product,'' he says, ''but if it sits on the dock for two weeks, it becomes the most expensive product.'' Could he be talking about Bangkok's snarled port? Malaysia's success in diversifying from commodities is most visible in Penang, an island connected to Malaysia by bridge. Not far from its sandy beaches is what seems to be a suburb of Silicon Valley. National Semiconductor, Motorola, Intel, and most other semiconductor manufacturers have outposts there. National Semiconductor, which now has two plants in the immediate area, discovered the tiny hideaway in 1971. Since then U.S. electronics firms have invested $1 billion in Malaysia -- about half in Penang. Malaysia is the world's largest exporter of chips. The plants were originally assembly operations, with lines of young women putting chips on circuitboards with nothing fancier than ''tweezers and a microscope,'' as Hewlett-Packard manager Steve Cooper puts it. But that is steadily changing. Cooper says more and more of the engineering design, materials procurement, and final product testing is done by Malaysian engineers and technicians. Recently, the research and development work on an enhanced version of a Hewlett-Packard component for computer printers was handled by a team that included Malaysian engineers from Penang. The engineers spent several months in the U.S. designing the new product, an electrophotographic printing engine. It is now being produced in Penang. There is also a lot of low-tech production in Penang, like Barbie dolls and rubber gloves and condoms for the U.S. The Japanese have been heavy investors too, thanks partly to the 50% depreciation of the Malaysian ringgit against the yen over the last four years. Japanese companies make color TVs, VCRs, tape recorders, home air conditioners, and other electrical appliances in Malaysia, mostly for export to the rest of the world. Malaysia's government-owned auto company, with Mitsubishi as minority partner, has been struggling for the last few years to make an exportable car. The first Proton Sagas off the line in 1985 suffered from quality and design problems. Recently an improved batch of about a thousand was shipped to Britain for the car's long-awaited European debut. THAILAND and Malaysia still face enormous problems in their move up the economic scale. Some of the obstacles, such as the risk that America's need to deal with its trade deficit will heighten trade tensions, are common to both countries. Many Thais and Malaysians realize that the export-oriented strategies that worked for Taiwan and South Korea succeeded partly because those countries enjoyed open access to the lush American market while being able to shield key industries from competition at home. Thus, they worry about increasing protectionist sentiment in the U.S. They also think the economic integration of Europe planned for 1992 is going to make it harder to penetrate that market. Indonesia and the Philippines are also would-be NICs. As they move toward that goal they will put competitive pressure on Thailand and Malaysia. Indonesia, the world's fifth most populous country, made up of 13,600 islands extending along the equator for 3,000 miles, has been removing various regulatory barriers in an effort to attract foreign money. Despite endemic corruption and the country's towering foreign debt of more than $50 billion, the effort is paying off. Foreign investors last year made commitments of $4.4 billion, three times the level of 1987. Burdened for years with the debilitating leadership of Ferdinand Marcos, the Philippines has begun to grow again under President Corazon Aquino. The country still suffers from corruption and a stifling foreign debt of $28 billion. Other obstacles are unique to each country. In Thailand, there is the possibility that while the country is building infrastructure, other more nimble countries -- Malaysia, say -- will pass it by. But Malaysia's ethnic and religious differences could yet stifle development -- either because government efforts to mandate economic equality slow some parts of the economy or because foreign investors perceive the mix as too volatile for comfort. Still, there's good news from the entrepreneurial front lines. Take Unicord, the Thai tuna canning company. President Dumri Konuntakiet has been looking ahead for some time. After successfully entering the tuna market, his company began cultivating prawns. In the beginning, Unicord froze the prawns and shipped them whole to Japan. But Dumri foresaw that competitors from lower- cost countries like Indonesia or the Philippines could easily take what is essentially a commodity business. Now Unicord sells ready-to-eat, cooked, peeled shrimp to the U.S. Says Dumri: ''We have to move now into ready-to- serve products.'' He figures low-wage countries will be hard pressed to find the skilled workers and technology needed to do the extra processing. Kamol Khoosuwan, executive director of Union Footwear Co., which turns out 250,000 pairs of Nike athletic shoes each month at its plant outside of Bangkok, echoes the thought: ''I designed our plant so it will be on a level with Korea five years from now.'' Kamol, Dumri, and entrepreneurs like them throughout Thailand and Malaysia know that even nouveau NICs have to run to stay ahead of the crowd.