Rise and revolution

PUBLISHED : Saturday, 15 January, 2011, 12:00am
UPDATED : Saturday, 15 January, 2011, 12:00am

Many people have talked about the rise of Asia. This is especially so now, post financial crisis, when prospects for the United States and Europe seem quite weak for the short to medium term.

But the term 'rise' is used by some to suggest something natural and irresistible. When we extrapolate growth graphs into the future this way, it seems smooth, even if the incline is steep.

However, there are reasons to forecast bumps and sharp edges to that growth. There are also possible disjunctures and problems that, unless surmounted, can throw Asian growth off track. This is true not only in business and economics, but also in social and political systems. Given this, rather than a smooth rise, Asia must expect transformation and indeed many revolutions from what we see currently.

The first necessary Asian revolution will be for nations to move from truce and co-existence to peace and deeper co-operation.

In the decade from the Asian financial crisis to the global financial crisis, from 1998 to 2008, a regional production system was created. Intra-Asian competition is strong, especially at the company level, but for nations and their governments, interdependence is now felt more strongly.

Yet this economic interdependence among Asians papers over many differences. Tensions between China and Japan, and China and India exist over past, present and future issues; from islets in the sea to distant mountain tops, from military build-up to accusations of unfairly subsidised trade. There are similar issues in relations between China and the Association of Southeast Asian Nations, as was seen last year when disputed claims in the South China Sea resurfaced.

As I argue in my 2010 book Asia Alone, Asia's rise is contingent and risky. We will need to further develop norms and habits of peace and deeper co-operation.

The second revolution in Asia will be how we think of our societies and our economies. The existing Asian economy emphasises export production, targeted primarily at the US and European markets. The existing Asian system also has a social outcome. Production has primarily involved and benefited certain elites in Asia, often collaborating with multinational corporations - involving professionals, the larger national companies and often the well-established elites and families - and less so the mass of society.

A revolution is needed to change these characteristics. Asians must increasingly produce for their own consumption at the national and regional level. For this to happen, companies need to refocus. From basic goods to luxury items, they need to produce for Asians, rather than in Asia.

The third revolution facing Asians is to move from production or manufacture to creation. The Asian production system, and especially China's, has been built largely by and for corporations in the developed world.

We have provided the cheap inputs of land, labour, resources and often subsidies. These corporations provided the concepts, intellectual property and industrial know-how, brands and marketing.

In this equation, not all parts are equally valued. Stan Shih, of Acer, has likened the general pattern to a smiley face: a curve on which the greatest value added is at the start and end; with creation and know-how at the start, and branding and marketing, and access to consumers at the end. Asians are increasingly going to have to learn to develop, protect and profit from their intellectual property, rather than copying and pirating others.

In the context of these three revolutions, we should resist the urge to see Asia's rise as being irresistible or smooth. It is a period of potentially disjunctive change and of increased competition.

The attention on Asian prospects, following the financial crisis, redoubles this. Before the crisis, even if Americans and Europeans and their companies looked at Asia, the region would have been just one of many areas for potential growth. Following the crisis, Asia is now the number one strategic focus for many more companies. They will resource their ambitions in Asia, with more funds, more management time and focus, and their best talent.

If Asia rises, as most people predict, they will want to be embedded in that rise, and maximise their benefits. As such, Asians and Asian companies will face even greater competition.

Everyone predicts that Asia will rise. Probably. But who will win in Asia's rise - which countries, and which companies and products? That is far less certain.

Simon Tay is chairman of the Singapore Institute of International Affairs and senior consultant at WongPartnership (Singapore). This article was first published in Singapore's Today newspaper