IT is time for Asian countries to abandon the notion that low wage costs made them competitive - in this shrinking world those days have gone, according to Professor Michael Porter of Harvard University. Prof Porter told the 1993 Pacific Rim Forum in Bali via satellite that the old paradigms governing competition were changing. Globalisation meant the old belief that a country was competitive if it had low-cost production no longer held water, he said. Instead, the innovative and dynamic use of available resources should be seen as the key to national and business competitiveness internationally. He pointed to New Zealand which based its economy on the old paradigm and thus slipped from being the sixth-wealthiest nation to the 23rd. ''New Zealand now faces too much competition from too many other nations with lower labour and raw materials costs,'' said Prof Porter. To illustrate what governments and businessmen should be striving for, he pointed, not surprisingly, to Japan. He said: ''Under the old paradigm Japan would be classed as uncompetitive because of its exorbitant land and labour costs. ''But Japan has found better and better ways to get a sustainable competitive advantage by using technology to make a better use of space. ''The economies-of-scale paradigm doesn't hold any more . . . Today, technology is more important.'' The constant development of innovative and dynamic goods, development processes, product-positioning and marketing can supersede the advantages of being big, according to the professor's new school of thought. He said: ''Japan has done well because it has come up with new product after new product after new product. ''Today, advantage comes from specialised skills and insights. ''That is the new paradigm.'' The Netherlands provided Prof Porter with another example. Despite having a shortage of land and terrible weather, it had somehow managed to become the world's leading exporter of cut flowers, with an extraordinary 65 per cent of international market share. The Netherlands chose to dedicate exceptional effort to making sure it had got this one industry right by nursing it with the right sympathetic infrastructure. The country's banks understood the cut-flower industry so well that they were sometimes willing to accept bulbs as collateral. The Netherlands had five large institutes which did nothing but study the cut-flower industry, plus five specialised auction houses for the marketing of cut flowers. Its auction business was so efficient that other countries sent their cut flowers there to be sold. Prof Porter said under the new paradigm it was also important that the home market be sophisticated and demanding. A demanding public at home pushed companies to excellence, which in turn rubbed off internationally, he said. To illustrate his point he turned to Italy's thriving shoe industry. Its fashionable leather shoes might be the most expensive in the world, but they were probably the best and certainly the most sought-after worldwide. Per capita spending on shoes in Italy was the highest in the world, but the immaculately dressed Italians bought fewer shoes because they knew what they were talking about and insisted on quality. Another contributing factor to Prof Porter's new paradigm is strong rivalry among companies, which likewise results in excellence. Here he pointed to the German car industry, home to such great competitors as Mercedes, BMW, Porsche, Volkswagen and Opel, a subsidiary of General Motors. Prof Porter said many Taiwanese companies got it wrong. They had relocated their bases to other low-cost countries to escape escalating domestic land and labour costs rather than nurture the right competitive and innovative environment at home. This he damned as short-sighted. He said: ''They are resting on the old paradigm abroad. What they should be doing is concentrating on becoming more innovative at home. ''They should be carrying out any low-technology, labour-intensive work abroad, but keep the innovative side at home.'' It would appear many Hong Kong companies have taken the same short-to medium-term approach as the Taiwanese, failing to heed the Japanese example. Well-known Hong Kong investment and fund management consultant Mark Faber, who chaired the Pacific Rim Forum debate entitled ''Asia's Competitive Map 1993'', said Hong Kong businesses, like those in many Asian countries, suffered from ''short-termism''. Hong Kong businessmen were too preoccupied with making a fast buck to plan for the long-term future, he said. ''If there were an Olympics in making money overnight Hong Kong would win year in, year out,'' he said. Mr Faber said Hong Kong was not a land of great innovators. Too many educated Hong Kong Chinese had gone abroad as part of the pre-1997 brain drain and of those with MBAs who had stayed, virtually all wanted to be stockbrokers, not professors. He also criticised businesses for often providing inadequate staff training and their apparent willingness to follow other companies' innovative ideas rather than strive through research and development to get one step ahead of the game. The uncertainty surrounding the territory's economic future after 1997 has undoubtedly contributed to some businessmen's rather short-term corporate approach. Mr Faber said China could also do well by boosting its academic might, noting that too many of its professors lived in economic exile abroad. He said: ''China should create an environment to attract its scientists and academics back. ''Professors in China are not paid anywhere near enough. ''It is discouraging for someone who is a professor to see that you can get richer from blackmail and corruption in China than being an academic.''
