Posts Tagged ‘asia’
Youth are our literal future.
I just came back from TED India in Mysore, and I saw examples of how Indian youth, using the array of mobile communications, Internet, social networking tools etc available, have been able to build businesses and also fulfill their social responsibilities. In their own way, they are pushing forward their vision of a new India.
How much does the leading edge of youth tell us about the future? In Singapore’s case, what does the leading edge of youth tell us what to expect of Singapore’s future? Futures Group just completed a study that I’ve posted in greater detail which you can download here.
How can Singapore tap on the leading edge of youth of Asia to help them fulfil both their career and social aspirations? What are their commonalities? I may not have articulated so explicitly before, but I believe that the city/nation that is able to tap on the creative energies of Asia’s leading youth stands in good stead to create a vibrant future.
Invented by Professor Josh Silver, the Adspecs are the first (and currently only) available self-adjustable glasses that allow the user to tune their glasses to their eyes. To change the power of the lens, the user turns the wheels on the syringes on the arms to pump more or less silicone oil into the lenses (which are simply two flexible membranes, protected by a hard plastic layer), changing their shape. When done, the user simply tightens the screws on each side of the frame and cuts off the syringes and tubing – transforming the Adspecs into a normal pair of glasses in a few minutes! This is great for countries with not enough optometrists. Prof Silver’s goal is for Adspecs to reach a billion of the world’s poorest people by 2020.
Paul Romer spoke at TEDGlobal on his new idea of ‘charter cities’. Charter cities are catalysts for economic development as they are the appropriate arena for new ideas (villages are too small and nations are too big). Economic development not only involves technologies (a main emphasis of Romer’s theories); it also involves rules. Charter cities are the ‘greenfield’ sites where new rules are implemented. As they succeed, cities nearby will become influenced and development will spread. Just as Hong Kong was a charter city which influenced Shenzhen and other cities, Romer proposes charter cities in Guantanamo Bay, Cuba (calling Canada to take a partnership there) and throughout Africa. Singapore’s experience complements Romer’s theory perfectly. I caught his attention with the idea of a TEDxCharter Cities to take these ideas further and encourage bottom-up discussion about the concept and its application. Something to think about…?
The world wealth report 2009 from Cap Gemini is out, download here.
Excellent article from Business Monitor on Asia’s long term challenges. How can one jump the chasm from high growth developing country to high growth developed country? Most end up as low growth developing country … Thailand comes to mind. This is my personal view, and it is not popular, that I think a society needs a high degree of coordination to go through the tumultous transformation needed to jump the chasm. Premature introduction of elections, widespread economic illiteracy is just the beginning of the unraveling.
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Asia’s Long-Term Challenges – No Easy Fixes
BMI View: Beyond the economic downturn stemming from global financial turmoil, Asian nations face significant structural challenges that they must overcome if they are to progress to a higher level of development. Success cannot be taken for granted. (21 Oct 2008)
The rise of Asia as the world’s future economic power centre has largely been taken for granted, and this has led to tremendous investment inflows into the region. Indeed, the euphoria has become so powerful that many are predicting that China and India will each overtake the US in terms of GDP by the 2040s. While BMI is certainly positive towards the region, we are outlining eight key structural challenges that economies need to overcome if Asia is truly to dominate the 21st century.
Asia’s economies are still heavily geared towards exports. While the proportion of net exports to GDP is low, due to significant imports, exports typically account for more than 40% of individual countries’ GDPs (more than 70% in Thailand and Vietnam). This reflects decades of policies that favoured national development through industrialisation and manufacturing, especially of low-cost goods that could be shipped to developed markets. Although Asia’s domestic demand has risen substantially, as incomes have risen, even emerging Asia’s two most developed states, South Korea and Taiwan, are heavily reliant on manufactured goods exports for their growth. Indeed, even Japan is still geared towards exports, albeit from offshore factories. This partly reflects Asia’s traditionally high savings ratios (which limit consumption). In most emerging Asian economies, stronger exchange rates should eventually ‘rebalance’ economies as exports become less competitive and foreign imported goods become cheaper. Furthermore, the rising number of ‘middle class’ citizens points to an explosion of consumption demand once per capita GDP exceeds around $5US,000 in purchasing power parity (PPP) terms. However, in many countries this could take decades rather than years.
Although Asian economies have made tremendous strides over the past 30 years, much of this was done through manufacturing, mainly of existing products such as textiles, cars, steel, and electronic goods. The region’s leaders, Japan and South Korea, have both become high-tech powerhouses, and have come up with significant new innovations, ranging from consumer electronics to robotics and biotechnology. However, many of the ‘next big things’, such as the internet revolution, were started in the US, and the US has taken the lead in a number of next-generation consumer goods (e.g. iPod, iPhone). Moreover, the American business model is more geared towards start-ups, which provide a channel for new ideas to be turned into tangible products. Thus, the challenge for Asia is not necessarily to spend more on R&D, but to ensure that what it spends gives more ‘bang for its buck’. Although Japan and Korea have taken big steps forward, both will have to keep up with the US, which has successfully recruited talent from Asia into its universities. However, we see a risk that the US may have shot itself in the foot by tightening visa procedures following ’9/11′. In time, the next Bill Gates and Google may come from Asia.
Asian economies also face the possibility of getting caught in the ‘middle income nation’ trap, that is to say, economic growth rates and the speed of development may slow sharply at a time when per capita GDP is still somewhat low by Western standards – the G-7 average was around $45US,000 in 2008. Generally speaking, as countries become richer, GDP growth slows. This is natural. However, we are already starting to witness slowing growth in countries that are still relatively poor. A good example is Thailand, which has had difficulty lately sustaining 5.0% growth rates – a performance attained by South Korea in recent years – despite the fact that it is much less developed than Korea. Thailand’s per capita GDP was $4US,400 in 2008, whereas Korea’s was $26US,000.
Furthermore, even as per capita incomes in Asia rise, they will still lag those of the US, Japan, and Western world by a long way. In Asia ex-Japan, only Singapore and Hong Kong have come close to matching G-7 income levels. Yet Singapore and Hong Kong are both city-states, and are thus anomalies in the region. Elsewhere, South Korea and Taiwan are closest to the G-7 in terms of per capita incomes, especially when adjusted to reflect purchasing power. Thus, the question is whether other Asian states can emulate the success of Korea and Taiwan. For the most part, this will take decades.
Asia’s increasingly modern cities nowadays look more advanced than many places in the developed world, in terms of architecture, urban street design, and roads and railway systems. However, this masks the fact that the countryside is often decades or even centuries behind the cities in terms of living standards and wealth. In addition, it should be noted that Asia is still far less urbanised that North America, Europe, and even Latin America. While the urbanisation of Asia through migration to the cities – or the expansion of cities to absorb surrounding rural towns – promises to be a major driver of long-term growth, governments will need to ensure that rural dwellers are not left behind. Indeed, one reason why former Thai premier Thaksin Shinawatra remains popular is because of his policies geared towards helping farmers and other rural dwellers.
The urban-rural divide threatens to become even more urgent in continent-sized countries such as China and India, where hundreds of millions of people live in the countryside and have not seen the benefits of growth in the big cities. Rural unrest in both countries threatens to become a major political issue.
Much as been made of how Asian countries’ demographic profiles will boost growth for many years to come. Essentially, expanding and youthful populations are considered conducive to economic growth because they entail maximum workforce size, minimum dependency ratios, and high demand for goods and services. Although BMI generally subscribes to this argument, we should point out that demographics are a double-edged sword. In order for countries to reap the rewards of their demographic profiles, they need to ensure that their economies are creating enough new jobs to absorb the workers. Otherwise, expanding and youthful populations will foster more unemployment and potentially political unrest. It could be argued that a growing population will in itself lead to more jobs (since there will be a greater demand for goods and services), but we believe that this is an insufficient strategy for most governments to rely on. In the case of the Philippines, around 10% of the population work abroad, and send home billions of dollars in remittances each year. While this is a major booster of the economy, the fact is that a truly healthy economy would be more able to create sufficient and attractive employment opportunities at home.
Overall, it should be recalled that until relatively recently, countries such as India and the Philippines have been urged to reduce their birth rates, lest their rising populations put too great a strain on limited economic resources. Looking further back, the historian Fernand Braudel has argued that the over-abundance of manpower in China was the main reason why China did not develop machines in previous centuries.
Immature Political Systems
Despite democratisation (to varying degrees) in Bangladesh, Indonesia, Malaysia, Pakistan, the Philippines, South Korea, Taiwan, and Thailand over the past 20-25 years, the political systems in Asian countries remain somewhat immature, which is why we have seen military coups in Bangladesh, Pakistan and Thailand, a ‘people power’ uprising in the Philippines, virtual one-party rule in Malaysia, and mass public protests elsewhere. Given that government policies are still important to growth, sudden changes of government or threats thereof can disrupt economic activity and scare off investment. Again, Thailand is an example, and we are now almost three years into a cycle of instability that has constrained economic growth and led to stock market underperformance. The new prime minister is already the fourth since 2000, and may not last that long.
However, the biggest political risk in Asia, and potentially in the world, ultimately stems from the uncertain evolution of China. China is increasingly anomalous in that it is the only major economy that is not yet a democracy. In 1987, China’s paramount leader Deng Xiaoping spoke of democratisation in 50 years, which would point to 2037 as the date to watch. However, we see a distinct possibility that the government may be forced to move a lot faster than this, given that China’s rapid economic growth is bringing about tremendous social pressures without any real safety valves. Thus, the question is whether China’s eventual transition to democracy will be relatively peaceful like in South Korea and Taiwan in the late 1980s, or violent and disorderly, like in Indonesia in 1998 (which accompanied an economic meltdown).
Another key challenge for Asian countries is to ensure that economic growth translates into quality of life improvements. This is difficult to quantify, but in China and India, the rush to develop industries is leading to severe pollution, which is already taking a toll on people’s health and the economy too. Indeed, the World Bank reported in July 2007 that the combined health and non-health costs of outdoor air and water pollution for China’s economy amounted to around $100USbn a year, or 5.8% of GDP (4.3% for health costs, 1.5% for non-health). Meanwhile, even though Japan and South Korea are highly developed and wealthy, the two countries have among the highest suicide rates in the world, underscoring severe stresses and unhappiness within society.
Going forward, quality of life factors will become increasingly important if Asian countries seek to attract talent from abroad, or even retain existing talent. For example, South Korea suffers a considerable brain drain because many middle class families have moved abroad or sent their children to be educated abroad to escape the repressive ‘exam hell’ conditions and rote-learning methods of the country’s harsh education system (admittedly, gaining English fluency is also a reason). Japan, South Korea, and Taiwan are all ageing rapidly, meaning that they will need to import talented workers. So too will China in the not-too-distant future. However, this will be difficult if they are perceived as unpleasant places to live.
Finally, Asia faces the challenge of fostering regional integration. The current global financial crisis has thus far failed to produce a coordinated Asian response, with China and Japan largely acting independently, although South Korea has been urging a tripartite summit. This is rather disappointing, since Asia has more than $4US.0trn in foreign currency reserves, and could thus potentially be leading the response to the global financial crisis, which would earn it the gratitude of the world.
However, ‘Asia’ as such does not exist, since North East Asia, South East Asia, and South Asia are all culturally and economically distinct regions. Even within these regions, there are considerable differences between countries. Overall, politics, history, and economic circumstances continue to divide the region, and preclude the drift towards the unity (albeit fragile) that Europe has built through the European Union and the euro single currency.
The Association of Southeast Asian Nations (ASEAN) remains a talking shop, and attempts by Japan or China to take a lead in the region are undermined by suspicions towards the former because of its role as aggressor in World War II, and towards the latter over its geopolitical ambitions as it becomes ever wealthier. Moreover, several key Asian states – Japan, South Korea, Taiwan, the Philippines, and Thailand – remain close allies of the US, and probably value their relationship with Washington more than they do their relationship with other Asian capitals. Attempts by some conservative Japanese politicians to create an ‘Arc of Democracy’ consisting of Japan, India, Australia, the US, and others only risk undermining Asian unity.
These differences are captured in our political and economic risk ratings, with Singapore topping both categories, while Pakistan comes bottom of our political ratings, and Sri Lanka at the bottom of our economic ratings. It will be decades before these gaps are closed.
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I must say this blog has been in labor way too long. I was agonising over whether to put up a facebook group, went ahead with it, and it is stillborn. I also agonised whether to put up a facebook page, like a brand, much like my good friend Dawn Yip’s redsport.sg but haven’t yet come to any good conclusion. But I think much like ducklings follow the mother duck, so a well formed blog would then guide the facebook page, one informs and forms the other. So let’s see how this goes.
Oh btw, these are my thoughts on many many matters, and they sometimes would not make sense, or be coherent, and they will be contradictory, sometimes they will waffle and hide in grey ambiguity, but they generally are my thoughts on the future. I make no apologies for that.
In an earlier post, I had mentioned in passing I did not realise there was such a gulf in perceiving the future. I understand a lot better now why, and I get on a deeper gut level what Kishore Mahbubani mentions in his books that two different nations can see the same issue and come up with completely different approaches. That created a niggling want for me to write on how we see the future here in Singapore. It will be different from that in the USA, China, Japan and India. It is from a more vulnerable perspective if you will. Small nations tend to be like that. What got me pissed off was a book written from an Australian perspective on Asia’s future shocks, where different facts of Asia’s future were woven together to form a rather negative reading of despair and gloom. I think it’s time we write out what we see our futures can be like. And so here we are.