Growth in Asia, its roots and implications

Asia Rising; By Jim Rohwer; Nicholas Brealey Publishing, Great Britain, 1996; Paperback edition, 382 pages; Rp 55,000

JAKARTA (JP): In his lucid and provocative book, Asia Rising, Jim Rohwer has attempted to provide insightful arguments on why and how "the economic rise of East and Southeast Asia in the half-century since the end of World War II has been, if perhaps not precisely miraculous, nonetheless astounding." He also tries to answer two major questions: Will Asia continue to grow as fast as it did between 1970 and 1995, and is the rise of Asia good or bad for the West?

Along the traditional lines of economic analysis, Rohwer argues that Asia has been extraordinarily good at putting together the four elements that make for economic growth: A workforce that grows fast and puts in long hours; improvement in the quality of workers through education and training; the injection of large amounts of capital made possible by exceptionally high savings rates; and significant improvements in productivity because the countries were open to the influence of new ideas, especially those from abroad through trade, investment and technology.

The book is made more interesting as it goes beyond the mere confine of economic analysis. Rohwer argues that the success stories reflect a consistent view of how society and the economy should be run, insisting that: "Asia will accelerate the shock waves that have already begun to destroy the Western world's assumption about public policy and social organization."

According to him the Asian idea of public policy is a hands- off policy, that government should not do much to temper the hazards of life, particularly the often harsh consequences of fast technological and economic change. In this regard, "the refusal of Asia's governments to protect people is .... the main explanation of why Asian economies have grown so fast and why Asian social institutions are still so strong." Asia lets its societies and economies run away with themselves at first rather than smothering them under government directions. Asia has done well because of its system of small (though powerful) government and its strong society.

On the other hand, while Asia has a good deal to teach the West about society, it has a lot to learn about the institutions of a modern political and economic system. Its worst weakness is "its failure to move beyond the informal and the personal in its ways of doing business, of governing, and of handling relations between states."

Examples of institutional weaknesses "run the gamut from opacity of company governance to lack of political accountability to paucity of infrastructure." In his view: "the rise of modern Asia has overwhelmingly depended on judgments (business and otherwise) based on personal trust and connection" that give the advantage of speed and informality in decision-making.

Looking towards the future, he is of the opinion that Asia's trajectory over the next 25 years is unlikely to be a smooth continuation of the curve it has traced over the past 25. Rohwer is betting that the next phase "will turn out to have been greatness."

Though we may argue or even disagree on the details, basically I accept his general thesis. In a nutshell what Rohwer proposes seems to be this: Asia's success stories are not only attributable to favorable economic factors and environments, but, perhaps more importantly, strong leadership (my term) as well as strong social institutions and values. I use the term "leadership" because his terminology (authoritarian government, albeit qualified as soft or enlightened) may unnecessarily raise controversy.

Besides his insightful and provocative analysis, I think Rohwer has made a significant contribution by demonstrating eloquently that fabulous economic success in Asia neither poses a threat nor a cause for alarm to the West in general and the U.S. in particular.

In a global system of economic interdependence, Asian success and economic well-being in the West is not a zero-sum game. The Asian economic boom creates tidal waves of tremendous new businesses and markets and vast opportunities in finance, accounting for about half the worldwide growth in demand for products and services. It does, however, alter the basic relationship but in a positive direction, toward a more symmetrical and healthier economic interdependence. Hence it is in the interest of the West to maintain a relatively free, fair and open world trading system and not to create barriers and protective measures to thwart Asian economic success stories.

Strong leadership has made the success stories possible. On the other hand, economic success has also strengthened the legitimacy of strong leadership. Whether the leadership of the future will remain strong depends to a large measure on whether or not the economic momentum can be maintained. The challenge of the leadership of the future is to be able to cope with the attendant problems (including the negatives) of success, and to adjust and restructure in line with the new environment and requirements. This includes a more open, transparent and accountable system with a respect for the rules of law.

Continued success will also hinge on a geopolitical structure that ensures the maintenance of peace and stability in the region. Regional conflict should be prevented so as not to lead to disastrous consequences. Again this calls for strong leadership.

-- Sofjan Wanandi

The writer is chairman of the Gemala Group. The article was presented as a paper in a recent seminar in Jakarta called "Leadership of the Future".