Growth in Asia, its roots and implications

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".