Sunday, July 18, 2010

Trailing the Tigers

I was a bit shocked when I realised yesterday that within the area occupied by one of the tiniest states in India - Goa - you can fit in two Singapore's, two Hong Kong's, and still have more than a 100 to spare.

Before trying to figure out why, in the whole of South Asia, there isn't a single world-class port or international trading hub, a more basic question: despite their late start, how did a some countries in South East Asia Asia become so prosperous?

In his book, "Innovation in East Asia", Michael Hobday gets down to brasstacks - the firm/company level - to try and explain explain how four "Tiger economies" - South Korea, Taiwan, Singapore and Hong Kong - were able to upgrade their technology and their marketing to compete in increasingly sophisticated products and services.

He uses the term - latecomer firms - to describe manufacturing companies that face two sets of competitive disadvantages in attempting to compete for export markets - (1) they are technologically dislocated from main sources of tech and R&D (local labs & universities being poorly equipped), and are (2) dislocated from mainstream international markets & sophisticated users.

The book was written in the early 1990s, so it is a bit dated in the sense that such firms may no longer exist - local labs are stronger, and regional markets may now be more lucrative. But it does give you an idea of how the firms evolved in each of these four, newly industrialised economies (NIE's).

It was no doubt their good fortune to be sitting on the right side of the cold-war fence during the turbulent 60's and 70's. Sitting under the US umbrella not gave them a good dose of enforced political stability but also free access to Western technology, capital and markets during their formative years. The respective national governments also played no small role in getting their priorities right - basic education, healthcare, housing, and macro-economic stability.

Even then, fact is that not all American allies in East Asia prospered. Even within the four NIE's patterns of learning and development varied -


Under the military dictatorship of Gen.Park Chung-hee (1961-1979) took a leaf from the Japanese Zaibatsu strategy and promoted large corporations - the Chaebol's - especially in niche areas like heavy industries, chemical industries, steel, construction and ship-building. The national education budget shot up from 2.4% (1951) to 22% (1981), skilled craftsmen were treated on par with engineers and scientists, all of whom were exempt from the compulsory military service. As a result, companies like Samsung, which began as a trading company dealing in fruit and dried-fish,went on to become world leaders in the manufacture of dynamic random access memory (DRAM) chips.

Home-grown Champs:  Samsung, Daewoo, LuckyGoldstar


In 1949, this island, smaller than Kerala and the oldest Japanese colony in the region, found itself flooded with 2 million refugees from mainland China. Most of these newcomers were soldiers, and, fortuitously, a good number of intellectual & business elites fleeing Mao's communists with their moneybags in tow. Gen.Chaing Kai-shek's KMT preferred to encourage a multitude of small companies (SMEs) rather than large corporations.

In 1985, the average SME size was just 24 workers, aAnd they produced everything from bicycles and footwear to sewing machines and high-end electronics. To help these firms, the government set up a range of effective institutions - Industrial Technology Research Institute (ITRI), Institute of Information Technology (III), Electronic Research Services Orgn (ERSO, under ITRI).

The entrepreneurs then went on to exploit FDI to their advantage,eventually making TNCs dependent on their manufacturing skills and their highly productive engineering. Local companies reversed the pattern of TNC exploitation, often complained of in Latin America and other developing areas, by supplying low-cost OEM/ODM services, components, systems and complete products.

Home-grown Champs: Acer, Tatung, Datatech (world's largest motherboard producer), EliteGroup, Mitac, Cal-Comp (calculator champ)


Even before it parted ways with Malaysia in 1965, Singapore's Economic Development Board (EDB) took a number of steps to woo TNC's. It allowed a level of foreign control inconceivable in either South Korea or Taiwan. While setting up its first industrial park at Jurong (1961) it established training institutes and implemented a series of measures for improving education and technical training. Once the training target was achieved it recommended a large increase in wages to attract technology-intensive manufacturers, moving the less lucrative firms into a "Growth Triangle" in neighboring countries.

By 1990, more than 3000 TNCs were thriving in the city-state, employing one of the most highly educated, ethnically diverse workers, living in the second-most densely populated places on Earth.


Unlike the other three NIE's, this former British entrepot, started out with a laissez-faire approach. The leaders here knew the city born out of the earliest "unequal treaties" would return to China in 1997. So the government just let the traders and entrepreneurs do what they knew best. The big opportunities came after Deng Xiao-Ping initiated his reforms in 1978. Joint ventures (JVs) with mainland China shot-up from less than 100 in 1980 to nearly 40,000 in 1992. The neighboring Guandong province expanded at around 30% in the early 1990s fueld by investments from Hong Kong.

In Hong Kong too official support bodies did their bit - especially the Hong Kong Productivity Council (HKPC), Vocational Training Council (VTC), TDC and IDC.

Home-grown Champs: VTech, KongWah (flatscreen TVs), RJP (palmtops), Varitronics (touch-sensitive, portable hand-heldsystems)
After reading Hobday's book, one cannot help concluding that the biggest advantage these four NIE's had was that they all had pragmatic, competent leadership that shielded itself from the divisive pressures of populist electoral politics...


Hobday, Michael (1995), Innovation in East Asia: The Challenge to Japan, Edward Elgar Publishing Company, USA, 1995

Prof. Mike Hobday - CENTRIM, Brighton, UK -

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