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The Big
Slowdown
By Michael Alan Hamlin
October 18, 1999
Don’t look now, but signs are
not good that the U.S. economy will keep sucking up Asia’s
exports at the rate it has the past two years. Alan Greenspan is
finally more than just concerned about inflated stock values —
he’s alarmed — and is warning investors to be careful
of value bubbles in light of new economic data suggesting that inflation
— producer and wholesale prices grew faster last quarter than
they have for nine years — has finally reared its ornery head,
threatening the New Economy and the probable myth that its rapid
growth is endlessly sustainable.
As usual, however, the indicators
are providing mixed signals. Consumer spending has actually slowed
somewhat, but new housing starts remain robust. Wages are holding
fairly steady, but so is employment when the effects of recent typhoon
damage is discounted. Sales of PCs and processors are up, but prices
are cheaper than ever. And, it’s October, the usual voodoo
month for U.S. stocks, and so the Dow plummeted Friday 2.6 percent,
or 266.90 points. The tech-heavy Nasdaq was also hit hard.
Despite the mixed signals, it’s
clear that many of Asia’s exporters — especially those
in traditional industries like food processing, appliance assembly,
and manufacturing — are likely to find the U.S. market less
welcoming over the next 12 months. To sustain growth, Asian economies
will have to perk up other ways, and do so mighty fast.
But for that to happen, Asian governments
must help by taking the bold steps requisite to catalyzing rapid
economic growth. The threat of stalled recovery as a result of a
downturn in export growth, in fact, may actually deliver to policy
makers the essential stuff necessary to achieve the political will
to force dramatic change: an ultimatum. Unless regional economies
accelerate liberalization and institutional reform and increase
pressures on corporations to streamline operations and enhance their
competitiveness, Asia’s economies won’t do much better
— at the very best — than recovering ground lost as a
result of the financial crisis.
In the view of Asia’s beleaguered
middle- and low-income families, that’s likely to be very dissatisfying.
And the reason is obvious: Asia will sacrifice the growth of democratic
prosperity for the sake of preserving for far longer than necessary
traditional business sectors that for the most part have been slow
to acknowledge and adapt to new business and competitive realities.
A significant slowdown in the U.S.
economy must be accompanied by the implementation of radical initiatives
in Asia to sustain prospects for rapid recovery regionally. How
radical? From my perspective, the fear, for instance, that President
Joseph Estrada may actually succeed in his effort at constitutional
reform is misplaced in terms of the economic agenda he has espoused.
The real concern should be that these reforms may come too late.
It’s important in this argument
to departmentalize the arguments for and against the necessity of
constitutional reform and whether we like Mr. Estrada (or other
historically reform-minded protagonists). Neither should it center
on the historical effectiveness of foreign investment recruitment
initiatives undertaken by neighboring economies. No country’s
— and especially the Philippines’ — development strategy
should be based on historical precedents that no longer represent
present-day realities that vary dramatically from conditions 25
years ago when Asia’s first miracle began in earnest.
Instead, arguments should be concerned
exclusively with the end objective: how to clearly and dramatically
distinguish the Philippines from its regional competition as the
ideal destination for foreign direct investment. To do this clearly
and dramatically, the Philippines must make itself profoundly different
from the competition, not more of the same, or even incrementally
better. It must be much better.
So the question is not how the Philippines
seduces the most foreign investment for the least cost in terms
of protecting traditional interests — from which most Filipinos
are excluded anyway — but how radically it remakes itself into
something entirely new: an obvious winner. As Philip Kotler says
in talking of "marketing places," not all communities
can prosper in the race for development.
"There will be winners and losers.
Some places may prosper through luck, accident, or initially strong
endowments without applying strategic market planning principles.
But market forces keep changing and don’t forgive the complacent.
Places that seriously apply the principles of strategic market planning
will build a better future for their citizens and local businesses
than those places that leave their future to chance or inertia."
Or to the politically correct and
convenient.
As Asia, hopefully, begins chapter
two of its miracle, national players must acknowledge that nations
will compete constantly for advantage against each other the same
way companies within industries compete. That means that national
leaders — like their private-sector counterparts — must
be always on the lookout for new sources of profitability and revenue
growth, focus on the specific investors the country needs and wants
the way companies focus on most profitable customers, and strive
to make the cost of doing business competitive to conserve resources
for value-added development.
Whether it is ultimately seen that
Mr. Estrada’s reform agenda is sincere, the debate on national
competitiveness is strategically of vital importance. And its objective
should not be preserving or insulating freedom and opportunity,
but extending both. For freedom and opportunity to be sustained,
they must be grown. And like everything else in life, growing resources
both tangible and intangible involves change and change involves
risk. But the risk of seeking to enhance national competitiveness
through fundamental reforms in the end is far less risky than the
emotional decision to avoid it at all costs.
Yes, there will be winners and losers
in the New Asia. And it’s a pretty sure bet that the losers
won’t be those that adapt to new realities. It’ll be those
who refuse to.
Copyright © 1999 The Events
& Awards Managers of Asia and
Hamlin-Iturralde Corporation. All rights reserved.
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