Exploring Asia

A major conference on Information Technology takes stock of Asia's potential and problem areas.

THE theme and the venue were made for each other, as it were. The theme was "Asia's Technology Future: Transforming Business" and the venue, Bangalore, India's high-tech capital which heralded the country's technology revolution. It was the 12th Annual C orporate Conference in Asia of the Asia Society, founded in the United States by John D. Rockefeller III in 1956 with the objective of fostering public understanding of Asia in the U.S. and communication between the peoples of America, Asia and the Paci fic.

Organised jointly by the Asia Society, Dow Jones & Co. Inc. and the Confederation of Indian Industry, the conference explored, from March 11 to 13, the impact of technology on business and society in Asia and the question whether the continent can rise t o the challenges of the New Economy and become the technology leader or will continue to serve as a manufacturing/service location for multinationals. The dominant topics were pan-Asian cooperation, China's growing strength and its desire to become a maj or software player, India's pre-eminence in the software industry and its relationship with its Asian neighbours, especially China, the downturn in the U.S. economy and its implications, the widening digital divide, and so on. Marshall Bouton, executive vice-president of the Asia Society, said that unlike previous annual conferences where broad macroeconomic policy issues relating to business were the focus, the 12th conference concentrated "on a particular ingredient of the business model".

Prime Minister Atal Behari Vajpayee set the tone for the conference when, in his keynote address, he called for a "collaborative approach to research, development and business partnership", which could create a win-win situation for all. Acknowledging th e importance of information technology (IT) as "a powerful agent of economic growth and social development" Vajpayee said that India would "embrace technology even more comprehensively and confidently" as it modernised its agriculture, industry, services and governance.

But are Asian governments and businesses on the ball? Change has been slow. For example, the idea of doing business through the Internet has not caught up in the region. Delegates referred to the tendency of Asian companies to try to appear to be up-to-d ate by creating non-interactive websites. These sites offered static information that could only be read but could not help carry out actual business. This is in sharp contrast to the global trend where competitors are increasingly doing business through e-commerce.

A recent survey by Goldman Sachs involving 70 companies in 12 industries in 11 Asian countries showed that companies could expect to save 5 to 30 per cent of operating cost by adopting e-commerce practices. This level of saving is crucial for Asian com panies if they are to retain the cost advantage they have enjoyed traditionally owing to lower labour costs. But the hurdle they face in switching to the efficiency of e-commerce is what is called guanxi, the Asian emphasis on personal connections . Family-owned conglomerates in India, South-East Asia, Hong Kong and Taiwan, closely knit business syndicates such as the keiretsu in Japan and the chaebols in Korea, and government-owned enterprises in China prefer the old system of doing business through personal contacts rather than through means such as the Internet.

With a population of over three billion, which is more than half the world population, Asia has a huge market, theoretically. According to the International Tele-communication Union, by 2010 more than 50 per cent of the mobile phone users in the world wi ll be in the Asia-Pacific region. But the pattern of use of IT varies widely, from country to country and even region to region. While some Asian countries have the highest rates of personal computer ownership and Internet and mobile phone penetration in the world, some have not even laid out the basic telecom infrastructure in rural areas.

Asian countries face the disadvantage of having small domestic markets when compared to European countries and the U.S. Yeo Cheow Tong, the Minister for Communications and IT in Singapore, said that Asian countries could be more competitive if they colla borated closely, encouraged closer economic ties between companies in their respective countries and removed regulatory and other barriers to their markets.

The advocacy of such a pan-Asian IT grouping at the conference was tempered by the realisation that it was almost impossible to achieve this, given the cultural and political divide and mutual suspicion among many of the Asian countries. The Indian softw are industry, for instance, is greatly focussed on North American (61 per cent) and European (23.5 per cent) markets, although the speakers emphasised that East Asia was highly relevant to India's future in an economic, cultural and geo-physical sense. S aid Bouton: "The Asia Society has in our meetings sought to tie India into a broader understanding of Asia. (Today) when East Asians define Asia, they stop at the Burma-India border. Likewise, when Americans look at Asia their gaze looking westward from Los Angeles goes as far as Singapore or looking eastward from New York goes as far as the Middle East (West Asia). India falls between these two stools."

There was virtual unanimity at the conference regarding the importance of China and India forging a relationship in the interest of the region as a whole. Micah Truman, co-founder of Madeforchina, an Internet-based marketing and consultancy company based in Beijing, said that for the Asian technology revolution to take place Indian software companies must make inroads into China. But this is very difficult to achieve, he acknowledged. Truman said: "The Chinese government's mandate is to meet the people' s enormous needs for software, knowledge in technology and state and tax services. It already does business with a number of big multinational companies and large institutions and will take it (software) as it needs it. The question is, can Indian compan ies supply it and will the Indians focus long enough?"

Dr. Jasmine Aimaq, director, Pacific Council on International Policy, an American-Asian think tank, said: "There is more separation between Asian countries than there are alliances. Countries only come together if there is a clear advantage to be gained. From the software perspective India and China coming together would be an advantage to the world. But I can't see that happening."

Truman initiated a heated debate when he spoke of the possibility of China overtaking India in the global software race. He said: "We have traditionally separated hardware and software, but the distinction is going to blur. In software, India has a huge headstart, has the infrastructure, manpower, and the government has been exemplary, but it is important to keep a clear eye to the possibilities and one of the possibilities is most certainly China. Don't overlook China. Yes, China's software exports are very low; the government regulates the Internet; IT laws have been slow in coming; it has problems with IPRs (Intellectual Property Rights); and has a shortage of IT talent. But the Chinese government firmly believes that information economy has to be e mbraced at all costs. Innovation is a very difficult thing, but a bunch of fast-moving guys from Chinese universities know that they must make innovations happen or otherwise IT will leave them behind."

Truman said that China's key strategy of getting its agriculture into shape created a base for low-cost export-oriented manufacturing. It leveraged that advantage into a fast-growing economy with increasing global clout, attracted foreign investments, an d developed a high level of competence in manufacturing. There was no reason why China could not do this in software too. It already has a much larger internal IT market than India. Now it is only a question of how China would do it for the export market .

Among other ingredients that Asia needs to face the challenges from IT-driven economies is strong capital market backing from both Asia and other regions. According to Tong, despite the carnage in the dotcom business, venture capital companies are making investments to the tune of $80 billion annually, which is four times what they invested in 1998. "Smart money will continue to chase innovations that change the way businesses work," he said.

Another essential was talent, a catalyst for growth in the New Economy. There was emphasis at the conference on the need to develop and retain talent within Asia. According to Tong, Asia can become the world leader if it can replicate the positive charac teristics of Silicon Valley, put in place a common market that sees a free flow of talent, ideas and capital, and raise education and skill levels.

James B. Hunt Jr., former Governor of North Carolina who is largely credited with his State's successful shift from an agriculture- and textile-based economy to become a leader in banking and IT, said: "North Carolina has become one of the outstanding hi gh-tech hubs in the world because we focussed in two ways. One, by investing more on higher education, research and development work, bringing in the brightest scientists and bringing universities together. We encouraged the private sector to join in, fo rging a three-way partnership between government, the private sector and higher education. Second, we sought to improve education through the grades, giving greater emphasis to technical education."

Hunt said that there was no reason why a similar model could not be replicated in Asia, given the fact that Asia has many of the best minds in the world. "The attitude should be very bullish in terms of how successful they can be in the world economy - a nd also to give all the children an education because they have the potential. Nowhere in the world can you find people with a greater aptitude for science and mathematics," he said.

Many speakers pointed out that the slowdown in the U.S. economy would have an impact in Asia because it means a decrease in the outsourcing of business - for instance, the Indian software industry. On the positive side, the American downslide could affor d an opportunity for Asian companies to become stronger at least for a little while. U.S. Ambassador to India Richard Celeste said: "This is a softer moment in the market place. It is the time for Asian companies to innovate and to gain markets." But, as Hunt said, "In the long term we have to have a rebound of the entire world economy if Asia is to be benefited greatly."

A downside of the IT revolution is the divide that has been created between the IT haves and havenots. The digital divide - between countries, within countries, between the sexes, between rural and urban populations and so on - has prompted such slogans as sorghum versus software, penicillin versus pentium and charkha versus chip. Among the suggestions made at the conference to bridge this divide were the creation of an equity fund that would take care of the needs of the developing world, the st rengthening and expediting of a link between commercial investment and governmental/development expenditure, the production of low-cost personal computers (PCs) and the removal of trade barriers.

The Asia Society holds annual corporate conferences to highlight issues and themes that are relevant at a given time for businesses and governments. Bouton said: "We seek understanding, informed, disciplined discussion, dialogue and debate, whether it is across nations or within our country (U.S.)" The conference in Bangalore had 600 delegates. Said Nicholas Platt, President of the Asia Society, "Of all the conferences, this one had the most focus and energy."