The day I saw Asia had it coming: April 30th 1995
Bandung, April 30th 1995
Dear Andrew,
Asia Has it Coming
Why a bunch of OEM countries have raised so much fuss? The growth path Asia is taking will never lead their countries to the same standard of the West's industrialised countries. Asia's economic structure is still very much underdeveloped The state is present in every business. Every business has to be settled by a local front man. The sort of person who get documents rubber stamped in fast time, has the political muscle to ask the government for protection for a certain industry. This is Latin America's economy sixties vintage. China's so-called Guanxy-the contacts one has to have to get business-is no more than a Cosa Nostra type of business. The Guanxy is a Mafia controlling access to markets demanding payment to the local power brokers. This is the well known frontman which companies have to deal in Africa and Latin America.
Asians, being still in a less developed stage than South Americans are naive to believe their leaders will propel them into development and work hard for it.
As things presently are they still have to:
• go through the stage when they discover that no matter how much their productivity increases; their standard of living is stagnant. For instance, Indonesia, regardless of more than a decade of 6% growth still have a $850 per capita income.
• go through the stage when their strongman policies will be contested.
• to struggle for the "openings" of their political processes.
• to pass through the interim period when opportunist leaders will promise to deliver democracy and economic growth and fail
• go through the period of lukewarm economic reforms as politicians changes just to keep the same.
• To pay back the principal and the interest of their debts
Latin America has gone through all that already. Just for comparison: Asia is behind Latin America at least 30 years. The economic growth experienced by Asia today is of the same sort Latin America experienced in the fifties and sixties. It is a growth that will not be sustained. The investment is not productive. There are deep structural adjustments that still have to be made. Asia will eventually crash as Latin America did in the eighties.
But then there are the economic facts. The high growth of Asian economies. There is not any special reason for the Asian growth. There is no Asian values to account for their prosperity—regardless Asians and their boosters stress that for their own benefit.
Is very simple to explain why Asian economies grew. When the European and American industries was looking for a base to replace the costly labour, regulations and energy costs, Latin America, Africa or Eastern Europe could not fit. In Latin America, then, Yankee Go Home was splattered all over the South American walls. Foreign multinationals were not welcome and American businessmen were being kidnapped. Eastern Europe was counted out because of the Cold War and Africa was too underdeveloped.
American and European companies turned their eyes to Asia as a industrial base. The generation of Americans who fought in the Vietnam war knew Asian mentality. Japan joined later on. For Japan, Asia is a natural market. Their investment in Asian countries accelerated after the Yen climbed against the dollar in the mid-80s. Lets not forget the Asians working in the Middle East and sending money back to their coiuntries of origin. On top of that the developing economies of Asia only by producing the basic needs of the growing population it would be enough to account for most of the growth. Transport, housing, food production and clothing.
We are observing in Asia today another propaganda campaign in the working. The same sort of well articulated publicity campaign that propelled Europe economy in the second half of 1980s. Remember the over hyped Europe 1992 talk of European Community's economic gains of 5% of European total GDP once the market would open. The real world showed a different picture of unfulfilled promises. The opening of the European market in 1992 coincided in fact with the worst recession Europe had experienced since World War II. Special interest groups are hyping Asia today as they hyped Europe 1992 in the late 1980s. Economic agents talk Asia up due to vested interests. Don't hold your breath there won't be a Pacific Century.
See please the Business Week Editorial of May 1st. This type of reaction of country against its investors happened in Latin America during the late sixties. Remember also Dr. Mahatir's brushes with Australia and Britain. Asia has it coming.
Best Regards
Osvaldo |
