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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story

A WORLD WITHOUT BORDERS

It's Time to Throw Away the 19th-Century Concept of Doing Business
Kenichi Ohmae

KENICHI OHMAE IS ONE of the world's leading management consultants. And one of its most challenging. His views sweep the globe, offering fresh and sometimes unorthodox solutions to old problems. In his latest book, The End of the Nation State, the 52-year-old international consultant calls for a borderless world of region states. Asia, he suggests, is perfectly placed to lead in this field. He spoke to Asiaweek's Tokyo Correspondent, Murakami Mutsuko.

Asian corporations are increasingly going global. What kind of vision should their managers have in understanding their own region, the "regional economies" you talk about in your book and the borderless world beyond?

I think one of the most important changes that will take place in the next ten years will be that the Asian economies will become a major part of the global economy. Of the top ten economies in the world in the year 2010, I expect five will be from Asia. They will be Japan, Korea - a united Korea - China, India and Indonesia. Depending on what ASEAN does in terms of alliance among its members, it might join the G-10 in terms of size.

How would you advise Asian leaders and businessmen trying to promote economic development?

There are lots of ways to develop economically today, but the best way is through focusing on regional development and on how to have the regions interact with the global economy, particularly to introduce technologies and capital. What I call the Four C's - corporations, communications, citizens and capital - now all migrate across national boundaries. That is the most important event of the last decade. Information technology has become a dominant factor in reshaping the global economy. Asia has done very well, compared with the rest of the world, in terms of taking advantage of this new technology, spearheaded by countries like Singapore. Hong Kong is not far behind. Australia and New Zealand are far better linked with the rest of the world through Internet than Japan is.

Why has Singapore been far more successful than others in taking advantage of information technology?

Because of its leadership. One of the most important things to recognize is that success in the 21st century will be very different from success in the 19th century. Competition among the regions in the 21st century will depend on the quality of their political leaders. They must be able to realign the legal and administrative systems so as to be compatible with information technology. Most nation states have too many vested-interest groups controlling their future. Many bureaucrats and politicians are still using the old 19th-century nation-state model. If you do that, you will have a tremendous handicap in developing your domestic industry to create wealth within the country, and in the use of wealth to make the country prosperous. In other words, you have to generate solutions of prosperity from within the country. A country like Singapore, with no natural resources and no room to grow food, etc., had to resort to the goodwill of the rest of the world. But Mr. Lee Kuan Yew did far more than that. He was the first to see that a country without resources could prosper if you have the global logic, capital markets, corporations and communications working for you.

So you could say he had your idea of regional states before you did.

He did not put it that way. But, if you recall, as far back as in l980 they switched their first language to English - in a country with a 70% Chinese composition. It was a major decision but it was a sensible one. If you trade with the rest of the world, English is the common tool of communication. Also, in 1984, Mr. Lee developed a concept called Information Technology Vision 2000 - IT Vision 2000. He said the country would prosper based on the value of information, as opposed to simply becoming a catalyst for trade. I think Mr. Lee had that vision to prosper, to make Singapore a prosperous country beyond the service sector. Thirty years ago, Singapore wanted to be one of the manufacturing sites for global corporations. Then they switched to a service-sector economy. Mr. Lee was quick to recognize that this alone was not enough, and they adopted an information value-added strategy as early as l984. Eleven years ago he was talking about the year 2000, which was 16 years away at that time. So, I have to say he had the vision. Dr. Mahathir Mohamad also has the quality of leadership to transform Malaysia into a multi-media-compatible country.

Mr. Lee also started the Suzhou project in China, outside Shanghai. In essence, he is trying to create a region as prosperous as Singapore in China. He didn't try to deal with the whole of China; he is trying to transfer the know-how that Singapore has gained over 30 years into one region. That also suggests that he had my kind of vision of development in the region.

In China, the prosperous regions should interact directly with the rest of the world. What I am saying is that we should think of China as consisting of 20 to 30 Singapores, as opposed to a one-nation state according to the 19th-century doctrine.

What kind of influence or control do you think the central Chinese government could have over a region state? Could anything like the Tiananmen Square confrontation happen again?

Freer movement of the Four C's could become a problem because the role of the central government in the old, 19th-century model is to use taxpayers' money to protect special interests. As such, it tends to become very jealous of prosperous regions, prosperous people, and prosperous corp-orations. And it tends to tax heavily those who make better-than-average incomes. The central government burdens the potentially prosperous segments of the economy to lower them to the average. And it takes a protectionist attitude and blocks the free flow of capital and information, and the migration of corporations. But if you do this, the country cannot prosper.

The problem that the rest of the world has in dealing with China is the fact that the Chinese central government is getting very jealous about regional prosperity. The center of the country has failed to have this prosperity. The biggest test of all this is going to come in l997, when the central government has to deal with the champion of that region's economy, Hong Kong, as an insider.

You think there is no way of China going back?

There are many ways of going back. One is the use of the military; the other one is the use of bureaucracy. I am not optimistic because there are very few people in the Chinese leadership who understand what we are talking about. If you have not seen the world, the global economy, it is difficult to understand it. It was difficult to explain how an elephant looked to the Japanese when the country was closed. All we knew was pigs, cats, dogs and chicken. So we had lots of drawings of elephants that looked like lions or giraffes with long noses. For people who have grown up with a centralized economy or with extreme centralization of the decision-making process, without a democratic political system, what we are talking about is just fiction.

In The End of the Nation State, you discuss the emergence of regions as the dominant structure of economies. How can companies make use of this trend in planning and managing their overseas operations?

I would say you should pick the 30 most promising regions and organize yourself according to these regions, as opposed to countries. For example, in Europe, I would certainly say Lombardi in Italy is a distinctive market in itself. Catalonia, in Spain, is another. This is a new reality in Europe. I would certainly recommend companies to take a look at the world mart in this context. The Pacific north-west of the United States might also include British Columbia or Canada and the mid-west might include Ontario in the context of NAFTA. When NAFTA comes into full effect in 1999, it is going to reshape north America. This will certainly make southern California couple more intimately with Baha California, particularly the Tijuana area. The shape of the world, economically, is already changing.

One obvious challenge for the global corporation is the diversity of cultures and business environments it has to deal with. What are the usual pitfalls in this area, particularly for firms that may be newly venturing abroad? And how can companies best deal with them? In particular, how should Asian corporations deal with foreign staff who do not share the authoritarian, consensus-seeking ethos found in much of Asia?

My experience tells me that you cannot teach the right cultural attitude and value system to the wrong people. Some Japanese don't understand the Koreans and vice versa. Your question assumes there is a golden rule. There isn't, but there is a definite mechanism - the survival of the fittest. Those who adapt to the new value system of the world will survive. Others won't. Consumers today have the final choice. They won't buy goods and services if they don't like them. Before, in a closed country, government-licensed corporations produced goods, so the consumer had no choice. Today, there is so much choice, and so much information is available to enable the consumer to buy the best and the cheapest from anywhere in the world. Therefore, information is the best judge. A corporation that gets it wrong will be eliminated by consumers. That is exactly what happens.


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