How Asia Works: Success and Failure in the World’s Most Dynamic Region

Updated: Saturday October 26, 2013 MYT 8:41:49 AM

Study on what drives Asian business

BY THEAN LEE CHENG

How Asia Works: Success and Failure in the World’s Most Dynamic Region
Author: Joe Studwell
Publisher: Profile Books Ltd

JOE Studwell, author of How Asia Works: Success and Failures in the World’s Most Dynamic Region, does not mince his words. He analyses the Malaysian auto sector and draws comparison with South Korea’s international success in the car manufacturing sector. Studwell says although Perodua was set up subsequently after Malaysia’s first car project, Proton, which took off in the 1980s, Perodua was tasked with producing cars with smaller engine capacity. This means that Proton, which was producing cars with higher engine capacity, had no competition as both had their respective markets.Studwell then compares the success enjoyed by South Korea’s Hyundai. Both Malaysia and South Korea started their car production at around the same time. Unlike Malaysia, the South Koreans created five auto companies, among them Hyundai, despite the fact that the South Korean car market was smaller than Malaysia’s. Another point to note is that the income of the South Korean population was more equal but lower than Malaysian population. The five companies were Daewoo, Asia Motors, Hyundai, Kia and Saehan and they competed with each other.

Today, says Studwell, Hyundai is the fourth largest car company in the world.

Answering questions from the floor about Thailand’s success auto industry, Studwell says while Thailand’s auto sector produces high quality cars, it serves only as an entry point for Japanese cars.

“It is a strategy but it is not a strategy that will produce a South-East Asian car. The amount of money invested there is limited. It is using low cost labour to produce quality cars,” he says.

Moving on to Honda, he says the car company started out on a small island in Japan producing just 50 cc motors which were attached on to bicycles. The motors sold extremely well for a period after WWII in the 1940s.

For a long while, Honda as a company was pretty much ignored but if it keeps growing and producing products which sold so well, it could not be ignored for long, says Studwell.

Proton and Perodua are national brands and enjoy certain benefits. In the non-national segment, Honda is the second top selling Japanese brand and Hyundai is growing and although their market share is still, it is progressing.

However, Studwell says one cannot look back at the period in which Malaysia was trying to develop an industrial development strategy and say that the whole thing failed.

“What one needs to do is to ask why (it) did not work. Malaysia still needs a strategy for development. It is not useful to say what happened,” he says. Instead, what is needed is to study the situation and have a better strategy that will produce results.

“(At the same time), one has to keep in mind that it was much easier for South Korea (and Taiwan and China) to learn from Japan, being the first developed country in this region, being former colonies of Japan,” he says.

It is against this backdrop that Studwell’s third and latest book How Asia Works considers East Asia as the most divided region in the world.

During his evening talk “Malaysia, China, Asia – The Key to Economic Success and Failure” organised by Chinese daily Sin Chew Jit Poh, he posed the following question – how did this huge difference in growth come about in just 15 years?

“It has to do with the government shaping the development policies in the country since any economic development will be aimed at extracting the most value from the population,” he says.

Against this backdrop is another wedge dividing East Asia – a north-east Asian group of states comprising China, South Korea and Taiwan with Japan being the most developed, and neighbouring South-East Asia countries which, he says, have proven to be a group of “paper tigers.”

He says that although South-East Asian countries enjoyed a spurt of growth, it was not sustainable.

Studwell compares countries like China and Vietnam which have land reform programmes and Malaysia, the Philippines and Indonesia which do not.

He says that land reforms and a focus on agriculture provided employment for the low-skilled segment of the population which enable them to demand for goods and services.

“South-East Asia will benefit from an aggressive agriculture policy,” he says.

Manufacturing, on the other hand, is important because it offers employment to the limited productive skills of a developing economy and provides a path for a segment from agriculture-based sector to move into the manufacturing-based sector. It is this path that provides sustainable and fundamental growth for the overall dynamic economy amidst other factors.

“Successful countries with an acute focus on manufacture will move towards exports, which provides returns for both people and country,” he says.

The third pillar, says Studwell, is financial reforms on accelerate economic transformation.

On the south-east region as a whole, he says countries must cooperate to have a policy in the interest of the region.

His latest work is a follow-up to his previous book, Asian Godfathers: Money and Power in Hong Kong and South-East Asia (2007). For Asian Godfathers, The Financial Times wrote: “Joe Studwell should be named chief myth-buster for Asian business … his myth-busting is as merciless as it is enlightening.”

The Wall Street Journal named Asian Godfathers one of 2007’s ten best books on Asia. BusinessWeek listed it as one of the world’s top 10 business books that year.Asian Godfathers remains popular, selling 15,000 copies in China alone in 2012 after five years in print.

Nonetheless, Studwell considers his third book, which he started working on in 2009 as the most ambitious, having written it while doing his PhD thesis.

Studwell did not expect his interest in China and the rest of Asia to culminate in three books. He says his interest started after he followed his wife, who read Chinese at Cambridge, to go to Hong Kong and then to Beijing.

Studwell and his family has returned to Europe but he still comes to Asia often.