12/02/96 COMMENTARY: ASIA'S BRIGHT HOPES STILL REST ON REFORM

Return to main story

COMMENTARY: ASIA'S BRIGHT HOPES STILL REST ON REFORM

When I arrived in Hong Kong in 1990, the year after the Tiananmen Square bloodbath and the onset of the recession in the U.S., little did I expect that over the next six years I would witness one of the most dizzying economic booms in history. By 1992, all of South China was in the midst of a building craze of Cecil B. DeMille proportions. Overnight, it seemed, Third World capitals such as Bangkok, Kuala Lumpur, Jakarta, and Shanghai became citadels of consumerism, with automated teller machines on every corner and a mobile phone in every other pocket. Across Southeast Asia, Motorola, Hewlett-Packard, Siemens, and Sony were erecting ever more dazzling factories of the future. The scale of it all was mind-numbing.
But even more impressive than all the exuberance were Asia's economic planners. Whether visiting gray ministerial complexes in Beijing or musty French Colonial-era buildings in Hanoi, I was briefed by articulate technocrats, all impeccably educated and with a clear view of what had to be done to compete globally. They laid out meticulous master plans for industry and infrastructure. They also described how they would bring their nations' backward capital markets, legal systems, and bureaucracies into the 21st century.
TWO BIG MYTHS. Many of those new commercial zones, factories, and airports are now up and running. But there has been little progress on the
other reforms, those that involve the way East Asian societies are managed and power is wielded. In Indonesia, the respected ''Berkeley Mafia'' of Western-trained officials--who pushed for greater
transparency in awarding government contracts and business franchises--was sidelined by the family and cronies of President Suharto. In Thailand, most of the technocrats who tried to solve problems in education, state enterprises, and mass transit have resigned in frustration. In China, financial and legal reforms have been so delayed by Communist Party elders that their advocates now talk in time frames of 20 years, rather than five. In Vietnam, even the most basic reforms needed to support foreign investment haven't gotten off the ground.
The half-finished agenda is now catching up with Asia's leaders. Autocrats have been willing to take the short-term steps to keep the boom going, for instance, by throwing more money into training institutes, heavy industry, and power plants. But the underlying problems are political. So far, leaders have avoided reforms that would jeopardize their own pillars of power. Growth has been so high, in fact, that it has easily covered the enormous costs of corruption, cronyism, and red tape.
If this year's deep export slump does prove to be an early warning of bigger difficulties, then leaders must muster the will to make the changes needed for a transition to the lean, flexible economy of the future. That means unwinding the nexus of power involving corrupt politicians, connected businesspeople, and financial institutions. It also means daring to open up rigid educational systems that have been designed to stifle individualism.
Two myths promoted by many Asian leaders are that deference to authority gives East Asia an edge over the ''decadent'' West and that high growth justifies social sacrifice. The first myth is debunked by the case of Taiwan, which has become a democracy and has achieved unparalleled success among Asian Tigers as a hotbed of information-technology design and entrepreneurialism. Belying the second myth is the decline in living standards of many Asian urban dwellers, who face skyrocketing rents, choking pollution, and monster traffic jams. ''Higher income is fine if your life becomes more comfortable,'' says Wisarn Pupphavesa, an economist at the Thailand Development Research Institute. ''We need economic plans that focus more on human beings.''
The Asian economic miracle may look less dazzling as the emphasis shifts from export statistics to human development. But after three decades of relentless growth, that's a luxury most of East Asia can well afford.
By Pete Engardio

Return to main story