With the exception of Singapore, which can be considered a developed city-state, most members of ASEAN are still developing nations, with a few still in the under-developed phase of growth. In addition, there is great range in the level of prosperity within each ASEAN nation, particularly between rural and urban areas. On face value[1] the ASEAN region looks potentially poised to become a major trading partner within the global economy, or is it?
Economic development within the individual ASEAN states has been heavily dependent upon government infrastructure (rather than private) development, foreign direct investment, and the growth and diversification of local conglomerate firms.
Very few ASEAN governments adopted the “Hong Kong” infrastructure development model which in many cases turns infrastructure from a cost to a profit centre. ASEAN governments have opted to borrow and provide basic infrastructure from their own fiscal budgets. Where some infrastructure projects were privatized in countries like Malaysia, most were undertaken by firms with little or no experience in developing infrastructure like roads, water distribution, and ports. Actual construction work is often sub-contracted to foreign firms which bring in turnkey technology in with them and return to their home countries with it when projects are completed. In addition, infrastructure projects are seen by some officials as an opportunity to personally benefit where costs often blow out . There have been numerous scandals reported over the years in many ASEAN countries over infrastructure development.
The second driver of economic development, foreign direct investment (FDI) has been primarily attracted to the region because of the availability of infrastructure, semi-skilled labour, and a relative low cost base. Innovation has been rarely on the agenda, where the region has been seen by international manufacturers more as a production rather than research and development hub. Thus many hi-tech clusters have not successfully catalyzed the creation of vibrant local innovation based companies as sub-contractors and suppliers, except for local freight forwarding industries.
Foreign MNCs that have set up to focus upon ASEAN as a market would set up a head office in a platform country like Singapore and establish agents, distributors, joint ventures, manufacturing facilities and distribution networks in the other ASEAN markets. Again there is little local innovation as most products and brands MNCs launch within ASEAN are adapted from other markets.
The third facet of ASEAN economic development are the locally owned Chinese conglomerates which commonly started off with some form of simple trading or natural resource exploitation. As the ASEAN economies grew and diversified so did these activities. The Chinese families of the region vertically integrated into both manufacturing and supply chain activities, later evolving into property, real estate, banking, and finance opportunities. These firms primarily developed through selecting low risk opportunities as the economy expanded and diversified, undertaking very little, if any real innovation, except in the area of branding. The advancement of these businesses in the past has often relied upon strong connections with politicians, the military, or royalty. Today many of these conglomerates prefer to expand in the lucrative service industries rather than develop costly and risky new technology.
As a consequence, the present capability to develop transformative innovation indigenously within the ASEAN region is low. There is very little new innovative technology being developed and emerging industries like mobile communications are consumers of turnkey technology rather than producers of new innovations.
As the ASEAN economies will still need to rely upon the global market for continued economic growth in the future, there is a great need for businesses and researchers within ASEAN to develop the capability for indigenous innovation. Without indigenous innovation long term per-capita income may even decline relative to other regions as the traditional agro, resources, and manufacturing sectors cease to contribute substantial growth to the economy. Foreign firms and the local Chinese conglomerates within ASEAN show no signs of providing this necessary indigenous innovation that is needed to produce a competitive economy and assist the transformation into a fully developed region.
If indigenous innovation is to be a future key driver of economic development, then future ASEAN government economic, research, education, and industrial policies and subsequent implementation strategies need to be reconsidered. This requires the abandonment of many existing economic and social assumptions held by those in executive power and at the public administration levels[2].
What’s the reality on the ground?
As mentioned in the introduction, most industries within the ASEAN region have been developed as consumers rather than innovators of technology. The communications, computer, aviation, and automobile industries are all consumers reliant upon outside technologies, either through the purchase of turnkey plants or licensing. As such there is little organizational learning that actually takes place and thus the development of internal innovation competencies within ASEAN firms is inhibited. Indigenous technological development just doesn’t occur. Likewise, many studies have shown that ASEAN SMEs are users rather than creators of technology.
The industries of the future will be in the hands of those who control the technology. Whether manufacturing, exploiting natural resources, or providing services, the key to any competitive advantage will be control of present and access to future technology. Without this any industry will struggle to contribute to a nation’s global competitiveness, and enhance the export base.
One of the major differences between the ASEAN region and other major trading nations like China, Japan, Korea, the US, and EU is in the area of research and development. The ASEAN region is still nascent when it comes to research. Researchers at higher education and other research institutions tend to imitate previous research undertaken in other regions of the world. Much research is undertaken on an ad hoc basis aimed toward fulfilling career and promotion requirements rather than focusing on commercially orientated and national development issues. There is very little collaboration with industry and most research projects are abandoned at conceptual level where even prototypes are not built.
Expert panels screening applications from research funding agencies are conservative and discourage avant-garde research projects, usually knocking them back due to lack of evidence or from commercial ignorance, preventing researchers pursuing new ideas. Consequently research output within the ASEAN region lags greatly behind other major trading nations indicating an horrendous gap in indigenous innovation as measured by resident patent applications filed through the Patent Cooperation Treaty procedure with various nation patent offices.
|
|
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
2010 |
|
ASEAN |
2,573 |
2,737 |
2,904 |
3,100 |
3,286 |
3,572 |
4,114 |
|
US |
189,536 |
207,867 |
221,784 |
241,347 |
231,588 |
224,912 |
241,977 |
|
CHINA |
65,786 |
93,485 |
122,318 |
153,060 |
194,579 |
229,096 |
293,066 |
|
INDIA |
4,016 |
4,721 |
5,686 |
6,296 |
6,425 |
7,262 |
- |
|
JAPAN |
368,416 |
367,960 |
347,060 |
333,498 |
330,110 |
295,315 |
290,081 |
|
EU |
103,367 |
101,232 |
100,678 |
110,731 |
111,880 |
110,319 |
98,894 |
|
Korea |
368,416 |
367,960 |
347,060 |
333,498 |
330,110 |
295,315 |
290,081 |
Figure 1. resident patent applications filed through the Patent Cooperation Treaty procedure of major trading nations[3]
With the exception of Singapore, university standards are low in the region. In contrast, Chinese, Korean and Hong Kong universities are rapidly rising within the world rankings. This research gap is likely to widen rather than narrow.
At the industry cluster level the Malaysia’s Multimedia Super Corridor (MSC), regional corridors, and Biotech clusters have to date achieved very modest results, and it is still too early to tell whether Singapore’s massive gamble on the Biopolis will bring enough biotechnology IPOs to bring sufficient financial returns from the research being undertaken.
The development of mega-cities within some ASEAN countries should be hotbeds of creativity and innovation[4]. However as the patent figures above indicate, the growth of mega-cities within ASEAN has not brought with it a culture of creativity that many other growing mega-cities around the world have experienced[5]. Further, ASEAN mega-cities have brought traffic jams and urban problems of crime and poverty. This appears to be corroborated by performance within other creative domains like the arts, theatre, music, and sport. This apparent lack of any culture of creativity will potentially cost the region dearly in the quest to participate in the next stage of world development based on innovative sustainability.
What needs to be done?
The ability to develop indigenous technology is a capability that may be more important than the issues of trade liberalization and implementing Western notions of democracy within the region. However ASEAN governments have been employing losing strategies in their policy initiatives. This all requires a rethink.
The ASEAN region has been bureaucratized almost to the extent of stalled effectiveness. For example the Ministry of Science and Technology (MOSTI) and Higher education (KPT) in Malaysia centrally control the allocation of scarce research funds which usually end up funding projects that have little benefit to industry or national development. This ego-centric, ‘government knows all approach’ to technology and industrial development is something akin to the old Soviet era “GOSPLAN” apparatus.
Another great tragedy is the lack of regional research cooperation with few existing mechanisms to encourage it. ASEAN has a very poor track record of collaborating as a group ever since the pull out of all the individual nations of the Malaysian initiated ASEAN car project back in the early 1980s. There are deep attitudes of complacency within the ASEAN leadership, contributing to the failure to synergize knowledge generation within the region.
The key to developing indigenous innovation seems to be culturally linked, which leads to the question of what type of culture do ASEAN nations need to nurture for the next generation?
A creative society is bound up in the norms, values and lifestyles embedded within the structure of society and this has been deeply influenced by the social directions ASEAN governments have encouraged over the last generation.
Creating change involves battling the inertia of society and this must begin with education which is vital to change. However ideas and curriculum are years behind other regions. Talent and diversity needs to be cultivated rather than conformity. It’s no longer enough to guarantee a place in the classroom and achieve high national examination scores, real creativity must be encouraged and nurtured. This doesn’t necessarily require a massive increase in funding, but rather reallocation and a cathartic change in the bureaucratic mindset to adopt new curricula. It may not be a funding problem, but a priority and allocation issue.
Creativity is fundamentally a social process where new ideas are more likely to come through rest and relaxation rather than strenuous formal meetings. Consequently workplaces need to be redesigned so that an environment of serendipitous sharing becomes the norm. This must be supported by the correct motivation systems that reinforce and truly reward new ideas and promotes high productivity – something deeply lacking in the region today. Nepotistic structures must be overturned with the practice of true meritocracy, where it should be recognized that creativity doesn’t necessarily increase with experience. Nepotism is a curse that prevents peer recognition of creative acts and suppresses excellence at the very time collective creativity needs to be developed within organizations in the region. The above calls for an almost total revolution within the ASEAN workplace, which would be strongly resisted by the by the ‘Hongs’, ‘Toukays’, and ‘powerbrokers’ within organization hierarchies.
Through ASEAN citizens studying abroad, travelling, and experiencing the values of other societies through the media and consumerism, the exposure is there for change. However the experience of other cultures has yet to bring a complete open mindedness within the region, enabling the mental flexibility needed to be creative as a society. We are eating the Big Mac without understanding how and why it came to be.
ASEAN is still plagued by inward thinking which is preventing the possibility of the region breaking out of old patterns, growing and maturing to become an influential trading block. Leadership in the region is still taking a risk adverse approach to issues of ASEAN integration and currently without the visions necessary to create the society as a platform that facilitates the synergy of new ideas that can potentially lead to untapped multiplier effects and greater diversity. ASEAN members are still locked within the psychic prison of tribalism and the belief of what has worked in the past will do so in the future.
This is not about freedom and democracy as some in the “West” deem necessary, as alternative models of growth and development like China now exist.
Development based upon imported technology will never be able to enable competitive advantage over the technology providers. The inability to develop indigenous agro technologies concerned with food production in the face of the changes rising population and climate change is a future disaster waiting to happen. At the very least, future agro-industry development without indigenous technology, being solely reliant upon foreign technology may even challenge the very notion of sovereignty over resources that ASEAN governments have so zealously protected. The lack of indigenous innovation may play into the hands of China and the US, where ASEAN will be militarily dependent upon hardware suppliers thus ensuring the region is weak militarily, at a time where a new Asia-Pacific order is emerging.
__________________
[1] One can see that ASEAN exports to the world are not far away from the US, EU, and China and surpass India and Japan.
[2] Currently most ASEAN governments must act to restrain wage growth so that FDI will find the country attract to set up and maintain manufacturing operations. This indirectly encourages the transfer of inefficient and outdated rather than the most up to date technology. Government policy is also at the mercy of external economic factors such as the state of the global economy, particularly the most important trading partners. Consequently government policy tends to be reactive to external conditions rather than proactive in seeking new technologically driven industries.
[3] See World bank data: http://data.worldbank.org/indicator/IP.PAT.RESD/countries/1W?display=graph
[4] See the hypothesis of Richard Florida (2012) in The Rise of the Creative Class Revisited, New York, Basic books
[5] A culture of creativity could be best described as an environment where people can interact creative synergies may occur as the result.
Another thoughtful and info-packed piece from Murray Hunter. His article points to a few of the major obstacles to innovation in the region, including an educational system and cultural norms that do not incubate and often even discourage fresh thinking. The picture obviously varies from country to country and region to region, but most anecdotal accounts that I’ve seen support the general picture that Mr. Hunter lays out, and seem to be corroborated by hard data on Southeast Asia’s innovation track record, which is reflected to some degree by the data table on patent applications that is included in the article.* I’d be curious to look at some further innovation indicators, like R&D as a share of GDP, to see how Southeast Asia’s innovation track record fares on a broader range of metrics.
What’s interesting is that some pundits have made a big to-do of the fact that many Southeast Asian countries have increased their spending on education and even, in some cases, put a larger share of their GDPs towards education than developed countries like the United States. Yet most on-the-ground assessments of education in the region indicate that schools in Southeast Asia tend to emphasize the kind of rote-learning and follow-the-leader values that are great for turning out factory workers but not for producing the next Steve Jobs. More money spent on education does not equal better education, even if it reflects the right priorities. That said, the manufacturing and extraction industries are major growth sectors in Southeast Asia right now, so the dominant educational culture today might at least be sufficient for the needs of most ASEAN countries at this time.
There’s another obstacle to innovation that Mr. Hunter alludes to, but which needs to be stated more clearly. Part of the problem stems from the fact that most Southeast Asian countries are either “emerging” or “frontier” economies, and as such, have made massive economic gains in recent years by simply adopting foreign technology rather than innovating. Because most of these countries still have per capita incomes of less than USD $5000 per year and have not yet hit what economists call the “middle income trap,” chances are that they will continue to see improvements in their standards of living by simply doing the same as they’ve done before. It’s only once they hit higher levels of income and national wealth that they will need to start innovating to see continued gains in GDP, and this might incentivize them to start creating things instead of just producing or adopting things that others have created. For the time being, though, the incentives are weak.
(*Note: most of the data on this table checks out, with the exception of the figures on Korea, which are inaccurate; the real numbers are less than half of what the table states.)
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“instead of just producing or adopting things that others have created” > Thailand seems to feel very comfortable with this situation.
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P.S.:
I wonder a bit whether calls for independent thinking, creativity, and technological innovations are not actually part of what Murray Hunter normally denounces as “western intellectual colonialism through the backdoor?”
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Srithanonchai raises a fair point. It is, of course, the prerogative of every society to determine how much it values innovation, and how it wishes to apply its creative energy. To say that Southeast Asia should pursue more innovation simply because it is better to be more innovative would be a statement that reeks of “Western intellectual imperialism,” but my reading of Mr. Hunter’s piece is that he favors more innovation because it will improve Southeast Asia’s long-term economic growth rates. This is not a moral position; this is a fact that appears to be well-grounded in the economics literature.
In his article, Mr. Hunter specifically decouples the concept of innovation from supposedly “Western” concepts of freedom and democracy. This makes sense. Innovation, in and of itself, is not a Western construct, even though placing a high value on innovation at the expense of tradition and conformity is certainly a Western tendency.
Mr. Hunter’s assessment of Southeast Asian innovation is not off-the-mark. I think the data clearly shows that Southeast Asian countries have chosen not to apply as many resources to innovation as their Western counterparts. This is reflected partially in the patent data that Mr. Hunter provides, as well as in data on R&D as a share of GDP. According to this report, most Southeast Asian nations, with the exception of Malaysia and Singapore, dedicate less than 0.25% of their GDP to R&D, whereas more developed and/or Westernized countries dedicate four to eight times that amount to promoting research. Whether that’s better or not is up to each country to determine for itself.
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Alright, Will, but isn’t “economic growth” a value taken from the Western intellectual tool box (as a classic case of the Weberian “Spirit of Capitalism”)? Why force other countries on this path? Thai royalists play proud lip-service to “sufficiency economy,” and even TIME recently found it worthwhile publishing a long article on Bhutan’s “Gross National Happiness Index.”
As for the “decoupling” of innovation etc. from freedom and democracy, doesn’t it make us arrive at the Chinese and Vietnamese development models, and prompt us to support the suppression of people in those countries who want more freedom and democracy? Or are those people not worthy, because these very desires demonstrate that they have fallen victim to “western intellectual colonialism?”
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Broadly defined, I don’t think “economic growth” is a Western concept, just as I don’t think that the principles behind “gross national happiness” or “sufficiency economy” are the sole province of the East. Honestly, I find that most East vs. West dichotomies tend to be reductionist at best, and perhaps I made a mistake by perpetuating them in my last post.
To be clear, my point was not that countries should pursue economic growth, but that economic growth tends to be driven by innovation when countries reach a certain level of income, and moreover that many indicators suggest that most Southeast Asian nations (with the notable exception of Singapore) are not pursuing innovation aggressively at either the national or the corporate level as their more developed peers in both the East and the West. Since my last entry, I’ve found even more indicators that corroborate this point, such as the EIU Innovation Index. Aside from Singapore, which ranks highly on virtually all innovation indicators, there’s not a single Southeast Asian country in the Top 30.
It is perfectly possible to argue over the question of what constitutes true innovation and how exactly to measure economic development. My analysis rests on the common definitions, i.e. that “innovation” is best viewed as the provision of new technologies and ideas, and that “economic growth” is simply an increase in the amount of goods and services produced in an economy. Economic growth is, of course, separate from overall well-being, and I fully agree that no entity should pursue growth at all costs. Personally, I’d rather have more gross national happiness than gross national income, but alas, these decisions are not up to me.
As to your final point, I think that the relationship between innovation, freedom and democracy is complex, but I do think it’s fair to say that the type of political system (e.g. democracy vs. autocracy) probably matters less than the specific policies and vision of the leaders that run the system. As previously mentioned, Singapore is a global hotbed of innovation, despite having relatively low press freedom and a political system with many authoritarian elements. Meanwhile, Myanmar also has low press freedom and an authoritarian political structure, and they barely even have technology, much less the capacity to invent new technologies. So as for the question of which kinds of political systems are best for producing innovation, and the relationship between those political systems and the level of freedom of the population, the answer is: it depends.
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Looking at the professional jumping off 5th floor along with 91 year old mother in Athens, Bhutan Gross National Happinessx Index may not be that much of a fringe joke.
When The Ford did the dissociation of work, workers and product for the sake of production and is perpetuated ending up with people happily flashing iPAD’s while not being able to feel anything for the workers who burned to death in assembling factories.
Is there an inherently dangerous monster luking in the cold, crisp, sometimes comforting NUMBERs?
Innovation itself is though no one’s monopoly. Patents are purely commercial entities and perhaps cannot be taken so seriously of their relationship to innovation.
For example, patents for multi-million dollar business of surgical staplers used for wildly successful operations around the globe are owned by few international conglomerates which have no relationship whatsoever with the original Hungarian thinker and inventer who died quietly with no fanfare.
And how do one think the 40 years old Chevrolets are running under ten times the weight it was originally designed to carry today?
Innovations do happen. It is only the question of whether it is widely commercialised. Therefore the intention of innovation.
Still public support of study of basic sciences and innovation is indeed beneficial to the country in the long term, a fact more and more neglected on financial pressure as even the Samsung engineeers are finding having to copy iPAD under management pressure rather than make one of their own vision.
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I would agree that the patent application process is a step removed from the actual innovation, so perhaps it’s fair to say that patent applications are a weak indicator of innovation. R&D spending might be a better indicator, but even that too has potential flaws: if it’s true, as Hunter claims, that Southeast Asia’s research institutions “tend to imitate previous research undertaken in other regions of the world,” then spending more might not be worthwhile or representative of true progress.
Ultimately, the numbers only tell part of the story, but then again, so do selective anecdotes. I think that for every worker that was burned to death in an assembling factory, many more were happy to have found jobs that took them off the farm and gave them more earning power.
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It is absolutely true. There are, happy or not, large number of people who are employed for every mishap. And indeed technological innovation is required to have this gratifying conversation to start with.
It is more of an issue of total lack of parallel and compensatory humanistic value along with mass production the sole aim of which being profit.
Perhaps work at the farm has more than grains as output.
Another anecdote of a carpenter selling home made chair feeling devestated as the customer breaking a chair just bought off him opposed to Ford workers cheering on someone burning a car just produced and bought shows mental and emotional values of “work” apart from the grains and iPAD’s.
Unfortunately the innovation has not reached to the point of making workers belonged to and proud of their own achievements needing totally artificial medals and prizes which the happy carpenter would not care about.
Off the track now, the happiness surveys do show consistently the miserable state of people’s mind in the “rich” countries.
And if the mass production and capital movements and consumerism are the answer, how come the biggest liberal capitalist, the United States is the biggest in debt-16 trilions just now? Debts it has no ability or intention to pay back and is trying the damnest to hide that obvious fact as a run on the bank would certainly make the country collapse.
Perpetual requirement of irreversible environmental destruction and multitude of disposable “underclass” to service the production lines make the current system of “wealth” unsustainable.
This is off the track of creativity but opportune.
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Fair enough. Economic growth is not necessarily a question of moving people on or off the farm, but merely giving them more opportunities and choices. This, I believe, is generally a good thing, but the dark side is that sometimes people, including both workers and factory owners, will either choose or be manipulated into “selling their souls,” so to speak, for greater profit. The profit motive certainly can be intoxicating and blind people to more important considerations in life.
In Southeast Asia today, my sense is that most people in most countries are voting with their feet for greater urbanization and industrialization. They are voluntarily choosing greater profits from factory work or urban service employment over whatever benefits they might receive from staying in rural and agricultural areas. In China, meanwhile, things appear to be heading in the opposite direction: the urban factory workforce is saturated, workers are demanding better conditions, and many are now returning to the countryside in search of a better life. Will Southeast Asia follow the same path as wages start to reach the same levels as that of China? Guess we will have to wait and see…
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With the light of the Chinese behaviour, you may find this article interesting.
http://www.dictatorwatch.org/articles/monkeypaw.pdf
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Further on the notion of “growth” in the Asian context (taken from the TLC mailing list):
Call for Abstracts
5th International Conference
Growth: Critical perspectives from Asia
13-14 June 2013 – Asian Dynamics Initiative – University of Copenhagen
Over the past fifty years we have witnessed phenomenal economic growth in Asia, lifting millions of people out of poverty, and propelling many Asian nations to premier ranks in the global order, but as the social and ecological costs become more apparent, economic and demographic growth looms as both promise and peril.
The concept of growth has not only been central to economic theory and ecological critique, but also to social and cultural theories of societal and civilizational trans-formation that increasingly challenges universalizing Western notions of modernity. This conference critically examines the notion of growth and the ways in which it is shaping social-political landscapes in Asia. We define and question growth in this very broad sense, implying that quantitative changes are inevitably accompanied by qualitative transformations, and paying equal attention to the intricate interconnectedness of naturally occurring growth and human interference as well as to its limitations, stagnation, decline and renewal. Understood in this extended sense, the term and related concepts can be fruitfully used to explore social, economic and cultural processes across time and space within the macro-region of Asia (and beyond) from cross-disciplinary perspectives.
Based on this notion of growth not as an autonomous, self-determined entity but as the outcome of close and constant interaction between nature and purposeful human action, at this conference we propose to rethink and scrutinize this concept from an Asian perspective and from multi-disciplinary vantage points – cultural, economic and social.
Dates
15 January 2013 Deadline for submitting abstracts
15 February 2013 Notification of acceptance
27 May 2013 Deadline for submitting paper
Please visit the conference website to read the full call for abstracts http://asiandynamics.ku.dk/english/growth/.
Abstracts including title, name and affiliation should be sent to marie.yoshida@nias.ku.dk.
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