What do Koreans think of Chinese Indonesians?
Despite the economic crisis, the Asian markets will continue to be among the most interesting in the world. Globalization therefore means showing market presence in Asia as well as in the USA and Europe. This view was expressed by Jean-Pierre Lehmann, professor of international economic policy at the IMD business school in Lausanne, in a publication in the Financial Times.
How does Asia itself react to the challenges of globalization? With three different economic models - the Japanese, the Korean and the Chinese. The Chinese model seems to be best equipped for long-term success in the future, as the author suspects.
Without East Asia we cannot speak of globalization. Around ten years after the end of the Second World War, 60% of the world's gross national product was generated by the USA and Western Europe, while Asia was a modest 15%. At the beginning of the nineties, the Asian share had already grown to 33% - and the trend is rising. Asia, Western Europe and North America have become the three pillars of the world economy.
If one looks at the shares of the regions in total world exports, the strengthening of Asia becomes even clearer: The share of the ten most important countries in East Asia (the seven Asean countries plus Japan, Korea and China) was only 13% in the mid-1960s In the 1990s this share skyrocketed to 35%. Today 80% of world trade is handled by East Asia, North America and the European Union. For direct investment abroad, this figure is around 85%.
What globalization has made global in the last decade is the fact that the western industrialized nations can no longer regard globalization as their monopoly. The states of the triad must have the ability to manage and maintain interest groups in these diverse markets and cultures. It is urgently necessary for western companies to have a presence in Asia. Not only because this part of the world offers a rapidly growing and solid customer base for the future, but also because the emerging competition comes from there.
Should the Asian crisis be over? For this purpose, the characteristics of the economies of East Asia are highlighted here.
In Japan, the “Kereitsu” (group of companies) emerged as the dominant form of company after the war. Each Kereitsu or Zaibatsu has its own trading house (sogo shosha). One of its main tasks is to collect information. It thus acts as a knowledge supplier for the entire group of companies. When foreign companies complained bitterly in the 1970s and 1980s about how difficult it was to break into the Japanese market, the answer was often that it was difficult not just for foreigners. Those few successful "new" Japanese companies that do not have a close relationship with the most important Kereitsus such as Sony, Honda, Kyocera, Canon or Minibea have built their success mainly on their foreign activities.
A key feature of the Japanese industrial system is economic nationalism. Government and industry cooperate to maximize profit for the national economy. The prevailing national ideology of so-called Japanism means, among other things, that it was not necessarily treasonable for Japanese people to work in non-Japanese firms, but it was certainly degrading. Hard work, a high level of education, a high savings rate and other social factors resulted in an industrial machine that was very easy to run.
When the catchphrase “Kokusaika” (internationalization) became ubiquitous in the Japanese business language in the 1970s and 1980s, the term naturally meant internationalization from Japan and not internationalization in Japan.
From the 1950s to the 1970s, the Kereitsus consolidated their positions in the East Asian markets. In many of these markets, especially Thailand and Indonesia, they achieved a dominant position. During the same period, the Japanese export machine turned to western markets with great success in some industries: Labor-intensive industries such as steel, shipbuilding, and textiles were tackled first. Export hits such as motorcycles, cars, consumer electronics, electronic components, machines, office equipment and cameras followed.
The large trade surplus and the appreciation of the yen led to a wave of Japanese investment abroad. The doubling of the yen against the US dollar was considered a kamikaze, a divine wind with which foreign investments could be made for pocket money.
By the late 1980s and early 1990s, the Japanese had convinced themselves and the world that they were on the way to global dominance. However, other qualities are required to achieve global supremacy: global attitude, agility and empathy. In the absence of these characteristics, when globalization emerged, no other industrialized nation was less well equipped for globalization than Japan.
Koreans have learned a lot from Japan in the fields of management and business organization. Korean economic nationalism is even more pronounced than Japanese. It was driven not only by the remarkable success of the Korean economic machine, but also by the country's precarious geopolitical situation, given that communist North Korea is a constant threat. Economic development was associated with national security.
Catching up with the Japanese was a major motivation for getting Koreans up very early in the morning. The “father” of the modern Korean economy was General Park Chung-hee, who set up a network of state-supported “think tanks”. These include the Korea Development Institute, the Korean Institute for Science and Technology or the Korean Institute for Industrial Economics and Technology. These institutes paved the way for South Korea's remarkable rise to become the most successful newly industrialized country in Asia and the eleventh largest economy in the world. The General Parks regime created its own version of the zaibatsu, called "chaebol" in Korea.
But there are differences. The Chaebol do not have their own banks. The financial system in South Korea is controlled by the state. There are also no vertical links to suppliers and distribution networks, which are striking features of the keiretsus. In contrast to the Japanese zaibatsus, the Korean chaebols remain in family ownership.
Under Park, Korea became an export nation. Initially in the construction industry, steel production, textile and shoe manufacturing and later with consumer electronics, electrical appliances, semiconductors and vehicles, the Korean chaebols set out to conquer international markets. The Koreans were far more intrepid than the Japanese when it came to working the markets in Eastern Europe and Central Asia. Much more daring than their Japanese counterparts, chaebol was synonymous with market share.
The Korean upswing abroad, both in the region and further afield, was driven by both pull and push factors. Pull factors required the development of market presence, while the push factors resulted from a wage explosion that arose after the country's democratization. The Korean "economic fortress" was based on a strongly chauvinistic ideology against foreign imports and investments.
The tremendous strengths that Japan has acquired are weaknesses in the age of globalization. "Japanese globalization" is something of an oxymoron, a combination of two contradicting terms. The Japanese economy is in deep trouble, which is also related to the disastrous consequences of Japan's massive foreign investment in the 1980s.
The Japanese industrial establishment's "successful" attenuation of foreign investment is another reason for weakness. On the one hand, unavoidable obstacles were placed in the way of foreign investors, and on the other hand, Japanese investors moved into the distance with arrogant recklessness. Money should be enough to get things going. Because of linguistic inadequacies and poor intercultural communication skills, the only way for the Japanese to manage their overseas investments was to send armies of managers from the Japanese headquarters. In the early 1990s, the following comparison could be used: For every American manager who worked for a European branch of an international US corporation, a Japanese corporation needed seven managers in its European branch. With the exception of Sony, the Japanese have failed to capture the imaginations of graduates from European business schools.
This phenomenon is not limited to Europe. In Asia, the level of integration and the attractiveness of Japanese companies is very limited. Chinese and Southeast Asian university graduates put Japanese companies in third place behind American and European companies when they are asked to determine which foreign company they want to pursue a career with.
Some Japanese companies will continue to be successful regionally as well as globally thanks to superior production or product technology. These include Canon, Honda, Toyota, TDK and Sony. However, the necessary management skills remain inadequate in the age of globalization. Not only is there a radical change in education required, but also in attitudes, particularly towards nationalism and racism.
The class of Japanese production technology stands in stark contrast to the utter confusion in the management of Japanese financial institutions. While the Japanese build cars that are technically superior to most Americans and Europeans, Americans and Europeans have a far better grip on their finances than the Japanese. Japan will of course remain in the international business scene, but on the basis of currently recognizable trends in a rather marginal position. The Japanese establishment is frozen not only in its attitudes, but also from a lack of fresh blood. Far too many old conservative men continue to dominate the Japanese economy. As soon as young men and women are spotted holding positions of leadership in Japanese industry, it is a sign that the Japanese economy is experiencing a strong second boom.
South Korea is still a relatively young, highly educated nation. A significantly higher proportion of Koreans than Japanese earn university degrees abroad, especially in the United States. Korea thus has a pool of personnel from which it can draw for globalization. Japan, on the other hand, clearly lacks this.
Koreans are not very popular in other East Asian countries. They often turn out to be tough bosses. Many Korean factories in China have been told that strict disciplinary practices prevail.
The siege mentality that has prevailed so far has allowed the Korean economy to take off successfully. But the environment has changed a lot while Korea has not changed. As the Korean political and economic establishment is losing face on a large scale as a result of the devaluation of the won, voices can also be heard from Koreans that this is in many ways the best thing that could have happened to the country, if it is more positive and international than reacts aggressively and nationalistically to the new conditions.
While the Americans gave democracy to the Japanese, the Koreans had to fight for it. Korea has a much stronger spirit of rebellion and independence than Japan. Korea is far too strong a nation and a potential regional and global industrial player to be negligible.
Asia in the Bamboo Decade?
The focus for momentum in the Asia-Pacific region in the coming decade is likely to be the Chinese economic area.
Taiwan is the main source of capital and technology in the region. The Chinese economy continues to be driven by the extraordinary dynamism and flexibility of Chinese companies and the speed and skill with which they cross borders. In contrast to Japanese companies, in Chinese companies you often meet young and talented people full of energy. Their internationalization is evidenced by the fact that hundreds of thousands of Chinese are studying business, economics, engineering and other subjects at American, Australian and European universities.
The openness of the Chinese economic area can be seen in the high level of foreign direct investment - in contrast to Japan and Korea. China took on rapidly growing investments. In the mid-1990s, China ranked second in the world for direct investment after the US. Britain and France came third and fourth. Much Western investments in the Asean economies have been joint ventures or other forms of alliances with local Chinese companies that are members of the so-called bamboo network.
The Chinese economic area is not only exposed to the outside world, but also open to foreign investment and influence. Taiwan was hospitable in contrast to Korea's dismissive attitude. Singapore and Hong Kong, the two main Chinese enclaves in East Asia, are almost entirely dependent on foreign trade and investment.
Chinese capital has had less influence on the West than either Japanese or Korean. Chinese companies have not spawned global brand names like Samsung, Hyundai, Sony, and Honda. This is partly because the Chinese bamboo networks are characterized by an abundance of small and medium-sized companies, while the Japanese and Korean economies are dominated by large stock corporations and groups of companies (Kereitsu and Chaebol). Most of the exceptions are companies that are primarily engaged in real estate and property development.
The Chinese economic area represents a huge new economic zone. It is certain that Chinese companies will concentrate mainly on the Chinese economic area in the foreseeable future.
Much depends on how the global economy develops over the next few decades. It remains to be seen that the Chinese business community is maintaining its momentum and increasing its reach. The process of globalization, with ever greater weight in the Asia-Pacific region, will continue. For western companies it should be clear that you need a solid foothold in the Chinese economic area and a good understanding of it if you really want to act globally. (ch)
Financial Times; Special supplement series “Mastering Global Business”, 10 episodes, 1/30/98–4/3/98
The Chinese network
The bamboo network is the third type of Asian company. There is no equivalent to the Japanese and South Korean national economies in the Chinese world. The term “newly industrialized countries” needs to be replaced by “newly industrialized economies” since two of the four newly industrialized countries, Hong Kong and Taiwan, are not countries and Singapore has a population of over two million as a city.
The bamboo network extends to all of Southeast Asia. The decision-makers and drivers in Southeast Asia are Chinese. Despite strong ties with local governments, there was no nationalist link between government and industry like the one in Korea or Japan. The relationship is based on financial support for openly criticized regimes in exchange for government protection or favor. Indonesia is an extreme example of this. The main driving force was substantial investment, mostly from Taiwan, and the cross-border regional and corporate alliances formed by Chinese corporate communities.
Ambition, wealth creation, huge savings, living in clans, high education, and an ethic of self improvement are the ingredients that got the industrial machine running and running.
With the turn away from Maoism, China opened its doors to foreign capital, the main source being the bamboo network. Chinese capital has no natural “home”. The capital of the People's Republic of China may embody political centralism, but centrifugal and regional forces have long been dominant in the economic field.
The boundaries between the Chinese economy and the network outside of China are fluid. The Chinese economic area, which includes the coastal provinces of the People's Republic, dominated by Shanghai and Guangzhu, Hong Kong, Taiwan and the bamboo network of Southeast Asia, is a truly "limitless world". Whether the Chinese bamboo network has the capacity and ability to go global remains to be seen. As a regional power, the network appears impressive.
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