Feb. 2004

        My recent travels through India, Malaysia and Thailand brought home a remarkable change in Asian attitudes and outlook. Asians are confidant and looking forward to dominating the world albeit with considerable anxiety. Taking each country at a time let me begin with India.

          Indians have not known this level of prosperity in centuries. The stock market was up 70 % for the year. India has been growing at 7 to 8 % per year since 1991 liberalization under threat of World Bank. Now India boasts of a 100 billion dollar foreign reserves. They believe they can “eliminate poverty” in 10 years at this rate. A recent Goldman Sachs study suggests  that in year 2050; China will be the largest economy, US 2nd and India 3rd. The per capita GDP for India will be $17000 that is just a few thousand below current US standards. Keep heart though, US will have a per capita of $77000 by then. This suggests that although US will have higher standard of living the size of Asian economies will certainly translate into flexing their muscle on the world scene. The evidence of prosperity is interesting. It is very hard to find domestic servants in India now most of them are immigrants from Nepal and Bangladesh along with a poor state Bihar. The newspapers are talking about the change in lifestyles as the servants vanish in 10 years. The  reasons for change are documented by a couple of books by India Unbound : The Social and Economic Revolution from Independence to the Global InformationAge by Gurcharan Das and “Elephant Paradigm (2002)”(Penguin books). Das was educated at Harvard and retired as Chairman of Proctor Gamble in India. He argues that the problem was never the “Indian Character” but misguided economic policies of Nehru. However, it was Nehru’s investment in education that is now translating into India’s dominance in software and outsourcing. My nephew told me he was selling Cable connections in Atlanta last night!  India has found its place in world economy by becoming the service sector for Call centers, medical transcription, insurance processing, medical chart review, back office banking and customer support are the backbone of this recovery. My cousin in California complains he can not compete with $23/hour rate of Indian software consultants. Even the next Intel chip will be designed in India.

                  China’s story is equally impressive and rather well known. China has become the manufacturing hub of the world growing at a rate faster than India and attracting huge foreign flows. Both China and India have recognized that their problems with each other are not worth pursuing instead economic cooperation could help them both. The bilateral trade between the giants is expected to be around $200 billion. They could just trade with each other and afford to ignore the rest of the world!

                 Thailand has a new Prime Minister Thaksin Shinawatra for last 3 years who is also the richest man in the country and a la Berlusconni became involved in politics to stop the investigations. He has engineered a CEO style leadership, firing cabinet ministers that failed to deliver. The stock market is up 70 %. Thaksin made his money in satellites and telecom ventures. His party has an absolute majority. He has launched a dollar/month health care and one county one product schemes that have been hugely popular. He claims he has “eliminated drugs” in a year after 3000 extra judicial killings.

 

                   Malaysia has managed to defy the world bank and pegged its currency to dollar, disallowed currency speculation and still managed to come out of Asian debacle on its own. The country is a mix of ethnic Muslim Malay, Chinese and Indians. The country is an Islamic state that has managed to avoid bloodshed between its ethnic groups and even has 3 columns of Hindu Temple, Mosque and Chinese temple at the entry into Melaka to tout its religious tolerance. The country has attained a level of development that is pretty close to European  standards. Mercurial Mahatir Mohammed served as the leader with an iron hand that has   managed to propel this country from a backwater rubber plantation into a modern prosperous state. The Anwar Ibrahim case that has recieved wide coverage in Western newspapers actually misrepresents the facts according to both Indians and Chinese. He was convicted of an attempt to obstruct justice not for sodomy. He is also a fundamentalist muslim. So much for independent media coverage by the western sources!

 

                      The above should clearly suggest that there is a sea change in world economic situation that will affect lives all over the world in many ways that were not possible to consider hardly 20 years ago. Napolean suggested that they should “let the sleeping dragon lie” (China) has proven remarkably prescient. 500 years ago India and China were the developed countries and have since then languished in poverty and communalism. They are now rising again to take their place on the world scene with half the world’s population. The "Elephant" and the "Dragon" will be hard to ignore. The result could be an alliance between Russia, China and India. The alliance is likely to be a military and economic power of the scale that would worry the dominant west. We have yet to mention Japan. This century is likely to be an Asian century rather than American. While America may be able to compete effectively, the price will be paid by Europe that will languish and decay.

 

                           What’s the catch? All predictions assume a linear event cycle. Reality is rarely linear, if so only for short time. The problems confronting Asia are also immense. Malaysia worries about their Islamic status that is leaving them out of the world scene. Believe it or not Iraq war did have an impact. Malaysians are squirreling away money out of the country fearing a conflict between the Malays who’s social benefits have been cut and the Chinese. The new Prime minister is an unknown. Malaysia is trying to reinvent itself as a multimedia and technology hub and has taken business away from Singapore (also has severe cuts in social benefits). Singapore is no longer looking good even to Singaporeans. Thailand has muslim terrorism in south, corruption, police violence and competition from China and India. China could fall apart as the communist party fails to control the growing independence demanded by its population. Crime and corruption are serious problems in China. India is currently ruled by a 14 party coalition with its myriad problems. The current government has called for elections in March hoping to capitalize on the “feel good factor”. The problems are crime, pollution, communalism, poor infrastructure and AIDS.

In other words, it is a “big If”. Those interested should consider reading :

 1.Building Wealth : The New Rules for Individuals, Companies, and Nations in a Knowledge-Based Economy
by Lester C. Thurow.

The Lexus and the Olive Tree: Understanding Globalization by Thomas L. Friedman (Author) (Paperback - May 2000). Keep your fingers crossed and invest in Asia.