Mr. Bin Kim Young on The Development models of four Asian Tigers

My MBA colleague Mr. Bin Kim Young comments on the Asian business models:

“Four Asian Tigers” or “Asian Four Little Dragons” means the newly developed Asian economies of Hong Kong, South Korea, Singapore, and Taiwan. These countries had become famous for their high economic growth and rapid industrialization between the early 1960s and 1990s. The growth rate of real gross domestic product per capita from 1960 to 1995 was around 6% per year. Even though attention has increasingly shifted to other faster growing economies, such as China, Indian, and Vietnam, all of these tigers have successfully transformed into high-income economies. All four Asian Tigers have a highly educated workforce and good infrastructures, but have specialized in areas where they have a competitive advantage. In other words, each of them has a different model.

For example, the economy of South Korea relies heavily on exports from a few conglomerates and it is among the world's top exporters. It is home of well known global conglomerates such as Samsung, Hyundai-Kia, and LG. The Hyundai-Kia Automotive Group is Asia's second largest car company and one of the top five automakers in the world. Samsung is world second largest cell phone maker. And South Korea makes half of heavy ships in a world.

On the other hand, small and medium-sized businesses make up a large proportion of businesses in Taiwan. Most of the development was thanks to the flexibility of familiar companies which is relatively small, but produced for foreign partners like IBM, DEC, and HP. But the importance of the State must not be forgotten. It was the central government which coordinated the industrialization process, created the infrastructures, decided the strategic priorities and, when necessary, recurred to impose its conditions.

Hong Kong is the gateway of Mainland China, thanks to favorable geographical position and trading opportunities to and from China. Under British administration, it soon became a thriving legitimate international port. By the late 20th century, Hong Kong had become the seventh largest port in the world and second only to New York and Rotterdam in terms of container throughput. The Kwai Chung container complex is the largest in Asia. Moreover, Hong Kong shipping owners are second only to those of Greece in terms of total tonnage holdings.

The economy of Singapore is a highly developed state-driven capitalism. Although the government intervention in the market is kept at a minimum, the state controls and owns firms that comprise at least 60% of the GDP through government-related companies, such as Temasek, and GIC. It has a business-friendly environment, relatively corruption-free government, and stable inflation. Exports from multinational companies provide the main source of revenue for the economy. Thus Singapore could be an extended concept of entrepot, which is a trading post where merchandise can be imported and exported without import duties.

Inequality and longer life

Here is an interesting book by Richard Wilkinson and Kate Pickett titled “The Spirit Level: Why Greater Equality Makes Societies Stronger”.

As the title suggests, this book discusses a controversial topic that brings the relationship between materialism and happiness into question. The authors have composed their creative effort by relying on results such as below. What we see below is a weak correlation between the income equality and longevity of citizens.

What I find remarkable in the book and related blogs is the assumption that the argument has been framed around: longevity of life can be an indicator of equality. The causation linking equality of income to happiness and to a longer life is not very convincing. The factors that may be quite important in determining the longevity of life or happiness may be plenty. Not to make a comprehensive list by staining my few working neurons, I will propose the following as other important parameters that need to be controlled for developing a comprehensive argument: Spiritual inclination, genetic predisposition, family harmony, societal structure, weather, availability of leisure, access to medical care, economy's fiscal position etc.

 I find it hard to comprehend these arguments is when I find the four “social democratic” economies of Sweden, Norway, Finland, and Denmark scattered  all over the range of the age distribution covered in this study. Well, as far as I understand, these countries are quite similar in the economy, weather, race, culture, and some other factors. The dispersion needs a valid explanation. Moreover, the income distribution disparity between Singapore and US may be quite comparable. But to compare Singapore’s older population, which achieved its independence quite recently, to US’s older generation is not an admirable argument. Singaporean elders faced severe malnutrition, multitude of tropical diseases, and dismal medical facilities till about last two and half decades.

My observations merely question the confidence and the legitimacy with which the book has been authored by utilizing data collected in the developed countries. I am sure this data has been shown to be “statistically significant”, but most of us who understand the statistical analysis would acknowledge that it may not mean much from a pragmatic outlook.

Someone needs to take a close look at the data and find better explanations than to resort to oversimplifications and grand generalizations. I must say that there is some truth in the statement that societies that refrain from discovering bliss in materialism and that do not contend in relative pleasure, will be happier compared with others. But, to claim this via an incomplete scientific study and to author a grand book requires some disconnection from the obvious reality.

Rich Indians and poor Government

In my recent trip to India, I couldn’t keep my mind off the vivid disparity in the purchase power of people in India. I must entertain the shouts of “cliché again” by the readers at the opening line itself. But if the readers may persist for a few more minutes, I may be onto something. So, what I saw was a clear case of what some economists call increasing Gini Coefficient, an indicator of income disparity/polarity in a society. On the one hand, I observed a lot of Indian eking out a meagre living by what some call a respectable profession while others call begging. On the other hand, I could not take my eyes off the over fed, over paid, and obviously overweight Indians, who had no embarrassment in exhibiting their newly acquired wealth.

These disparities were made even more vivid in my visits to the rural and inner most parts of India, Chattisgarh. Lack of proper infrastructure such as roads, electricity, drinking water, and even clean air has become a national problem. Of course, rich people cannot remain unaffected by these inconveniences. But they can minimize their discomfort by buying expensive cars, electric generators, and living in better houses (equipped with all the comforts of the world). Poor people are the ones who face music everyday and need to put up a fight for the essential resources. If you have kept up with the story so far, I must introduce my point of the narrative.

The Government of India needs to fill the gap to improve the sorry state of affairs in our infrastructure. Why doesn’t that happen? Now, I am not tempted to follow the approach taken by others to oversimplify the issue at hand. But, I am not going to delve in this rather short piece about the details of inefficiencies in the Indian Governance. I will concentrate of one of the causes of Government’s failure to address these burning issues and that is: TAXES. Government implements the entire social and community programs through taxes or by borrowing, which is also known as budget deficit. India has been running deficits of the order of 7-10% of the GDP in the last few years. It cannot afford to borrow further (will be discussed in the upcoming blogs). Therefore, Government has resorted to the only tool available at hand to increase its revenue: Taxes.

Government of India has decided to levy a Goods and Services Tax (GST) on its citizens starting April 2010. Before I overlay my opinions on this topic, let me give a small background on why world’s fourth largest economy fails to generate enough taxes. First, due to lax law enforcement and corruption, the Government of India gets its tax revenues from only 50-60 million tax payers. Rest of the some 1.15 billion individuals do not show up in any tax records. Second, the corporations and high net worth individuals hire tax consultants and partake creative accounting to evade taxes. Last, most transactions in India are never recorded and/or done through underground routes, decreasing the tax revenue quite significantly for the Government.

Government of India’s decision to introduce GST is seen as positive towards improvement of infrastructure and development of India. But three issues call for our attention to ensure the success of this proposition.

1. Poor Indians can hardly afford any more taxes. Over 400 million people in India subsist with less than Rs 100 a day. To tax 10% of their income will be denying them a stomach-full meal.

2. GST can be collected if the transactions are recorded. There is no guarantee that the transactions will be documented effectively. Given our citizens’ creativity (in the detrimental methods), one has to be a sceptic in the proper extraction of the taxes.

3. Will the appropriated taxes be allocated properly? Another billion dollar question that I do not even desire to attempt!

Being a mere mortal and of limited capacity of the grey matter, I will leave at the description of the problem here. What I believe is that a carpenter may change his tools as much as he wants, but the final outcome of his effort will also be dependent on the quality of the wood he utilizes. Similarly, Government of India can change the methods of tax collection, but inefficiency and corruption will not yield the desirable outcome of such policy.

A better India, A better world

I recently ran through the book “A better India, A better World “by Mr. Narayana Murthy of Infosys. This book is a collection of numerous speeches made by Mr Murthy in his career as an entrepreneur and his recent role as an advisor to the Ministry of Education. This blog is not intended to provide a critical review of Mr. Murthy’s query on the paucity of everything in India. But, I cannot resist the temptation to point out some of my observations, some praise and some criticism.

Let’s start with the good stuff first. Mr Murthy is a keen observer of the dynamics of the Indian society. His western experience and interaction was utilized quite effectively to portray the inadequacies of the Indian society. His approach to recommend policy is quite scientific: description, diagnosis, and prescription. The book covers a coterie of topics such as education, corruption, infrastructure, population, poverty etc. In his analysis, he comes across as a passionate and genuine individual. In most of the issues with India, he presents an excellent case in the departments of description and diagnosis. But the plot goes awfully bad after this.

His prescription can be described as shallow and generic. His speeches, which are intended to be grand and motivational, come across as a boring repetition of stale ideas that have existed for a while in the journalistic publications. What went missing was a fresh set of ideas beyond the usual fixes of corruption such as better law enforcement, accountability, and IT!

If he displayed lack of creativity in the policy prescription, then he continued this trend by offering the policy prescription without dwelling into the actual mechanics. For example, his three prong solution to corruption has been described in the last paragraph. But, he does not go into the necessary details on how to implement these changes in the system. He admonishes average Indian as everyone wants to be a thinker not a doer. Not sure if it such a bad idea to think or have a thinking process in our society compared with some other nations who want their citizens to be mere order processors.

Regarding his speeches, I must say they bloat with clichés and quotations. The quotations are sometimes inserted without much appreciation to the context or necessity. Just browsing through the quotations, one might be tempted to compare Mr Murthy with raging intellectuals such as Pandit Nehru. I am not susceptible to such a pitfall as I am aware a good quotations book can become an ample substitute to reading an entire array of grey matter stimulating books. Lastly, I cannot get rid of the arrogant pomp and self entitlement that is vivid in the book due to his success as an entrepreneur. His success is not only due to his intelligence and diligence but also due to being at the right place at the right time or what simple men call “LUCK”. Mr. Murthy shows amnesia to the above observation or rule.

In all, he is a living reflection of the contradictions that mar the Indian society in a grand scale. I have read and heard about his rants on him being humble. Mr. Murthy may be repulsive to apply the words such as “humble” or “unassuming” in practice, but does not hesitate to utilize the same words in describing his personality. But, after hearing the stories regarding the money spending orgy at his daughter’s wedding at the Leela Palace in Bangalore, I am not going to buy his claims on the face value. I believe his analysis on India is an educated one. But, there is no need to done him as the latest social scientist or visionary. I bet the following Hebrew saying is apt in this context:

“After a man is rich and successful, he is not only handsome and wise, but he also possesses an excellent sense of humour.”

In the defence of Indian Foreign Policy

Barabar Crossette’s article is one of the many that have been written during the smear campaign against India in the name of journalism. Due to the inherent biases, contradictions, and superficial analysis, Barbara Crossette’s article is laughable at the best!

Barbara Crossette (Courtesy: Authorsguild.net)

http://www.foreignpolicy.com/articles/2010/01/04/the_elephant_in_the_room

If India is labeled adolescent in the article, then the award for childish flip-flop must definitely go to Uncle Sam. A few points where the author’s “educated" analysis is not quite right:

1. On nuclear proliferation, what moral and legal authority do the "developed" nations have to dictate India's stand on its nuclear program? Questions about the safety of our program are quite invalid considering we haven't yet bombed anyone or did not have even one nuclear accident (Barbara may not be aware of the Hiroshima and Three Mile Island incidents or does she conveniently ignore them before preaching India a lesson on nuclear restraint/safety).

2. On the matter of trade also our "expert" author maintains her consistent ignorance on the facts underlying the denial of Indian Government to succumb to the big corporations that are called "farmers" in the US. These "farmers" get huge subsidies in the order of GDP of some of the developing nations. Indian and developing countries' farmers can never compete against such companies. Entry of these subsidized commodities into India will lead to end of livelihood of over 60% Indians. Therefore, Indian Government prefers life of its people over capitalist efficiency. This should explain the defensive trade policy of India and other nations. Before Barbara preaches India on the trade policy, she should consider taking a course on Macroeconomics 101 and should educate herself on the century old predatory economic policy of her nation (and other EU members).

3. It doesn't sound right for Barbara to propose a Carbon Cutting program to India when she and her compatriots are and have been the #1 polluter of the world for at least three generations. Barbara again maintains her anti-India rhetoric with abject ignorance and denial!

4. Complaining about corruption in Indian context doesn't make much sense when lobbyists in US have corrupted their whole democratic process. Misappropriations of the order of trillions of dollars during the war on Iraq are conveniently swept under the rug. Barbara needs to look at the other three fingers' direction when she points one at India's direction.

5. I need not touch upon America's stand on human rights as its antics at Abu Ghraib paint quite a colorful picture. Talk about Visa denial is a complete non-sense as American approach to allocate Visas to developing countries’ citizens works more like a lottery. Also, someone needs to give Barbara a count of life lost and/or irreparably affected by the actions of her compatriots all over the world.

I have to give her credit where it is due. Her article is highly accurate in an unintended way. One has to make a small adjustment to the article to make it factually correct and logically sound. REPLACE INDIA WITH AMERICA.

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Photography on a weekend

A few attempts with my new camera. Tried some shots in Boston...thank god the weather is coming around. Today it was mid forties, so I was out taking some pictures. I also made some attempts to get picturesof a tennis ball bouncing in my room. I tried to use really fast shutter speeds (1/200S, F/5.6, IS 1600). The pictures outside in birght sunlight were mostly taken in the program mode. ( 1/25 s shutter speed, f/6.1, ISO 100-200)




The track behind MIT (right in the middle of cambridge). On a philosophical level just seems like my life. Me and Deepthi running parallel, but due to parallax error, it seems to converge at infinity.



My favorite street Mass. Ave. You can see Novartis. The huge builiding with exhausts popping out on the top.

Boston!! The sidewalk runs parallel to the Charles River. It was beautiful day today and a lot of people were taking a nice walk in the afternoon.

Boston side of charles river (a small canal). Bad shot right into the Sun.

Attempted to catch the tennis ball on a roll. This shot was taken at a much slower shutter speed (1/25 s). Check the numerous frames that the camera captured.

Here I captured the ball in mid air (in flash, shutter speed 1/100 s)

Similar attempt to capture the ball, with nuch slower shutter speed (1/10 s)

Caught the ball right at the bouncing point! See the slight change in the shape at the contact point! (1/100s shutter speed)

Caught the flame in motion ( 1/50s, flash)

Need to get more creative with the subjectds and need to work on reducing the white balance so I can capture things in day light with small aperture and slower shutter speed.