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The Lost Continent... - Views on News from Equitymaster
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  • Dec 2, 1996

    The Lost Continent...

    Look at a map of the world. The United States has an economy that produces 20 times the value of goods produced in India. All of Europe has an economy that is 15 times larger than India's. Japan, China, and the Tiger economies of south east Asia collectively produce goods valued at over 12 times that in India. The Middle East has oil which drives the world, Latin America has the United States as its benefactor, and Australia and New Zealand are rapidly building ties with the Asian economies.

    Guess who is left out of the global wealth picture? Africa and South Asia. If I told you to think of images of Africa you would probably visualise things like: poverty, tribal dancers, wild life parks with elephants and tigers, and utter chaos. I have never been to Africa but those are the sort of images I, as a foreigner, would have.

    If I ask an American, Chinese, or European who has never been to South Asia what images come to his mind he is most likely to think of: corruption, poverty, and sickness.

    Take a look at that world map again and visualise the economic might of China and Japan in the east and Europe and USA in the west. And look at us in South Asia with our 1.2 billion people misguided by politicians, strangled for decades by bureaucrats, side-tracked for centuries with religious and social fires. Wasting scarce money on buying arms that we aim at each other always ready to punch each other to uphold our honour and dignity while hundreds of millions cannot get water to drink or food to eat. There we are, the member countries of SAARC - the South Asian Regional Conference - directionless children of the economic world holding each other's throats and walking towards a slow economic and social death.

    One theory of origin has it that Africa and India were part of one land mass before South Asia began drifting away - the Himalayas are a result of a collision of this South Asian land mass with the China border. Well, although Africa and South Asia may have moved away physically over the last few million years, the economic vacuum in these regions seem to have maintained old ties.

    There is a global economic ladder and we are at the bottom of it. Many other countries have been at the bottom before but they have had a plan to climb upwards for the benefit of their people. Forty years ago, Japan was at the bottom. They decided to build toys, plastics, and textiles to feed a growing global market. As demand for their products grew, they climbed up the economic ladder and, by the 1970's Japanese companies manufactured cars, stereos, and televisions. As the Japanese benefited from more wealth, they are now getting into manufacturing satellites and aeroplanes - and their accumulated wealth from past manufacturing dominance has made them owners of factories in Malaysia, Thailand, and Indonesia which manufacture lower-value goods like televisions and stereos. In the 1960's the label "made in Japan" suggested that the product was of low quality. In the 1990's "It's a Sony" is a global ad campaign that immediately brings to mind innovation, quality, and reliability. Sony is a Japanese company.

    Ten years ago, Malaysia began the long climb up the global economic ladder by first manufacturing textiles and then the consumer electronic products like stereos and television sets. The next ten years will see them manufacturing cars and semiconductor chips to feed the growing Asian demand. Last month Proton, a Malaysian car company acquired Lotus, the venerable racing car company in England. Proton is hoping that the technology that Lotus has, along with its brand name, will give it instant recognition and product ideas to become a global player in automobiles.

    Taiwan, which also began as a textile manufacturing country, specialises in manufacturing products like keyboards and modems for the computer industry. GVC, the second largest modem manufacturer in the world is from Taiwan. In an increasingly "internetted" world the demand for modems is likely to grow at over 40% per annum ensuring that there will be sufficient wealth creation in Taiwan. Also, Taiwan has a 35% market share of the GLOBAL production of laptop computers - and demand for laptops is growing by 30% per annum world-wide.

    Singapore is positioning itself to the be the multinational headquarters for companies with an Asian operation. Ever since the China take-over of Hong Kong was announced ten years ago, Singapore has concentrated on building its infrastructure to meet the expected surge in demand for facilities like airports, ports, roads, telecommunication networks, and hotels - essentials for any multinational looking to find a new Asia headquarters. And Singapore wants to be the shopping mall for Asia with millions of square feet of shops carrying goods from all over the world. The day will come when Singapore Airlines will give you Rs 5,000 worth of coupons to shop in Singapore each time you fly the airline.

    And South Asia? I guess we are still busy finding excuses for our failures. Blaming it on the politicians, the low literacy levels, the economic rape by the East India Company, lack of capital, population growth, and the weather. Playing the role of "poor-me" is the favourite hobby. But like a Singaporean official said: "The world does not owe us anything." We have to go and and work for it.

    Maybe we should look in the mirror and ask ourselves if we, as individuals, are to blame? After all, you get the government you deserve. Revolutions occur at the grassroots level and are reflected by changes at the very top. Either we need to think for ourselves what it is we want and work towards that objective or we should bow our heads and pray for the miracle of a benevolent dictator who can plan and strategise on behalf of all of us so that we can give our children a better life. That is a fairy risky strategy and can fail - look at what happened when we placed our future in the hands of the Nehru-Gandhi family.

    Meanwhile, let's try not to fall off that global economic ladder.



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