Asia's Turning Point

Asia was probably the biggest economic sensation of the post-war decades. The breathtaking success of Japan was followed by a remarkable rise of "four tigers", then ASEAN founder states and then China. The Asian miracle became a commonly accepted definition of this success. In the late 1970s and especially 80s it became clear that the balance of power in the world had changed. Politicians, businessmen, scholars began to talk about "the new Asia Pacific age" and Asian economic model, different from and, maybe, even superior to Western capitalism. However, in 1997-98 the Asian economic crisis came and made the region a sick man. Six years before that Japan, the regional powerhouse entered more than a decade-long period of stagnation. The miracle was over. However, the crisis was overcome within a surprisingly short period of time. Naturally, the question arises: What now? What is going on in the region after the miracle and after the crisis? What is today's face of Asian capitalism and how should we view its performance?

Readers interested in regional developments will find a lot of literature about miracle decades and crisis years. However, few analysts have addressed the challenging questions addressed in this book.

The authors vividly show that Asian capitalism is undergoing a radical structural transformation. These changes are directly affecting its key institutions: governments, companies, labor relations, etc. As a result Asian economic systems are becoming much closer to the Western-style, especially Anglo-Saxon capitalism, though the region retains some important specific features, especially regarding business culture.

This book is a must for business people worldwide, for all those who study the region in colleges and business schools, for people engaged in various international activities and, finally, for all those who want learn more about our world at the dawn of the new century.

Acknowledgments xiii

Prologue 1

Part 1: Region 5

Chapter 1: The East Asian Miracle in Retrospect 7

Similarity in Diversity 7

Why Rapid Growth? 10

The East Asian Model of Capitalism: An Outline 10

The East Asian Model of Capitalism: How It Worked for Growth 14

The Asian Crisis: The Final Curtain 16

Entering a New Stage 20

Chapter 2: A New Wave of Growth 23

East Asia in the World: Its Present Position 24

Running Fast But Slowing Down 28

Labor and Capital: Inputs and Productivity 29

Growth Drivers on the Demand Side 36

China-led Growth 36

The Growth of Poor Quality: Energy Inefficiency and Environmental Unfriendliness 38

The Impact of the Global Financial Turmoil 40

Concluding Remarks 44

Chapter 3: Structural Transformation: The State 47

The Developmental State is Yesterday 47

“Less Government, More Market” 49

Industrial Policy: Still There, But… 51

An Emphasis on Upgrading and Innovation 56

Modernizing Agriculture: A New Old Task 57

SOEs and GLCs as Leaders in the Market Economy 60

Concluding Remarks 63

Chapter 4: Structural Transformation: Business 65

Three Big Shifts 65

Ownership Shift 66

Corporate Governance Shift 77

Dominant Shareholders: A New Mentality, a New Mode of Action 81

Concluding Remarks 85

Chapter 5: Structural Transformation: Labor Relations 87

Overview: Directions of Change and New Challenges 87

Evolving Practices and Way of Thinking 88

The Signs of a New HRM System 90

Building Sustainable Labor Relations 92

Concluding Remarks 96

Chapter 6: Regional Integration and Prospects for the East Asian Community 97

The Interdependence of East Asian Economies 98

East Asia’s FTAs 103

Regional Institution Building: ASEAN Plus Three 108

The Creation of the East Asian Community: Dilemmas 111

East Asia’s Integration Pattern: A“Do-What-You-Can-Do” Community 113

Part 2: Nations 115

Chapter 7: China: A New Heavyweight 117

A Few Basics 117

Postwar Development 118

Structural Reforms 122

Present Performance 123

Three Super-Challenges 127

The Upgrading Game 129

Foreign Trade 132

FDI and the Business Environment 135

Concluding Remarks 138

Chapter 8: Hong Kong: Ten Years with China 143

A Few Basics 143

An Historical Perspective 145

Postwar Development 146

Present Performance 146

Foreign Trade 151

FDI and the Business Environment 152

Concluding Remarks 153

Chapter 9: Taiwan: A Center of Advanced Manufacturing 155

A Few Basics 155

Postwar Development 156

Structural Reforms 159

Present Performance 159

Foreign Trade 164

FDI and the Business Environment 165

Concluding Remarks 167

Chapter 10: South Korea Reformed: Challenges for a Newly Developed Nation 169

A Few Basics 169

Postwar Development 170

Structural Reforms 173

Present Performance 175

Foreign Trade 179

FDI and the Business Environment 180

Concluding Remarks 183

Chapter 11: Singapore: Globalized, Entrepreneurial, Diversified 185

A Few Basics 185

Postwar Development 187

Structural Features 190

Present Performance 191

Foreign Trade 196

FDI and the Business Environment 197

Concluding Remarks 198

Chapter 12: Malaysia: Developed by 2020? 201

A Few Basics 201

Postwar Development 203

Structural Reforms 206

Present Performance 207

Foreign Trade 211

FDI and the Business Environment 211

Concluding Remarks 214

Chapter 13: Thailand: Rice Bowl, Regional Factory, and Land of Smiles 215

A Few Basics 215

Postwar Development 216

Structural Reforms 220

Present Performance 221

Foreign Trade 227

Inward FDI and the Business Environment 228

Concluding Remarks 232

Chapter 14: Indonesia: The Start of the Post-Suharto Era 235

A Few Basics 235

Postwar Development 238

Structural Reforms 242

Present Performance 244

Foreign Trade 248

FDI and the Business Environment 250

Concluding Remarks 252

Chapter 15: Philippines: Speeding up at Last 255

A Few Basics 255

Postwar Development 256

Structural Reforms 260

x Asia’s Turning Point

Present Performance 261

Foreign Trade 266

Inward FDI and the Business Environment 266

Concluding Remarks 269

Chapter 16: Vietnam: A New Magnet for Investors? 271

A Few Basics 271

Postwar Development 271

Structural Reforms (The 1990s and the 2000s) 273

Present Performance 275

Foreign Trade 279

FDI and the Business Environment 280

Concluding Remarks 283

Chapter 17: North Korea: Utter Orthodoxy or Attempts to Reform? 285

A Few Basics 285

Postwar Development 286

Structural Reforms 287

Present Performance 290

Foreign Trade 291

FDI and the Business Environment 292

Economic Relations with South Korea 293

Concluding Remarks 294

Chapter 18: The Russian Far East: Yes, It is Also East Asia! 297

A Few Basics 297

The RFE in the Soviet Economy 298

The Market Transition of the 1990s 299

Present Performance 300

Foreign Trade 303

Inward FDI and the Business Environment 304

Concluding Remarks 307

Chapter 19: India: The Next-Door Neighbor Knocking at the Door 309

A Few Basics 309

Postwar Development 311

Structural Reforms 313

Present Performance 314

Foreign Trade 321

FDI and the Business Environment 322

Concluding Remarks 325

Chapter 20: Japan: Forgotten Giant 327

A Few Basics 327

Postwar Development 329

Structural Reforms 334

Present Performance 336

Foreign Trade 343

FDI and the Business Environment 345

Concluding Remarks 348

Epilogue 351

References 355

Index 371

Ivan Tselichtchev is professor at the Niigata University of Management in Japan since 1994. He graduated from Moscow University in 1979 and joined Russia’s leading think tank, the Institute of World Economy and International Relations. He got his Ph.D. in 1983 and became Senior Researcher in 1984. Tselichtchev is the author of four books and co-author of many others. He has written more than 200 articles on the Asian, Japanese, Russian and international economy as well as on international politics, in English, Japanese and Russian. In 2005, the Committee of the Cabinet Office of the Government of Japan named Tselichtchev Seikatsu Tatsujin (A Master of Life) which means a person with outstanding achievements and lifestyle.


Philippe Debroux is a Belgian national and for over 30 years resident in Japan. He holds an MBA from INSEAD and a Ph.D. from Brussels University. He began his career in a Japanese company before entering academic life in the mid-1980s. He has since developed a successful career as a professor of business in Japan, Vietnam, Belgium and France while continuing in-depth field research focused on developments in human resource management, innovation and entrepreneurship in Japan and other Asian countries. His substantial experience in both business life and academic research give his work a particular cachet. Effectively combining theory and practice, his books and articles make a valuable contribution to our understanding of Asia. Asia’s Turning Point is a comprehensive, one-stop introduction to the economies of Asia. Its coverage extends from Japan, China, and the “Four Tigers” to ASEAN 4, as well as Vietnam, North Korea, India, and the Far Eastern provinces of Russia. The author’s offer detailed information about each country’s economic and trade status along with a description of its business environment, including legal and cultural issues.

Asia’s Turning Point uses a multi-disciplinary approach, mixing economic analysis and business concepts. It covers topics that are important in all countries in the region such as labor markets, employment issues, entrepreneurship, innovation and financial problems, as well as a number of specific sub-regional issues.

Asia’s Turning Point is focused on Asia’s structural transformation at the beginning of the new century. The authors investigate far-reaching changes in government-business relations, corporate ownership, governance, management, labor relations, as well as the phenomena of new East Asian regionalism and prospects for the creation of the regional community. They argue that the dawn of the 21st century marks Asia’s turning point: the rise of a peculiar Asian model of capitalism inspired by the rise of Japan appears to be no longer feasible. Asia’s economic and business systems are Westernizing. More and more East and West are speaking the same business language. However, the Westernization is systemic, not cultural. The intrigue is that it is taking place within Asia-specific cultural and social contexts.

Asia’s Turning Point combines innovative concepts with lively descriptions of Asia’s economic, business and everyday life. Readers not only deepen their knowledge about the region, but also feel its flavor and pulse. It is a must for everyone engaged in international economy, business or Asian studies, and for all those who want to learn more about today’s world.

Asia's Turning Point An introduction to Asia's Dynamic Economies at the Dawn of the New Century

Asia's Turning Point provides a wealth of invaluable insights for anyone wishing to understand where Asia's growth miracle has come from, and where it is going in the future. It deftly highlights both the opportunities and the pitfalls on the road ahead. The authors systematically examine all of the critical forces that are shaping the Asian business and economic environment including the economic and political role of the apparatus of the state, ownership and governance, the management of local Asian companies, and Asian-style labor relations. This book is a treasure trove of information for business people, policymakers, researchers or students alike. Prof. Peter Williamson Professor of International Management University of Cambridge Judge Business School

Asia's Turning Point is a landmark for scholars, researchers, and businessmen. It explains why the fastest growing area of the world is Asia and why it will continue to be in the future. A large market—from Mumbai to Sydney—is taking shape with a strong determination to grow and modernize. Tselichtchev and Debroux have put together an incredibly interesting book that brilliantly captures the essence of very complex diversified socio-economic realities. Vittorio Volpi Chairman, Parallels Consulting

Asia's Turning Point is a very timely volume. A unique cluster of highly performing Asian economies has retained growth dynamics in spite of recent global financial turmoil. Its future prospects crucially depend on how we understand the three major aspects of the systemic transformation of major Asian countries: (1) the economic role and policies of the state, (2) ownership, governance, and management of companies, and (3) Asian style of labor relations. A great deal of literature covers many aspects of Asian capitalism but what sets this book apart is that it deals not only with the NIEs and ASEAN 4 but also with the "Four Heroes" (in authors' terms) of Vietnam, North Korea, Russian Far East, and India. This wide selection will provide a precious gift for researchers who are struggling to find a new worldwide perspective including genuine emerging economies. Kenichi Imai Senior Fellow Emeritus, Stanford University Professor of Economics, Emeritus, Hitotsubashi University

Ivan Tselichtchev and Philippe Debroux provide a highly readable, up-to-date account of the economic development and outlook for East and Southeast Asia. Asia's Turning Point is both broad and deep. It gives a comprehensive treatment on a region-wide basis to relevant issues such as the transformation of the Asian development model, Asian business corporations, and Asian business-labor relationships. The studies of individual key economies add depth. The volume will be valuable in classrooms and for policy-makers. A tour de force, it fills a needed gap and comes at a time of history when it is even more critical to understand Asia's growth trajectory. Charles Morrison President, East-West Center University of Hawaii