This commentary appeared in South China Morning Post on July 31, 2003.
The Nasdaq is up 31 per cent so far this year, and technology companies are
finally showing double-digit profit growth. The industry downturn has been long
and brutal but, finally, shimmers of recovery are on the horizon. And not a
moment too soon for Asia's battered economies. What have we learned over the
course of the boom-bust cycle? That the fates of the information technology
(IT) industry and Asian governments are closely intertwined.
Back in the heady days of 1999, South Korea's chaebols were in bankruptcy
death throes from the Asian currency crisis; Japan's big five electronics companies
were bleeding red ink; Southeast Asia was the disk-drive capital of the world;
Taiwan was on the edge of breaking out of outsourced manufacturing into innovation;
Hong Kong established a science park, declaring itself open for IT business;
and China and India were footnotes in the global technology world.
How times have changed. China is now the largest mobile phone market in the
world and claims the second-largest personal computer market and internet user
base. China's technology output has also grown dramatically, as Southeast Asia's
has shrunk; Taiwan is still firmly entrenched in outsourced manufacturing; and
South Korea is the rising phoenix with globally competitive and innovative leading-edge,
name-brand products. The normally nimble Hong Kong has made no noticeable progress
in establishing a technology sector, while technology conglomerates in Japan
have miraculously restructured and outsourced to reclaim their edge in select
sectors. And where has China been sending delegations to study start-ups? Not
Silicon Valley or Taiwan's science parks—but to India.
As we argue in a report from the research institute RAND, in Asia, the rise
and fall of technology-industry fortunes are inextricably linked to the policies
of governments. Since Japan first led the way, technology exports are considered
one of the most coveted economic drivers in Asia.
But as many bureaucrats are finding, strategies effective in erecting past-pillar
industries cannot be easily applied to technology. Protectionism, subsidies
and heavy regulations were used to establish banking, steel and vehicle industries.
In contrast, the technology industry requires a combination of creative thought
to develop intellectual property, the legal and enforcement infrastructure to
protect it, an efficient capital market, and management expertise to produce
competitively or to outsource, and then to market globally.
Government policies can make or break a country's IT industry, but influence
travels in the other direction, too. The internet and mobile phones are only
becoming more critical to how politics and governments operate in many Asian
countries. Interestingly, this is true in democracies and one-party states alike.
Perhaps the most dramatic example of technology's influence on government
in Asia happened in the Philippines. In 2001, Filipinos used mobile cell phones,
email chat groups and websites to organise and carry out the campaign to oust
against President Joseph Estrada. In last year's South Korean election, the
success of President Roh Moo-hyun was attributed in large part to his internet-based
supporters' organization, Nosomo.
Of course, most eyes have been watching China for signs of IT's political
influence. While the Chinese government has successfully used a variety of both
hi- and low-tech measures to counter the political influence of the internet,
it is enormously invested in technology's commercial role and encourages its
use. As a result, there is no question that technology is affecting politics
there. The Sars outbreak provides just the most recent example. Chinese turned
to foreign websites for information when the government would not admit to the
crisis. This phenomenon will prove to be a major force for political change
in China, especially during crises.
Technology is also changing how the Chinese government itself operates. While
most e-government initiatives are aimed at greater efficiency, in some of the
wealthier, coastal cities, local officials have been experimenting with the
potential of technology to exchange views with the public directly. Again, this
could foretell real political reform.
Thus, for the foreseeable future, while government policies will have a strong
hand in the success or failure of the IT industry in Asia, the technology produced
will continue to empower citizens to comment and act on the success or failure
of government policies as well as on the politicians themselves.
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