The Crisis Plus Ten (Part Two): Asia's Leadership Challenge

One of the challenges analysts of Asia have is that the continent is a place where it is often difficult to discern rhetoric from fact, perception from reality. The gap between what is at the surface and what lies beneath, between what is said in public and what is admitted behind closed doors, can be significant.

Take South-East Asia and the region’s integration. On the one hand, ASEAN countries have hailed their efforts to create a free-trade area and to conclude a spaghetti bowl full of bilateral deals in the face of setbacks at the multilateral level. At the same time, ministers tacitly acknowledge that much of the work so far has been focused on lowering tariffs, while certain sensitive sectors have been kept protected. The heavy lifting required to eliminate non-tariff barriers, facilitate trade, and create a real single and seamless market remains to be done. For example, there is no harmonization of rules in the trade of services in the ten ASEAN economies. This deficiency means that global services companies have no ASEAN business strategy; it would not make sense to have one. “What we need is for ASEAN to have a free trade agreement with itself,” advised Steven Okun, Vice-President, Public Affairs, for global package and document distribution company UPS in Singapore, at the World Economic Forum on East Asia which recently took place in the city.

Behind that somewhat jocular statement was a very serious plea for authenticity, for leaders to focus less on grand visions and more on pragmatic policies that would have real impact. “We need less planning and more doing,” said meeting Co-Chair Carlos Ghosn, who is President and Chief Executive Officer of both Japanese automaker Nissan and French car manufacturer Renault. “ASEAN has more of a facility for planning and less of a facility for execution. We may have wonderful plans but execution is 5%.”

ASEAN officials usually bristle at charges, particularly from the business sector, that the organization is all talk and no action. But today, with the pressures of globalization mounting and China and India continuing their market-shaking rise, the chips are down and South-East Asian leaders are speaking more plainly. “The step-by-step way they are handling the integration of ASEAN and East Asia is slow by the reckoning of many of us, too slow by the reckoning of business people,” Singapore Senior Minister Goh Chok Tong conceded. Vowed Ong Keng-Yong, the Secretary-General of ASEAN: “In the coming year or two you will see the leadership focus on implementation.”

In politics, there may be wisdom in discretion and necessity for spin. Yet leaders today cannot coast on vision alone but need to deliver results – and in short order. To be sure, the collective record of Asian leaders over the past two decades has been laudable. Asia has performed extraordinarily well, the 1997-98 financial crisis notwithstanding. According to the World Bank, the number of East Asians living on less than a dollar a day was halved from 300 million to about 150 million between 1990 and 2004, a decline in the incidence of poverty from 29% of the population to just 8%. In Asia as a whole, however, about 20% of the population is still poor.

“We have two faces in Asia,” said Rajat M. Nag, Managing Director-General of the Manila-based Asian Development Bank. “One Asia is growing; the other is falling behind. There are 1.9 billion people in this part of the world who live at US$ 2 a day; some regions are even worse off than sub-Saharan Africa. These two faces must converge rather than diverge as is the case now.”

As Asia progresses and many of its countries become middle-income economies, the shortcomings of the region will stand out more sharply against the backdrop of its fantastic success. Already, a new set of problems has emerged – infrastructure deficits, environmental degradation, energy security, technological development and innovation, and ageing demographics. The most urgent priority will have to be the growing gap between the rich and poor, particularly in countries such as China and India, where the ranks of the middle class have swelled and some have become rich while hundreds of millions remain in poverty. “Differential responses to globalization are leading to income inequality that is becoming a more serious problem in every country, every city and maybe every family around the world,” warned George Yeo Yong-Boon, the Singaporean Minister of Foreign Affairs. “Unless we have global leadership, this problem will become even more acute.”

But therein lies a major challenge. Today, there are no clear lines of global or regional authority. In a world of global threats that require regional and global solutions, there is a lack of regional and global leadership with any clear mandate. In the absence of such an agenda-setting force in Asia, it is up to each country to balance their national interests with their regional and global responsibilities. Authentic leadership means acting to prevent or prepare for crises, not responding to them. It means staying ahead by pursuing reforms constantly, not reacting to competitive pressures or public criticism. It means taking a long view, not governing with the next election or quarterly results in mind.

Indeed, how a government responds to widening disparities in income that are stirring a sense of insecurity, fear and resentment among citizens could be a real test. “Governments may be pressured to roll back reforms and liberalizations and revert to nationalistic rules for foreign investments or protectionist policies for trade,” Singapore Prime Minister Lee Hsien-Loong told participants. “This will not only choke off growth in the region but lead to tensions and souring of relationships.” How countries prepare for the next regional or global crisis will also be an indicator of the quality of their leadership in both the public and private sectors. “A shock will come at some point,” warned Tharman Shanmugaratnam, Singapore’s Minister for Education. “Emerging markets must have shock absorbers. It requires astute management.”

How can East Asian countries ensure that they have the leadership that can provide that astute management? One way is to invest in education that encourages creativity, innovation and a global perspective, attributes that future leaders of the region will need. “The educational system is not responsive enough to the new world that we are facing,” said meeting Co-Chair James T. Riady, CEO, Lippo Group of Companies, Singapore. Minister Yeo stressed the importance of preparing the next generation for globalization. “We can’t just feed them rules and regulations or canned knowledge,” he concluded. “Countries which pay attention to education and value systems will do well. Those which neglect this area are not in the game.”

L'état, c'est lui: Will Sarkozy be a Thatcher/Reagan or a Bush/Blair?

The election of Nicolas Sarkozy as the next president of France yesterday had us thinking about the nature of leadership in the globalization age. His arrival on the scene marks a major break from the past for France: the Hungarian immigrant's son is the first French president to be born after the World War II. In addition, Sarkozy has presented himself as a reformer, a tough guy who would not hesitate to make tough choices in pursuit of his strong-held beliefs.

The question is whether he will turn out to be a Thatcher/Reagan or a Blair/Bush. What do we mean by this distinction? Both pairs of British and American leaders presented themselves as people of conviction who governed by principle rather than by polls. They pushed ahead with their ideas regardless of the political setbacks and, at least in the case of Thatcher and Reagan, they were either admired or vilified for their commitment, grit and steely determination. Though his administration ended up creating a huge deficit due to the combination of high defense spending and tax cuts, Republican Ronald Reagan is now beloved - even by many Democrats - for his vision, his simple ways and his communication skills. Even Thatcher's critics would agree that her handbagging style and "the-lady-is-not-for-turning" rhetoric did force structural changes in Britain that were necessary and have turned out to be beneficial in the medium term.

As for Blair and Bush, both have turned out to be less-desirable "mini-me" versions of the two giants of the closing years of the Cold War. Blair came in on a wave of optimism, promising a "third way" - the free market outlook of Thatcher with the compassion and progressiveness of the Labour Party. Bush spoke in a pseudo-folksy manner and promised to rid Washington of the parsing of the Clinton years and instead govern along simple conservative principles. After 9-11, he took that a step further when he adopted a "with-us-or-against-us" stance in his "war on terror" - black and white, no gray.

Unfortunately, Blair and Bush went down the path to Iraq together, ensnaring themselves, their countries and the world in possibly the worst foreign-policy debacle in their respective histories. Their performance, however, has belied the rhetoric. Blair has been less than successful in improving education, healthcare and public services, while Bush has turned the Clinton surpluses into huge deficits. And of course there is Iraq - a devastating triumph of demagoguery and corruption over thoughtfulness and common sense that the world will pay for for many years to come.

So what then of Sarkozy? As former US treasury secretary Larry Summers said last year in Singapore, globalization means that the positives that result from it are magnified, as are the negatives. So when leaders do right, the full impact of benefits is greater than it might have been when the world was not as interconnected as it is today. In other words, good governance can really help. But the opposite is true: screw up and you can really make a mess. Iraq is just such a debacle.

If Sarkozy comes in with ideological blinkers on and pursues reform for reform's sake without the pragmatism and wisdom that comes with experience and perspective, then he could turn out to be a Bush/Blair. But if he takes a pragmatic approach even as he pursues his policies, he could be a great leader. France certainly needs to be shaken up. But you can shake a tree by the roots and kill it.