CREDIT SUISSE Bulletin 2017 1 / 1

. e world’s oldest banking magazine. banking oldest world’s e .  Since 075360E

e New Asia A Short Trip rough the Most Exciting Region in the World Powerful, fluid contours and a characteristic waveform shoulder line make the new A5 Sportback a true design icon. Its standard Audi LED headlights provide daylight-like illumination of the road for your safety. For more information contact your Audi dealer.

audi.ch — Editorial —

A Continent of Vast Opportunity n 1999, a group of 18 people came together then very much a developing country, with in an apartment to learn more about an in- many living in poverty. It accounted for less novative business idea. All that was missing than 2 percent of the global economy. Today it Iwas money. at evening, however, the host of is the second-largest economy in the world the gathering was able to raise 60,000 US dol- after the United States (see our research unit’s lars in seed money to start a new company. in-depth dossier on page 39). Other regions in Fifteen years later, in 2014, our bank was in- Asia are also experiencing a boom, particularly volved as the company went public – valued at the members of the Association of Southeast 25 billion US dollars, it was the largest IPO the Asian Nations (ASEAN), including countries world had ever seen. like Indonesia, Vietnam, Singapore and ailand, is page of business history was written where we have a signi¦cant presence and are not in Silicon Valley, as one might assume, but investing. in Hangzhou, a city in eastern China. e com- pany in question was Alibaba and its founder ith its 625 million inhabitants, Jack Ma, a former English teacher who, as he ASEAN will soon be the fourth- says, had only managed to be admitted to his largest economic region in the city’s “worst university.” world, W as geostrategist Parag Khanna tells us in Ma’s career re£ects what Asia is today – a our interview (page 14). continent of vast opportunity. As Malaysian is issue of Bulletin, which focuses on business leader Kathleen Chew says in this is- Asia, will be available at Credit Suisse’s Asian sue of Bulletin, “ e American dream is now Investment Conference (AIC), the largest and more of an Asian dream” (page 28). Asia is a most important such conference held in the re- key growth market for Credit Suisse, leading gion. Even before I joined Credit Suisse, I at- our drive to penetrate further the emerging tended that event regularly, since it is simply the Economies of our world. Our goal in this issue place to meet the most important actors on the is to show you how fascinating and dynamic Asian stage. e AIC will be celebrating its Asia is. As Helman Sitohang, our CEO for the 20th anniversary this year – another Asian Asia Paci¦c region, points out, “More people success story! live here than anywhere else. Nowhere else have assets increased more rapidly over the past 10 I hope you’ll ¦nd this issue both stimulating years. Nowhere else are there more high net and informative. worth individuals” (page 24).

oday 10,000 companies are created in China every day (see our report from Shenzhen on start-ups, page 56). It is Powerful, fluid contours and a characteristic waveform shoulder line make impressive T to see how the world’s most populous the new A5 Sportback a true design icon. Its standard Audi LED headlights country is continuously creating added value. provide daylight-like illumination of the road for your safety. For more When I visited China for the ¦rst time, in Tidjane iam, information contact your Audi dealer. 1984, it was already a political power but still CEO of Credit Suisse Group AG

Cover photo: CL, alias Lee Chae-rin, a South Korean singer Photo: Kim Yeong Jun for W Korea audi.ch

Bulletin 1 / 2017 — 1 The mountains are calling. The road is calling even louder.

Experience the new 911 GTS models. On 8 April 2017 in all Swiss Porsche Centres.

The new 911 GTS is hard to forget. Direct contact with the road, limitless power

and that unmistakable engine roar are sure to give you those typical GTS

butterflies in your stomach. In your day-to-day life and on one of many extremely

stunning and extremely sporty GTS routes around the world.

Register today and experience the GTS feeling on 8 April.

www.passiondays.ch

Follow us on

155038_220x297_K_e_Porsche_Passion_Days_Anzeige_Bulletin_CS.indd 1 21.02.17 10:18 — The New Asia —

Contents

4 Letters to the Editor / 28 “You have to study hard” 52 Ten Artists Publishing Information Education and the constant Important Asian artists who hunger for success in Eastern will shape the future. 6 e New Asia cultures. A short trip in photos through 54 A Better Balance the most exciting region in the 29 Rugsit Kanan, 23, from ailand Japan’s in£uential economist world. e student on the pace of critiques the ideology of growth. being a Schwarzman Scholar. 14 “Everyone beneŒts massively” 56 Land of Unicorns Geostrategist Parag Khanna 30 e South Korean Wave China is investing billions in on globalization and the state How an uncool country start-ups to make the country of things in Asia. conquered the world with pop. more innovative.

19 Pioneers of Swiss Trade 34 “I’m making Asia smaller” 64 Where the World’s Container e incredible story Aviation pioneer Tony Ships Cross Paths of an economic adventure. Fernandes is always good for e nexus for trade between an entertaining interview. East and West runs right 21 e Foundations through the port in Singapore. of a Relationship — Dossier — Facts and ¦gures showing the CREDIT SUISSE ECONOMIC 68 Ten Philosophers deep connections between Asia RESEARCH ON ASIA Asian thinkers of and Switzerland. Introduction: e Next Generation of historic signi¦cance. Growth (40), Services: From Farm 22 Ten Authors to Laptop (42), Real Estate in China: 70 “More than a few pennies” Asian writers whose works are Doing Well (for Now) (44), Demo- Why learning about money is well worth reading. graphics: Increasing Pressure (45), important for street children. Innovation: By Order of the Govern- 24 “We stayed” ment in China (46), Financial Markets: 72 How Well Do You Know Asia? Helman Sitohang, CEO Asia Step by Step (48), Facts and Figures: irteen questions about The mountains are calling. The road is Paci¦c at Credit Suisse, on Asia in Statistics (50) the world’s largest continent. calling even louder. markets, loyalty and the rise of the middle class.

Experience the new 911 GTS models. China South Korea p. 14, 29, 40, p. 30 44, 45, 46, 56 Japan On 8 April 2017 in all Swiss Porsche Centres. p. 45, 54

The new 911 GTS is hard to forget. Direct contact with the road, limitless power and that unmistakable engine roar are sure to give you those typical GTS Philippines butterflies in your stomach. In your day-to-day life and on one of many extremely p. 71 stunning and extremely sporty GTS routes around the world. India Singapore Register today and experience the GTS feeling on 8 April. p. 14, 70 p. 14, 24, 64

Indonesia p. 24 www.passiondays.ch Malaysia p. 28, 34 Follow us on Thailand p. 29

Map: La Tigre

155038_220x297_K_e_Porsche_Passion_Days_Anzeige_Bulletin_CS.indd 1 21.02.17 10:18 — The New Asia —

Comments

Credit Suisse’s #youthbarometer of Worry Barometer With 40 Years CREDIT SUISSE CREDIT SUISSE Bulletin Bulletin #2016 4 / 2016 / 4 2016 / 3

3 .  e world’s oldest banking magazine. magazine. banking oldest world’s e  . magazine. banking oldest world’s e .   Since Since

2 1 Big interview with digital pioneer Sebastian run Page 22 075360E 075360E

Stability Digital World, Analog Life What Keeps the World in Balance Man and Machine – How We Change Each Other

Bulletin “Stability” Bulletin “Digital World, Analog Life” Contributors to this issue: 4/2016 3/2016

High-Quality Journalism Unexpected Development 1 – Manuel Rybach I’ve been reading Bulletin for I found the range of articles in the last e Global Head of Public A¯ airs and decades, and I love every issue. is issue of Bulletin on the digital world Policy at Credit Suisse has lived and worked is what high-quality, exciting and analog life to be both informative in Asia for several years. He provided ideas and engaging journalism looks like, and groundbreaking. ey show where and opened doors for the editors. Rybach especially in comparison to other we are now and what unexpected earned a doctorate at the University of in-house magazines. developments are before us. We can’t St. Gallen, where he also is a lecturer on Sten Nahrgang, Cologne, Germany entirely grasp or gauge these in our public a¯ airs. He has worked for Credit short time on earth. Presumably, we’re Suisse since 2000 in various locations, in- What about the Environment? at the dawn of an epochal and revolu- cluding in Washington D.C. His interview I was shocked that environmental tionary development, whose e¯ ects and with Helman Sitohang, CEO Asia Paci¦ c protection was no longer among the ten uses have yet to be revealed. at Credit Suisse, starts on page 24. biggest worries for 2016, in contrast Paul Baumberger, Bern to 1976. I can hardly believe that Swiss 2 – Euny Hong people no longer think about the Ideas for Friends Hong was born in New Jersey and moved environment, especially when climate As a tech nomad working with 3D to Seoul at age 12. She studied philosophy goals are not going to be met, carbon printing, I found this issue a joy at Yale and then began working as a jour- and particulate matter emissions to read. I read it from cover to cover nalist, writing for the New York Times, the are increasing dramatically and even on a £ ight to Basel and I want Wall Street Journal, the Washington Post, our bodies of water are becoming to thank you for the excellent and and the Atlantic, among others. She de- more and more polluted. entertaining issue. I was confronted scribes how South Korea has conquered the Peter Niermann, Oberiberg with a number of ideas that I’ll world with pop in her 2014 book “ e be certain to pass on and discuss with Birth of Korean Cool.” Page 30 my friends. Hanna Watkin, Munich, Germany 3 – Lam Yik Fei A photographer from Hong Kong, Lam Yik Fei has worked with the New York Times, the International Herald Tribune, We welcome all letters to the editor.  e editors reserve Bloomberg and others since 2011. For this the right to select and edit the letters. Write to us at: issue, he traveled to Shenzhen, South China’s Silicon Valley, with Lea Deuber, Email: [email protected] Address: Credit Suisse AG, a correspondent from WirtschaftsWoche. Bulletin Editorial Team, HTG, CH-8070 Zurich Page 56

Publishing Details: Published by: Credit Suisse AG, project management: Christoph G. Meier, Mandana Razavi, contributors: Jessica Cunti, Yanik Schubiger, Simon Staufer, content design, editing: Ammann, Brunner & Krobath AG (www.abk.ch), design concept, layout, production: Craƒ t Kommunikation AG (www.craƒ t.ch), photo editing: Studio Andreas Wellnitz, Berlin, translations: Credit Suisse Language & Translation Services, pre-press: n c ag (www.ncag.ch), printer: Stämp† i AG, circulation: 110,000 Editorial committee: Oliver Adler, Felix Baumgartner, Œ omas Beyeler, René P. Buholzer, Béatrice Fischer, André Helfenstein, Anja Hochberg, Markus Kleeb, Carsten Luther, Manuel Rybach, Robert Wagner, Gabriele Zanzi

PERFORMANCE Subscribe to Credit Suisse Bulletin for free Write an email with your address to: neutral Printed Matter [email protected] No. 01-17-499269 – www.myclimate.org © myclimate – The Climate Protection Partnership

4 — Bulletin 1 / 2017 More than a donation...

This is a fresh start for someone who wants out of poverty.

This is dignity for someone who wants a meaningful job.

This is a chance for a brighter future.

Credit Suisse’s support of FINCA allows us to provide access to micro loans, savings accounts and other critical nancial services for millions of hardworking people across 21 countries.

Thank you to Credit Suisse for providing entrepreneurs with the support they need to make a better life. Congratulations on 15 years of investing in micro nance!

FINCA.org | @FINCA | FINCAInternational

Photo: Julia Maria Ixchop Us De Ventura, FINCA client in Guatemala. Faces of the New Asia PHUONG LINH NGUYEN — Page 53

Artist from Hanoi, Vietnam: Th e 32-year- old is one of Asia’s ten most infl uential up-and-coming artistic innovators. Her work focuses on the tension between the traditional and the modern; here, she poses in front of the Goethe Institute in Hanoi.

Photo: Justin Mott PARAG KHANNA — From page 14

Geostrategist from Kanpur, northern India: Political scientist, strategic consultant and publicist Parag Khanna lives and researches in Singapore. In his opinion, traditional Western democracy is not the ideal form of government for Asia – he believes there are more advantages to technocratic leadership.

Photo: Wee Khim TAHMIMA ANAM — Page 23

Bangladeshi writer: Tahmima Anam, 41, is a native Bengali and one of the most interesting young voices coming out of the immense Asian literary tradition. Her most successful work to date, “A Golden Age,” deals with the war for Bangladeshi independence.

Photo: Immo Klink NORIKO HAMA — From page 54

Economist from Tokyo, Japan: Considered to be an important expert on economic issues, Noriko Hama, 64, is a critic of the policies of Prime Minister Shinzo Abe: Striving for growth is wrong for a mature economy like Japan.

Photo: Yasuyuki Takagi STUDENTS OF THE AFLATOUN PROGRAM — From page 70

Pratiksha More, Trupti Yadav (standing, left to right), Aarati Phalke, Sharmila Chaudhury and Payal Jagdale (seated, left to right) from Kolhapur, India. Th e Afl atoun program provides the girls with training in fi nancial themes, as well as in social and civic skills.

Photo: Mahesh Shantaram AIREEN OMAR — From page 34

CEO from Selangor, Malaysia: e 43-year- old built a career on Wall Street before joining AirAsia in 2006, where she is now head of Malaysian operations. e airline was founded by Tony Fernandes, who also owns the British football club Queens Park Rangers and was, for a time, the owner of the Caterham Formula 1 team. His central leadership principle is meritocracy.

Photo: Charles Pertwee / Bloomberg / Getty Images COMPANY FOUNDERS IN SHENZHEN — From page 56

Mason Zhang, Chen Lang and Addison Li (left to right) from Shenzhen, China’s Silicon Valley. eir company “Subtle” has produced streetwear since 2014. e company has had great success with its extraordinary designs and materials. Start-ups are Beijing’s hope for the future. e country has grown rapidly in the past three decades and depends on innovation to further raise the standard of living.

Photo: Lam Yik Fei — The New Asia — e turning point: After visiting Lee Kuan Yew, the founding father of Singapore, in 1978, Deng Xiaoping, China’s head of state, launched his own famous reform and modernization program.

“ e most exciting region in the world” How was Asia able to become the largest economic power? Which direction is the continent headed in? Which countries are playing a role in that development? Will there really be a con£ict between China and the US? A look at the big picture with Parag Khanna, one of the world’s leading global strategists. By Daniel Ammann and Simon Brunner (text) and Lyndon Hayes (illustrations)

Parag Khanna, every university in to know what the future of Asia looks like, the world would probably like to have you you have to study Singapore. as a researcher. Why did you decide on Singapore, where you’ve been living We are sitting here in the 71st oor since 2012? of a skyscraper and looking out at the city’s I’ve lived in the US and London over ultramodern business district. Just 50 the years, but then I absolutely wanted to years ago, this was mostly a swamp. Today move to the most exciting region in the this is some of the most valuable real world: to Asia. e rise of the continent estate in the world. How did Singapore began in Singapore about 50 years manage that? ago. e city-state is the most successful Impressive, isn’t it? According to postcolonial nation in history and has traditional teachings, the ingredients for managed to o¯er its residents prosperity economic ascent are an enlightened and stability. Singapore is the role model government, good organization, ¦scal for most Asian countries. If you want discipline, legal certainty, private

14 — Bulletin 1 / 2017 property, trade. But there are speci¦c Governments were not his only role models. information and models for its gover- factors as well. Without its founding People are only half joking when they nance. It observes the global economic father, Lee Kuan Yew, who served call Singapore the best-managed company and political situation, drafts scenarios as prime minister for decades, today’s in the world. from it and uses them to guide its Singapore would be inconceivable. Truly. Like a company, the government uses economy and workforce in a successful key performance indicators and adheres direction. e objective must be to He planned Singapore’s rise meticulously. to best practices. It actively pursues talent guarantee its citizens prosperity, welfare Lee Kuan Yew sought the advice of management and constantly adapts and stability. global experts, looked all over the world to the changing environment. Singapore to see what works and implemented is currently the leading info-state. Can a tiny country with only about it here. He developed a modernization six million residents even be a role model for strategy that intentionally promoted Info-state brings up images of Big Brother the large Asian nations, such as China, industrialization and the infrastructure – and a transparent populace. the world’s most populous country? and connected Singapore to the global No, when I say that I mean a technocratic Singapore has been a role model for supply and value chain. country that makes use of statistical China for 40 years, even if that seems

Bulletin 1 / 2017 — 15 — The New Asia —

almost surreal in hindsight. Deng Can you explain that a little more in depth? to massively increase its degree of connec- Xiaoping, the head of China’s Twenty years ago, China was the work- tivity in the global economy with billions Communist Party at the time, traveled shop for the West. Cheap T-shirts in investments in infrastructure, both here in November 1978. He and tennis shoes carried the “Made in at home and in many other countries. It is assumed with a certain arrogance China” label. ese days the country in the process of becoming the world’s that he would ¦nd a poor, backwards produces the most computers in the largest infrastructure exporter, gaining city – but he found the exact world. And another fact is important, too: commitments from a growing number of opposite instead. He spoke with Ten years ago, China had to import countries. at is a power factor. Lee Kuan Yew for ¦ve and a half hours. 60 percent of the electronic components; In December, Deng announced today they only import 30 percent. e How will China’s economy develop in the the “open-door policy,” his famous Chinese have learned to produce semicon- near future? Will state industries reform and modernization program. ductors themselves. e country is be privatized, as we keep on hearing? working hard to climb up the value chain. I don’t think so. With this topic, we can How can we see Singapore’s inuence “Made in China” is increasingly being once again look at how Singapore on China these days? replaced by “Made by China.” did it – and then assume that China will You can see it all over China to follow the same model. My prediction: this day. ere are at least 10 special In your book “Connectography,” you show e state-owned enterprises will economic zones and industrial how China has built extensive economic be converted into new companies where parks that were developed by Singapore. networks with other countries, especially the state owns a narrow majority. ese are no less than China’s since joining the World Trade Organization e role model here is Temasek, the most important high-tech £agship areas. (WTO) in 2001. Singaporean government’s holding Singapore’s function as a role model Today China is the most important company worth 170 billion, which owns is also important for predicting China’s trading partner for 124 countries, while substantial shares in companies future. at Singapore brought part the US only holds that position for including Singapore Airlines, Singtel, of the value chain back into the country 52 countries. Since the 1990s, China has DBS Bank, PSA [see page 64] and many was essential – China has done the become one of the largest importers more. China will also restructure same. Import substitution as a strategy of raw materials, especially from countries its ¦nancial sector based exactly on the is the key factor for the rise of a that began to ignore the West after model here. When Singapore’s rise national power. the Cold War. And China has been able began, the growth of banks was speci¦-

Infrastructure for the world: high-speed train in China.

16 — Bulletin 1 / 2017 — The New Asia —

cally promoted and the market opened for foreign institutions. Banks play an eminently important role in a national economy.

Which other regions in Asia have great potential? e Association of Southeast Asian Nations (ASEAN*) de¦nitely belongs to that group. It will soon be the world’s fourth largest economic region, with 10 countries and a population of 625 million. ASEAN generates a greater gross national product than India with just half the population! e workforce is young and labor costs are low. ASEAN has taken over the role of the world’s workshop from China. And the region is very well integrated into the supply chains. Integration between the countries is growing. Large companies in Vietnam are outsourcing to Laos and Cambodia. e Burmese need money from Singapore. Former adversaries Singapore and Malaysia will soon be connected by a high-speed train between their capitals. e borders are becoming more open. e Indian route: e software industry is a promising cluster. •e economic rise of the continent is a success story. According to the OECD, two- thirds of the global middle class will live in Asia within 10 years. How has this rise shaped the people? the junta in ailand, for Malaysia. So the ere are the super¦cial signs, rapid future of Asia is technocratic … urbanism, the infrastructure, the growing middle classes, the consumerism. I ¦nd … and not democratic? it more interesting that the social contract It’s di·cult to advocate for traditional between citizens and government in Western democracy in Asia. Asia is much more solid than in the West. So the trade-o¯ is a hierarchical govern- Why? ment model for stability and welfare. Unfortunately, Asia’s big Unfortunately, Asia’s biggest democracies – India, democracies – India, Indonesia, the Philip- A Faustian bargain? pines – have not managed to create It’s positive when a government acts as Indonesia, the welfare and stability. ey are poor and a meritocracy and utilitarian system, when Philippines – have not chaotic countries. And who wants that? it establishes its policies to increase Who wants to be poor? No, the most prosperity and stability for its residents. managed to create welfare populous region in the world is moving en it is technocratic in the best sense. and stability. toward technocracy – which I consider a When its actions are arbitrary and better development than going the Indian violate human rights, it’s authoritarian and democracy route. negative, course. India, the country of your birth, has Where does China stand? wanted to position itself over the years as China is technocratic – there are human a Eurasian counterbalance to China. rights violations, but China’s behavior An unbelievable error. India is simply too is largely utilitarian. Naturally, Singapore far away! It cannot be the center of is also technocratic. at is the role Asia. e country is behind the Himalayas model for governments in Vietnam, for and surrounded by Pakistan and

Bulletin 1 / 2017 — 17 — The New Asia —

Bangladesh, with which it has complicat- •e transatlantic and transpaciœc free trade ed relationships. e country has made a talks are stumbling. major e¯ort to become a nuclear power. Financial investments are far more What did that do for it? Nothing. North important than trade for the degree of Korea and Pakistan are also nuclear globalization. Just one number: e powers and still don’t have any weight in foreign direct investment (FDI) stocks the world. India lost 20 years in this as a percentage of the global gross nation- pursuit. al product. ey totaled only 30 percent back in 1980; today they amount to Narendra … 60 percent. ose are long-term, stable … Modi. I know what you want to say, interdependencies between national and yes, you’re right: A lot of good economies. If trade agreements collapse things are happening in India under the and borders become less open, there current Prime Minister – because it’s are even more direct investments because ¦nally going in a technocratic direction. companies want to put down roots in ey are once again focusing on their their selling markets. e bottom line is own country and are seeing the highest that there is no scenario in which global- growth rates in the world. India wants to ization does not move forward. become the regional power on the Indian Parag Khanna, 39, is a political scientist and Ocean and is investing a great deal best-selling author (just published: “Technocracy Many people in the West feel left behind by in America: Rise of the Info-State,” 2017, in its £eet. at’s not a bad plan. With its in which he sees Switzerland as a role model for globalization. What needs to be done so that software industry, India has established other countries). A native of India, he is a more people beneœt? a promising cluster that will add greater Senior Research Fellow at the Centre on Asia and Politicians have been talking about value to the value chain – unlike with Globalisation at the Lee Kuan Yew School retraining programs for people whose jobs T-shirt manufacturing. of Public Policy in Singapore. have been sent overseas since the 2004 election in the US. For more than What does Asia’s rise mean geopolitically? 12 years! Little has been done. e •ere were two superpowers in the Cold War, Germans, Swiss, Singaporeans, Koreans, the US and the Soviet Union. And today? and Japanese have all invested in When you measure it by economic power education. Just because the Americans and military potential, the US, China and British haven’t done that, does and Europe are superpowers. So we’re And that means? it mean that globalization has failed? living in a tri-polar world. ey would have to bring production back into their own country before We are among the winners of globalization. Russia is no longer part of it? they could start a war. Otherwise two But others … De¦nitely not. Russia is too weak. of the ¦ve largest companies in the Excuse me for interrupting you. Everyone US would go bankrupt. bene¦ts from globalization – in You once wrote that in times of change, America, in Europe and in Asia. Even the when a hegemonial power like the US meets Despite this greater interdependence, unemployed guy in Detroit bene¦ts a rising competitor like China, conict stronger protectionist tendencies massively, I say: massively – from global- will inevitably arise between these powers. are emerging in the US and Europe. ization. He wouldn’t have a mobile ere are always tensions between And that’s the new form of war, the supply phone otherwise. He wouldn’t be able superpowers. Con£icts at a trade and chain war, where it’s no longer about to a¯ord his jeans, they would cost regulatory level are common. ere conquering territory. It’s about linking 10 times as much. is the con£ict over the disputed islands your country physically and economically and reefs in the South China Sea. all over the world to secure access to e question is: Will this lead to war? the most important raw materials, to And more importantly: Will there cutting-edge technology, to trade routes be a world war? and growth markets. Control over the production process has been the route to •e answer? becoming a superpower for millennia. No, there won’t be a world war. Economic interdependency is much greater Are we now experiencing the end today and goes deeper than ever before. of globalization? Our currency reserves, monetary Not at all. Globalization will not collapse reserves, interest rates are determined in just because global trade growth slows part by foreign investments. Two of down a bit. It’s still growing. e ASEAN * e ASEAN nations: Brunei, Cambodia, the ¦ve largest US companies manufacture countries decided in 2016 to introduce a Indonesia, Laos, Malaysia, Myanmar, the in China. free labor market. Philippines, Singapore, ailand, Vietnam.

18 — Bulletin 1 / 2017 Photography: Wee Khim — The New Asia —

Part of the capillary distribution network: DKSH trucks in Ho Chi Minh City.

DKSH’s Market Expansion Pioneers of Swiss Trade: How to Do Business Successfully in Asia By Adrian T. Keller and Jörg Wolle

In 1863, it took Switzerland’s Caspar Brennwald a full 122 days, or Diethelm & Co. expanded from Singapore to Indochina, ailand, four months, to travel to Japan. Brennwald, the son of a baker from and Malaysia; Ed. A. Keller & Co. went to China and Hong Kong. Männedorf on Lake Zurich, was part of a diplomatic delegation In the middle of the 20th century, there were unimaginable busi- whose aim was to conclude the ¦rst trade agreement between ness opportunities across the entire region. For example, in the ear- Japan and Switzerland. e project proved worthwhile ly 1950s Diethelm & Co. provided British Austins for the entire for Brennwald, as he stayed in Yokohama and, with fellow coun- Bangkok taxi £eet; a few years later, it helped Swissair establish tryman Hermann Siber, founded a trading house, the future a new route between Zurich, Bangkok and Tokyo, thus promoting SiberHegner & Co. In the 19th century, however, there were inter- trade between Switzerland and Asia. In Japan, meanwhile, esting opportunities throughout Asia for adventurous young men SiberHegner & Co. was the leading exporter of Japanese silk. from Switzerland, which at the time was mired in poverty in many places. “Go east, young man,” was the motto. Eduard Anton Keller e End of Traditional Trading Houses reached the Philippines in 1868; three years later, Wilhelm e Asian crisis in 1997 dealt a severe blow to the three trading H. Diethelm arrived in the British crown colony of Singapore. In- houses, all of which were by this time headquartered in Zurich. dependently of one another, they found work in trading houses, Right before the start of the new millennium, SiberHegner was on worked their way up, and after just a few years, took over manage- the brink of ¦nancial collapse. But a turnaround process initiated ment of their respective companies. anks in part to their open at the last minute led to solid gains for the company again within and positive attitude toward people and cultures, within a few a short period of time. In 2000, Diethelm and Keller, which had years they managed to expand their businesses geographically. family ties going back many years, decided to merge after the

Photo: DKSH Bulletin 1 / 2017 — 19 — The New Asia —

fourth generation took over management of the two companies. Hanoi to a beach bar on Koh Samui. DKSH also has proven Shortly thereafter, discussions were initiated regarding the merger marketing and sales capabilities. of Diethelm Keller Services Asia and SiberHegner. e DKSH Group as we know it today was created in 2002. Ten years later, its e Asian Century shares were listed on the stock exchange and Diethelm Keller Despite all of the di¯erences and current challenges, Asian ex- Holding AG is still an anchor shareholder. Of the major Swiss pansion is worthwhile – now more than ever. ere is no ques- trading companies, DKSH is the only one that still exists today, as tion that Asia will play a prominent role in the 21st century: Swiss newspaper Neue Zürcher Zeitung recently noted. World-re- China is once again the second-largest economy in the world, nowned names from the past, such as Winterthur’s Volkhart and while Japan, despite all the doom and gloom, remains a strong Lausanne’s André & Cie, have disappeared entirely. Others, such No. 3, and India has been making strong gains for years. Mean- as Desco and Cosa Liebermann, were taken over by DKSH. Busi- while, the countries of Southeast Asia are developing into anoth- ness has developed very nicely since then. e number of employ- er economic power. Ridiculed just a few years ago as the “extend- ed workbench of the West,” the ten member countries of ASEAN are now becoming independent and self-con¦dent economies. Asia is developing into the dynamic center of the global econo- “What works in China or India will my, o¯ering countless opportunities for business success. work in Japan or ailand as well” is a common misconception. Asia Society: A Window to the East Switzerland has historically held special status as a link in the exchange between East and West. e Asia ees has more than doubled to over 30,000, and DKSH’s pro¦ts Society, founded 60 years ago in New York, has a similar task: promoting mutual understanding between have increased ¦vefold while its turnover is more than twice as people and cultures in Asia and the rest of the world. high. e company had to fundamentally rethink its business Today, the organization has a large footprint, with model ‒ trading houses have lost their traditional geographic and 12 centers across Asia, the US and Europe. It is active in temporal competitive advantages as a result of globalization and the areas of business, international relations, science, digitalization. In recent years, DKSH has transformed itself into a education, art and culture. e Asia Society founded its service provider for market expansion in Asia. ¦rst European chapter with the opening of a center in Zurich in 2016. Adrian T. Keller serves as president of the chapter. As a non-pro¦t organization, the Asia Tokyo Is Not Bangkok Society serves as a bridge between Switzerland and other Market expansion services for Asia are still in high demand; this Central European countries and Asia. Credit Suisse is because, although modern communication technologies have supports the organization. made international trade much easier, the region is still highly complex, especially for Western companies. Perhaps the most common mistake is to believe that there is a one-size-¦ts-all pan-Asian solution for business expansion: “What works in China or India will work in Japan or ailand as well,” is a com - mon misconception. Not all countries in Asia are alike. is is just as true for religion as it is for culture. A successful business in Buddhist ailand will look very di¯erent from one in Indo- nesia, the largest Muslim country in the world. Nor is taste the same everywhere: A blue rice cracker snack may be a hit in Japan, but it will not necessarily catch on with consumers in Malaysia. And, of course, di¯ering levels of purchasing power also play a crucial role. Myanmar, with a per capita income of around 5,000 US dollars annually, cannot be compared with Singapore, which, with a per capita income of 85,000 US dollars, is wealthier than Switzerland. A sense for such di¯erences and local re¦nements cannot be developed overnight. DKSH is able to share the valu- able experience it has gained from more than a century’s worth of local presence. is experience bene¦ts not only a large number of Swiss SMEs, but also international companies such as Mars in Southeast Asia and Procter & Gamble in Hong Kong, which recently outsourced a large portion of their local operations to DKSH. DKSH is often able to develop local business better than producers themselves. Over the years, the company has estab- lished a large capillary distribution network in the region, which allows for comprehensive retail distribution to a wide variety of Adrian T. Keller is Chairman of the Board of Directors of DKSH; businesses ‒ from a supermarket in Taiwan to a pharmacy in Dr. Jörg Wolle is CEO of DKSH.

20 — Bulletin 1 / 2017 — The New Asia — The Foundations of a Relationship Switzerland has strong ties to Asia. These facts and fi gures prove it.

Compiled by Sara Carnazzi Weber, Florence Hartmann and Bettina Rutschi Ostermann

USD 3.3 RMB Others Swiss Employees in Asia Direct Investments 4.0 1.9

e volume of direct investments by Sharp increase in headcount at Swiss Currencies used Swiss companies in Asia has more than in direct payments companies in Asia. HKD 2005 2015 (in thousands of employees) with China and doubled since 2005. 45.8 All of Asia China (in CHF bn) Hong Kong CHF Source: SNB (in %) 45.0 Source: SNB Source: Swift Watch 262 1,433 107.0

528 1,963 The Swiss Renminbi Hub

Asia 45.5 China is making a serious push to World internationalize its currency, the 20.3 renminbi (RMB). Because the RMB is 3.5 not freely tradable as a result of China’s 2005 2014 capital controls, China is supporting the development of so-called RMB hubs

Share of Swiss abroad. It has been possible to trade watches exported Import/Export Swiss francs and renminbi directly on to Asia the o· cial Chinese currency trading China is Switzerland’s most important Asian trading partner platform since November 9, 2015. e by a wide margin, especially in terms of imports. Japan and % Swiss National Bank (SNB) has prob- 40 Hong Kong make up some ground when it comes to exports. ably invested some 2 billion Swiss francs 25 Source: Swiss Federal Customs Administration, SECO, Credit Suisse of its reserves in Chinese securities.

rts in CHF bn Impo 20 Trading volume orts in CHF bn xp 12.3 Free trade agreements E 8.9 EFTA: in effect since … Bilateral: in effect since … 15 Under negotiation * Signed on …

10

6.4 3 .1

5 3 .5 1.6 5 .7

1 .4 2

1

0

SWITZERLAND Philippines Indonesia Vietnam India South Korea Singapore Hong Kong Japan China 4/2016* Malaysia Thailand 9/2006 1/2003 10/2012 9/2009 7/2014*

Graphic: Cra¯ t Bulletin 1 / 2017 — 21 — The New Asia —

Eka Kurniawan Eka Kurniawan (Indonesia, writes in Indo- nesian) is a signi¦cant voice from South- east Asia. His works – “Man Tiger” and “Beauty Is a Wound” are the best known – re£ect the legacy of violence stemming from the major power struggles that shaped the region. Kurniawan has been compared to Gabriel García Márquez and Salman Rushdie, and his themes are so universal that they resonate across cultures. Literature U. R. Ananthamurthy U. R. Ananthamurthy (India, 1932–2014, wrote in Kannada), one of India’s most powerful voices against the repressive as- pects and the politicization of religion, was the grandson of a priest. Also one of India’s most respected academics, he was a distin- guished poet, ¦ction writer, essayist, critic, dramatist and public intellectual. 10Asian authors whose works are well worth reading.

Cixin Liu Cixin Liu (China, writes in Mandarin) has enjoyed a huge fan following in China since the publication of “ e ree-Body Problem” in 2007. He became world-re- Amitav Ghosh nowned in 2015, when the book won the Amitav Ghosh (India, writes in English) is Hugo Award for Best Novel. As a science not resting on his laurels after completing ¦ction writer deeply anchored in reality, the Ibis Trilogy, which ¦ctionally explored he is establishing a new, Chinese style of the deeply interconnected worlds of em- science ¦ction. Compiled by Antara Dev Sen, pire and commerce. He has just released literary critic, author and founder the non¦ction book “ e Great Derange- of e Little Magazine, a journal ment: Climate Change and the Unthink- of contemporary South Asian able,” in which he tries to explain why civi- literature. A British-Indian, she lizations, cultures and political systems chairs the jury of the annual have failed to understand the scale of ex- DSC Prize for South Asian treme natural events and climate change. Literature. She is the daughter of Nobel Prize-winning economist Amartya Sen and novelist Nabaneeta Dev Sen.

Photos: Philippe Matsas / Opale / Leemage / laif; Boaz Teitelbaum / Camera Press / Keystone; Olivia Arthur / Magnum Photos / Agentur Focus; Draupadi Verlag; Isolde Ohlbaum / laif; Linda Nylind / eyevine; Li Yibo / Shaanxi Xinhua News Agency / China / Heyne; Judy Misquitta; Isolde Ohlbaum / laif; Everett Collection / Keystone

22 — Bulletin 1 / 2017 — The New Asia —

Michael Ondaatje Michael Ondaatje (Sri Lanka/Canada, writes in English) earned his spurs as a poet and his fame as a novelist with “ e English Patient,” which was turned into an Mahasweta Devi award-winning ¦lm. Later, he returned to Mahasweta Devi (India, 1926–2016, wrote his Sri Lankan roots with “Anil’s Ghost.” in Bengali), a deeply political writer and e world knows him for his novels, but his Tahmima Anam social activist, championed the rights of fans love him just as much for poetry an- Tahmima Anam (Bangladesh, writes in the marginalized and the dispossessed. She thologies such as “ e Cinnamon Peeler.” English) is one of the few authors from was the voice of the disempowered and the Bangladesh who write in English and can conscience-keeper of her times, as well as a reach out directly to the world. She arrived chronicler of oral history and a crusader for in 2007 with “A Golden Age,” set in the social justice and change. Indo-Pakistani War of 1971. With “ e Good Muslim,” she explores the milieu in which armed fundamentalism was born in Bangladesh.

Rabindranath Tagore Rabindranath Tagore (India, 1861–1941, wrote in Bengali) remains one of the great- est poets of India, and an astonishingly Cyrus Mistry relevant essayist, novelist, short story writer Cyrus Mistry (India, writes in English), is an and playwright, more than 75 years after extremely sensitive writer and brilliant story- his death. His stories and essays on nation- teller, playwright, journalist and short story alism, for example, may be exactly what the writer. He became famous upon releasing his world needs to read today. 2014 novel “Chronicle of a Corpse Bearer,” a story about the people who handle the dead of the Parsi community of Mumbai.

Kenzaburo Oe Kenzaburo Oe ( Japan, writes in Japanese) is the literary voice of conscience of his country. After the Fukushima disaster, he urged his government to renounce nuclear power, just as it had rejected war by consti- tutional mandate after World War II. Oe’s work has focused on ethics, responsibility and the e¯ects of nuclear war and earned him the Nobel Prize for Literature in 1994.

Bulletin 1 / 2017 — 23 — The New Asia —

Most of the ¦nancial institutions left the region.

WeAs a child, he left communist-erastayed. Prague for capitalist Jakarta and lived through the massive e¯ects of the Asian crisis. Helman Sitohang has worked for Credit Suisse for nearly 20 years. As CEO for the Asia Paci¦c region, he knows that his customers attach great importance to loyalty. By Manuel Rybach (interview) and Wee Khim (photography)

24 — Bulletin 1 / 2017 “Switzerland’s entrepreneurial spirit is very highly regarded here.” Asia expert Helman Sitohang.

Bulletin 1 / 2017 — 25 — The New Asia —

Mr. Sitohang, you were born in Czechoslovakia in 1965. Your family When did you develop an interest in banking? returned to Indonesia when you were nine years old. Looking back, When we arrived in Jakarta, I spoke only Czech – and that didn’t how did your move to Asia a£ect you? do me much good in school. It took me a few months to pick up Prague was a beautiful city, very orderly, but also communist and the local language, but I was good at mathematics, so I was able not that vibrant. Jakarta, on the other hand, was just beginning to survive. I discovered my talent for numbers and that, coupled to develop and was capitalist – and I found that incredibly exci- with my enthusiasm for the vibrant business atmosphere that I ting. A spirit of entrepreneurship was in the air; practically any- was immersed in, started to spark my interest in banking. thing was possible. Business was a constant topic of discussion – I noticed that immediately. Being thrown into an unfamiliar You joined Credit Suisse after the outbreak of the Asian crisis in environment and having to ¦nd my way was a formative experi- 1997. •e region was in a state of shock. ence, and one that often proved helpful later on. I started my career in Indonesia. e situation was critical – with the exception of a minor dip in the 1960s, the economy had •e population of Indonesia’s capital city has increased from experienced uninterrupted growth. And suddenly everything fell 4.5 million in the 1970s to more than 10 million today. How did apart in 1997. Indonesia’s GDP dropped by 13 percent in just you experience Jakarta’s transformation into a global metropolis? one year. No one had ever experienced this kind of situation, and Our house was just around the corner from Sudirman Street, no one knew how to handle it. Many of our clients were facing which is now one of the city’s main thoroughfares, but at that ruin; their capital was practically melting away, and some of the time it was just a local road that I took every day as I walked to famous Asian billionaires had debts that exceeded their assets. school. A car might pass by every few hours. Today it’s one of those notorious streets where people can spend hours caught in How did you respond? a tra·c jam. Back then, only one building in the entire city We stayed true to our clients and supported them – despite the fact had 18 £oors. My father and I would often go up to the top £oor; that it’s not always easy, even for a bank, when a crisis hits. Most we found it fascinating, having known only low, prefabricated of the ¦nancial institutions left the region. We stayed. Our clients buildings in Prague. Now, Jakarta has almost 70 high-rise build- have never forgotten that. During that crisis period, Credit Suisse ings that are at least 150 meters high. was able to build an outstanding reputation in Southeast Asia.

“Vibrant business atmosphere.” Jakarta has grown by 5.5 million inhabitants since Helman Sitohang’s youth (photo of the central business district).

26 — Bulletin 1 / 2017 Photo: Felix Indarta / iStock — The New Asia —

demand for consumer goods, entertainment, media and health It’s important to remember the sheer care. As far as countries are concerned, it’s important to remember size of these markets. All together, China, the sheer size of these markets. All together, China, India and India and Indonesia have a population Indonesia have a population of nearly three billion. Four out of ten of the world’s people live in one of these three countries! of nearly three billion. Four out of ten of Asia’s emerging markets represent another trend. Today they are the world’s people live in one of these experiencing growth that is reminiscent of China 10 years ago. Again, we need to pay attention to the size of these markets: three countries! Taken together, the Philippines, ailand and Vietnam are home to nearly half as many people as the European Union.

Setting aside all the hype, what risks do we need to take seriously in Asia? ere’s no doubt that growth in China is the unknown factor with the potential to have the greatest impact. We continue to anticipate GDP growth of 6.5 percent, driven by investments in infrastructure and increased exports. But that’s not set in stone. e world has become more uncertain, and that also applies to Asia. e big question is how relations between China You work for a Swiss bank. What does “Swissness” mean in Asia? and the United States will develop. Switzerland’s entrepreneurial spirit is very highly regarded here, and of course entrepreneurship is in Credit Suisse’s very DNA. •is year, for the 20th time, Credit Suisse will be holding the Asian Precision, attention to detail and a focus on quality are other Investment Conference (AIC) in Hong Kong, where issues like strengths that are associated with the Swiss. Ultimately, Switzer- this will be discussed. What signiœcance does this conference have land stands for tradition and longevity. Rather than chasing for the Asian continent? after the latest trends or abandoning clients at the ¦rst sign of e AIC is the region’s largest and most exclusive investment adversity, the Swiss show solidarity, just as we did in Indonesia conference. It brings together policymakers, business leaders during the crisis. and scientists. Last year 3,500 people attended this event, repre- senting 18 trillion US dollars in assets. Jack Ma, Shinzo Abe, What sets Asian clients apart, in general terms? Michael S. Dell and Lawrence Summers – all of them have par- Eighty-¦ve percent of companies are family-owned. at in- ticipated in the conference. We will have an incredible line-up cludes everything from small businesses in rural areas to of speakers again this year, including Mo Farah and Glenn multi-national conglomerates worth billions. It’s interesting Hubbard. to note that many of these companies are still led, or at least owned, by members of the founding generation. e needs of our clients are a function of this ownership structure. Today many companies are transitioning to the next generation, wealthy families want to diversify their portfolios, and clients need help with their activities in the capital market – for themselves and their companies. We are also seeing a boom in philanthropy.

Nearly all of the œnancial institutions have now returned to the region, and they have ambitious growth targets. Asia is a key market for Credit Suisse, too. How do you di£er from the competition? As I’ve already mentioned, our bank occupies a special position here. And I’ve been here longer than any other CEO of an Helman Sitohang, 51, is CEO of the Asia Paci¦c Division for international bank in our region. What’s more, our model works: Credit Suisse. He is regarded as one of Asia’s most in£uential Our investment banking and private banking work hand in hand; investment bankers, and has managed numerous IPOs, mergers and acquisitions. Among other awards, he received the 2015 this is unique in the region and well suited to the prevailing Outstanding Achievement Award from the industry publication family-based ownership structures. And in general Asia is simply Finance Asia. He earned a degree in engineering and lives in the most interesting market in the world today. More people Singapore. His father, an Indonesian from Sumatra, received a live here than anywhere else. Nowhere else have assets increased scholarship to study in Prague, where he met his Slovakian wife. more rapidly over the past 10 years. Nowhere else are there Manuel Rybach is Global Head of Public A¯airs and Policy more high net worth individuals. at Credit Suisse. Before that, he worked for the bank in Hong Kong, where, among other roles, he was responsible for the Where do you see the main opportunities for growth? program at the Asian Investment Conference. e rise of the middle class is a key topic. Asia is a textbook e Asian Investment Conference will take place from example showing which sectors experience a boom when dispos- March 27 to 30, 2017, in Hong Kong. able income exceeds a certain threshold – there is considerable For more information, visit credit-suisse.com/aic

Bulletin 1 / 2017 — 27 — The New Asia —

“You have to study hard if you want to have a better life” Attorney Kathleen Chew discusses di¯erences between East and West on a wide range of topics, such as the importance of education, the constant hunger for success and the role of foundations in promoting human welfare. Interview: Daniel Ammann and Simon Brunner

What investments is YTL making young man’s story that I stayed with in education? the foundation. He went on to study We started sponsoring scholarships in medicine, and today he is a surgeon at 1997. at seemed to be the most direct the public hospital in Penang. He is the way to reach people. As the company’s ¦rst person from his village to attend Group Legal Counsel, I was tasked with university – he gives everyone there hope. setting up the foundation. •e YTL Foundation’s civic engagement And you ended up staying with it? has grown over the years. I was introduced to a bright, clever young Today we provide a broader range of sup- s. Chew, you run one of Asia’s largest founda- man right at the start. His father had port for schools, particularly in one area in tions, the YTL Foundation in Malaysia. It died and his mother was a poor seamstress. which YTL has expertise to o¯er: tech- primarily supports education projects. Why? She couldn’t a¯ord the monthly school nology. We developed an online platform Education, as a fundamental part of fees of 50 ringgits [editor’s note: worth called Frog, and working together with society, is highly valued in many Eastern slightly less than 20 Swiss francs at the the Ministry of Education, we have ins- cultures. If you raise children properly, time]. We were asked if we would like to talled it in over 10,000 public schools. they will become better people and their support this young man. We said yes Our subsidiary YTL Communications is Mchances of having a better life improve. immediately. I was so touched by the helping to bring fast 4G internet access Well-educated people care more for the to the classroom. Since many schools lack environment and have a higher life computers, we have had to provide them expectancy. e parents of our company’s with basic Chromebook laptops. Most founder, Yeoh Tiong Lay, were immigrants important of all, however, is the need for from China. Education is even more thorough training and for a general wil- crucial for immigrants who have to work lingness to embrace change. Our goal is their way up in society. for schools to be capable of maintaining the computers and network connections Biographies of people who have climbed the on their own, and of making appropriate ladder of success are best-sellers in bookstores use of IT in the classroom. from Beijing to Bangalore. What does this say about Asia? How might Malaysian foundations Ambition and the hunger for success may improve? have declined a bit in well-established Foundations here focus too much atten- Western economies, but the Asian corpo- tion on their own concerns rather than rate world is still characterized by people supporting one another. One example: e who work very hard and have an incredi- Bill & Melinda Gates Foundation is very bly strong will to succeed. It was drilled e¯ective in many areas, so other founda- into me from a very young age: “You have tions around the world trust it with their to study hard if you want to have a better resources. at would be very di·cult life.” Today the American Dream is more here. A ¦rst step in this direction is the of an Asian Dream. But it’s easier to Kathleen Chew, 57, has worked for YTL since 1988. Malaysia Collective Impact Initiative She helped establish the legal department there, as work your way to the top in Asia, because well as the foundation that she now heads up. She (MCII), which brings together corporate we haven’t yet achieved the same level of graduated from the University of Birmingham in the foundations and other stakeholders in development. United Kingdom with an LLB (Hons) degree. a systematic e¯ort to improve education.

28 — Bulletin 1 / 2017 Photography: Private archive — The New Asia —

e Schwarzman Scholarship Program Rugsit Kanan, 23,

As a member of MCII, we have assembled a thorough overview of from ailand Malaysia’s very fragmented foundation sector. By the way, Credit Suisse is a founding partner of MCII.

Corporate foundations seem to be more common in Asia than private philanthropy. Why is that? ere is one simple reason: In many Last summer I left Boston to come to Bei- He likes to point out that we are changing companies, like YTL, the founding jing. Studying at Harvard was certainly the course of history. families are still very much involved, so challenging, but there’s no comparison with ese are big words, but when I look their wealth is tied up in the business. Tsinghua University. Here we’re required at my 109 fellow scholars, it certainly seems But the number of very rich individuals to attend considerably more classes, and the possible. What they have experienced and is growing, as is the middle class. As purpose of lectures is to impart knowledge. achieved is incredible – and most of what a result, individual philanthropy is Classes were primarily a place for discussion I’m learning, I’m learning from my col- becoming a more signi¦cant topic in in the United States, but at Tsinghua stu- leagues. It’s interesting to note that my Asia as well. dents are bombarded with new information Chinese classmates know a great deal about at a dizzying rate of speed. the United States – more, at any rate, Are you noticing a change in mentality ere are often guest speakers in than my colleagues at Harvard know about from the older generation of founders, who the evenings, like the economist Lawrence China. made it to the top from extreme poverty, Summers or CNN moderator Fareed e one-year program leads to a compared with today’s young people? Zakaria. I was particularly impressed by master’s degree. When I’m ¦nished, I’ll be Our fathers and grandfathers achieved Ngaire Woods, the ¦rst dean of the Bla- joining Lazard Asset Management in New a great deal. ey had only one goal: vatnik School of Government at the Uni- York; one of the world’s top ¦nancial man- to leave poverty behind and get rich. versity of Oxford. On the weekends we agement ¦rms has o¯ered me a job. Asset e younger generation is di¯erent. frequently go on ¦eld trips, and I play chess management is similar in its complexity For example, they are much more on ailand’s national team. at requires to the problems you encounter on a chess- aware of issues like inequality and pol- practicing late into the evening. board. lution, and they want to do something We are members of the ¦rst class of I could have stayed in China, but about them. In my experience, it is Schwarzman Scholars, the largest chari- where I live is not so important to me. easier to get young people involved in table project in the history of China. Its What matters is that my job has a global social projects than was the case with founder, Stephen A. Schwarzman, co-found- orientation and that I’m in a multinational their parents or grandparents. er and CEO of Blackstone, has already do- environment. What does home mean to nated 100 million US dollars and plans to me? Of course Bangkok, where I grew up, is raise an additional 400 million for the proj- an important city for me, but I feel just as ect. Schwarzman says that the program comfortable in Boston, Beijing and many YTL Corporation Berhad is an infrastructure is intended to bring together the “world’s other places in the world. conglomerate with headquarters in Kuala best and brightest students.” According to Lumpur, Malaysia. Yeoh Tiong Lay (YTL) Schwarzman, “Whether in politics, busi- founded a construction ¦rm in 1955 Credit Suisse is a supporter of the Schwarzman that now earns revenues totaling 3.5 billion ness or science, the success of future leaders Scholars program, www.schwarzmanscholars.org. Swiss francs and generates after-tax pro¦ts around the world will depend upon an un- of 430 million francs. derstanding of China’s role in global trends.” Recorded by Simon Brunner

Photography: Private archive Bulletin 1 / 2017 — 29 The South Korean Wave How a really uncool country became cool by government decree. by Euny Hong

According to a Time magazine reader survey, the second most influential figure in the world (2015): pop singer CL (real name: Lee Chae-rin). — The New Asia —

facturer. South Korea is not only a leader have been enthusiastic fans of K-series (“K” in technology. It also sets cultural trends for South Korea) since “Winter Sonata” in Asia and beyond. Evidence of Hallyu was broadcast in 2002. e lead actor, (literally: Korean wave) is hard to miss known as the star with the soft voice, be- these days, no matter where you are in came for the Japanese what Brigitte Bardot the world. was for a good part of the world in the South Korean pop culture is even 1960s: the romantic and sexual ideal of an ”ooding into countries with which Korea exotic stranger. maintains few diplomatic ties. But South People in Southeast Asia are parti- Korean pop is so popular that there was a cularly crazy about Korean beauty prod- discussion during a 2014 meeting of Chi- ucts. e Face Shop, comparable to Euro- nese o—cials about why China couldn’t pean cosmetics chains like Sephora or produce a television soap as popular as the Douglas, has over 1,000 stores in Asia. South Korean hit, “My Darling from An- Sephora and Douglas themselves carry other Star.” It’s a TV series about an extra- South Korean beauty products, including terrestrial, who falls in love with a Korean in Europe. actress. In Iran, whose relations with South In France, tickets to a 2011 K-pop Korea have been strained for many decades, concert sold out in ¤fteen minutes. In 2015, the historical drama “Jumong” achieved an Korean pop singer CL (real name: Lee 80 percent audience share during its time Chae-rin), front woman for the girl group slot. In contrast, American series are rarely 2NE1, was voted the second most in- seen in Iran or other Islamic countries be- ”uential person in the world, beating out cause of their strict moral codes and for polit- President Obama and the Pope. ical reasons. Relations with Cuba are strained So how did a country that no one as well. But Canal Habana, Cuban state tele- really thought about a few decades ago vision, still broadcast the South Korean suddenly become the coolest country on series “e Queen of Housewives,” which earth? If it almost seems like a political was reportedly quite successful. In other conspiracy, that’s because it sort of is. words, a whole generation of young people Hallyu is the brainchild of the Korean gov- around the world is more familiar with ernment. e global explosion of Korean South Korean than American TV series. pop music, television dramas, fashion and food has been ¤nanced and orchestrated Beauty, Made in South Korea by the Korean government for the last Hallyu’s ¤rst, biggest and most consistent 20 years. e nation’s Ministry of Culture sphere of in”uence is Asia. e Japanese has an entire division for pop culture

outh Korea is the only non-English speak- ing country in the world that has ever tried to challenge America’s monopoly on world pop culture. e very idea is astonishing for a country like Korea. Especially considering that, after S the Korean War (1950–1953), its gross domestic product was lower than that of most Sub-Saharan African nations. Well into the seventies, South Korea’s GDP was lower than North Korea’s. When my family returned to South Korea from the US in 1985, the country was so backward that our cleaning lady had never even seen a vacuum cleaner. Elec- tronics and household devices were rarities. I thought South Korea was the furthest thing from cool. irty years later, a Korean company named Samsung sells more mobile tele- phones worldwide than any other manu- Discussion topic for the Chinese government: scene from the TV series “My Sweetheart from Another Star”

Photos: Kim Yeong Jun for W Korea; Courtesy HB Entertainment Co., Ltd Bulletin 1 / 2017 — 31 — The New Asia —

along with others for video games, tele- through force. Hard power is military nowhere. ey were born out of necessity. vision and cultural industry policy. e might or economic coercion. Soft power is And by necessity, I mean shame. e im- taxpayer-backed Korean Venture Invest- how the United States got the world to buy petus came as a consequence of the Asian ment Corporation has earmarked a fund of its Marlboro cigarettes and Levi’s jeans: by ¤nancial crisis that crippled South Korea 1.5 billion US dollars for the ¤nancing of peddling a desirable image, with James in 1997 and 1998. South Koreans were de- pop culture and IT projects. Dean or John Wayne. moralized. e day that South Korea had One might well ask, why focus on It would be di—cult to overestimate to ask for a bailout of 58 billion US dollars pop culture when this area has been the the in”uence of pop on world culture. from the IMF was dubbed a “day of na- near-exclusive domain of the United States One of the most obvious examples of this tional mourning.” To add insult to injury, for a century? e answer: Popular culture was the 1989 Velvet Revolution in the South Korea had just started to become is the key to soft power. former Czechoslovakia. It drew its name a wealthy nation. And now the ignominy from the fact that Václav Havel and other of debt made some Koreans panic in the Soft Power leaders of the Czech resistance were in- fear that their recent successes were just Harvard political scientist Joseph Nye spired by e Velvet Underground, a US some ”uke. coined the term “soft power” in 1990. It rock band. e South Korean government real- refers to the intangible power a country South Korea’s cultural ambitions are ized that the nation was going to have to wields through its image rather than not just chutzpah, nor did they come out of fundamentally change how it made money if it wanted to avoid these types of disasters in the future.

It Needed Only Time and Talent South Koreans learned through centuries of political instability that hitting rock bottom comes with a great advantage: One has nothing to lose by taking crazy risks. And that’s just what the nation did. ey decided to focus on an industry that did not require every factory to retool. e only things this new industry needed were time and talent. And that industry was pop culture. us Korean cool was born out of the ashes of bankruptcy. It is now a national priority. e South Korean government de- cided to fund and enforce Hallyu. is included using Korean taxpayer funds to ¤nance the translation of South Korean dramas into other languages and bailing out the K-pop industry with an emergency loan when it came under threat from boot- leg copies and music piracy. e South Korean economy is a paradox. It is utterly capitalist, yet at the same time in certain respects it is a plan- ned economy. From the earliest days of its independence from Japanese rule fol- lowing World War II, the South Korean government has continuously intervened in private industry. Pop culture is no ex- ception. I was sure that the Hallyu trend would have gradually ebbed by now. But if anything, it’s become stronger, there’s been a kind of second wave. Music videos by K-pop band Girl’s Generation, which had been written o¯ after their popular singer Jessica Jung quit, have now been viewed online more than two billion times. Cultural ambition: actor Song IL-Gook as Jumong in the TV series, “Jumong.” Hallyu has inspired countless imitations.

32 — Bulletin 1 / 2017 — The New Asia —

A Chinese version of “My Sweetheart Paraguay, with a per capita GDP of only from Another Star” launched in 2016, 4,200 US dollars, is a prime example. Some now titled “My Unbelievable Friend.” In South Korean series have been dubbed not reverence to the inimitable Hallyu appeal, only into Spanish, but Guaraní as well, an the Chinese even cast a Korean star in indigenous language spoken by only two the role of leading man, the actor Kim million people. Tae-Hwan, who now speaks Chinese in You can bet that once the people in the series. these countries are able to a¯ord to buy mobile phones and washing machines, Hooked on Korea the Brand they’ll buy South Korean products. Why? us Korean cool was e key to South Korea’s success is its Because they are already hooked on Korea market focus on countries where America the Brand. born out of the ashes fears to tread. Developing countries are often too poor to be truly attractive to of bankruptcy. Now a American export industries. at’s where national priority. South Korea has an unbeatable advantage: It was once a developing country itself. So it understands the stages of devel- opment in which other nations ¤nd themselves. It has carefully studied their cultures in order to determine what K- Euny Hong is a business journalist who grew up products would be most promising there. in the US and Korea. She writes for e Financial And South Korean economists are hard Times, e New York Times, e Wall Street Journal, e Washington Post and e Atlantic. at work gauging the rate at which these She is also the author of “e Birth of Korean nations will become wealthier and gain Cool: How One Nation Is Conquering the World more purchasing power. through Pop Culture” (2014, Picador).

Two billion views on YouTube: the K-pop group Girl’s Generation.

Photos: © MBC 2017; Han Myung Gu /WireImage/Getty Images Bulletin 1 / 2017 — 33 — The New Asia —

“I’m making Asia smaller” Tony Fernandes is one of Asia’s best-known and most colorful entrepreneurs. With his budget airline, AirAsia, he has revolutionized the travel industry. We spoke with him about his childhood dreams, the business principle he considers most important and social capitalism. Interview: Daniel Ammann

34 — Bulletin 1 / 2017 Photo: Xavier Popy/REA/laif — The New Asia —

Tony Fernandes is probably more aware of the ”ight’s proceeds to a charitable orga- than most business leaders of the critical nization. e global media, from the BBC importance of marketing, and this is also and CNN to the South China Morning re”ected in his self-marketing. e founder Post, reported on the bet and its outcome. It and CEO of AirAsia, Fernandes usually ap- was priceless – and free – advertising for pears in public wearing jeans, a T-shirt and Tony Fernandes and his AirAsia airline. a bright red baseball cap emblazoned with After rapidly rising in the music in- the word “AirAsia” in white. His interviews dustry – ¤rst at Branson’s Virgin Records in are always entertaining. London, then at Warner Music in Malaysia – If it can bene¤t his company, he is also Fernandes decided to go into the airline willing to star in a reality show on television: business, despite having no experience in the “e Apprentice Asia” substantially in- ¤eld. In 2001 he purchased AirAsia, which creased Fernandes’s name recognition at the time was deeply in debt. It was owned throughout the continent. e show origi- by the Malaysian government and its ”eet nated in the United States, where it featured totaled two outdated Boeing planes. Despite Donald Trump. At one point he attracted all predictions to the contrary, Fernandes public attention by making a bet with his was able in the space of a few short years not friend Richard Branson. Branson lost – and only to launch Asia’s ¤rst budget airline, but as a result, he had to serve passengers while also to make it one of the world’s most suc- dressed up like a female ”ight attendant on cessful. Today AirAsia serves 112 destina- an AirAsia ”ight. For his part, Fernandes tions in 20 countries, and its 171 planes donated approximately 200,000 US dollars transport more than 50 million passengers each year. Fernandes, a sports fan, owns London’s Queens Park Rangers soccer

Bulletin 1 / 2017 — 35 — The New Asia —

club, and for a while he was also the owner I loved airplanes. When I was seven couldn’t a¯ord it in the past. Half of of the Caterham Formula One team. years old, I said to my father, “I want to our passengers are ”ying for the ¤rst have my own airline.” His answer was, time in their lives. Mr. Fernandes, you asked us to submit the “I’ll be happy if you manage to become a questions for this interview in advance... concierge at the Hilton.” Asia’s economic boom has led to a … I read the ¤rst two, and then I got signi­cant expansion of the middle class bored. [He laughs.] You want to know Most boys want to y airplanes, not own and increased purchasing power. the same things as everyone else. them. And as they grow older, they generally How is that aecting your business? abandon the dream of becoming a pilot. We never went on vacation when en we’ll shift gears and ask you some Luckily I continued to have that dream, I was young, except for an occasio- dierent questions. If I were to go to Asia even while attending a boarding school at nal weekend at the beach. at’s once in my life, where should I go? Epsom, in southern England. I would all changed now. Today vacations I’ll give you two recommendations for have liked to ”y home to Kuala Lumpur are an accepted part of Asian a beach vacation and one for a historical during school breaks, but we couldn’t culture. Families are spending more site. You should de¤nitely go to Bali; a¯ord it. I told my mother, “You’ll see, time together, and budget airlines it’s one of the most beautiful places in someday I’ll make ”ying cheap.” have allowed them to travel farther

When I was seven years old, I said to my father, “I want to have my own airline.”

“Follow your heart”: Entrepreneur Fernandes.

the world. And then you should go Unfortunately she didn’t live to see that away from home. Academics and to Palawan Island in the Philippines – happen. She died much too young, businesses are also bene¤ting from faster a paradise on earth. My third recom- when I was just 16 years old. and cheaper air travel from one part mendation would be Borobudur, the of Asia to another. Buddhist temple complex on the You’ve transformed AirAsia into Indonesian island of Java. It’s incredible. the world’s biggest and most successful Do you go on vacation more often And then I’d also recommend a city: budget airline, and it’s also the than you did years ago? Bangkok, the most exciting metropolis ­rst one to serve a number of Asian Not as often as I’d like. Sometimes I’ll go in Asia. Everyone should go there countries. How has that changed to Paris or the south of France, which are at least once. the continent? places I greatly enjoy. But I plan to take Now you’re asking the boring questions. more vacations after I turn 55 – provided When you were a child, what did you (He laughs.) But seriously, and without that Credit Suisse continues to provide want to be when you grew up? meaning to sound arrogant, I have to say the necessary support. (He laughs.)* Keep I always wanted to own an airline. that AirAsia has changed Asia quite a lot. that in the interview, okay? To put it simply, I have made Asia smaller. You’re kidding! I’ve brought people closer together. We’ve Of course. Which Asian countries have the No, I’m serious. Even as a small child made air travel possible for people who potential for growth, in your opinion?

36 — Bulletin 1 / 2017 Photos: Ian Teh/Agence VU/Keystone; Stephen Crowley/e New York Times/Redux / laif — The New Asia —

e Philippines will experience enormous threat facing the world today. Nationalism Asia has been too preoccupied with growth over the next few years. and racism have already caused far too ethnic and religious issues. I some- many problems in the world. times have the feeling that we are Why the Philippines? more segregated than ever. But to It has a great deal of untapped potential What business principle is most return to your question: I would say as a tourist destination. Its middle class is important to you? that the concept of meritocracy continuing to grow. And the country’s Meritocracy is the lifeblood of my is fairly new to Asia, but it is quickly infrastructure is improving enormously. company. I attach great importance to gaining ground. Indonesia is a similar case. a ”at organizational structure, since I wanted to create an atmosphere that is It is also striking that a large What chances do you see for India? conducive to innovation. at’s a trite percentage of AirAsia’s top executives India really should have the most growth buzzword, I know. But if you want your are women. Are you taking active of any country, but the government is employees to be innovative, think for steps to promote the hiring of women? putting the brakes on developing tourism. themselves and be willing to take risks, I made it clear from the beginning that I For example, new airlines have to wait then you need to create the right kind of wanted to bring women into the company. for ¤ve years before introducing interna- environment. It has to be an atmosphere I’m a strong supporter of gender equality.

US President Barack Obama and Malaysian Prime Minister Najib Razak at the signing of a contract between John Rice of GE Global Growth & Operations (seated at right) and Tony Fernandes (left) in 2014.

tional ”ights, and they are required to that allows people at every level of the Before AirAsia, there were no female have at least 20 planes on domestic routes. hierarchy to think independently, pilots in Malaysia or Indonesia, and only and they should not be afraid to express very few in other Asian countries. I’ve What are the greatest challenges facing criticism. ey need to be able to tell never given women preferential treatment your business? me, too, if they disagree! at AirAsia. Women should have the e challenges are in that same area – opportunity to apply for the best jobs, but government intervention, nationalism Is this concept of meritocracy new to Asia? they need to be the best in order to be and protectionism. at depends on the country. But I hired. at’s what meritocracy is all about. would say, generally speaking, that in Anything else would be tokenism. Are such measures causing more di†culties many areas it’s still true that who than they did just a few years ago? you know matters more than what How have male pilots responded to their Absolutely. It’s quite paradoxical! anks you’re capable of. And many companies new female colleagues? to globalization, we ¤nd ourselves in what are family-owned. at has certain Some people have expressed criticism, of is probably the most prosperous period advantages, but it may also mean course. One of my chief pilots complained in human history. And now we’re returning that the best-quali¤ed person doesn’t bitterly at ¤rst. But we talked with to a kind of Cold War, with nationalism always become the company’s CEO. the pilots and were able to win them showing its ugly face. is is the greatest I should also note that in recent times, over. And the female pilots have

Bulletin 1 / 2017 — 37 — The New Asia —

never given us reason not to hire them. How have you been shaped by these various He once told me that I had made the ese outdated views are beginning to identities? right decision. disappear. I consider myself Malaysian, ¤rst and foremost. But I could live anywhere in the You’ve achieved everything you wanted: How signi­cant is the role of women in world. I know it sounds like what a You own an airline and a soccer club – the Asian economy? Miss World contestant might say, but it’s Queens Park Rangers in England – and Women have traditionally played a very true: I’m a citizen of the world. I could you even had your own Formula One team important role in Southeast Asia. But in survive anywhere, as long as I can learn for a while. What else would you like to Japan and Korea, for example, women have the language. accomplish? less of a presence in the business world. I’m left wing when it comes to social What advice would you give a young Asian issues. I think it’s possible to be a social Low-cost airlines in the United States and student or entrepreneur? capitalist. People need access to better and Europe have balked at oering long-distance Don’t listen to anyone. Don’t just do what more a¯ordable healthcare. So my goal and intercontinental ights – why have you your parents expect you to do. Follow is to build high-quality hospitals that are decided to do so? your heart. Make sure you’re o¯ering slightly more expensive than the ine—-

After losing a bet, Richard Branson had to serve as a ”ight attendant on an AirAsia ”ight in 2013.

In Europe, Norwegian Air Shuttle has a great product that people want. Assem- cient public hospitals, but 80 percent already successfully introduced long-dis- ble a team that complements your own cheaper than private clinics. I plan to pre- tance ”ights. But you’re right, we were abilities. Find good people to help you sent a model of such low-cost hospitals pioneers. At ¤rst there was considerable market your product. Far too many good in the near future. skepticism about our chances of success- ideas fail because they aren’t marketed fully ”ying long distances. When I appropriately. And most importantly: introduced short low-cost ”ights, I was Cash is king. Liquidity is the most impor- simply bringing a new model to Asia that tant requirement for a business operation. had already proved successful in Europe. But today Norwegian and other Western What occupation did your parents expect airlines are looking to us for new ideas you to choose? to emulate. It’s wonderful that Asia is now ey wanted me to be a doctor, a role model in the air travel business. like my father. *e business relationship between AirAsia and Credit Suisse began in 2002 with a private placement of 30 million US dollars. Since then, You were born in Kuala Lumpur to an Indi- Is he happy that you didn’t follow his advice, Credit Suisse has been involved in all of the an father and a Malaysian mother, and you and that you’ve gone farther than becoming airline’s business transactions, including its IPO spent some of your early years in England. a hotel concierge? of 227 million US dollars in 2004.

38 — Bulletin 1 / 2017 Photos: Ahmad Yusni/EPA/Keystone —— Economic Research —— What Is Growing, How and Where?

 e research unit of Credit Suisse provides answers to key economic questions concerning the world’s largest continent.

+ Starting point: The next generation of growth 40 + Services: From farm to laptop 42 + Real estate in China: Doing well (for now) 44 + Demographics: Increasing pressure 45 + Innovation: By government order in China 46 + Financial markets: Step by step 48 + Facts and fi gures: Asia in statistics 50

Photo: Rüdiger Nehmzow / laif —— Economic Research —— The Next Generation of Growth

In recent years, a number of Asian economies have seen subdued growth, largely due to the sharp slowdown in China. So long as trade channels remain open and governments continue to pursue stability, the outlook remains positive, particularly for the poorer countries. By Oliver Adler

Since World War II, Asia has experienced With economic growth now far slower in most of the poorer Asian economies to im- three “economic miracles”: ¤rst, the tre- the US and Europe, these economies can prove physical infrastructure, especially in mendous growth of Japan, which lasted no longer act as the major growth drivers urban centers, thereby contributing to from the early 1950s to the late 1980s; sec- for the less developed Asian economies. growth and, especially, absorbing labor that ond, the rise of the four Asian Tigers Latin America and Africa are also very would otherwise remain in unproductive (Hong Kong, Korea, Singapore and Tai- unlikely to take over that role in the fore- agriculture. wan) stretching from the mid-1960s to the seeable future; therefore, export-driven mid-1990s; and ¤nally, the China-led growth will only be possible if it is of an High Savings Rate as a Recipe for Success? growth surge from the early 2000s until intra-Asian nature. Although trade among In an oft-quoted 1994 article entitled “e around 2014. While South Asian nations newly industrializing Asian countries has Myth of Asia’s Miracle,” Paul Krugman ar- such as Malaysia and ailand participated slowed in the past two years, its share in gued that the rapid economic growth of in the two latter boom periods, overall the their overall trade grew from 22 percent Asian countries such as Singapore would northern Asian economies bene¤ted most. in 1980 to more than 38 percent in 2015. be only temporary. Written just a couple of Measured by GDP per capita, these econo- Given that China already accounts for years before the outbreak of the Asian cri- mies have managed to catch up with – and 69 percent of Asian GDP (excluding Ja- sis, this analysis seemed truly prescient. As in some cases surpass – those of Germany pan) and 42 percent of all non-Japanese it turned out, however, Krugman’s warning and the United States, the two leading Asian imports, it will be crucial that the was premature, for growth re-accelerated Western economies. Chinese economy remains on a healthy in Singapore and the other economies e key question for the future is growth track. shortly after the crisis and remained at very whether other economies in Asia, includ- Even if intra-Asian trade re-acceler- high levels until very recently. ing China, will be able to achieve a similar ates and volumes rise in coming years, it Moreover, saving and investment lev- feat or will stall at a low- or middle-income seems unlikely that it will ever play the els actually rose after the Asian crisis, with level. Given that a number of Asian eco- same role for employment as was the case the result that many countries generated nomies are among the poorer emerging during the past decades. For one thing, savings in the form of a current account markets (see ¤gure), their catch-up phase East Asia is rapidly aging, which curbs its surplus. Governments contributed sub- will, in the best of cases, be a very pro- growth potential (as the article on page 45 stantially to the generation of such surplus- longed one. at fact apart, the key concern shows). However, trade is likely to continue es by limiting ¤scal de¤cits. ailand, for is that the development models which to consist largely of ”ows of semi-pro- instance, managed to turn a ¤scal de¤cit made the previous growth miracles possi- cessed or fully processed manufactured of –6.3 percent of GDP in 1998 into a ble may no longer be available for these goods – segments where productivity is surplus of 0.25 percent of GDP in 2015. latecomers. rapidly advancing. Moreover, after the boom period and the Employment shares are thus unlikely currency crises that followed, central banks Inter-Asian Trade as a Key to rise anywhere near to the levels wit- reined in in”ation. Given the investment One of the major factors that drove the nessed in the more advanced Asian econo- needs described above as well as the need successful growth of the “early bloomers” mies during their boom years. is implies, to invest in human capital to train young in Asia was their focus on exports – partic- conversely, that services will have to play a populations for a service-oriented econo- ularly to the United States and Europe. In far greater role even in less developed econ- my, high savings actually appear to be a the period from the 1980s onward, the omies if the catch-up process is to succeed. prerequisite for a successful growth strate- share of Asian exports absorbed by the However, there is still some uncertainty as gy. One reason for this is that relying US and the EU ranged from 31 percent to whether this can happen (see page 42). on foreign capital exposes economies to to 43 percent of total exports (in USD). at said, there is still ample latitude in the risk of being hit by external ¤nan- 40 ‘ Introduction ’

cial shocks. With economies around the important. Funding it will require high world advancing rapidly in terms of tech- national savings, which can only be gener- nology, the future of the poorer Asian ated if governments resist excessively ex- economies is unlikely to lie in policies pro- pansionary monetary or ¤ scal policies. moting industrialization, although com- Moreover, as discussed in the article on parative advantages for segments of ma- page 48 of this issue, deeper ¤ nancial sys- nufacturing may arise where costs of in- tems within countries and more ¤ nancial dustrial labor are lower. Urbanization, integration among countries are needed infrastructure and a broad range of service in order to create larger and more liquid industries are more likely to become the capital markets and thus better match key growth drivers. Consequently, invest- the sources of ¤ nance with their pro- ment in human capital will be ever more ductive uses.

Source: IMF, Credit Suisse 80 000 Broad range of income levels in Asia Annual GDP per capita for selected countries (2016, estimated, in USD, PPP-adjusted) 60 000

40 000

20 000

0 Bangladesh Pakistan Vietnam India Philippines Sri Lanka Indonesia Peru South Africa Colombia China Brazil Thailand Mexiko Turkey Uruguay Chile Russia Malaysia Poland Spain Italy New Zealand Korea Japan France UK Canada Taiwan Germany Australia Sweden Holland US Hong Kong Switzerland Singapore

41 Photo: Markus Hanks / Gallery Stock ‘ Services ’

From Farm to Laptop

Can a national economy succeed on the path to prosperity without industrialization? By Julia Dumanskaya

For almost every developed nation, the in- big question is this: Will these countries Only ¤ ve have made the leap into the dustrialization of the economy was the key succeed in achieving prosperity without group of high-income countries to date: step toward greater prosperity and im- industrialization? Japan, Hong Kong (China), South Korea, proved living conditions. As part of a dra- Singapore and Taiwan. While Singapore matic structural transformation, laborers ­ e Alternate Route and Hong Kong developed directly into shifted from agriculture into industrial en- Asia has fundamentally changed over the o¯ shore ¤ nancial centers, the economic terprises, thereby laying the foundation for last four decades. Agriculture’s contribu- transitions in Japan, South Korea and Tai- subsequent economic progress. Only later tion to value creation has declined signi¤ - wan followed the traditional pattern of a did the rise of the service sector begin. cantly. Urbanization has progressed quick- structural shift from agriculture to industry, Yet this developmental triple jump is ly, and almost four times as many people with the service sector emerging only after no longer the rule. Among the developing live in cities today than in 1970.  e num- gradual deindustrialization. and emerging nations in Asia and Latin ber of children per woman, averaging more However, many developing and America, there are a few economies that than ¤ ve in 1970, has dropped to barely emerging nations in Asia now seem to be have jumped directly from largely agrarian three.  ese profound changes have not taking another route. For example, relative societies to service economies without ever impacted all Asian countries equally, and employment in the industrial sector in establishing a strong industrial sector.  e development has progressed unevenly. India, Indonesia, the Philippines and 42 Photography: Atul Loke / Panos —— Economic Research ——

Pakistan today is only marginally higher that although the percentage of employ- tivity and thereby stronger growth. If the than the (low) level of the 1970s. So this ment in modern, productive services has minimally industrialized or non-industri- certainly is not a surge in industrialization. grown in the last 10 years, it still lags sig- alized countries in Asia do not succeed in At the same time, 700 million Asian work- ni¤cantly behind traditional services. e increasing productivity in agriculture and ers – around 43 percent of the workforce – highest employment percentages outpace the service sector, their development pro- still work in agriculture, even though the the less productive areas of retail, the hotel cess could take longer than that of their added value contributed by this sector has industry and gastronomy by more than 40 successful forerunners in the region. shrunk signi¤cantly. e relative percent- percent. Accordingly, service sector pro- Low-income countries like Cambo- age of agricultural workers is declining more ductivity in these countries lags behind the dia and Laos can bene¤t from comparative slowly than its percentage of value added, industrial sector and those countries with a advantages in labor-intensive activities in since these countries have signi¤cantly traditional development path. an initial phase. However, it will be di—cult higher population growth than the devel- Most research reports conclude that to achieve a marked increase in industrial oped countries did in their era of industrial- industrialization is a prerequisite for a soci- employment, because technological prog- ization. At the same time, the industrial ety’s successful structural transition and ress is enabling industrial production to sector does not o¯er enough jobs. erefore, greater prosperity. With only two excep- function with a dwindling number of jobs. the still very unproductive agricultural in- tions (Israel and United Arab Emirates), Investments in education and infrastruc- dustry or service sectors where value cre- all 25 high income countries ¤rst achieved ture will be essential for Asian economies ation is low – often in the gray economy – a high degree of industrialization. e and will establish and continu to develop a serve as a reservoir for excess labor. Asian Development Bank even estimates solid ¤nancial and legal framework. e that no country has succeeded in making fact that out of the 55 industrialized coun- Too Few Modern Services the leap into the high-income group with- tries worldwide, only 23 are also high- in- In many countries, the service sector re- out employing at least 18 percent of its come countries demonstrates that these mains less productive than industry (see workforce in the industrial sector over an factors are important for increasing pros- chart.). e few economic sectors that add extended period. perity. great value, such as ¤nancial and business services, are countered by a whole range of Engine of Progress less productive areas such as retail, gastron- e importance of industry lies in its cen- omy and public services. tral role in generating and disseminating e more productive service indus- innovations. For example, in 2008, around tries often emerged as a supplement to in- 90 percent of private expenditures for re- dustrial enterprises and were able to bene- search and development in South Korea ¤t from new technologies. If the industrial came from the industrial sector. e spend- phase is skipped as the economic structure ing levels are similarly high in Germany. changes, there is a risk of sluggish growth With this fundamental contribution to for productive services. e examples of technological progress, the industrial sector India, Indonesia and the Philippines show signi¤cantly promotes increases in produc-

90 Industry more productive than services Value added per worker in in 2010 in thousands of USD, 60 at 2005 prices Services Industry

30

0 Suisse Credit Tables, World Penn GGDC 10-Sector Database, Sources: India Indonesia China Philippines Thailand Malaysia Taiwan South Korea Singapore

43 —— Economic Research —— ‘ Real Estate ’

In recent decades, construction investments have made a signi¤ - cant contribution to the increase in ¤ xed asset investments in Chi- na. About a quarter of the demand in the Chinese economy now comes from the real estate sector. So it is not surprising that varia- tions in demand for residential real estate have always had a big impact on ” uctuations in the economic cycle.  e government has found it di— cult to control these varia- tions, not least because property sales provide local governments with a considerable portion of their revenue. However, it seems that the latest stabilization measures have been far more successful than previous measures, decreasing the risk of a collapse in the real estate market.

Not Much of a Surprise In mid-2016, the Politburo listed the “control of asset price bub- bles” as one of its policy objectives.  e public reacted with a wave of residential property purchases in August and September, which led more than 20 Chinese cities to tighten their rules for buying and selling residential property. A market correction loomed, but ultimately turned out to be modest. First, the regulatory tightening did not occur everywhere; smaller and less important cities were not a¯ ected. Second, the Doing Well People’s Bank of China kept interest rates low.  ird, household incomes have risen by an estimated 60 percent over the last ¤ ve years, which, together with moderate mortgage rates, means the burden is sustainable. Most importantly, however, mortgage debt (for Now) in China remains low. According to estimates, mortgage debt is only 8 percent of total housing assets and 14 percent of ¤ nancial assets ( June 2016). In addition, demand for residential property in  e real estate market is a cornerstone China remains high.  e rating agency Fitch estimates that some 800 million square meters of living space will have to be built an- of the Chinese economy. But the nually through 2030 to meet demand as people move to cities.  is major ” uctuations it has experienced is roughly equal to the area of Singapore. So everything is ¤ ne, right? Not quite.  ere are still struc- have created uncertainty in the past. tural problems.  e government is not allowing housing to be built By Vincent Chan, Weishen Deng and Ray Farris where people actually want to live, causing a fundamental market distortion. Very little land is being made available, particularly in urban areas, leading to a mismatch between supply and demand and boosting prices. Another distortion is rooted in restricted op- portunities for ¤ nancial investments. Stringent capital controls and low deposit rates at state banks make property an attractive but highly in” ationary investment opportunity. In sum, taking account of all the factors mentioned above, 2017 is unlikely to see a substantial decline in housing prices. But dealing with structural problems is a key step toward reducing vol- atility, and it will be indispensable in preventing the risk of a col- lapse in the longer term. 44 Photos: Qilai Shen/EPA/Keystone; Lee Chapman/REX/Dukas —— Economic Research ——

Increasing Demographic Pressure

Some Asian societies are aging rapidly.  is is having 2105 an impact on growth and pension systems. Africa By Sara Carnazzi Weber and Thomas Mendelin 2095

Oceania 2085

Which country 2075 is aging the Asia fastest? Year in which the number 2065 Aging populations are one of the most of people age 70+ South America important sociopolitical issues of the 21st exceeds people ages century. What has so far primarily been an 10 to 25. Selected 2055 North America issue in developed countries is increasing- countries that exceed the threshold within the ly becoming a global phenomenon. After forecast period. Regions: 2045 Europe, East Asia is one of the world’s average values. fastest-aging regions; it is aging much faster, for example, than Latin America 2035 Europe and North America. Only in Africa will the average age over the next several 2025 decades remain relatively low, and after 2050 it will be the only continent that Source: United Nations,

Credit Suisse Japan Hong Kong South Korea Singapore Thailand Macau China Sri Lanka Vietnam Bhutan Malaysia Bangladesh Nepal North Korea India Cambodia Laos Mongolia will still be experiencing signi¤ cant popu- 2015 lation growth. In Japan, the proportion of people over the age of 70 is now higher than the proportion of young people between the ages of 10 and 25. Between 2027 and 2029, this will also be the case in South Korea and Singapore (see chart). Europe will reach this point in 2030.  ailand is ex- pected to reach this level of aging in 2034, with China following in 2038. China is already feeling the e¯ ects of its one-child policy. Although the government o— cially ended this policy in 2015, changing living conditions in cities and the sharp rise in prices for housing and education make it di— cult for many couples to have more than one child. Other parts of Asia, however, will have a more favorable age structure for some time yet. In India, Cambodia and Laos, it will be 60 to 70 years before the ratio of young to old people tilts in favor of the latter.

Not Much of a Surprise Demographic aging in developing and emerging regions is not an unexpected phenomenon. As a result of economic gains and the associated increase in living standards, life expectancy is improving; ‘ Demographics ’ —— Economic Research ——

at the same time, birth rates are declin- ing, leading to the increased aging of China: Innovation, society. In addition, developing and emerging countries are continuing to catch up, relatively speaking, with the by Order of the developed world. While they only ac- count for 60 percent of the population over the age of 70 today, this ¤gure Government will reach 75 percent by 2050. e (over)aging of society has a fundamental economic impact. For ex- With its regulations and subsidies, Beijing is ample, it has a signi¤cant in”uence on potential growth, i.e., the growth that attempting to make the country more innovative. would have been possible if the capacity But the importance of the internet is increasing. utilization rate were normal. e la- By Vincent Chan bor-intensive growth models that pre- viously characterized developing and emerging countries will become less important, while growth as a result of technological advances will become more prominent. Over the past 15 years, China has made On the one hand, there have been some ma- Pension Systems under Pressure signi¤cant investments in research and jor successes in the telecom and internet Ensuring the sustainability of pension development (R&D) in an e¯ort to close sectors, where China has caught up to the systems will also become more di—cult. the gap between the People’s Republic and rest of the world in terms of R&D capa- e major di¯erences in the quality of other countries. city, creating companies that are extremely the pension provisions of individual According to o—cial data, the share pro¤table and competitive both domestical- countries make it di—cult to o¯er gen- of Chinese GDP attributable to R&D ex- ly and internationally. e market leaders eralized statements concerning the fu- penditures more than doubled between in these two sectors not only invest at least ture of retirement in Asia. e main 2000 and 2015, climbing to around 2 per- 10 percent of their revenues in R&D, they problems are the high levels of system cent in 2015, or 228 billion US dollars (or are also among the 25 companies with the fragmentation, the discrepancy between 373 billion US dollars, adjusted for pur- highest spending overall in this sector in pension bene¤ts for public sector em- chasing power parity). While this ¤gure is China. On the other hand, there are still ployees and programs for the private impressive, it is still 25 percent less than many companies in knowledge-intensive sector, which is usually much less de- the United States. Furthermore, the e¯ec- sectors that do not invest enough in R&D, veloped, the much overlooked but im- tiveness of these considerable R&D invest- and they continue to face overcapacity and portant informal economy, and the level ments has been quite mixed so far. intense price competition. of the replacement rates (the pension income compared with an individual’s last salary). In China, for example, according to a study by the Asian De- % of GDP 2000 Source: UNESCO, OECD velopment Bank the replacement rate for public sector employees is a high 3 Japan 90 percent. In the rural pension system, however, which is what a large portion US of the population relies on, the rate is Germany just 17 to 30 percent. So better coverage South Korea France and more sustainable ¤nancing for pen- 2 sion systems require fundamental re- Singapore UK R&D spending forms if these countries want to avoid the problem of widespread poverty in R&D spending as a % of GDP; the size of the circles re”ects the old age, which impacts growth. amount of annual R&D spending 1 China by the indicated country in USD India purchasing power parities; India, Hong Kong Malaysia and ailand: 2011. Indonesia Malaysia Thailand Pakistan % of GDP 2013

0 1 2 3 4 5

46  e Chinese government is serious about promoting innovation as a major driver of the economy. Education reform, such as the expansion of tertiary education over the past two decades, has helped to boost China’s pool of human capital. According to the government’s plan, R&D expendi- tures are to be increased to 2.5 percent of GDP by 2020. Credit Suisse estimates that this would represent an increase of 73 per- cent compared to 2015, meaning the US will likely be surpassed (adjusted for pur- chasing power). ‘ Innovation ’ Similar to the Olympics However, whether the country’s current regulatory policy will actually promote in- novation is an open question.  e way the Chinese government is promoting scien- ti¤ c progress strongly resembles its almost superhuman e¯ orts to win gold medals at the Olympic Games: massive govern- In what areas could in China that should drive demand for tech- China become a nology across hardware, software, services and ment-controlled programs supported by infrastructure sectors. enormous national resources, but with rel- global market leader? atively little leeway for market and social NEW ENERGY VEHICLES (NEV): China forces to unfold freely. is now the largest NEV market in the world. BIOTECH: In 2015, sales of alternative-powered vehicles in However, the internet is increasingly e market for biologics and bio- similars is still in its infancy in China, but it China rose by 343 percent over the previous year contributing to the strategic importance of has grown quickly in recent years thanks to a to 331,000 vehicles. As a result, the penetration the private sector, and these new entrepre- large domestic market, a favorable regulatory rate of NEV rose from 0.3 percent in 2014 to neurs are also being recognized to a greater environment and strong government support. 1.3 percent, outpacing the NEV penetration rate in the US of 0.6 percent. extent by the government as important BIG DATA AND ARTIFICIAL drivers of innovation and technological INTELLIGENCE: e Big Data sector in China NUCLEAR POWER: Based on installed nuclear developments. grew by 65 percent in one year, reaching a volume capacity, China is not the world’s largest nu- of 2.32 billion US dollars in 2015. is represents clear power producer, but its planned nuclear 10.7 percentof the global Big Data market. projects will make it the world leader in this area. e country has pushed forward with its ambi- INTERNET OF THINGS (IoT): China is the tious nuclear energy generation plan, which calls world’s largest hardware manufacturer and it has a for a doubling of capacity, from 28 GW in 2014 broad internet user base. IoT is the new mega trend to 58 GW by 2020. 47 Photo: LeEco —— Economic Research —— Step by Step

Asian countries have high savings rates, but investments are predominantly short-term. However, they have embarked on the path to longer investment horizons and deeper capital market integration. By Björn Eberhardt

Asia’s investment needs are enormous and should not be ¤nanced solely by the pub- Banks are generally less involved in lon- will likely continue to grow over the com- lic sector. To encourage greater involve- ger-term forms of ¤nancing due to their ing years. Well-regulated, open and liquid ment of the private sector in ¤nancing risk policies and regulatory and cost struc- capital markets therefore play an impor- infrastructure in particular, however, many tures. Meanwhile, many Asian capital mar- tant role in investing the available capital Asian countries need to further reform kets are relatively underdeveloped, particu- as e—ciently as possible. Individual coun- their ¤nancial sectors. larly in the longer-term segments of the tries will need to increase the depth of their bond markets. is is frequently true of the own ¤nancial systems, as well as improve Substantial Increase in Wealth markets for government bonds, where lon- the integration of their ¤nancial markets Asian emerging markets have relatively ger maturity ranges still tend to show less across national borders. ey are already high savings rates compared to industrial liquidity. In the absence of a broad range of starting to move in this direction, although nations. According to the World Bank, reliable prices for government bonds over the ¤rst steps will have to be taken rather the national savings rate was 28 percent in longer maturities, it is di—cult to establish carefully. South Asia in 2014 and 45 percent in the comparable segments for corporate bonds. Many Asian national economies East Asian/Paci¤c countries. Many Asian is problem is even more serious when have exhibited impressive growth rates households saw their wealth grow enor- emerging markets try to establish such over the past twenty years. Much of this mously as a result of the combination of market segments in their local currencies. growth has been driven by increasing in- high savings rates and rapid economic vestment spending. is includes public growth. According to the 2016 Global Highly Fragmented Market and private infrastructure spending, ener- Wealth Report published by the Credit Another compounding factor, according gy supply, transport, telecommunications, Suisse Research Institute, wealth in Asia to ¤gures provided by the Asian Develop- supply and disposal, investment in equip- (excluding Japan) grew from 9 trillion US ment Bank (ADB), is that the Asian ment and buildings as well as capital in- dollars in 2000 to 29 trillion US dollars ¤nancial sector remains relatively frag- vestments by companies, and investments in 2016. Over the same period, the share mented and focused on domestic markets. in private residential construction. Ac- of global wealth grew from 7.7 percent Cross-border ¤nancing activities are large- cording to the International Monetary to 11.5 percent. In other words, the wealth ly handled by foreign banks, which have Fund, investment made up 45 percent of of Asian households outpaced the global tended to dial back their activities in recent the GDP in China in 2015, 35 percent in average. years as a result of regulatory changes. In Indonesia and 32 percent in India. For Representing one of the biggest chal- this context, the ADB and other interna- Asia’s developing countries, the average lenges in this regard is the fact that, al- tional organizations point to risks asso- share of investment in GDP was 41 per- though savings rates in Asia are very high, ciated with inadequate ¤nancial market cent, compared to 21 percent in industrial a large share of these savings is invested for development in the region. For instance, countries. In the years to come, investment the relatively short term. e reason for there is the danger that key Asian emerg- spending is expected to continue rising at this can be found in the ¤nancial sector, ing markets could stagnate at an average a high rate, but this spending cannot and which is geared primarily toward banks. per capita income level and not move up 48 Establishing and supporting public and/or private old age insurance systems can play a critical role in supporting this. Further- more, it would create a new or larger pool of investors with a long investment hori- zon. Fundamental steps will also be needed to promote increased awareness of long- term saving, to establish a regulatory framework protecting those investors and savers, and to ensure that tax incentives are in place. Regulatory measures can also manage the supply and demand for capital in certain market sectors. And ¤ nally, fur- ther liberalization of the interest rates in some countries remains an important point in allowing market prices to rise and thus improving the allocation of capital. It comes as no surprise, therefore, that international organizations propose more active involvement of Asian coun- tries in formulating the global ¤ nancial market regulations that impact them.  is is even more important now that regu- lation of the ¤ nancial markets is on the upswing in the US and the EU as a result of the numerous crises in recent years. When it comes to questions of ¤ nancial market regulation, a more active role by the Asian emerging markets – one com- mensurate with their share of the global economy and global wealth – would there- fore be preferable.  e path to deepening integration and development of the ¤ nan- cial markets in Asia should therefore be followed, but with care. Steps taken in in- ‘ Financial Markets ’ dividual countries in recent years are, at least, encouraging.

to join the group of countries with high in recent years by the International Mone- income levels (see page 41). tary Fund and one that does not necessari- In some ways, the experiences of ly have to run contrary to deeper ¤ nancial many Asian countries, in particular from market integration. the era of the Asian currency crisis in 1997–98, as well as the global ¤ nancial cri- What Needs to Be Done? sis of 2008–09, remain a crucial ad- What can those Asian countries a¯ ected do ditional factor in” uencing reform e¯ orts. now to develop their capital markets fur- As a result of these lessons of the past, ther while ensuring that reforms are built opening the ¤ nancial markets is consid- on both the positive and negative experi- ered to be a risk. Measures controlling the ences of recent decades from a global per- movement of capital, in particular, were spective?  e ADB and the Organization and still are a useful tool for ensuring the for Economic Cooperation and Develop- stability of ¤ nancial markets in certain sit- ment (OECD) mainly suggest measures e Credit Suisse Global Wealth Report is uations – a view that has also been adopted aimed at fostering long-term savings. available at www.credit-suisse.com/gwr. 49 Photo: Wang Dongzhen / Xinhua / ddp images —— Economic Research ——

Asia in Statistics ‘ Facts› Where’s the best place to live? Where is there internet access? How quickly is the population aging? and Where do Asians immigrate from and emigrate to? ›Figures ’ By Thomas Mendelin

Portion of the 100 population City Growth in millions India (in %) 5.2 e percentage of the population living in cities is growing rapidly almost everywhere in Asia. e 80 Thailand proportion of Bangladesh’s urban population, for Japan 3.9 example, quintupled between 1960 and 2015. Source: World Bank: Urban Population; UN: World Urbanization Prospects Pakistan 60 1960 2015 3.6

Top 3 Immigrants 40 China India, ailand and Pakistan Pakistan are the most popular im- Indonesia 20 India migration countries in Asia, while India – along with Urban population China and Bangladesh – has (in millions) the most migrants leaving. 0 100 200 300 400 500 600 700 800 e most Indian migrants move to the United Arab Emirates, while the most Chinese migrants head to Hong Kong and the US. Remittances 42.8% Top 3 Emigrants Close economic integration of Asian countries and e percentage of Asia’s the importance of migrants for the national economy workforce employed in Bangladesh agriculture is decreasing 7.2 of their home countries become apparent when we look at the volumes of personal remittances. steadily, but is still Source: World Bank: Personal remittances, received (current USD), based on IMF data 42.8 percent. By way of comparison, EU: China Remittances 4.4 percent (2014). 9.5 in USD billions

hlpie 30.0 Philippines

China 44.4 49.7% India 15.6 Almost half of the

19.3 Pakistan 105.9 workforce in India Source: UN Population Division: Trends in international still works in the migrant stock: migrants by destination and origin (2015); India 68.9 Asia UN: World Urbanization Prospects agricultural industry Bank World 2013; Bank, Asian Development Sources: Other countries (2013).

—— Economic Research ——

Singapore (11) Greenhouse Gas Emissions Hong Kong (12)

10 China, India and Japan are responsible for more than two-thirds of Asia’s greenhouse gas emissions. China’s percentage South Korea (17) rose from 36 percent to over 51 percent over 10 years, even 20 though Asia’s total emissions also grew over the 52.5% Japan (20) 2002 2012 in billions of tons same period. of Japan’s population holds 30 between 100,000 US dollars and 1 million US 40 Brunei (31) 1.5 dollars, which makes Japan one of the countries with 12.5 3.0 7.1 50 the most equal distribution Japan of wealth worldwide. India Quality60 of Life Source: Credit Suisse Global Other Asian Wealth Databook 2016 China countries In addition to the economic situation of70 the population, World Bank: Total greenhouse gas emissions (thousand metric tons of carbon dioxide equivalent); Emission Database for Global Atmospheric Research the United Nations’ Human Development80 Index also considers life expectancy and Internet usage education indicators.90 Four Asian countries are among

In many Asian countries, less than half the population used the internet in 2015, the top 20100 in the world, far below Europe and North America. But internet usage is growing rapidly. although there are vast dif- ferences within the continent. 110 Source: UN Development Programme, Human development reports, 2015

120

130 Cambodia (143)

140 Nepal (145) Pakistan (147) 150

Myanmar (148) 160

170 > 65.57 51.21 – 65.57 180 31.50 – 51.21 Afghanistan (171) 14.40 – 31.50 <14.40

World Bank: Internet users (per 100 people); International Telecommunication Union

Demographics 2016 People are living longer in Asia, which will present society with major economic and social 404.4 million challenges – like Europe is facing today. North America Chart: people over 70 years of age Australia/ Source: UN, World Population Prospects:  e 2015 revision Oceania 2050

1108.7 million Africa Asia Europe Latin America and the Caribbean 51 Chart: Cra¯ t Martha Atienza Martha Atienza has an unusual life story. e daughter of a Filipino sea captain and a Dutch mother, Atienza often features the sea as a primary motif in her work, while demonstrating a keen understanding of her surroundings as a landscape of people, rst and foremost. e use of art as a tool for e
ecting social change is another import- Ha endi Anuar ant aspect of her work. e Malaysian artist Ha
endi Anuar grew up in Kuala Lumpur but attended art school in Rhode Island and London. Upon returning to his native city, he became fas- cinated with the visual textures and struc- Art tures of its urban milieu, and turned these into immersive installations that juxtapose painting, sculpture and objects. References to Western art history are part of his work as well.

Asian Artists Who Will 10 Dusadee Huntrakul Shape the Future Dusadee Huntrakul is a ai conceptual artist who works primarily in clay and Fyerool Darma graphite. Both his sculptural and his paper Born and raised in Singapore, Fyerool works have a quiet and captivating charm. Darma works primarily in the medium of Drawing on the artist’s personal history, his painting. His work focuses on migration, works deal with topics such as economic cultural identity and postcolonialism. He value systems, the labor market and envi- addresses controversial aspects of South- ronmental issues. east Asian history, particularly in the Compiled by Louis Hu, curator Malay-speaking world, for example in his of the Singapore Art Museum, project for the 2016 Singapore Biennale. which focuses on Southeast Asian art. Hu also teaches at the National Institute of Education and writes for a variety of art journals.

Images: Martha Atienza, Endless Hours at Sea (detail), 2016, installation view Singapore Biennale, courtesy Singapore Art Museum; Ha
endi Anuar, Elephant Utopia (detail), 2015, courtesy Richard Koh Fine Art and the artist; Phuong Linh Nguyên, e Last Ride (detail), 2016, installation view Goethe Institut Hanoi, courtesy Skylines with Flying People program, Nha San Collective, curated by Truong Que Chi; Agan Harahap, Mardijker Photo Studio (detail), 2016, cour- tesy the artist; Lim Sokchanlina, National Road No.5, 2015, Singapore Art Museum collection, courtesy National Heritage Board; Fyerool Darma, e Most Mild Mannered Men, 2016, installation view Singapore Biennale, courtesy Singapore Art Museum; Dusadee Huntrakul, sample for possible monument, 2016, courtesy the artist and Naruebes Vadvaree; Tun Win Aung and Wah Nu, e Name, 2016, courtesy Singapore Art Museum; Boedi Widjaja, Black-Hut, 2016, installation view Institute of Contemporary Arts Singapore, courtesy Cher Him; Sarah Choo Jing, e Hidden Dimension II, 2013, Multi- media installation, edition 3/5, Singapore Art Museum col- lection, courtesy the artist.

52 — Bulletin 1 / 2017 Lim Sokchanlina Phuong Linh Nguyen Lim Sokchanlina’s works re¥ect the theme Phuong Linh Nguyen was born in Hanoi, that occupies the promising younger gen- Vietnam. Her interdisciplinary works in- eration of Cambodian contemporary art- clude installations, sculptures and videos. ists: the changing face of Cambodia as a She was one of the founders of the Nha result of globalization. Sokchanlina was San Collective, a group of young Vietnam- born in the southern Cambodian province ese artists whose work speaks of the ten- of Prey Veng. He is a founding and active sion between tradition and modern iden- member of a number of cultural organi- tity as well as between local roots and glo- Agan Harahap zations in Cambodia, including Stiev balization – themes that play a central role Agan Harahap is an Indonesian artist who Selapak/Art Rebels and Sa Sa Bassac. in her work as well. began his career as an illustrator, graphic designer and photographer. He embarked on a full-time career as an artist only in his early thirties. His works combine fantasy and reality to present a satire or parody of contemporary life in an environment shaped by social media and popular culture. Tun Win Aung und Wah Nu Tun Win Aung and Wah Nu are a hus- band-and-wife artist duo who hail from Yangon, Myanmar. ey are prominent on the international circuit, with works that were shown as part of the 2013 exhibition at the Guggenheim Museum entitled “No Country: Contemporary Art for South and Southeast Asia” as well as at the Singapore Biennale in 2016. Much of their work deals with the realities of contemporary life in Myanmar.

Sarah Choo Jing Sarah Choo Jing is a young Singaporean Boedi Widjaja artist – the youngest on this list – whose Displacement has dened Boedi Widjaja’s chief media are photography and video. life and his artistic practice. Born in Sura- A graduate of the NTU School of Art, karta, Indonesia, to Chinese parents, he Design and Media and of the Slade School ¥ed the ethnic tensions of his native Java at of Fine Art, she made a splash with her a young age, arriving in Singapore. He was thesis project, “Hidden Dimension,” a pan- trained in architecture, worked in graphic oramic video installation showing everyday design, and turned to art only in his thir- life in a typical Singaporean home. ties; much of his work draws from experi- ences in his own life. — The New Asia —

ethic: their employees’ dutiful devotion to their oc-cupation, their perfectionism, and their absolute reliability. For a long time this island nation with a population of 126 million had no Noriko’s Prescription: need to look beyond its own borders. To this day, Japan’s SMEs, the backbone of “Japan Inc.,” rely to a large extent on this Better Balance huge domestic market. But a reorientation Despite anemic growth and a rapidly aging is slowly under way, now that demographic change is becoming ever more apparent; in population, Japan remains the third largest economy 2016 the population shrank for the seventh in the world. Renowned economist Noriko Hama year in a row. e fact that, despite its di«culties, explains this apparent anomaly and gives us Japan retains its position as an economic her critique of the country’s economic policy. powerhouse also demonstrates, according to Hama, that “national economies do not By Sonja Blaschke all have to be so youthful and full of energy, and growth is not necessary to be productive and creative.” In a portrait published by Slate, the US-based online magazine, Hama was de- scribed as “a Japanese version of Paul e days when the world feared an appar- ments on economic a
airs for the BBC, Krugman.” Like that Nobel laureate, she ently all-powerful “Japan, Inc.” are long Sky TV, CNN and the Financial Times, too is an “intellectual celebrity,” a promi- past. Japan’s giants like Sony and Panasonic and is considered one of the sharpest critics nent academic and a sharp polemicist. are hard pressed to keep up with their in Japan. In fact, even after over two de- For example, she renamed the eco- nimble South Korean competitors. “ ey cades of slow growth, Japan remains the nomic policy of Prime Minister Shinzo became victims of their own success,” third largest economy in the world, trailing Abe, well-known as Abenomics, as “Aho- says Noriko Hama, a well-known Japa- only the US and China. nomics” or “fool’s politics.” She is sharply nese economist. critical of the combination of extremely “Japanese manufacturers are out- Learn from Japan loose monetary policy government spend- standing when it comes to managing pro- Hama credits that status to the fact that cesses. But the trend toward digitalization the Japanese economy has achieved a very no longer necessarily requires such a high high degree of maturity. e economic and degree of precision in process management, social infrastructure that keeps such a sys- which had been the source of so much tem running is rmly anchored and not so pride for Japanese companies. Today, ideas easily thrown o
course, says the economist and their implementation tend to be more and commentator. Another pillar support- important,” the 64-year-old professor ex- ing continuing success is the Japanese work plained during our conversation on the campus of Doshisha University in Tokyo. Japan became the “sick man of Asia” when its bubble economy burst in the ’90s. e recovery has taken its time. While the numbers have not been negative, growth rates have rarely exceeded 0.5 percent since that time. Wages and salaries have stagnat- ed; the job market is shrinking. Today, one out of four people in Japan is over 65 years old; by 2030 almost one in three will have reached that milestone, according to pro- jections. On top of that, the nancial crisis and then the Fukushima disaster in 2011 were additional weights dragging Japan down. Despite all these challenges, the Jap- anese economy still functions “unbelievably well,” Hama noted. at is high praise coming from a woman who regularly com-

54 — Bulletin 1/2017 — The New Asia —

ing programs, and structural reforms be- Japan would also be healthier if it stopped cause she regards the goal – growth – as sealing itself o
from people who want to completely mistaken for a mature econo- immigrate. “I think it is extremely illogical my. “ at’s as if someone who is already that Japan wants to keep people out even fully grown wants to keep growing and though it obviously needs them desperate- growing,” she says. ly,” Hama points out. Experts estimate that at only makes sense for an economy by 2050 the population of Japan will shrink that is just starting out, or has lost everything from 126 million to 97 million. But Japa- after a war, for instance. She argues that nese politicians, afraid of losing votes, have under Abe, Japan fell victim to a “Faustian been unwilling to touch the topic of immi- obsession with youth.” It is almost like dop- gration. ey would rather promote greater ing and, like doping, it will destroy a healthy integration of women and seniors into the equilibrium. job market. at’s the wrong way, accord- ing to Hama. “If Japan wants to be part of Opening Is Another Solution the world community, it must be open to To make Japan t for the future, Hama newcomers.” prescribes a better balance, instead of ex- She does see a willingness to change pansion. “What we need to consider now direction among her compatriots, however. is balanced health, checking our own Hama believes that Japan was already on the biorhythms and knowing whether we’re right road in 2009 when the Democratic functioning well.” Her prescription? A Party assumed power. e Japanese were better distribution of wealth, for instance discovering the advantages of slowness then. by increasing the top income tax rate for Instead of continuing to live at full bore, high earners. at would solve Japan’s “big- they were looking for a better quality of life gest and, in some ways, only real problem,” “ at’s as if someone who and understood change and diversity as op- which Hama says is “poverty in the midst is already fully grown portunities. With a “very interesting and at- of abundance.” e money is there. Com- tractive mix of diversity and integration,” panies are sitting on enormous cash re- wants to keep on growing Japan could have become a model for other serves but it’s not circulating, she claims. and growing.” advanced societies, according to Hama. According to a 2014 OECD study, one out She appeals to Japanese companies of six people in Japan is poor, and among to return to their roots and to reconsider single parents that gure is one in two. their abilities. ere is no lack of creativity. It’s just been smothered by the excessive orientation toward process. Hama also wishes her compatriots would show a little more courage and audacity, qualities she herself exhibits with her violet hair. Com- pared to its Asian neighbors, Japan is slow to take up trends and make them its own, whether by copying or fusion, Hama says. “Instead the Japanese, being so conscien- tious, always think that they have to rein- vent the wheel rst, even if it’s already rolling right at them.” Hama takes a prag- matic view: “If the wheel is already rol- ling in your direction, why not just roll with it?"

Sonja Blaschke is an independent East Asian correspondent and television producer for German language media. She has lived in Japan since 2005.

Photography: Yasuyuki Takagi Bulletin 1/2017 — 55 — The New Asia — e Land of

UnicornsChina must become more innovative to grow over the long term. Beijing is investing billions in the start-up and maker scene with just this in mind. Out and about in Shenzhen, the Silicon Valley of southern China. By Lea Deuber (text) and Lam Yik Fei (photography)

56 — Bulletin 1/2017 — The New Asia —

Bulletin 1/2017 — 57 — The New Asia —

he robot arm turns in a series of jerky motions. Coming momen- tarily to a halt, it rotates in the air as though installing an invisible screw, before skipping back to its original position. Song Junyi looks admiringly at the black metal structure anchored to the ground in front of him. Song has been working on this prototype for two years. e 26-year-old founded Elephant Robotics with his colleague Wu Qilin. Now they tinker with industrial robots destined for Chinese factories. Where unskilled workers by the hundreds of thousands areT still sewing buttonholes by hand, Song’s robots will soon take up needle and thread. “Wages in China are climb- ing, and before long, factories will no longer be able to a
ord the workers,” says the inventor. Meanwhile, China currently has a mere 19 industrial robots per 10,000 workers. Germany has “ e pace is extremely fast”: Benjamin Jo
e supports start-ups in Shenzhen (top); over 300. Song’s robots have a strong selling point: ey are inex- Wu Qilin and Song Junyi in the HAX o«ces (bottom). pensive. At around 10,000 US dollars, even smaller factories can a
ord them.

Reorganization of the Economy Young founders like Song are the hope of Beijing. China has un- dergone rapid growth over the last three decades, and things have

58 — Bulletin 1/2017 — The New Asia —

ese policies are showing signs of success. e number of start-up companies is exploding mainly in the services sector, online retail and in the gaming and entertainment industry. Around 10,000 new start-ups are purportedly founded every day in China (read more on China’s government subsidies for innovation on page 46).

„e Workshop of the World – and Now? Shenzhen is one of the places where the president’s vision is to become reality. When devices like mobile phones and computers are “made in China,” that usually means they come from here. Economic reformer Deng Xiaoping designated this city surround- ed by rice paddies as the country’s rst special economic zone in 1980. Located only minutes from Hong Kong by train, the loca- tion was to benet from its proximity to the international nancial metropolis and bring new growth to the still closed nation. e plan worked. In just a few years, Shenzhen became one of the country’s key economic hubs. China became the workshop of the world, and the Pearl River Delta became its manufacturing heart- land. Factories sprouted up like mushrooms, and Shenzhen, the

“ at can’t happen in Silicon Valley, or in Berlin or Bangalore.”

world’s hardware capital, was born. e city only had a population in the tens of thousands during the ’70s, but that has grown to an estimated 12 million today. e proximity to factories no longer attracts just manufacturers from around the world, searching for cost-e
ective production sites. Young founders have also discovered the city, like the ones who founded Elephant Robotics. Song and Wu work on their robot in the workspaces of the American accelerator HAX. In addition to its location in Shenzhen, HAX also has o«ces in San Francisco and is part of the venture capital rm SOSV. e US only been getting better for many years now. But rising wages company was founded in 1995 by electrical engineer Sean O’Sul- are dulling China’s competitive edge. Simply put: e workshop livan and has already invested in over 500 start-up companies of the world has become too expensive. Exports are falling; the around the world through a number of di
erent accelerator pro- economy is ¥agging. Last year, economic growth was at its lowest grams. e motto of the accelerator rm in Shenzhen: “When rate in over 25 years. Today, the economy is running on cheap building hardware, all roads lead to Shenzhen.” funding and gigantic infrastructure projects. China needs to re- Benjamin Jo
e heads the program. He has been working in organize its economy to be able to grow over the long term. Asia for ten years and already considers Shenzhen a rival to To ensure that the restructuring succeeds, Beijing is relying Silicon Valley. “ e pace of Shenzhen is extremely fast,” says Jo
e. mainly on growing the services sector, utilizing more technology e o«ces of the seed accelerator are on the eighth ¥oor of a glass in industrial applications and improving innovation for “made in high-rise, and elevators provide direct access to the city’s under- China.” e country is investing billions in the start-up scene to ground markets below. Rows of countless small, informal stands achieve these goals. President Xi Jinping is calling for “national, representing the area’s factories are tucked away in ¥oors under mass entrepreneurship.” In the future, students will be able to take the glass skyscrapers. Hard drives, batteries and power supply a break from their university degree programs to start a business. units are available in ten-thousand packs, directly from the manu- roughout the country, start-up companies have easy access to up facturer. If Song needs a screw for his robot in the morning, he to 100,000 yuan (15,000 Swiss francs) in seed money, and if they will have it by lunchtime. “ at can’t happen in Silicon Valley, or hire university graduates, the government will pay their social in Berlin or Bangalore,” says Jo
e. “Our start-ups in Shenzhen insurance contributions. ere are also tax incentives and billions can get more done in a week than companies located elsewhere available in start-up funds. Development centers and high-tech can do in a month." parks at universities aim to provide students with the chance to Start-up founder Song studied robotics in Xi’an, in northern work on their own ideas at an early stage. China. He was already working on intelligent robots capable

Bulletin 1/2017 — 59 — The New Asia —

of executing complex movements and able to react to variations a competitor to the established industrial nations. China is the on the production line during his time at the university. He met only start-up market outside of the US where there are “unicorns” his business partner Wu at his rst job in a factory that manufac- in almost every industry. Unicorns are companies worth over a tured robots for children. Making the leap to self-employment billion dollars. China’s unicorns include the taxi-hailing service was not easy for Song. His parents would have preferred for Didi Chuxing, valued at 17 billion dollars, the delivery service their son to nd a position at a state-owned company. Jobs Ele.me, valued at 3 billion dollars, and the group-discount provid- there are secure, and there is a good retirement pension down er Meituan-Dianping, which, at 18 billion dollars, is valued at the road. “But we knew that we could build a better robot,” says nine times its American counterpart, Groupon. Song. For many young Chinese, the founders behind these tech giants are role models. Frank Wang is one such example. e Drones for Hollywood “Steve Jobs of China” founded Chinese drone manufacturer DJI Song and Wu are part of an investment program lasting four Innovations. Headquartered in Shenzhen, the company holds a to six months. ey received 100,000 US dollars and, in return, 70 percent share of the global market and is valued at an estimated gave the accelerator a nine percent stake in the business. In addi- 8 billion dollars. Whether in Nepal in the aftermath of the earth- tion to the funding, they also receive support in establishing their quakes or in Hollywood on the set of a lm, Wang’s drones provide company, developing prototypes and nding potential follow-on the images. e messenger platform WeChat is yet another exam- nancing. ey can use the HAX o«ces free of charge. Around ple. With its system of interlinked online apps including a mes- 20 teams are working on their ideas there. ey spend their breaks saging service, a social media platform and the app’s own WeChat playing tennis or cooking together. HAX is considered to be one Wallet payment service, the company dominates its international of the most successful accelerators in the world. competitors Facebook, Snapchat and WhatsApp. More and more Innovation and China – some think these two things don’t of the functions now being introduced to social media in the West go together. For years, China was seen as the land of cheap prod- have long been standard in China. ucts and counterfeiters. But in the tech area in particular, there Just how far China’s start-up scene has come is evident on a have been huge gains in recent years, and it is developing into visit to the Chinese tech start-up Youquan, roughly translated as

Hard drives, batteries and power supply units in ten-thousand packs: the electronics market in Shenzhen.

60 — Bulletin 1/2017 — The New Asia —

“property.” Che Keda founded the company in San Francisco in 2015 together with managing director Chen Kai, but he soon re- located to Shenzhen with his team. e company develops an ID to help manufacturers prevent product piracy. If a shoe manufac- turer produces a pair of loafers, for instance, they need to be able to trace the product’s transport route from factory to sales ¥oor and verify that the product in question is an original. e shoes can

“Here, we determine who we are, who we want to be and where we are headed.”

be lost at any point along the supply chain, replaced by or mixed with counterfeit products. “ e problem is not the cheap knock-o
s, but rather with copies that can be passed o
as the originals,” says Chen Kai. With a chip for each individual product, the ID system can prevent this from happening. e company’s backers include Sanjeev K. Mehra, a former investment pioneer at Goldman Sachs.

Born in China, Raised in the US e 25-year-old Chen Kai was born in China. When he was still a baby, his father ¥ed to the US and was obliged to borrow money in the village to pay for the nine-month passage, with his son remaining behind as collateral. Luckily, the father got a work permit, and Chen’s mother followed one year later. When his par- ents had saved enough money, they were able to repay the loan and bring their son to live with them. While his parents ran a Chinese restaurant, Chen studied business at the elite Yale University. Although countless career opportunities were open to him, Chen decided to start his own business. “Here, we determine who we are, who we want to be and where we are headed.” e team has support from up high for its anti- piracy ID chip. Along with ve other companies, in- cluding DJI Innovations and the Chinese real estate colossus Vanke, the newly founded company is men- tioned in the city’s ve-year plan, the economic plan for the years ahead in Shenzhen. “ e ght against product piracy is one of the government’s main priorities,” says “ e problem is not the cheap knock-o
s.” Che Keda and Chen Kai of Youquan. Chen. e city therefore pays for the company’s o«ces in a high-rise building in the city center. Heavy wooden chairs and antique tea services are reminiscent of the old Imperial Palace in Beijing more than a new start-up. Yet relocating from Silicon Valley to Shenzhen would have made sense for Chen even without the government support. “Nowhere else in the world is there more happening than in China.” Like Chen, many Chinese with international educations are coming back home. According to a study by growth enterprise board Chuangyeban, only around half are here for the money. Of the other half, almost 90 percent are more interested in realizing their dream and doing work that they believe in. eir own dreams, independence and a vision – these are no longer utopian ideals

Bulletin 1/2017 — 61 — The New Asia —

for many Chinese. e young generation has often studied abroad, has traveled extensively and has an idea of what makes life in an- other country special. And surprisingly, most of them come back home, either to work at a Chinese company or to start their own business.

55 Percent Women at was the case for Sonya Zhang. She sits in a white chair, relaxed, a steaming cup of tea in front of her. She speaks rapid English with a British accent. When Zhang is not in Hong Kong or the US, she works at one of the long wooden tables in Simply- Work’s coworking space, tucked away in Shenzhen’s western district. Founded in 2015, SimplyWork is still a start-up itself. e company now runs seven coworking sites, and the o«ces and ¥exible workspaces are very popular among young entrepreneurs, who crowd the space on weekends, working laptop to laptop. A pair of young women stand in the kitchen discussing a Beijing’s hope: start-up metropolis Shenzhen. new app as Zhang prepares her tea. e 28-year-old feels at home here. e percentage of female founders in China is relatively high. According to information provided by the Chinese government, one quarter of all founders are female. In the tech sector, that Zhang comes from Nanyang in eastern China and studied for six number rises to 55 percent. years in the UK. She now works at a major consulting rm headquartered in the eastern Chinese city of Hangzhou. For the past year, she has also been working with nine friends on the start-up company MYH. With this business, they plan to help with the orientation of exchange students overseas. e name is an acronym for “make yourself at home.” Each year, hundreds of thousands of Chinese students go to the US, Australia or Europe to study there, just as she did. Arrival in those foreign countries is often di«cult due to the signicant language barrier as well as cultural di
erences. Zhang aims to help with that. e company picks students up from the airport, rents apartments and helps them register at the university or school. “More than anything, the parents feel better when they can hire a service like ours." Zhang is responsible for operations in China. Even though she does not come from Shenzhen, she has chosen to make this city her home for the time being. She likes the entrepreneurial spirit, the fast pace of life and the openness of the people. Because not long ago, the city was only a small shing village, there are no strangers here. As the saying in Shenzhen goes, “you are a Shenzhener once you come.”

Lea Deuber is China correspondent for One quarter of founders are women: Sonya Zhang of MYH. WirtschaftsWoche, she lives in Shanghai.

62 — Bulletin 1/2017 We Can Understand You Both with and without Words.

ZISI 50x50 «Piktogramm für Hörbehinderte»

We want to understand the needs of all of our clients. That’s why we are dismantling barriers, for 0 5 example with the help of audio equipment, sign language interpreters, or bank statements in braille. This also allows us to ensure that people with impaired hearing, vision or mobility receive the best Inductive audio equipment50 service. It is an area where we have been constantly one step ahead for the last 10 years. in all Credit Suisse branches credit-suisse.com/accessibility

19.10.2016 [email protected]

Copyright © 2017 Credit Suisse Group AG and/or its affiliates. All rights reserved.

xxxxx Anzg Accessibility 220x297ra e V4.indd 1 23.02.17 15:44 — The New Asia —

Where the World’s Container Ships Cross Paths The world’s ten largest container ports are in Asia. We visited the port of Singapore, located on the crossroads for trade between East and West. By Daniel Ammann, Simon Brunner (text) and Juliana Tan (photos)

64 — Bulletin 1/2017 — The New Asia —

“Look, there’s the Straits of Malacca. The quarters in Singapore, pointing out the Ten Times around the Globe shipping lane is narrow, between 50 and sights and telling us all about the past, The skyscraper that is home to PSA head- 300 kilometers wide, but it’s the nexus present and future – of Singapore, contain- quarters is closer to the equator than for the world’s shipping,” says Tan Chong er shipping and trade. Zurich is to Fribourg. The temperature is Meng. The Straits of Malacca connects “Over there, in the distance, you can well over 30 degrees Celsius, and the the Indian and Pacific Oceans, linking see the original container port of Singa- humidity is close to 100 percent. The East Asia with India, the Middle East and pore. The first container ship arrived in guests, coming from winter in Europe, are Europe. “In terms of global trade, 50 % of 1972. The modern container had been in- uncomfortably warm in their suits. Tan is seaborne tonnage and 30 % of maritime oil vented only 20 years earlier, in America. brimming with energy. pass right by our doorstep,” he adds. “That’s It was a big gamble for us to build a con- Viewed from above, the port facilities look 230 vessels per day.” tainer port, the first in Southeast Asia, like a series of geometric lines, with a Tan Chong Meng – in Chinese especially as many experts advised against mosaic of crisscrossing cranes. The con- names, the surname comes first – is the it then.” tainers resemble tiny Lego blocks. It is not Group CEO of PSA International, one The gamble paid off: “Today the port until later, when we are actually at the port, of the world’s largest port operators. Tan and maritime cluster is responsible for that its scale becomes clear. strides purposefully across the roof-top 7 percent of Singapore’s gross domestic A standard container is nearly 20 feet viewing gallery of the company’s head- product, directly or indirectly,” says Tan. long and over 8 feet high

Bulletin 1/2017 — 65 — The New Asia —

(6.06 meters × 2.59 meters). The American units of measurement reveal where the “box,” as it is commonly called, was invented. One standard container corresponds to one “twenty-foot equivalent unit,” or TEU. This is the primary unit used in the industry. Last year, PSA moved almost 68 million TEUs worldwide. Is that a lot? Well, if these containers were laid end to end, they would span the globe ten times – or stretch from the Earth to the moon. PSA (formerly known as the Port of Singapore Authority) has come a long way since its origins as Singapore’s maritime authority. Corporatized in 1997, the com- pany expanded internationally and now operates over 40 port terminals worldwide. Roughly half of PSA’s 68 million TEUs pass through the port of Singapore itself, making it the second-largest con- tainer port in the world, only slightly smaller than Shanghai. The rest of the world’s ten largest container ports are in Asia as well: 7 in China, one in South Korea and one in Dubai. Judging by port volume, world trade is firmly in Asian hands. Only 15 % of the containers handled by PSA remain in Singapore; the rest are loaded onto other ships for transhipment. The port functions much like a large air- port, as a hub for further distribution, with most of the containers coming on trade routes connecting countries in Asia and “It was a big gamble.” Tan Chong Meng, CEO of PSA International. Europe.

The Scarcest Resource Tan Chong Meng notices his visitors are Tan Chong Meng, born in the 1960s to ings. At PSA headquarters, it takes only wilting in the heat and ushers us into the Chinese immigrant parents spent 23 years a few seconds to travel down 40 floors. next room, which is air conditioned. working for Shell all over the world before A minibus is waiting at the building’s “Within the next 20 to 30 years, shipping returning to the city-state. It is often said entrance. On the way to the port, Tan gives in the Straits of Malacca will double once that Singapore is a country that is managed us an update about the container industry again. The old port will soon have outlived like a company. When it was founded, Lee in Asia. its usefulness; it’s too small. And real estate Kuan Yew, Singapore’s first prime minister, developers want to build residential build- looked to the management of the Shell Have you seen signs of the global return ings and shops in this highly desirable company as a role model – for example to protectionism that we’re hearing so much location.” adopting the idea of using “helicopter about? Land is the scarcest resource in qualities” to evaluate leaders. Naturally, I am concerned about the in- Singa­pore, a tiny country that is less than Today, PSA is privatized and a wholly- creasing reports of protectionism – rhetoric half the size of the canton of Zurich, yet owned subsidiary of Temasek Holdings, an or otherwise. What we are seeing however, home to 5.6 million people. In 1993, con- investment arm under the auspices of is that production is being shifted from one struction began on a second port, which is Singapore’s finance ministry. In 2015, it place to another, due to a phenomenon we still being expanded. By early next decade, recorded sales revenues of CHF 2.5 billion call shifting labor arbitrage. If the anti-glo- a third port will begin operations in Tuas, and after-tax profits of CHF 920 million. balisation tide gains momentum, it could at the western tip of the island. This mega- “But that’s enough facts and figures – no doubt impact the way trade is conduct- port will replace all of the existing port in- now I’d like to show you the port,” says ed and the level of maritime activity. frastructures, and with a designed capacity Tan. In Singapore, you feel constant pres- of 65 million TEUs, it will be the world’s sure in your ears, owing to the speed of the When wages increase, production moves to largest container port. elevators in the country’s high-rise build- other, less developed regions?

66 — Bulletin 1/2017 — The New Asia —

Precisely. In 1995 average wages in China We’re in the process of testing self-driving ships for PSA in 16 countries around the were half of what they were in Indonesia. trucks, and drones will soon be a possibility world including China, Saudi Arabia, Italy, Today, they are more than twice as high in as well,” says Tan Chong Meng. Belgium and Argentina. How is it possible China than in Indonesia. The elimination of physically de- to manage a workforce that includes people manding jobs presents an opportunity for from so many different cultures, and in So China is outsourcing more and more jobs. Singapore, he points out. “In recent years, such diverse geographic locations? Do you To what countries? it has already been difficult to find people send your allies from headquarters to all Thailand has been very important for a who are willing to take a job as a dock- of these locations? “On the contrary,” says long time – Malaysia and Laos, too. Indo- worker. And our population is not getting Tan. “Only 50 people from here are work- nesia is definitely on the list; it is a very any younger.” ing outside of Singapore.” populous country, home to a quarter of a In other countries with more workers PSA follows a culture change phi- billion people. And as in the case of many and lower wages, PSA is not pursuing losophy that was inspired by the fishmon- emerging markets that are becoming more automation as quickly. gers at Seattle’s Pike Place Market. Those industrialized, consumption is playing an merchants transformed their business increasingly important role. What’s more, Wearing a Robot Costume into a major attraction; fish fly through the population is relatively young. Vietnam to a Company Event the air, sellers joke with their customers, is in a similar situation with its large, and Tan plans to continue to innovate: “Last and the atmosphere is one of gaiety and young, population. Many manufacturers of year we launched ’PSA unboXed,’ a venture laughter. Business consultant John Chris- low-cost products are taking a close look capital company with SGD 20 million tensen used that approach to develop his at that country. So far, the Philippines has (CHF 14 million) in startup capital, in an philosophy for improving a company’s focused mainly on the service sector, on call work climate. centers. But it, too, is trying to move into production. Learning from Fishmongers “Sooner or later, all of The goal of the so-called Fish! Philosophy You seem very optimistic about Southeast the world’s goods is to make employees alert and active in Asia. the workplace. Caroline Lim, global head It’s the next global center of production. pass through our ports. of human resources at PSA, was Employee Per-capita incomes with large young popu- We are the ideal place for No. 23 at Apple in Asia. She has written a lations make low-cost production possible. number of books and received several At the same time a new middle class is surveying the entire awards for her accomplishments in HR emerging. Local consumption could fur- chain of production.” management. She introduced the Fish! ther stimulate growth. But India, too, is Philosophy to PSA. She explained her mo- taking off – we’re in the process of building tivation in an interview with The New York its largest port, with 4.8 million TEUs. Times in 2015: “I strongly believe in the effort to promote good ideas,” says Tan, people philosophy that ’brains can be What effects is the production shift having? who showed up at a recent company event bought, but hearts and minds have to be In general, it is shortening the supply chain, wearing a robot costume and issued a pas- won.’” since many of the countries I’ve mentioned sionate plea for more innovation. Tan is doing a great deal to win are closer than China to export destina- “Around the world, the way loading those hearts and minds. At a graduation tions in the West. As a result, shipping is planned can still be very primitive and ceremony at Singapore Polytechnic in routes are shorter, and more ships and time-intensive,” says Tan. “It sounds obvi- 2014, he spoke about work-life balance – a containers are available in the market. ous, but the containers to be unloaded first difficult topic in Singapore, where even should always be at the top. We are far elementary school children have to spend We’ve arrived. Ronald Toh, who heads from achieving that goal across the indus- 10 hours or more studying. operations at the new expansion at PSA’s tr y.” “When I started work in 1983,” he Pasir Panjang Terminal, greets us and In addition, he wants to transform said, “we weren’t familiar with that term. takes us to the control room. Workers in ports into data-driven enterprises: “There And in 1992, when my wife was giving T-shirts are sitting at their computers. But are thousands of manufacturers and scores birth to our third child, I was doing my most of the monitors are dark. We worry of shipping companies, and at the end of work by her bedside at the hospital, and that all the systems may have crashed, but the supply chain there are numerous retail- urging her to get it over with, so I could get Ronald Toh laughs: “The cranes move the ers, as well as millions of customers. But on the next plane. She did her part, but I containers automatically. Workers don’t sooner or later, all of the world’s goods pass will never forget the look on her face, and need to intervene unless something goes through our ports. We are the ideal place she has never allowed me to forget that wrong, and then the monitors switch for surveying the entire chain of produc- moment.” themselves on.” tion, from raw materials to finished prod- He closed his address to the universi- The days of dockworkers in oily over- ucts, and for collecting data.” ty students with these words: “I am proba- alls appear to be gone; in general, fewer and Tan, who has been married for 32 bly not the best role model for work-life fewer people are needed to operate a port. years and has three children, oversees the balance. But I hope my children can be “Many cranes today are fully automated. more than 30,000 people who process proud of me.”

Bulletin 1/2017 — 67 Muhammad Iqbal Sir Muhammad Iqbal was a poet and phi- losopher from Pakistan, although the state itself didn’t come into existence until after his death in 1938. He sought to read the Koran and Islamic tradition from a mod- Philosophy ern, voluntarist perspective: Humans mir- „e Buddha ror the creativity of God and are individu- e Buddha (Siddhartha Gautama) “awak- ally responsible for their own well-being. ened” from his princely existence to the real- His central concept of Khudi – variously ity of su
ering, both of humans and of sen- translated as ego or self – is the instrumen- tient beings, and set out in a quest for tality through which the divine Self focuses Enlightenment to eliminate, or at least re- the dissipative tendencies of life into cre- duce, such su
ering. His Four Noble Truths: ative purpose. 1. Life is su
ering. 2. Su
ering is caused by cravings. 3. Cravings can be ended. 4. ere Asian thinkers is a way, called the Eightfold Path, to end such cravings. 10 of historic signicance. Abhinavagupta Abhinavagupta was a philosopher and aes- thete of the late 10th and early 11th cen- tury. He developed the philosophy of Kashmiri Shaivism with the idea of ab- solute idealism, which denies that there is any reality independent of the universal consciousness identied as Shiva. All rea- Mencius lity is a manifestation of Shiva conscious- Mengzi (Mencius) developed Confucian- ness, which is particularly pronounced in ism. Like Confucius, he believed that hu- Compiled by Joseph Prabhu, aesthetic experience. man nature was good, but he did not take Professor of Philosophy this to mean that people will behave right- and Religion at California State ly. In his teaching, the presence of evil in University, Los Angeles. Born the world indicates that their good in- in Bangalore, India, Dr. Prabhu stincts can be perverted. erefore, sound is a former president of the Society moral education is necessary to cultivate of Asian and Comparative the goodness of human nature. Philosophy and a member of the executive committee of the Parliament of the World’s Reli- gions, a large interfaith meeting held every ve to six years.

Images: SZ Photo; Museum für Asiatische Kunst, SMB/ bpk; Wikimedia/Marcus Hvadga/CC BY-NC 3.0; Wikimedia Commons/Baodo/public domain; Bibliothèque Nationale de France, Paris, France/Archives Charmet/ Bridgeman Images; Wikimedia Commons/5anan27/CC 1.0; Iberfoto/ullstein bild; Wikimedia Commons/Walters Art Museum/CC BY-SA 3.0; Pictures from history/ ullstein bild; Private archive

68 — Bulletin 1/2017 Dharmakīrti Together with his predecessor Dignāga, Lao Tzu Dharmakirti developed Buddhist epistemol- Lao Tzu (also known as Laozi or Lao-Tze) ogy (the theory of knowledge) and logic. In is the founder of philosophical Taoism and the  eld of epistemology, Dharmakirti held the author of the in¥ uential “Tao Te that there were only two valid instruments of Ching.” e central symbol is that of the knowledge: perception, which is a non-con- Tao, the source and guiding spirit of all ex- ceptual grasp of particulars, and logical infer- istence, which cannot, however, be de- Shankara ence, which is conceptual. In the  eld of log- scribed because it is non-conceptual, being Adi Shankara was a Hindu philosopher ic, he clari ed the notions of causality and of the foundation of all concepts. Two of the who lived in the 8th century and devel- universal concomitance. most in¥ uential Taoist concepts are Wu- oped the doctrine of Advaita-Vedanta, Wei, spontaneous action, and Yin-Yang, based on a non-dualistic interpretation complementary opposites. of the Hindu scriptures. He taught that only Brahman or the Absolute is real and unchanging, while all else is illusory by comparison. Dōgen For this 13th century Japanese philosopher, who founded the Soto school of Zen Bud- Confucius dhism, meditation was both a religious and Confucius lived in China in the 6th centu- philosophical practice. His central teaching ry B.C., a time of social and political chaos. is the oneness of practice and enlighten- Nāgārjuna He was much concerned with the well- ment. Meditation exposes the mere con- Nāgārjuna, one of the most in¥ uen- being of society and the good life of in- ventionality of the distinctions between tial Buddhist philosophers, founded the dividuals. His central idea is that of jen self and world – rather, we are in the world Madhyamaka school (the “middle way” of (human-heartedness), which connotes fel- and the world is in us as one impermanent Buddhism). His central teaching is the low-feeling and individual rectitude. He reality. concept of “nyat,” the idea that all things addressed the cultivation of qualities of are empty of inherent natures, that each both heart and mind as prescribed by the thing arises in dependence on other things. customs and rites of society. — The New Asia —

“It’s about more than just saving a few pennies” Street children need to learn to handle money at an early age, says Jeroo Billimoria. e award-winning NGO founder talks about  nancial literacy and the growing inequality in her home country of India.

Interview: Daniel Ammann

Do street children really earn enough money to be able to save some of it? We show them that it pays to save, little by little. It can make a real di
erence in their lives. It’s about much more than the pennies they set aside. It’s about making a conscious decision, a way of thinking that leads them to save money rather than spending it right away.

In your view, then, is handling money s. Billimoria, you teach street children how wisely part of a more general attitude? to handle money. Don’t these children have Absolutely. e ability to handle money is other things to worry about? probably the most important skill children „e Credit Suisse Global Education Initiative: Focusing on Financial Education for Girls If we can teach them how to deal with have to learn, and they need it throughout Within the framework of its Global Education money and encourage them to save some their lives. But an economic education Initiative and a number of regional educational of what they earn, this will make them alone is worthless. It has to be combined programs, Credit Suisse has been working since more independent and improve their lives. with social and civic education. 2008 with selected international development organizations to provide greater access to educa- We want to transform dependence into M tion and improve the quality of education sys- independence, ending the vicious cycle of What exactly does that mean? tems. Working with A¥atoun International and poverty and inequality. It means thinking of the future, respect- Plan International, it shifted its focus in 2014 ing the environment, helping others. e to teaching girls nancial skills. Plan International How do these children earn money? concept of “saving” that we seek to teach is an organization with substantial experience in the educational sector; A¥atoun International As garbage collectors, for example, by to these children involves much more specializes in developing curricula and instruc- recycling and selling anything that than just money. It’s also about natural re- tional methods for teaching social and nancial can somehow be used. I’m continually sources – saving water, light and power. skills. e program’s goal is to assist approxi- impressed by how enterprising and crea- mately 100,000 girls and young women in Brazil, China, India and Rwanda in gaining access tive most of these children are in their What is the best age to start? and transitioning to secondary school. e
orts to survive. And how brave! Some e younger the better. Even four- are very young, children who have run year-olds can learn these things. When away from home to escape terrible situa- children are very young we don’t talk tions. We want to steer this energy, this about money, but instead encourage them creativity, in a positive direction. to develop a certain way of thinking.

70 — Bulletin 1/2017 Photo: Private archive — The New Asia —

We ask them to turn o
the light, the fan ere are so many! But if I had to choose Do you have an explanation? or the tap – in other words, to conserve one, it would be Shaqul, an 11-year-old Unfortunately, the “trickle-down” theory, resources. We start talking about banking, boy from Bangladesh. He dreamed of which posits that greater prosperity will money and accounts when children are having a bicycle shop. So he saved his eventually “trickle down” to the poorest about 10 years old. money and bought his rst used bike for members of society, doesn’t always prove the equivalent of about 90 Swiss francs. to be true. What is the best way to provide street Now he has four bicycles, and he rents children with a general ­nancial education? them out for a few cents per hour. is What needs to change? Children hate it when you focus just on earns him slightly more than one franc We need a more caring society. ere are nancial topics, because that’s no di
er- every day. now more billionaires in India and China ent from mathematics. Personally, I didn’t than in the United States – but we haven’t like math at all when I was a child. e How does support from Western companies been able to conquer poverty. best approach is to work with the children. bene­t your NGO A„atoun International? Our goal is to promote self-condence e nancial sector, in particular, is doing Is money a taboo topic in Asia? and a sense of personal responsibility. We a great deal to help the most marginal- It’s not taboo in India, at any rate. In make it into a game. For example, we set ized groups, and particularly girls. Our many European countries, people avoid savings goals that the children are capable partnership with companies like Credit talking about personal matters. We’re of achieving. Suisse not only provides nancial support, much more open in India. it also gives us opportunities to work with So it has to be fun. other NGOs, such as Plan International. It denitely shouldn’t be boring. And it has to have some connection to their Have children bene­ted from Asia’s day-to-day lives. Of course, we also economic rise? show children that they will earn in- On the one hand, millions of people have terest if they deposit their money in a seen their incomes rise over the past bank account. And that their money 20 years. On the other hand, the poorest is more secure at the bank than on of the poor are becoming increasingly the streets, where it is often stolen, or marginalized. where they might be cheated out of their earnings. But this is also where the problems arise.

What problems? e rst is that many banks don’t o
er My name is Syrel Z. Aplaon. I am 41 years child-friendly accounts. If they would old, and I live in the Philippines – in Ba- pay attention to the needs of these colod, a city with a population of half a mil- children, they’d have customers for life. lion that is known as the “City of Smiles.” I e second problem: In many coun- work for the Negros Women for Tomorrow tries, laws prevent children from taking Foundation, a micronance institution, in advantage of nancial services without the bookkeeping and nancial department. the permission of their parents. Yet it is Women in Banking Last year, I had the opportunity to partici- the parents themselves, in many cases, pate in the year-long Leadership and Diver- who exploit their children economically. sity for Innovation Program, which o
ers In addition to education, access to the online instruction as well as two seminars, nancial system is crucial. If children are Being a one in New York and one in Mumbai. ose to liberate themselves from their miser- experiences have helped me realize that able situations, they need that access. leading my team is a journey that has only Real Leader, just begun. Rather than spending too much You help them to help themselves. time thinking about themselves, true leaders Exactly. It is essential for children to learn should think about how they can help those through their own actions – learning by Every Single around them to move forward. is is what doing. My favorite analogy is this: Chil- I try to do, every single day. dren can play all the football games in the world on the computer, but that won’t Day Recorded by Simon Brunner make them good football players. ey have to go out onto the eld. Credit Suisse has been supporting the NGO Women’s World Banking since 2011 as part of Can you give us an example of something its Micronance Capacity Building Initiative: www.credit-suisse.com/micronance that particularly impressed you?

Photos: Private archive Bulletin 1/2017 — 71 — The New Asia —

How Well Do You Know Asia?

irteen questions about the world’s largest continent. by Simon Brunner, Mikael Krogerus (quiz) and Takeuma (illustration)

1 A former king of Bhutan 4 Sort the three countries 8 Which of these was not 11 In which of the following coined the term “Gross by estimated population size, invented in Asia? Asian countries do people National Happiness.” in 2030. a — Slide rule not eat with chopsticks? But what Asian people are a — India, China, Indonesia b — Yoga a — Myanmar the happiest, according to the b — China, India, Indonesia c — Gunpowder b — Laos World Happiness Report? c — China, Indonesia, India d — e sel e stick c — North Korea a — Indonesians d — Indonesia, China, India d — Indonesia b — Bhutanese 9 Which of these was the largest c — Singaporean 5 Did construction on the Asian company in 2016, according 12 Which of the following is d — Kazakhs Great Wall of China begin before to the Forbes Global 2000 ranking considered terribly bad table or after the birth of Christ? (taking into turnover, pro£ t, assets manners in Chinese culture? 2 What is the fourth tiger a — Before and market capitalization)? a — Placing your smartphone economy, after South Korea, b — About the same time a — China Construction Bank on the table Taiwan and Singapore? (+/- 50 years) b — Industrial and Commercial b — Poking your chopsticks into a — Hong Kong c — After Bank of China (ICBC) your food b — Malaysia c — Agricultural Bank of China c — Rubbing the chopsticks c — Vietnam 6 What language is spoken d — Bank of China together before eating d — ailand in Goa, India? d — Pointing at someone with a — Portuguese 10 What is the £ rst Google your chopsticks 3 How many kilograms b — Hindi autocomplete suggestion for the of meat does a Bengal tiger c — Urdu search query: “Why is China … 13 Who said: “Anything you don’t consume per day? d — Konkani a — … an emerging market?” pass on will be lost”? a — ey’re vegetarian b — … so economically successful?” a — Rabindranath Tagore, poet b — 5 kg 7 According to Forbes, who is c — … called China?” b — Lee Kuan Yew, founding father c — 3 kg the best-paid Asian athlete? d — … overpopulated?” c — Mahatma Gandhi, revolutionary

d — 8 kg a — A Japanese tennis player d — Mao, party chairman b — An Indian cricket player 13a / 12b / 11b / 10b / 9b / 8d

c — A Chinese football player Nishikori)/ (Kei 7a / 6d / 5a

1c / 2a / 3d / 4a / 4a / 3d / 2a / 1c

d — A Japanese baseball player Solutions:

72 — Bulletin 1/2017 Organic rice for investors The Cambodian company AMRU Rice is doubling its production annually, creating a higher income for local farmers – and attractive returns for investors.

text Dave Hertig photo Nici Jost

The “Best White Rice in Cambodia” comes from leading rice exporter Amru Rice; pictured here is the company’s warehouse in Phnom Penh.

Founded in 2011, AMRU Rice focuses pri- Gaining organic certifi cation for the bulk organic rice over the next three years,” says marily on organic rice produced by its own of its harvest is one of the many triumphs Eva Tschannen, Head of Technical Assistance contract farmers. On average, the company of the fl ourishing rice export company. at responsAbility. has been doubling its production of organic Organic certifi cation improves the sales rice annually since 2014. In 2013, around 100 margin and enables AMRU Rice to pay 15 And how do the farmers use the additional farmers were working for AMRU Rice; by to 75 percent more to the farmers for their income that they receive thanks to higher sel- 2016 this fi gure had grown to over 2,500. rice. This higher price is justifi ed and earned ling prices? According to a survey conducted in daily practice, as organic certifi cation at the Samakee Rohas Meanchey Cooperative, The company exports 90 percent of its rice – requires healthy soil and prohibits the use the majority of farmers buy tools and machi- mainly to Europe – and the level of demand of synthetic pesticides and fertilisers. The nery – for example a small tractor. For many among potential customers is outstripping farmers remove the pests by hand and learn of the farmers, it also means that their children the current rate of production. AMRU Rice how to produce and successfully use natural are able to study instead of having to work in is therefore pursuing a three-year investment pesticides and fertilisers themselves. the fi elds as soon as they are teenagers. plan that will see around USD 5 million inves- ted in warehouses, additional production faci- Higher income for rice farmers lities and state-of-the-art equipment by 2019. CAchieving these high standards requires RESPONSABILITY INVESTMENTS AG professionally managed change processes The Swiss asset manager responsAbility and intensive training, which is where the The Swiss asset manager specializing in Investments AG manages the fi nancing of the Technical Assistance unit of responsAbility development investments currently has company via investment vehicles and is advis- comes into play. In collaboration with the USD 3.1 billion of assets under manage- ing on its strategy for moving forward. “We Swiss Development Cooperation, the team ment, invested in 97 developing coun- are helping CEO Saran Song to sustain this fi nds local experts for AMRU Rice to con- tries in over 540 companies – including face pace while ensuring that he maintains duct the training and raise the working stand- AMRU Rice, Cambodia. full control over the company’s growth,” says ards of the farmers to the level required for Anshul Jindal, Senior Investment Offi cer for organic certifi cation. “Up to 2,500 additional www.responsAbility.com the agricultural sector at responsAbility. farmers will receive certifi cation for growing C

M

Y

CM

MY

CY

CMY

K