THE SOCIAL CONSTRUCTION OF WORKFORCE DEVELOPMENT ORGANIZATIONS IN AND ,

By

Daniel E. Berry

Submitted in partial fulfillment of the requirements for the degree of Executive Doctor of Management

Project Advisors: John D. Aram and Paul F. Salipante

CASE WESTERN RESERVE UNIVERSITY May 1998

THE SOCIAL CONSTRUCTION OF WORKFORCE DEVELOP1\1ENT ORGANIZATIONS IN SINGAPORE AND PENANG, MALAYSIA

Abstract By

DANIELE. BERRY

This study reviews the experiences of workforce development organizations in

Singapore and Penang, Malaysia. On the basis of the similarities in population and workforce size, the study argues that lessons can be learned from the two places which can be applied to U. S. regions. The study further argues that place-based workforce development strategies, such as those implemented in Singapore and Penang, will be essential to the economic competitiveness of manufacturing and export-oriented regions in a globalized economy.

In the first part of the study, the Singapore and Penang experiences are placed in the context of what has been referred to as the "East Asian miracle." From the synthesis of various economic and cultural interpretations of East Asian success, a set of questions is developed to guide the second part of the study. The second part includes case studies of the Skills Development Fund and the Institute of Technical

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Education in Singapore and the Penang Skills Development Center in Malaysia. These analyses are enriched by interviews conducted by the author with principals of the four workforce development organizations and others during site visits to Singapore and

Malaysia in early 1998.

After reviewing the experience of Singapore and Penang, the study concludes that both places have long-term economic development strategies which are supported by and training policies. These policies ensure the workforce skills needed to support the strategies are available. These policies also reflect a perspective that the direction of economic development can be influenced by investments in the skills of people. Workforce development organizations, capable of adapting readily to changing circumstances, and which coordinate relationships among business, labor, and the government, have been socially constructed to accomplish this goal.

Despite significant differences in culture, the study suggests that underlying concepts can be abstracted to a higher theoretical level, thereby enabling their transfer to U.S. regions. Five management principles of workforce development are proposed as relevant to U.S. regions. These five "Ps" are: 1) primacy of people; 2) through continuous learning and technology; 3) planning and strategies; 4) pragmatic change management and adaptation; and 5) place-based workforce development.

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DEDICATION

To my wife, Mary Jo, for her support and immeasurable assistance, and to my son, Douglas, for his forbearance in my absence from the golf course. Special appreciation also is due to my former employer, David Bergholz of The George Gund Foundation, and especially to my present employer, Carole Hoover, of The Greater Cleveland Growth Association, for their support of my academic pursuits.

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PREFACE

Throughout much of my professional career, I have been concerned with

designing and supporting community problem-solving mechanisms in urban areas of

America. I have done so from the vantage point of I serving as a senior staff member

in two philanthropic foundations, one for 5 years, and the other for 13 years. My

responsibilities at both foundations included overseeing community development and

civic affairs grantmaking programs. Partly because of this background I gained

through the foundation experience, I was recruited to the chamber of commerce for

the Cleveland area in 1996. Since that time, as vice president for workforce

preparation, I have directed an effort to provide qualified workers to employers in

Northeastern Ohio. In this capacity, I have attempted to involve employers in

developing a regional strategy for workforce improvement, called the Jobs and

Workforce Initiative (JWFI). My experience with the JWFI is one of the two principal

influences on the study which follows.

The other influence is the Executive Doctorate in Management (EDM)

program at the Weatherhead School of Management at Case Western Reserve

University in Cleveland, which I entered shortly before assuming my responsibilities at

. the chamber of commerce. Consequently, the directions I took in fulfilling my new

professional responsibilities were enhanced by the opportunities provided at

Weatherhead to develop a stronger theoretical basis. For example, in two of my major

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EDM papers, I used the JWFI as a case study. In one, I considered it as a social organizing process to achieve collective action. In the other, I analyzed the JWFI as an example of the social construction a system. Both of these papers were written from the perspective of a participant/observer, with reflexive consideration of my role in the shaping and managing the organizing and design processes. This interest in the processes of organizing and designing social systems is a theme which bridges both my professional and academic pursuits.

Another important contribution of the EDM program to my personal development has been the exposure to other cultural perspectives. For this reason, and because of my professional interests, I became interested in expanding my knowledge base to include an understanding of the experiences of East Asian countries with workforce preparation. It was my perception that these countries had achieved impressive growth rates at least, in part, because of their ability to develop highly skilled workers in relatively quick fashion. Because I am concerned with developing

Northeast Ohio's ability to function in an increasingly global economy, I believed the experience of East Asia might provide some useful lessons.

Nearly all of the literature reviewing the East Asian economic development experience considers the lessons which might be learned and applied to other developing countries or national policies. In contrast, my interest is in evaluating the experience of Singapore and Penang, is to determine the relevance of their experiences for regions in the United States.

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My experience in workforce development has enormously influenced the directions of this study. The perspective I have developed over the past few years leads me to believe that at least three principles should guide workforce development efforts in U.S. regions. First, they should be employer-driven in the sense that workforce development should reflect the skills that are necessary for present and emerging jobs. Second, workforce development activities must be organized in ways that reflect the geographic scope of the labor --a principle difficult to achieve in the U.S. since systems are presently structured on the basis of political jurisdictions.

Finally, my experience leads me to believe that workforce development in U.S. regions must be addressed through new forms of partnerships both among the public, private, and non-profit sectors and within those three sectors. Throughout this inquiry, therefore, I have both tested by personal biases against the experience of Singapore and Penang and reflected on their relevance to my own efforts.

The reader will quickly notice I have drawn on literature from a wide variety of disciplines, including , sociology, political science, and history. In fact, as a generalist, I am not schooled in any of these disciplines to a great degree. However, consistent with the aim of the EDM program, the goals of this study are to synthesize the observations of the scholars in the various disciplines from my--a practitioner's-• perspective and to interpret their implications for management of workforce development efforts in the U.S. In this respect, the study is a step toward bridging theory and application.

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ACKNOWLEDGMENTS

I especially thank my advisors, John D. Aram and Paul F. Salipante for their constructive criticisms and guidance. Helpful comments were provided by William P.

Madar and Mohan Reddy in the early stages of the project.

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TABLE OF CONTENTS

Title Page/i

Abstract/ii

Dedication/iv

Preface/v

Acknowledgments/viii

Table of Contents/ix

List of Figures/x

List of Tables/xi

I. Introduction 1

II. Narratives in the Economic Paradigm 18

III. Narratives in the Cultural Paradigm 55

IV. Bridges Across Paradigms I 05

V. Workforce Development Strategies and Organizations in Singapore 137

VI. Workforce Development Strategies and Organizations in Penang, Malaysia 186

VII. Synthesis and Conclusions 227

Bibliography 267

IX

LIST OF FIGURES

1. Structure and Programs of SDF 157

2. Vocational Education and Training System in Singapore 169

3. Fishbone Diagram of Challenges Confronting Penang in 1990 211

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LIST OF TABLES

1. Different Disciplinary Perspectives on East Asian Success 9

2. Scores of Selected Countries on Hofstede's Dimensions of Culture 59

3. Comparison ofLewinian/Organization Development (OD) and Confucian/East Asian Attitudes Toward Change 62

4. Features of Development in Two Stages of Capitalism 84

5. Listing of Economics Paradigm Metaphors by Narratives 115

6. Listing of Cultural Paradigm Metaphors by Narratives 118

7. Control Metaphors 121

8. Government Metaphors 123

9. Labor Metaphors 125

10. Education Metaphors 126

11. Firm Metaphors 129

12. Productivity Metaphors 130

13. Change Metaphors 132

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CHAPTER I

INTRODUCTION

This is a study of workforce development organizations in The Republic of

Singapore and Penang, Malaysia. Both places have experienced dramatic . Between 1970 and 1996, Singapore's rate of growth averaged 8.2 percent and it went from a to the status of a fully industrialized country.

In the same time period, Malaysia's overall growth rate averaged 7.4 percent and

Penang's was even higher. These two places were selected for study because both have achieved success in mobilizing new workers and educating them. They also have enhanced the skills of large numbers of their existing workers in a remarkably short time.

Both places have much in common. They have a majority of their citizens who are ethnic Chinese and significant populations of other ethnic groups, including and Indians. They both began as trading centers and were part of the British Empire until 1959. Of particular interest to this study, the two places are comparable in size to many metropolitan areas in the United States. Singapore has a population of about 3.1 million persons, supported by an economic base of 1.7 million jobs. Penang has a population of approximately 1.2 million and about 700,000 jobs. Significantly, both places have operated in the context of national leaders who have enormously influenced the direction of the nation in ways considered to be highly authoritarian.

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2

Most studies of East Asian economic development focus on identifying lessons that other nations can learn. However, on the basis of the similarities in population and workforce size, my claim is that there are lessons regions in the United States can learn from the experiences of these two places. These lessons can help us understand what can be done at the regional level to promote and sustain economic growth now and in the future. I will argue that place-based workforce development strategies, such as those implemented in Singapore and Penang, will be essential to the economic competitiveness of regions as they increasingly operate in a globalized economy.

I am not alone in making this argument. Some scholars have identified the necessity of strengthening the role that internal regions play in promoting knowledge acquisition and development in determining the future competitiveness of Western nations. In their conception, learning networks which emphasizes the importance of cooperation and mutual learning at the regional level are essential for innovation and change. Such networks increase the capacity for know-how and doing. They are particularly relevant in efforts to upgrade the skills of a workforce and in transferring technology from large companies to small-to-medium sized firms .1 Importantly, for the purposes of this study, the needed networks for learning are based on partnerships between enterprises and other regional knowledge institutions, such as universities, innovation centers, and vocational education and training providers.

As I will show, the workforce development organizations created in Singapore and Penang have played a significant role in promoting the kind of learning referenced

3

above. They have done so at a large scale and at a relatively rapid pace. This is not to say that Singapore and Penang have solved all the problems of workforce development. Both places confront rising wages which are unmatched with productivity gains. These leave them vulnerable to competition from lower-wage places elsewhere in Asia and around the world. Both places confront skilled labor shortages as do many American regions. However, the methods Singapore and Penang have used to address these challenges are relevant to regions in the United States.

The workforce development organizations in Singapore and Penang cannot be transplanted to the U.S. in their entirety. There are cultural differences which I cannot minimize. However, the lessons from their experiences are not completely bound by these cultural differences when considered at the appropriate conceptual level. Lessons about productivity improvement strategies, commitment to education, and labor policies can be extracted which are pertinent to regional development in the United

States. Furthermore, I will argue that the lessons are somewhat independent of the differences in political structure, when they are considered from a theoretical perspective that accounts for situational differences. Finally, the lessons are also not obviated by the current crisis in East Asian financial and money markets and can stand the test of time.

The study is organized into two major parts. In the first part, I place the

Singapore and Penang experiences in the context of what has been referred to as the

"East Asian miracle," as defined by the to mean high rates of economic

4

growth, with a reasonably equitable distribution of income. From analysis and synthesis of various interpretations of East Asian success, I develop a set of questions that are addressed in the second part of the study. The second part contains case studies of the Skills Development Fund and the Institute of Technical Education in

Singapore and the Penang Skills Development Center in Malaysia. These analyses are enriched by interviews I conducted with the principals of the four workforce development organizations and others during site visits to Singapore and Malaysia in early 1998.

BACKGROUND

The story of East Asia's economic success since the 1960s is one of the most documented "miraculous" occurrences in history.. As of November 1994, through

Dow Jones News Retrieval, one could access 1591 articles in the business press which used word "miracle" to describe East Asian economic performance.2 Syed Anwar, in reviewing the generally more reserved academic literature, found over 1000 citations which included the word "miracle" to describe East Asian development in the past ten years. 3

A New Paradigm?

The East Asian miracle has been widely viewed as a profound challenge to the continuing significance of Western economic development theory and public policy. 4

A great deal of popular literature reflects this fact. For example, in Looking at the Sun,

James Fallows argues that Westerners have failed to recognize what their competitors 5

have accomplished, and the countries of East Asia have found new ways of mobilizing and deploying the economic power of their societies.5

John Naisbitt also has written glowingly of East Asia, saying it looks like one coherent region with a number of advantages on its side. These include: 1) economies dominated by small companies linked to Westem Seaboard of the United States, built from the bottom up by entrepreneurs; 2) family-based societies with strong ties which, because of Asia's economic success, will eventually lead to the "Easternization of the

United States;" and 3) the overseas Chinese networks. He says these networks are leading to a borderless economy that will be the "first truly global tribal network," enhanced by the telecommunications revolution and enabling a network of networks.

This network of networks is a new paradigm, the organizational model for the 21st

Century.6

Another positive portrayal of the Asian success story is offered by George C.

Lodge who describes what he calls "The Winning Asian Paradigm" in his book

Managing Globalization in the Age of Interdependence (1995). His winning paradigm is based on four premises, which taken together, he says subvert traditional Western notions of capitalism and may serve as the basis for a new world ideology.7 These pretruses are:

1. A country can create its comparative advantage with a strategy aimed at global competitiveness; it does not have to rely on nature's endowment and the invisible hand of marketplace competition in which firm battles firm.

2. It is the job of government to design a competitive economic strategy. Marketplace competition is an extremely useful tool but is not an end in itself. 6

3. The purpose of business is to preserve and promote the long-run health of the enterprise for the good of the community as a whole. Relationships between the managers and the managed should be harmonious and consensual because both ultimately have the same interest in the prosperity of the firm. Shareholders benefit along with everyone else.

4. The members of the community have rights and duties. The community--• not individuals--must determine the balance in accordance with the nation's strategy. To be effective, these determinations have to be regarded as fair and equitable.8

The ardor for the East Asian economic development model has waned with the recent onset of its problems in financial and currency markets. Consequently, the premises underlying the most enthusiastic of the predictions have been seriously questioned . 9 However, in order to assess the future prospects for East Asia, it is important to understand the roots of the arguments advanced by the advocates for the new East Asian paradigm.

Explanations for Success

One straightforward explanation comes from who believe that population dynamics are the key to economic growth in East Asia. From this viewpoint, demographic transitions occurred in East Asia within a generation which took over a century to happen in the West. Declining birth rates and improvements in medical care increased the working aged portion of the population and lowered the dependency ratio--the number of people too old or too young to work. As the dependency ratio has fallen, those persons of working age have increased the proportion of income they save. In turn, increased savings provides the capital 7

necessary to support economic growth.10 However, proponents of the demographic link to economic success conclude that the population advantage could be squandered if appropriate policies are not in place to take advantage of it, leading us to search for more complex interpretations.

Based his extensive review of the recent literature, Anwar identified eight clusters of rationales which have been advanced for the success of East Asian economic development. They are: 1) Confucian cultures and East Asian values; 2) social structure and overseas Chinese networks; 3) industrial policies based on the developmental state concept; 4) political stability and "soft authoritarianism;" 5) bureaucrats versus technocrats; 6) emphasis on economic exports; 7) efficient human and physical capital allocation; and 8) the role of conglomerates and enterprise groups. 11

Among the scholars who attribute East Asia's rapid development to the strength of its cultural values are Hofstede (1988) and Tai (1988). Others say that the economic miracle of East Asia is explainable simply on the basis of neoclassical economic theory (Krugman, 1994, Young, 1995, and Krueger, 1996), in which large investments in factors of production, such as education of the labor force, inevitably yield substantial rates of return that cannot be sustained over time. Still others argue that the national industrial policies of the East Asian states have been central to their economic development success (Rodrik, 1994 and Wade, 1994), while the World

Bank (1993) ties East Asian success to its reliance on free-market forces. Other 8

perspectives justify the success of East Asian development on the basis of the advantages which accrue to "late developing" nations, which are able to imitate the proven successes of already-developed nations (Amsden, 1991 and von Elkan, 1994).

Chui and So (1995) have developed a schemata to classify the theoretical approaches to explaining East Asian success. They identified five categories of theoretical perspectives: 1) neoclassical, which focuses on the role of market forces and private enterprise in the transition from import-substitution strategies to export• oriented industrial economies; 2) cultural, which draws primarily on Confucianism as the contributing factor to East Asian economic success; 3); statist, which expounds on the role of the state governments in promoting development; 4) dependency, which began with neo-Marxist theories of domination and exploitation of East Asia by the

West, but more recently have explained development in terms of the role of multinational corporations and infusion of foreign capital; and 5) world systems, and which examines East Asian development in terms of the interaction of political, economic, historical, and social forces. 12

I have summarized the theoretical approaches underlying some of these various explanations and theories in Table 1 below. I will return to each of them at various points in the course of the study. 9

Table 1.

Different Disciplinary Perspectives on East Asian Economic Success.

Perspective Explanation Population/Demographics Dependency ratios Neoclassiccal economics Reliance on market forces Political economics Developmentalist state Social structure Guanxi Culture and values Confucianism Organization and management Postmodern organizational practices Political science Authoritarian political leadership (soft or hard) Product development cycles Ability to imitate and leapfrog World systems theory Interaction of large-scale global forces

The variety of explanations listed in the table indicate the degree of difficulty in isolating lessons from any single explanation. There is, according to Anwar, no best paradigm to describe the East Asian dynamism. 13 As I ultimately will show in the case studies, the lessons may be in how the confluence of a variety of factors is managed at particular times in particular places.

Need for New Analytical Approaches

Gaining the necessary understanding of this management process is complicated by the fact that there is, as yet, no interdisciplinary consensus that can account for the East Asian economic success, and discipline-centered critiques remain equivoca l.14 To address this problem, Peter Gourevitch says:

The experts needed are dispersed among area studies, social sciences, law, business, international relations, public policy, and the natural sciences. The regional sciences of the future will require collaboration among these fields which may require new programmatic forms and provide new grounds for the integration of fields of study.15

10

Alternatively, it may be necessary to create a whole new discipline. However, this study is but a small first step toward addressing the issues identified by Anwar and

Gourevitch--and only in the context of the experiences of Singapore and Penang.

Even so, it represents an attempt to respond to another important need in the study of

East Asian development--the need to differentiate among the diversity of experience among the newly industrializing economies . 1 6 To accomplish these study goals, my methodology draws on techniques developed outside any one of the disciplines presented so far.

THODOLOGY

My approach is to treat the various disciplinary interpretations of East Asian success as narratives. These narratives will be constructed from the streams of literature representing the various disciplinary viewpoints. In their search for truth, the authors of these studies have relied on various metaphors and analogies to develop their plots and explain the morals of their stories. In the case of East Asia, as these stories have told, they have attract supporters and detractors who added their voices to a larger, ever-evolving narrative through streams of related literature. Taken together, these narratives have produced counter-plots and intrigue. New villains and heroes have emerged. Consequently, the original plots have thickened, and truth seems ever more elusive.

In the first part of this study, I will borrow the technique of reciprocal translation from the field of meta-ethnography to gain a deeper understanding of what

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the various narratives are saying. I will do this by facilitating a conversation among narratives using the techniques of reciprocal translation and paradigm crossing.

Noblitt and Hare indicate that meta-ethnographic inquiries can take any one of three directions . 17 First, they can focus on studies that reinforce one another, which they refer to these types as reciprocating studies. Second, a meta-ethnography can synthesize studies that examine parts of a whole and build on one another to complete the larger picture. They refer to this type as building a line of argument. Third, are the studies that are expressly undertaken to contradict the findings of others, or refutational meta-ethnographies. In this study, the conversations will largely focus on those narratives which are reciprocating and those which are refutational.

Taken together, these streams ofliterature are rich enough to warrant use of the reciprocal translation technique. In doing so, I will analyze the claims, supporting evidence, and warrants nd limitations of each stream. In doing so, I will pay close attention to the language used in these studies and to the kinds of frameworks and metaphors that are used in order to uncover the underlying storylines. I will move through the processes of de-contextualization and re-contextualization to synthesize a position which draws on each of these perspectives and facilitates movement to a higher level of analysis in later chapters.

In Chapter II, I discuss the narratives which draw on a variety of competing economic models and theories. In these structuralist narratives, the protagonists vary-• in some cases, the forces of the neoclassical market are dominant; in others, the state,

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through its thoughtful application of industrial policy, is the hero; and in others the plot lines are blended in a larger narrative. The World Bank's middle ground theory known as the "market friendly" approach to economic development is an example of the blended narrative. This chapter also includes the stories of the product development cycle, influenced substantially by Japanese industrial policy. Together, these stories explain East Asian success as resulting from global patterns of industrialization that affect developing countries. Other economics-based stories add even further complexity and a dark side to the narrative. These include world systems and dependency theories.

Chapter III examines the cultural explanations for East Asian success. The cultural interpretations reflect views that the economic success of the East Asian nations can be explained by the unique cultural values held by their people. They cast the influences of Confucianism, Islam, and other Asian cultural features in their lead roles in their stories. Proponents of the cultural narrative cite the collectivist orientation and other values of Confucianism such as guanxi (interconnectedness) as important factors in the East Asian miracle. However, there are critics of this view, who believe Confucianism is instead a tool being used by the state to manipulate economic performance of its people. Other critics believe that the Confucianist perspective falls short in its explanatory power, since it was once used as an excuse for lagging economic performance. Still others believe that the precepts underlying

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Confucianism are quite similar to those of the Protestant Work Ethic, which were used to explain American industrial success in the past.

To end the first part of the study and begin the second part, Chapter IV synthesizes the narrative streams in a way that can guide my consideration of workforce development institutions in Singapore and Penang. By using the technique of reciprocal translation, I will attempt to push the synthesis and understandings up to another level, principally through noting similarities, differences and interdependencies, and by playing the findings and interpretations of various studies off against one another. 18 This is an attempt to explore the social construction of knowledge as relating to the phenomenon of East Asian economic growth. In doing so, I will consider the processes whereby organizations are created and constantly redefined through the interaction of social, economic, and cultural forces. This section will rely heavily on the social constructionist concepts advanced by Anthony Giddens (1979,

1986) Mark Granovetter (1992), and Douglas North (1994 and 1995). From this, an interpretivist perspective, I will explain what context or situations have influenced the form and content of the knowledge conveyed by the representatives of the various disciplines. 19

Whether it is the characteristics of the people themselves or the role that the state has played in investing in human resources, we will see that all of the stories have a lead role for the competency of the workforce in their plots. Therefore, the reciprocal translation will focus on developing a set of questions based on the

14

concepts that are particularly relevant to workforce development; such as labor policies, education, productivity, firms, government, change management and organizational control. These questions will, in turn, shape my analysis of the workforce development organizations in the two subsequent chapters.

With the previous chapters as context, in Chapter VI will present case studies of the workforce development institutions which have evolved in Singapore and, in

Chapter VI, in Penang, Malaysia. In these chapters I will draw on two sources: 1) the literature; and 2) interviews with organizational leaders, government officials, and company executives which I conducted during a visit to Singapore and Malaysia in late

February, 1998--in the midst of the East Asian financial crisis. My primary focus will be on the Institute for Technical Education and the Skills Development Fund in

Singapore and, in Malaysia, on the National CAD/CAM Center and the Penang Skills

Development Center.

In concluding, I will interpret the case studies through the framework drawn from social constructionist theories--structuration and agency, social embeddedness and social learning. I will incorporate one other factor--space--to help understand the situationality of the experiences. This will show that space, or the places within which organizations function, is an important factor in their determining purpose and structure. For this purpose, I will draw on the growing body of literature that examines the role of regions in development and views them as increasingly important economic

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actors in the global economy. The perspectives of scholars like Hill (1997), Storper

(1995), Scott (1995), and Porter (1996) will be helpful in this regard.

This analysis will enable me to draw out the lessons for the organization and management of workforce development in U.S. regions. The use of the theories will help in testing my initial premise that there are lessons to be learned from Penang and

Singapore, but the situationality of these lessons must be recognized and understood. I also will speculate on whether a new paradigm of workforce development can be specified as the result of the interaction of Japanese, European, and American management practices in Singapore and Malaysia. Finally, I will evaluate the role of development as a source of economic competitiveness in the evolving global economy and the degree to which leaders in regions must elevate the priority accorded to developing their people resources.

I turn now to the first stream of literature on which the reciprocal translation

among paradigms will be based--that drawn from economic theories.

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ENDNOTES

1 Ludgar Deitmer and Graham Attwell (1998) "Partnership and Networks: a dynamic approach to learning in global regions," mimeo, Institute for Technik and Bildung, Bremen, , p. 1-2.

2 William McGurn (1994) "What Miracle?" Far East Economic Review, Nov. 24, p. 248.

3 Syed Tariq Anwar (1997) "Trends in International Thought and Literature: Reviewing East Asia's Miracle, Its Economic Dynamism, and Future Issues," The International Executive, Vol. 39, No. 1, p.87.

4 Gordon L. Clark (1994) "The End of an Era: Asian NIEs and the Global Economy," Growth and Change, Vol. 25, No. 4, p. 488,

5 James Fallows (1995) Looking at the Sun, New York: Vintage Books, p. 452.

6 People Management (1996) "Eastern Renaissance Could Eclipse West," Vol. 2, No. 14, p. 14-15.

7 George C. Lodge (1995) Managing Globalization in the Age of Interdependence, Oxford, UK: Pfeiffer & Co. p. 71-73

8 Lodge, p. 71-73.

9 (1998) "Re-reviewing the pundits," Feb. 28, p. 86.

10 Economist (1997) "Asia's population advantage," Sep. 13, p. 80.

11 Anwar, pp. 87-89.

12 Alvin Y. So and Stephen W. K. Chui (1995) East Asia and the World Economy, London: Sage Pub., pp. 22-26.

13 Anwar, op cit., pp. 87-89.

14 Anwar, p. 86.

15 Peter A Gourevitch (1991) "Asian Studies in a Changing World," Education Record, Vol. 72, No. 4, p. 57.

16 Clark, p. 489.

17 George W. Noblit and R. W. Hare (1988) Aleta-Ethnography: Synthesizing Qualitative Studies, Newbury Park, CA: Sage Pub. p. 38.

18 Noblit and Hare, pp. 32-35.

17

19 Diane Strassman (1996) "How Economists Shape Their Tales," Challenge, Vol. 39, No. 1, p. 15.

CHAPTER II

NARRATIVES IN THE ECONOMICS PARADIGM

Once upon a time, an East Asian country was poor, then it studied hard, saved a lot, and borrowed money and ideas from the rich countries, and therefore became rich itself.1

This quotation succinctly captures one of the many stories that has been told to explain East Asian economic success. Most of these stories are written from the perspective of the most dominant paradigm used in the social sciences today-• economics. In this chapter, I will discuss several streams of literature which combine to form larger explanatory narratives of various applicable theories and how labor is interpreted in each one.

World Bank Report

The single most influential story in recent years is the World Bank's 1993 study entitled The East Asian Miracle: Economic Growth and Public Policy. Funded by the government of Japan, this study has stimulated streams of literature, some supporting the Bank's claims and others which criticize its conclusions. Because of its central role in catalyzing debate, the World Bank study is a touchstone against which I will play off the stories of the different interpretations within the economics paradigm.

The World Bank study examined eight high-performing East Asian economies

(HPAEs), including Hong Kong, , Japan, South Korea, Singapore, Taiwan,

Thailand, and Malaysia. Taken together, these nations have achieved rapid increases in output and productivity in agriculture; high rates of growth in exports (their share of

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1 0

world exports grew from 9 percent in 1960 to 21 percent in 1990); steep declines in fertility rates; higher initial levels and rates of growth of human capital; and generally higher rates of productivity growth.2

The report's analysis and conclusions are based on the researchers' evaluation of total factor productivity growth (TFP) in each of the countries. Because TFP is such a key concept, I will discuss it in depth in later chapters, but briefly, it represents the calculation of the residual increase in productivity after the productivity effects resulting from investments in labor and capital have been accounted for. This residual is usually attributed to the results of innovation, increased workforce skills, or better use of technology.

According to the report, East Asia has had sustained growth with highly equal income distribution. Importantly, this equality of income distribution is not the result of forced redistribution. According to Gustav Ranis, this "egalitarianism" means equality of opportunities, rather than "after the fact" equalization of income and wealth through redistributionist policies.3

The report acknowledges two schools of thought around explanations for the success of HPAEs. The first is the neoclassical view, which stresses that their success is due to "getting the basics right." These basics include a stable macroeconomic environment, a reliable legal framework, an orientation toward international trade, non-distorting polices toward the market, and a focus on investments in human capital.

The second major school of thought is the revisionist view. The revisionists argue that

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the whole region does not conform to the neoclassical model. They say industrial policy and other interventions in the financial markets are inconsistent with neoclassical theory. They suggest that East Asian governments "led the market" by altering incentive structures to boost industries that would not otherwise have thrived.4

MARKET-FRIENDLY APPROACH

The World Bank report itself moves toward a middle ground between the revisionist and the neoclassic schools by identifying a "market-friendly" approach. In this intermediate position, the role of government is to ensure adequate investments in human and capital, provide a competitive climate for private enterprise, keep the economy open to foreign trade, maintain a stable macroeconomy, allocate capital to highly productive investments, and acquire technology. While government interventions have occurred, they have been carefully limited and have been aimed at stimulating market forces rather than distorting them.5

The report draws a distinction between the experiences of the northeastern countries of the region--Korea, Japan, Taiwan and Hong Kong--where state interventions have been more regular, and the southern group of states--Malaysia,

Singapore, Indonesia and --which have relied more on the neoclassical growth model. While acknowledging that some of the interventions in the northeast have resulted in higher and more equal rates of growth than would have occurred without them, the World Bank clearly prefers the less-interventionist state roles in the southern states.6 21

The World Bank report lists competent bureaucracy, government-led business partnerships, and mechanisms for income redistribution as key institutional factors that contributed to growth. Added to this list are strong and stable political leaderships. 7

Finances

In creating effective financial systems, the governments encouraged savings through positive real interest rates and secure bank-based financial systems. In

Singapore and Malaysia, mandatory contributions from workers and employers were funneled into provident funds (savings accounts held by the state for the purpose of financing an individual's retirement, education, or home purchase). Also, all the studied countries created an investment-friendly environment through tax policies, tariffs, and financial repression by keeping deposit and lending rates below market• clearing levels.

Other consistent features highlighted by the World Bank include:

1. A common reliance on the principle of shared growth, which led to the use of explicit mechanisms to share wealth across income levels. In Singapore this took the form of massive investment in public housing. In Malaysia there were wealth sharing programs to benefit Malays.

2. Private investment was encouraged through: a) responsible macroeconomic management; and b) deliberation councils established to enable private sector groups to influence allocation rules.

3. Contests were created in which the governments distributed rewards based on performance. This makes the World Bank report noteworthy because it positively introduced the usefulness of "contest-based" as well as "market• based" competition.8 22

The concept of shared growth is especially important to the consideration of the East Asian experience. To some, this is the key to their economic development success. None of the countries would have succeeded unless they were able to convince two constituencies that government strategies were in their best interests: 1) big business, which had to be convinced to make long-term investments and upgrade organization and management; and 2) the non-elite segments of the population which were induced to make short-term sacrifices in exchange for larger benefits in the long run.9

In Malaysia, a highly institutionalized form of wealth allocation was adopted to insure that the development process of wealth creation included the bumiputras

(indigenous Malays) in positions of ownership in assets. In Singapore, the allocation effort included of vigorous efforts to attract new jobs and massive upgrades of housing. Referred to as a "developmental policy without losers," these initiatives helped create more political stability, which in turn, was important to muting lobbying and attracting new investment .10

The key to implementing wealth allocation was the development of a competent bureaucratic structure that was able to pursue economic development. The region's bureaucracies had several important characteristics that contributed to their high competency levels:

1. A merit-based recruitment and promotion system.

2. Well-defined career paths within the bureaucracies with the possibility of substantial rewards at the end; 23

3. A careful balance between the independence of the bureaucracy and accountability to leadership and

4. The attention given to involving the private sector in decisionmaking, in contrast to those who have argued that the authoritarian governments of East Asia were insulated from the private sector. 11

Citing regression analyses of economic growth rates against measures of bureaucratic power, competence, integrity, and accountability, Campos and Root argue that the effectiveness of the economic bureaucracies accounts for a significant marginal contribution to the unexplained growth rates of these countries. 12 As we will see in the case studies, these elements are present in the workforce development organizations of both Singapore and Penang. The degree to which these factors can be sustained in the current crises confronting East Asia is, however, an open question.

The Role of Labor

Overall, based on the Bank's analysis of productivity increases, two-thirds of

East Asian growth is due to the rapid accumulation of physical and human capital. The other third is TFP. In Malaysia, 87 percent of the actual growth rate is predicted by the accumulation of physical and human capital, initial income levels, and population growth. Of the 87 percent, 73 percent is accounted for by investments in primary education and 14 percent by investments in secondary education. For Singapore, the comparable figure is 65 percent resulting from investments in education with 75 percent of that amount resulting from investments in primary education and 22 percent in secondary education. Even though TFP growth in Singapore and Malaysia is lower 24

than the rest of East Asia, their rates are comparable to the developed countries and both are in the top one-third of all developing economies on this measure. 13

The World Bank report attributes a significant portion of East Asian economic success to investments in human capital, noting that in nearly all of the economies, the growth and transformation of education and training during the past three decades has been dramatic. The report cites the following as evidence of this claim:

1. The enrollment rates in educational institutions are higher than would be predicted based on per capita income. This is most obvious as early as 1965 when Singapore and others had already achieved universal primary education and by 1987, when it was also apparent at secondary level.

2. The expenditure per pupil in all eight of the countries studied dramatically increased between 1970 and 1985.

3. The cognitive skills of East Asian children resulted in better academic results than achieved by children from other developing regions--and even, recently, better than children from high-income countries.

4. The nature of the home learning environment in the East Asian societies was enhanced at high rates, based on results of an analysis using a simple index taking into account the mother's education and the number of children at home.

5. The gender gap in educational enrollment was eliminated as all of the East Asian countries (excepting Indonesia) had secondary enrollment rates for girls that were as high, or even higher, than the rates for boys.14

Job Creation and Productivity

The East Asian countries relied on flexible labor markets and were less responsive to organized labor demands. They focused on job-creating activities, and as a result, the numbers of jobs increased, followed by increases in demand for labor, then increases in productivity, and finally wage increases. 25

A key point in growth is that they also undertook activities aimed at promoting productivity. These included efforts to absorb foreign technologies, accelerate development of advanced industries using moderate incentives, and encourage export strategies through active promotion of manufactured exports, such as occurred in

Malaysia and Singapore. All of the HPAEs, with the exception of Hong Kong, passed through an import substitution phase, but eventually adopted strategies close to free trade, with some institutional support for exporters, primarily in the manufacturing sector.

By staking out a claim to the middle ground between revisionist and neoclassical interpretations, the World Bank opened itself up to criticisms from both camps. I turn now to consider one of those camps--those economists who operate exclusively within the neoclassical paradigm.

NEOCLASSICAL PERSPECTIVES

Krugman offers a simple definition of the tenets of neoclassical economics: 1) obvious opportunities for gain are rarely left unexploited; and 2) things add up. These points translate to two principles that are reflected in the metaphors and models of neoclassical economics-- maximization and equilibrium. 15 The neoclassical critics of the World Bank study generally believe that there is nothing at all miraculous about the economic development performance of East Asian countries. In their view, market forces ultimately determine economic outcomes. 26

Neoclassical proponents tend to believe that markets should be liberalized as much as possible. Policies which encourage such liberalization, such as open and free trade, will result in what Krueger refer to as a "virtuous circle."16 Krueger speculates that such a circle may have contributed to economic growth in East Asia. In this circle, successful export-oriented trade policies force adoption of other efficiency and growth-enhancing policies. The gains from these policies simultaneously induce further growth and additional complexity to the economic structure. As a result, the costs of government interventions in the economy, such as credit rationing and regulations of international financial transactions, increases as output grows and the circle persists . 17

Historical Perspective

Another major proponent of the neoclassical view is Alwyn Young. In 1995 he released a study that analyzed the historical patterns of output growth, factor accumulation, and productivity growth in Hong Kong, Taiwan, South Korea, and

Singapore.

While acknowledging the extraordinary and sustained growth of output per capita in the four countries, Young debunks the notion that productivity growth in these countries has been extraordinarily high, particularly in their manufacturing sectors. Rather, he says, the economic growth in the manufacturing sector can be explained by factor accumulation, especially with regard to labor, owing to: 1) declining birth rates and increasing female participation in the workforce; 2) the shift of workers from agricultural employment to other sectors of the economy; and 3) 27

rising educational attainment of the population. 18 Although, in identifying these factors, Young essentially agrees with the World Bank report, his conclusions about what they mean are quite different.

When the other investments are factored into measures of labor productivity growth, Young concludes that productivity growth in Singapore and Korea actually underperformed the aggregate East Asia economy. Adding in the large amounts of capital investment further eroded the productivity growth measures, leading him to conclude that the four nations cannot be considered strong outliers in the postwar world economy. 19

The major basis of Young's argument is his calculation of TFP. In the case of

Singapore, his calculations actually indicate that TFP had a negative growth rate of -1.0 percent during the period 1970-1990. He attributes this to a slow rate of growth in output per worker and a rapid fall in output per unit of capital. 20 Here, the facts are in dispute with those of the World Bank, partly because of his use of different measurements.

Young concludes that the results of his study should be heartening to economists and policymakers alike. He says :

If the remarkable postwar rise in East Asia living standards is primarily the result of one-shot increases in output brought about by the rise in participation rates, investment to GDP ratios, and educational standards and the intersectoral transfer oflabor from agriculture to other sectors (e.g. manufacturing) with higher value added per worker, then economic theory is admirably well-equipped to explain the East Asian experience. Neoclassical growth theory, with its emphasis on level changes in income and its well• articulated quantitative framework, can explain most of the difference in the 28

performance ofN1Cs (newly industrializing countries) and that of other postwar economi·es. 21

No Miracle?

Drawing heavily on Young's work, expanded on the argument that there has been no East Asian miracle. He starts from the tautology that economic expansion represents the sum of two sources of growth, increases in inputs (growth in employment; education level of workers; in the stock of physical capital such as machines, buildings, roads; and so on) and increases in outputs, such as those resulting from better management or better which, in the long run, are primarily due to increases in knowledge. This kind of growth accounting provides insight into how much growth is due to each input--say capital as opposed to labor-• and how much is due to increased efficiency. 22

To Krugman, growth accounting is more than an academic exercise, because it leads to the crucial insight that sustained growth in a nation's per capita income can occur only if there is a rise in output per unit of input. Mere increases in inputs, without an increase in the efficiency with which those inputs are used, must run into diminishing returns; input-driven growth is inevitably limited. Advanced nations have been able to use technological advances to continually increase TFP--a continual rise in national income for each unit of input. In support of this point, he cites Robert

Solow's assertion that 80 percent the oflong-run rise in U.S. per capita income is explainable by technological progress and only 20 percent results from investment in capita l.23 29

In evaluating the experience of the case of Singapore, Krugman points out that between 1966 and 1990, its economy grew at a remarkable rate of 8.5 percent per annum, three times as fast as the United States' economy. During this time, per capita income in Singapore grew at a rate of 6.6 percent, roughly doubling every decade.

But, if Singapore's performance is a miracle, it is one based on perspiration, not inspiration. Singapore grew through a mobilization of resources--the employed share of population surged from 27 to 51 percent and educational standards were dramatically upgraded. In 1966, more than half the workers had no formal education, and by 1990, more than two thirds had completed secondary education; above all, the country had made an awesome investment in physical capital with investment as a share of output rising from 11 to 40 percent.24

From his analysis, Krugman concludes that Singapore's growth is based on one-time changes in behavior that cannot be repeated. At present levels of participation, it is impossible to double the number of people employed or to double the population which has high school degrees, and it is unlikely that all will obtain doctoral degrees. All of Singapore's growth can be explained by increases in measured inputs. There has been no sign at all of increased efficiency. Singapore's economy has always been relatively efficient; it just used to be starved of capital and workers.25

30

The extraordinary record of economic growth in East Asia has powerfully influenced conventional wisdom about economic policy and geopolitics. The conventional wisdom is that three propositions are demonstrated:

1. Conventional: A major diffusion of world technology is in progress, and Western nations are losing their advantage. Krugman: Recent research by Kim and Lau has found no evidence of convergence between technologies of newly industrializing nations and established industrial powers.

2. Conventional: The world's economic center will inevitably shift to Asian nations of Western Pacific. Krugman: While it is likely that East Asian growth rates will continue to exceed West over next decade, they will not be at the pace of the past.

3. Conventional: East Asian successes demonstrate the superiority of economies with fewer civil liberties and more planning than the West has been ready to accept. Krugman: The arguments of Fallows (1995), Vogel, and others who say that Asian success demonstrates the weaknesses of laissez faire in favor of selective protectionism and sophisticated industrial policies are false. There is no "Asian Way" that will triumph. If there were, the benefits of strategic trade and industrial policy would be manifested in growth of efficiency of economy, but they are not.26

The conventional wisdoms are destroyed by the facts, according to Krugman, who concludes that:

If there is a secret to Asian growth, it is simply deferred gratification, the willingness to accept putting off current satisfaction for future gain. That's a hard answer to accept for those American policy intellectuals who recoil from the dreary task of reducing deficits and raising the national savings rate. But economics is not a dismal science because the economists like it that way; it is because in the end we must submit to the tyranny not just of the numbers, but of the logic they express. 27

As we shall see in Chapter III, deferred gratification is one of those cultural values that is attributed to East Asia. Yet, we will see later, there are many economists

31

who are writing different stories which call into question Krugman's assertion of its importance.

Despite the assurance with which Krugman contends that total factor productivity growth has lagged in Singapore and Malaysia, more recent neoclassical studies have called into question his conclusions and those of Young. Reporting on a study completed by UBS International Finance in late 1996, the Economist questioned the data that Young used in his research, charging that it under-estimated the significance of capital investment. Such investments may actually represent another form of productivity growth. On this basis, and using more recent data, UBS concluded that productivity growth in Singapore and Malaysia averaged between 2 and 2.5 percent from 1978 to 1996.28

The significance of the discrepancy between the TFP calculations of Young and UBS goes far beyond that of a disagreement among academics. On one hand, the conclusions of Young and Krugman reflect a diagnosis of structural problems in the

East Asian economies while those of UBS point to cyclical problems as the cause of the current downturn. 29 On the other hand, as we shall see in Chapters VI and VII, both Singapore and Malaysia have based their economic development strategies on increasing total factor productivity, perhaps over-responding to Krugman's criticisms.

The Role of Labor

Within neoclassical economics, the standard approach has been to treat human capital (generally using the average years of schooling for the labor force as the

32

variable) as an ordinary input in the production function, as measured by effect on per capita income growth. 30

In traditional economic theory, the returns to education and training are appropriated by individuals through higher earnings. To the extent both the formal education and training systems and the labor market operate efficiently, utility maximizing decisions at the individual level will lead to socially optimal investments in human capital. 31 This is often referred to as "market clearing."

The general view of neoclassicists is that market clearing should be relied upon as much as possible to avoid distortions. While they acknowledge that governments should continue to play a fundamental role in the provision of basic education and health, there is a dubious case for public subsidization to rectify market failures. They believe that national interests are best served by a greater reliance on cost-recovery schemes and private-sector initiatives in managing post-primary education.32

REVISION1ST PERSPECTIVES

Cosmopolitan economy... that science which teaches how the entire human race may attain prosperity. ... that science which limits its teaching to how a given nation can obtain (under existing conditions of the world) prosperity, civilization, and power, by means of agriculture, industry, and commerce. 33

With slightly different terminology, the above quotation from Friedrich List captures the difference between two of the major schools of thought in economics. We already have discussed the cosmopolitan economic perspective under the rubric of neoclassical economics. To White and Wade, neoclassical economics operates on the

33

assumption that citizens of the world operate as economic individuals, seeking competitive advantage in free international and internal trade. It gives no significance to the division of citizens of the world into nation states. In contrast, the political economists, whom I will call revisionists, argue that economic development of latecomer countries (such as those in East Asia) should be understood as a process in which the states have played a strategic role in taming domestic and international market forces and harnessing them to a national economic interest.34

This, then, is the main revisionist criticism of the World Bank report and of neoclassical explanations: that neoclassical economics underestimates the role of government in formulating industrial policies as a factor. For example, Malaysian scholar Stephen Leong has argued that the government's role is important in the early stages of development when private-sector response cannot be expected. This should be accomplished by maintaining close relations with the private sector, creating a vision of economic development, and providing support and incentives to promote the growth of the private sector. To Leong, the etfectiveness of industrial policy in East

Asia is obvious and can be proven by Japan's historical performance and by Malaysia's economic plans. These include: The Industrial Master Plan, the 5th and 6th Plans, and

Malaysia 2020.35

According to Dietz, a realistic reading of East Asian success suggests that:

1. A developmentalist state can accelerate the pace of growth (one with a coherent vision of economic growth and sufficient autonomy from vested interests to shape policies for specific interests alone). The state can produce complementary inputs like human capital, infrastructure, technology leadership, and, sometimes, missing factors of production like financing and

34

international marketing. East Asia suggests that policy decisions have been made that are superior to what the market would have made.

2. Getting prices right sometimes requires getting prices wrong first. While the state should not tamper with international market prices, East Asia suggests that getting policies right sometimes paradoxically meant getting prices wrong. The state is as much the axis of the developmental project as are the markets and the private sectors.

3. An export orientation per se is insufficient to guarantee successful growth. A great deal of nonsense is written that East Asia owes its success to export orientation.... Starting out with an export strategy and sustaining it over time has not happened.36

Other critics of the World Bank's recommendation to focus on trade caution that the international environment must be taken into account. Says Ping:

During the past 30 years when the HPAEs achieved remarkable economic development, the international environment was relatively favorable. However, there has been a marked change in the environment, and it is no longer certain to what degree an export-push strategy can be effective. 37

Dietz believes that a hallmark of a successful developing economy is its ability to recognize when a particular policy has reached the point of diminishing returns and to shift approaches. He refers to this as the ability to recognize "strategy switch points." East Asian governments have been especially adept at recognizing them, he says, because of a felicitous interaction of necessity, vision, and their ability to resist special interest pressures. 38

From Dietz's perspective, whatever development strategy is selected, it must focus on expanding the base of national capital, increasing internal articulation, and achieving technological autonomy. He notes that the ability to learn and internalize

35

international levels of technology, the 'technological imperative' theme, is being sounded more and more often these days. Is a significant shift in focus, if not theory, but has not yet been elevated to a first level of priority.39

The Japanese were upset that the World Bank report appeared to criticize them for maintaining steep barriers to foreign investment despite their country's economic super-power status.4° From their viewpoint, the World Bank pays too little attention to the most obvious common denominator linking the eight economies--geography.

While the report notes that there is one chance in I0,000 that success would have been so regionally concentrated, the proximity of the East Asian nations to Japan is not discussed among the study's official conclusions. 41 Yet the Japanese believe the most dominant factor has been their foreign direct investment (FDI). While World Bank cites openness to FDI as an important factor, it does not consider its origin to be a significant factor. This is a oversight to the Japanese, who consider much of East

Asian economic success to be the result of their structural adjustment after the yen appreciated following the 1985 Plaza Accord.42

When Japanese look at East Asia success, they think of countries that have been under the influence of Japan for better part of a century. Regional integration has been, in fact, the cornerstone of Japan's Asia policy for some time under a version of industrial policy often called the "flying geese" model of regional integration policies. 43

Terry has described the flying geese theory as follows:

In the flying geese theory, a follower country (koshinkoku) is seduced into importing from an advanced country (senshinkoku). It is then shocked into producing goods for itself. Finally, exports its goods to other countries.

36

As a follower country moves up the ladder in stages from nondurable goods to consumer durables and finally capital goods, other follower countries begin the same sequence to catch up with it. The followers naturally employ industrial policy, in the form of protection of infant industries and promotion of exports, to even the balance in their competition with the stronger economies. When the lead goose tires, another goose takes the lead. The result is a division of labor within a group of economies, all striving for the common goal of industrialization.44

The implicit assumption in this model is that Japan has been the lead goose in the East

Asia region. This is an assumption which I will examine more closely in later chapters when I consider specifics in Malaysia and Singapore.

In another perspective on the role of industrial policy, Robert Dernberger uses a different metaphor to describe his concerns about the World Bank study:

If we view East Asia as a flower garden, it would appear that 'capitalism is blooming'. In the communist part of the garden, we find some very flourishing and beautiful blooms, largely owing to the planting of a new miracle seed, capitalism, although these flowers may still be found along side some dying and ugly Soviet-type weeds. At the same time, the traditional blooms in the non-communist part of the garden have been able to react better to the world-wide drought (recession) owing to the application of improved fertilizers (sales of nationalized enterprises to the private sector, fewer government controls over the domestic economy an less interference in foreign trade and capital movements). 45

This metaphor is Dernberger' s interpretation of the arguments used by the World

Bank, the International Monetary Fund (IMF), and the US. government to influence the governments of East Asia to privatize and marketize as well as to open their economies to free trade and capital movements. In these efforts, he equates the World

Bank, the IMF, and the U.S. to colonializers--the contemporary equivalents of the

37

representatives and missionaries of the Crown, the British East Company, and the Church in the 19th century. 46

However, he believes that the economic policies that make the economies of

East Asia more competitive may deserve some share of the credit, whatever their may be.47 He sees four policies as important to the success of East

Asian economies, including: 1) an active acceptance of government intervention in the economy; 2) an authoritarian or single-party state that is not beholden to special interests; 3) a commitment to an effective administrative bureaucracy; and 4) domestic policies that emphasize monetary conservatism in the form of stable prices and real, positive interest rates, equitable income distribution, and investments in education. 48

To have an effective developmentalist state, leadership must be strong, stable, and committed to economic development as a priority. For example, says Ping, the

Mahathir administration in Malaysia has placed a top priority on economic development for the past 10 years.49 Initially, under the leadership of Lee Kuan Yew and now under Prime Minister Goh, Singapore has referred to itself as Singapore, Inc. in its promotional materials to convey the priority it accords to economic development.

This commonality of purpose was, according to Leong, facilitated by the fact that these states were not normal--there were threats from the outside. Widespread communist insurgency in the East Asian region made it easier for these countries to direct their energies towards economic development. 50

38

Finally, even if the fundamentals are in place, economic development is unlikely to advance without private-sector initiatives. To Leong, the private sector should be the driving force for growth. This advice leads Ohno to conclude that there are two important issues which must be better understood in order to comprehend the economic development story. These include the government's capacity for policy planning, implementation, and political leadership and "policy acceptance conditions" which he explained as follows:

In view of the underdevelopment of market economy and social responses, greater attention must be paid to the interactions between government and the private sector and the private sector's capacity to respond to the government's policies including whether there is: a) a sufficient division of labor in production; b) adequate infrastructure for merchandise distribution; and c) a social acceptance of market rules such as property rights, rules of trade and contracts. 51

Labor and Production

Dernberger agrees with the neoclassicists that East Asia's increases in labor force participation rates and educational attainment cannot be sustained, and rates of investment return on capital are also so high that they must necessarily fall. However, he believes that a reasonable working hypothesis is that the East Asian version of capitalism (that is, active government participation in the economy) does better a·t achieving "competitiveness," at the present stage of the world economy than does a regulated-market, capitalist system. The economies of East Asia, he says, have proven their ability to cope with exogenous shocks--oil crises and world recessions--better

39

than the regulated capitalist economies of the West and their "competitive edge" and should continue to serve them well into the future. 52 However, the East Asian nations are presently enduring other major shocks that call Dernberger's assertions into question.

With respect to production, latecomer governments in postwar capitalist countries have assisted the private sector in building professionally managed, large• scale corporations and in entering mid-technology industries, and as Amsden says, the statistics on the average real growth of manufacturing output and output per manufacturing worker confirm that this government assistance has worked. Singapore and Malaysia perform very well on these measures, with Singapore's value added per employee increasing 12.3 percent from 1960-1990, and Malaysia's value added increasing 10.7 percent during the same time period.53

Amsden is critical of the World Bank's emphasis on transaction costs inherent in the study's admonition to "get the prices right," asking why they should be more important than production costs. She predicts that companies which imagine that they can compete globally by "getting the prices right" will be in for an unpleasant surprise and argues that it is necessary to combine relative price and production subsidies in one measure to avoid this.54 To Amsden, understanding government's role in late industrialization must be built from ground up, based on production, not simply exchange, starting with how firms actually emerge and industries expand rather than how economies "get the prices right." She says:

40

When the issue is investment in productive capacity, however, the notion that industrialization is a process of moving toward an increasingly perfect market is palpably false.55

As North Atlantic economies and Japan demonstrate, moving closer to the world technological frontier and becoming internationally competitive have involved deliberate creation of 'distortions' in the form of firm-specific skills, knowledge-based monopolies, and other types of entry barriers. Government's role has been one of joining with the private sector to socially construct competitive assets (resources, capabilities, organizations) rather than to create perfect markets. Despite all exchange• related reforms, a new social construction of assets will be necessary to rebuild productive capacity on heels of neoliberal market failures. 56

Social Structure

In addition to the capacity of the private sector, Hara speaks of the need for

"social response," in that a country's and society's capacity to respond and adapt to policies varies with differences in their stages of development and their social structure. He views an egalitarian social structure as an important precondition of growth, as does , who emphasizes the importance of an initially equitable social structure, including distribution of assets and wealth. On this point, Malaysia's initial steps to rectify inequalities deserves special attention. 57

The Role of Labor and New Growth Theory

Revisionists are critical of the neoclassical reliance on the market-clearing mechanism. In developing countries, the strong assumptions underlying the

41

neoclassical model are inappropriate for characterizing a developing economy, as various market distortions are introduced. Another important inadequacy of the model is that it is not designed for highlighting the important role of structural changes in econo.rrncd eve1 opment. 5s

For a low-income economy, these changes are sequenced. First, there is a move of labor from agriculture to industry. Then there is a move gradually from low value-added, unskilled labor-intensive activities. Finally, a shift to high value-added, capital-intensive or skills-intensive activities occurs. This has been the pattern in developed economies and can be seen today in the East Asian economies. 59

Underlying such structural changes in development is a need for continuous improvement in the general level of labor skills of a nation and expansion of high• valued-added sectors. From these perspectives, government's role is key to raising welfare in the long run by accumulating human capital to leverage change to a domestic economy based on high value-added activities. Further, the government's stance toward trade policy may play an important role in shifting from low value• added to high value-added activities. On this basis, Xu recommends that governments intervene to upgrade labor skills and the technology intensiveness of domestic industries. 60 Such arguments have crystallized into what is referred to as "new" growth theory. Associated with it models technological progress, or the growth of total factor productivity, as a function of the level of education or human capital.

42

A recent study from this theoretical perspective found two relationships between human capital investments and economic growth: 1) a direct influence on productivity by determining the capacity of nations to develop new technologies suited to domestic production and 2) an influence on the speed of catch-up and diffusion of technologies from abroad. In new growth theory, someone is always a leader, but a country that lies below the leader in technology will catch up and overtake the leader if it possesses a higher human capital stock. It will also maintain its leadership position if its human capital advantage is sustained. An additional role for human capital may be as an engine for attracting other factors, such as physical capital.61

Product Cycle Theory

Many of the new growth theory concepts are evident in the product cycle theory of industrialization. An early version of theory was alluded to in the earlier discussion of the 'flying geese' model of Japanese-led industrial development. It has been expanded to more broadly explain the waxing and waning of industrial sectors in the context of global forces. This theory is particularly notable, because its proponents argue that it is a mid-range theory which is compatible with all of the major interpretative narratives we have discussed so far. According to Bruce Cummings, the product cycle theory offers:

...a useful way to understand change and mobility among nations. It is a mid-range theory which is compatible with liberal, neomercantile, and Marxist or world systems theory. Neoclassical theory can make the Ricardian assumption that a system of open exchange (free trade) provides the structure in which nations maximize their comparative advantage and thus create a world-ranging, mutually beneficial division of labor. The mercantilist can make the Listian assumption that free-trade is the ideology of the early-

43

arriving hegemonic nation, and that to catch up, the follower nation needs not laissez faire, but a strong state, not open systems but protectionist barriers. For a world systems analyst the product cycle is one among several means of upward and downward mobility; the core assumption is the existence of a world capitalist system. Thus, the core power pursues an imperialism of free trade, and rising powers use strong states, protectionist barriers, or a period of withdrawal and self-reliant development (socialist or Stalinist option) as a means to compete in the world system.62

Not surprisingly, there are those who do not agree with product cycle theory-•

another sub-plots emerges. Gary Garreffi, in his study on production-driven and buyer•

driven networks in East Asia, criticizes the product cycle model for being too state•

centric and for omitting forward and backward linkages. He says:

Commodity chains in Asia encompass coherent trade and investment networks that lie below the aggregate picture for the entire region, but above the interactions between states. Nonetheless, these production systems must be grounded in local contexts. In this regard, the shared understandings embodied in institutional conventions are extremely important. . .it is evident that numerous conventions underpin the micro and macro institutions and routines that allow this system to operate. International competitiveness of East Asian firms has been spurred by organizational learning through networks and it is anchored in conventions that are an amalgam of Western and Asian institutions, norms, and practices. 63

Gereffi 's point has significant implications for the balance of this study with its emphasis on the importance of "place" as a factor in East Asian economic success. As we will see in later chapters, place-based workforce development strategies are extremely important in understanding the roles and :fi.mctioPing of the case study organizations in Singapore and Penang.

The interpretations from the neoclassical and revisionist perspectives paint very different pictures of the East Asian success story. The differences between these

44

interpretations of East Asian success are not likely to be resolved, although there is a great deal of overlap. Production cycle and commodity chain theories appear to be blend concepts from these other streams. It is important for our purposes to note all the views hold that education and human capital are important to economic development, although they differ in their answers to the "how" question. There is one last stream of literature to consider in the economics paradigm--that based on neo•

Marxist and Schumpeterian interpretations. As we will see, this narrative tells yet another story.

NEO-MARXIST AND SCHUMPETERIAN INTERPRETATIONS

Initially neo-Marxist theories focused on domination and exploitation of East

Asia by the West. More recently, they have explained development in East Asia in

terms of the role of multinational corporations and infusions of foreign capital.64

NIDL and Regulation Theory

Two of these theories are the new international division of labor (NIDL) and

regulation theory. The NIDL is based on the assumption that capital is mobile and will

seek locations where the cost of labor is lowest. It is a theory in which transnational

corporations are dominant actors, is complemented by the fragmentation of job tasks

with a resulting de-skilling of work, and is facilitated by global transportation and

communications. Regulation theory is an attempt to describe global development

patterns in terms of two concepts: 1) regimes, or the set of practices and conditions

that promote economic growth; and 2) the modes of regulation (norms, habits, and

45

regulating networks) that ensure unity of the process and support the framework of growth.

For example, in the 1960s, the regime for accumulation was 'F ordism,' whereby economies of scale were derived from mass production. It went into crisis in the late 1960s, as labor reached technical and social limits and productivity gains slowed down. Capital's response, in general, was to adopt flexible employment practices and to shift to flexible production. The result was the rise of "bloody"

Taylorism and "peripheral Fordism" in the newly industrializing East Asian nations, as the multinational corporations moved to the periphery to exploit labor in export processing zones.65 These concerns are especially relevant to the early stages of industrialization in Malaysia in the 1970s and 1980s when serious criticisms were raised by human rights advocates about the exploitation of female labor in export processing zones.

Regulation theory blends concepts from Marxist thought with those of

Schumpeterian economics. This theory assumes that crises constantly occur under capitalism. The crises involve the disruption of the regimes of accumulation which dominate during stable periods of capitalist growth. Regimes of accumulation are based on institutional forms resulting from the compromises between societal groups with normally conflicting interests, such as capital and labor, and citizen and state.

These compromises create a mode of social regulation, which insures the proper functioning of the economic system and its reproduction over time. Those crises which

46

can be addressed within the current regime of accumulation are referred to as cyclical; those that cannot be addressed under the current regime are called structural.

Proponents of this theory argue that regimes of accumulation are historically specific, and that the crises of capitalism, while they may appear similar, always have different causes. They also say that regimes of accumulation are place specific. 66 In this sense, regulation theory incorporates concepts that I believe are important to gaining an understanding of workforce development in Singapore and Penang.

According to Keily, however, the tendency in these theories is to lean toward a functionalist mode of analysis which labels but does not explain. The problem in the

Fordist mode of regulation was underconsumption, whereas the problem in the East

Asian countries was raising productivity and creating international competitiveness, not increasing demand. In these theories, social relations are relegated to a secondary place, derived from the determining structure. The cycle of the crisis of mass production gives way to a new structure of flexible accumulation. In these theories, social phenomenon are 'read off' the demands of the dominant, structural logic of capital.67

To Keily, the mainstream accounts of "Third World" industrialization also suffer from the tendency to explain the phenomenon in solely global terms, which leads to the fetishized accounts or models of social reality. These models fetishize reality because they abstract from the social relations in which industrial development takes place--to paraphrase Marx, they "universalize the historical and naturalize the social."

47

On the one side, the radicals argue that the rise of selected East Asian countries is part of a constant pressure of 'Third World' subordination to the western world--in this case to the needs of Western capital. Thus, a continued and never-changing model of the world system and underdevelopment is posited. The implication is that there is no need to look at events within the periphery because these are de facto not "proper" developments and are simply serving the needs of Westem or Japanese imperialism. 68

On the other side, the free market advocates argue that the rise of selected East

Asian countries is a product of the adoption of free market principles operating at an institutional level. Thus a model of adopting free market principles is posited for the rest of the 'Third World.' Although this does not preclude examination of events within the periphery, this school of thought does so only to the extent that particular nations embrace the global force of comparative advantage, and governments adopt the correct policies. The continued search for these two principles, however, precludes an adequate analysis of how the state may modify or completely challenge the principles of comparative advantage, and it reduces the policy-making process to a purely technical discipline. It is for these reasons that neoclassical, NIDL, and regulation theory are unable to transcend the impasse in development theory.69

World Systems Theory

Another macro, more integrative theory is that of world systems. Proponents of this theory include So and Chui (1995), who examine development in terms of the interaction of political, economic, historical, and social forces. The theory is based on

48

the work of Wallerstein. World systems theory is undisciplinary, in that it examines the interactions among three supposedly distinctive areas of policy--economics, politics, and society. Like NIDL and regulation theory, it operates at a global systems level, in this case dividing the world into three categories of countries: core or developed nations, semiperiphery or developing nations, and periphery or under• developed countries.

In contrast to the revisionist perspective, world systems theory questions the treatment of the state/society as the basic unit of analysis in favor of an historical world-system. Five forces are constantly at play, and the interplay among them over time determines the instantaneous reflection of the world system. These are:

1. Incorporation--expansion of the world economy's boundaries to other parts of the world;

2. Deepening--commodification and industrialization processes through which production in one zone of the economy is geared into, dependent upon, and integrated into production into other zones of the world economy;

3. Social Construction--a process of conflict resolution in which the economy, the constructed and reconstructed by the dynamics of the world economy;

4. Cyclical Rhythms--alternate patterns of expansion and stagnation as a result of the imbalance between global effective demand and global supply of goods in the world economy; and

5. Antisystemic movements--democratic and egalitarian responses to the inability of accumulators of capital to resolve contradictions of the world economy. 70

This is clearly the most integrative theory considered thus far. However, its ambition may be its weakness. Keily advocates an alternative, less ambitious approach, which is to acknowledge that there are strong tendencies operating in the

49

global economy which militate against the rise of the 'Third World' countries as

competitive industrial nations. This, he says, does not preclude some countries,

including 'late developers,' from becoming rapid industrializers, but they are hardly

likely to do so on the basis of adopting free-market principles. Whether or not they

become successful will depend on specific social struggles and relations within

particular societies, not on the basis of either a 'correct' policy or a passive

subordination to Western interests. There are structuralist constraints (imposed by the

world economy) on human action (the nation state), but these constraints can, and are,

capable of being changed by human action. Moreover, because human action is

unpredictable, it is impossible to construct models which conform to the real world.71

The Role of Labor

In the theories with nee-Marxist and Schumpeterian origins, labor is clearly

subordinate to other factors and is subject to exploitation by capital, or more

specifically multinational corporations. In NIDL, we saw that labor is governed by

regime such as the 'Bloody Taylorist' or 'Bloody Fordist' regimes. These concepts are

important to an understanding of the current workforce management approaches in

Singapore which are intended to promote a new regime--Toyotaism--as we shall see in

Chapter VI.

CONCLUSION

We have discussed several streams of literature that constitute narratives explaining economic success in East Asia. Neoclassical explanations are helpful in

50

explaining economic outputs at a macro level, but attribute these outcomes to a faceless entity called "the market." They provide inadequate guidance in explaining how these outputs were achieved. In this regard, they sometimes seem to fall prey to equating correlation with causation. The revisionists are, perhaps, too sanguine about the role of the state--particularly in view of the financial and monetary crises confronting East Asia today. The nee-Marxist and Schumpeterian narratives focus on large-scale, inexorable global forces, and they too attribute outcomes to entities with whom we cannot speak, like capital. Even governments and transnational corporations cannot speak for themselves. The regulationist and commodity chain theories seem to be more encompassing and offer some promise in their capacity to draw together the various streams. To learn more, an understanding of how people fit into the equation is necessary. This is the subject to which I now turn in the next chapter--culture and its impact on economic development.

51

ENDNOTES

1 Donald N. McCloskcy (1994). If You're So Smart: The Narrative of Economic Expertise. Univ. of Chicago Press: Chicago. p 2.

2 John Page (1994) "The East Asian Miracle: An Introduction," World Development, Vol. 22, No. 4, p. 616.

3 Izumi Ohno (1996) Beyond the East Asian Miracle: An East Asian View, New York: United Nations Development Program, p. 25

4 World Bank (1993) The East Asian Miracle: Economic Growth and Public Policy, Washington DC: World Bank, p. 9.

5 World Bank, p. 9.

6 World Bank, p. 6-7.

7 Ohno, p. 16.

8 Ohno, p. 6.

9 Jose E. Campos and Hilton L. Root (1996) The Key to the Asian Miracle, Washington, DC: The Brookings Institution, p. 29.

1° Campos and Root, p. 49.

11 Campos and Root, p. 171.

12 Campos and Root, p. 173.

13 World Bank, p. 52-53.

14 World Bank, pp. 43-47.

15 Paul Krugman (1995) Development, Geography and Economic Theory, Cambridge, MA: MIT Press, pp. 74-75.

16 Anne 0. Krueger (1990) "Asian Trade and Growth Lessons," American Economic Review," Vol. 80, No. 2, p. 111.

17 Krueger, p. 111.

18 Alwyn Young (1995) "The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience," The Quarterly Journal of Economics, pp. 641-642.

19 Young, p. 644-645.

20 Young, p. 659.

52

21 Young, p. 674-675.

22 Paul Krugman (1994) "The Myth of Asia's Miracle," Foreign Affairs, Vol. 73, No. 6, p. 66.

23 Krugman, pp. 67-68.

24 Krugman, p. 71.

25 Krugman, p. 71.

26 Krugman, p. 77-78.

27 Krugman, p. 78.

28 Economist (1997). "The Asian Miracle: Is it over?" Mar. 1, 1997, p. 24.

29 Economist, p. 24.

30 Jess Benhabib and Mark M. Spiegel (1994) "The Role of Human Capital in economic development: Evidence from cross-country data," Journal ofMonetary Economics, Vol. 34, p. 143.

31 Iyanatul Islam and Anis Chowdhury (1997) Asia Pacific Economies: A Survey, London and New York: Routledge, p. 90.

32Islam .and Chowdhury, p. 94.

33 Gordon White and (1988) "Development States and Markets in East Asia: An Introduction" in Gordon White (ed.) Developmental States in East Asia, New York: St. Martins Press, p. 1.

34 White and Wade, p. 1.

35 Ohno, p. 55.

36 James L. Dietz (1992) "Overcoming Underdevelopment: What Has Been Learned from the East Asian and Latin American Experiences," Journal of Economic Issues, Vol. 26, No. 2, p. 374.

37 Ohno, p. 56.

38 Dietz, p. 377.

39 Dietz, p. 379.

40 Edith Terry (1996) "An East Asian Paradigm?" Atlantic Journal of Economics, Vol. 24, No. 3, p. 184.

41 World Bank, p. 5.

53

42 Terry, p. 185.

43 Terry, p. 185.

44 Terry, p. 187.

45 Robert F. Demberger (1997) "Capitalism and the East Asian Miracle," in George T. Yu (ed.) Asia's New World Order, Washington Square, NY: New York Univ. Press, p. 44.

46 Demberger, p. 44-45.

47 Demberger, p. 45.

48 Demberger, pp. 51-52.

49 Ohno, p. 55-56.

50 Ohno, p. 55.

51 Ohno, p. 32.

52 Demberger, p. 63-70.

53 Alice H. Amsden (1996) "Editorial: Bringing Production Back In--Understanding Government's Role in Late Industrialization," American Economic Review, Vol. 81, No. 2, p. 471.

54 Amsden, p. 475.

55 Amsden, p. 477.

56 Amsden, p. 478.

57 Ohno, p. 33, 36.

58 Yingfeng Xu (1995) "Upgrading Labor Quality, Structural Change and Economic Development," Atlantic Economic Journal, Vol. 23, No. 2, p. 122.

59 Xu, p. 133.

60 Xu, p. 133.

61 Benahabib and Spiegel, p. 167.

62 Bruce Cummings (1984) "The Origins and the Development of the Northeast Asian Economy: Industrial Sector, Product Cycle, and Political Consequences," International Organization, Vol. 38, No. 3, pp. 4-5.

54

63 Gary Gcreffi (1996) "Commodity Chains and Regional Divisions of Labor," Journal of Asian Business, Vol. 12, No. 1, p. 109.

64 Alvin Y. So and Steven W. K. Chui (1995) East Asia and the World Economy, London: Sage Pub., pp. 22-26.

65 Raymond Kiely (1994) "Development Theory and Industrialization: Beyond the Impasse," Journal of Contemporary Asia, Vol., 21, No. 2, p. 138-139.

66 Sean Digiovanna (1996) "Industrial Districts and Regional Economic Development: A Regulation Approach," Regional Studies, Vol. 30, No. 4, p. 374.

67 Kiely, pp. 156.

68 Kiely, pp. 156.

69 Kiely, pp. 156-157.

70 So and Chui, pp. 28-30.

71 Kiely, p. 157.

CHAPTER III

NARRATIVES IN THE CULTURAL PARADIGM

Fallowing is a narrative from works of scholars, primarily sociologists and anthropologists, who operate within a paradigm which considers the organization of a society to be a reflection of its culture--important components of which are their spiritual and religious beliefs. In contrast to the economists who generally see the market as the dominant metaphor, the culturalists believe that the organization of a given society--its economic, legal, political, social, and moral enforcement institutions, together with its social constructs and information transmission and coordination mechanisms, profoundly affect economic performance and growth.1

CULTURE AND VALUES - OVERVIEW

Culture is defined as the collective programming of the mind that distinguishes the members of one category of people from another.2 Hofstede and associates have conducted considerable research to identify the primary dimensions of culture and their impact on economic development. Since this work has been widely cited and forms the basis of the argument that economic development success is culturally driven, I will cover these findings and the related stream of literature in some depth. In his initial work, Hofstede and Bond identified four primary dimensions of culture:

1) Uncertainty Avoidance. This dimension reflects the extent to which people in a society feel the need to avoid ambiguous situations. It also addresses the extent to which they try to manage these situations by introducing explicit and formal rules, by rejecting novel ideas, and by

55 56

accepting the existence of absolute truths and subordinate goals in the context of work organizations.

2) Power Distance. This is a measure of the extent to which less powerful members of society accept the unequal distribution of power within their organizational and social hierarchies as normal features of society.

3) Individualism vs. Collectivism. This dimension reflects the relationship between individuals in society. At the individualistic end of the spectrum, ties between individuals and organizations are very loose, and people are expected to look after their own self-interests in the domains of both work and non• work. In collectivist cultures, ties or bonds between individuals are very tight. In individualist cultures, individuals are more inner-directed, while in collectivist societies, individuals are more traditional and other-directed.

4) Masculinity vs. Femininity. This dimension measures the extent to which a society's dominant values emphasize assertiveness, acquisition of money, status, and achievement of visible and symbolic rewards, as opposed to an emphasis on other less tangible outcomes. East Asian countries score high on a masculine scale. In masculine-oriented societies, economic growth is seen as more important than social welfare. On this measure, Japan is the most masculine country in the world, and Nordic nations tend to be the most feminine .3

The first dimension listed above--uncertainty avoidance--relates to one's search for the truth. According to Hofstede and Bond, uncertainty-avoiding cultures are more accepting of Absolute Truth. People in uncertainty-avoiding cultures are more emotional and motivated by inner nervous energy. Uncertainty-accepting individuals are relativist on religious and philosophical levels and are more contemplative and unemotional. The last three of the dimensions refer to types of social behavior. The first is behavior toward people lower in rank; the second is behavior within a group; and the third is behavior toward members of one's sex. 57

In an expansion on this work, Franke, Hofstede, and Bond identified a set of

Chinese Value System variables: 1) Confucian dynamism; 2) integration; 3) human heartedness; and 4) moral discipline. As a result, Confucian dynamism was incorporated into their subsequent work as fifth major dimension of culture. They argued that measures on these variables explained more than 50 percent of the differences in international rates of growth. They concluded that the differences between two cultural measures, with quite different sources and values, accounted for most of the variance in national economic growth rates. Of the five dimensions of culture, the Confucian dynamism variable was found to have the most consistent power in explaining the relative success of East Asian economies over the past 25 years.4

This dimension is a measure of emphasis on those teachings of Confucius that are oriented toward the future (dynamic), as opposed to those which are oriented toward past and present (static and tradition-oriented). Thus, Confucian dynamism reflects movement toward persistence, away from personal steadiness and stability; toward ordering and observing relationships by status, away from protecting face; toward thrift, away from respect for tradition; and toward having a sense of shame, away from reciprocation of greetings, favors, and gifts.5

The other dimension that can be related to East Asian success is individualism, but it is really a long-term liability in a world where group cohesion appears to be a 58

key requirement for collective economic effectiveness. They note that economic growth after 1980 seems to be aided by equality of power among people in organizations (lower power distance) and by a tendency toward competitiveness at the expense of friendship and harmony.6

Entrepreneurship is also the link between values and economic growth.

Hierarchical dualities and interrelatedness are at the center of the Confucianist conception of being human (wu fun). The Confucian sense of shame supports interrelatedness; Confucian thrift leads to savings, which is essential to accumulation of economic capital; and Confucian persistence suggests a general tenacity in the pursuit of goals. On the other side, however, there is more concern with performance than good manners; too much respect for tradition, which has impeded innovation; and personal stability, which, if overstressed, can lead to a lack of initiative and innovation.7

Hofstede and Bond point out that culture alone is not sufficient for economic growth, and developed markets and an appropriate political context are two other necessary factors. The absence of these two factors, they say, explains why growth in

East Asia did not start until after 1955. The West, reflecting Judaic, Christian, and

Islamic values, has been so concerned with searching for the Truth it has led to conflict. In the East, human truth is seen as partial, since no one human can have all the Truth. In such an environment, a practical, non-religious set of ethics became a cornerstone of society. Chinese script betrays a lack of interest in general laws. This is 59

why the West were the first to discover Newton's laws--the Chinese simply were not looking for them. While the West is concerned with analysis, the East is concerned with synthesis. In the 20th century, the Western concern for Truth has become a liability, because the East is better able to pragmatically synthesize. For example, the successful exploitation of technology developed in the West has been one key to East

Asian economic success.8

The scores on Hofstede's dimensions of culture for the countries which are of particular interest to this study scored are shown in Table 2.

Table 2.

Scores of Selected Countries on Hofstede's Dimensions of Culture

Cultural Power Individualism Masculinity Uncertainty Confucian Dimension Distance Avoidance Dvnamism Country Score Rank Score Rank Score Rank Score Rank Score Rank Japan 54 33 46 22-23 95 l 92 7 80 3 Malaysia 104 1 26 36 50 25-26 36 46 NIA NIA Singapore 74 13 20 39-41 48 28 8 53 48 8 United States 40 38 91 1 62 15 46 43 29 14

From: Geert Hofstede and Michael Bond (1988) "The Confucian Connection: From Cultural Roots to Economic Growth," Organizational Dynamics, Vol. 16, No. 4, p. 12-13.

As the table shows, Malaysia is most accepting of power distance, with Singapore ranking high on this measure and the U.S. and Japan considerably lower. The United

States is the most individualistic of the 72 countries rated, with Japan also rated high and Singapore and Malaysia considerably lower. Japan is the most masculine-oriented country, and the U.S. scores higher on this measure than either Singapore or Malaysia.

Malaysia, Singapore, and the U.S. all rank well below Japan on measures of 60

uncertainty avoidance. Japan and Singapore rate high on Confucian dynamism, and the

U.S., although somewhat lower, also ranks relatively high on this dimension.

Kedia and Bhagat (1988) relied on the work ofHofstede and associates in their studies of the transfer of technology across nations. Their goal was to identify the cultural constraints that affect receptivity to technological change. In addition to

Hofstede's dimensions of culture, they developed another scale to measure abstractive versus associative tendencies. The former can also be called positivist or rationalist tendencies, while the latter refer to more intuitive and contextualist tendencies.

In associative cultures, people use associations among events that may not have much logical basis; in abstractive cultures, people rely on rational thinking and cause-effect relationships. Cognition and behavior in associative cultures are more diffuse, as communication is face-to-face and dependent on the specific context in which it takes place. In abstractive cultures, communication channels are generally through the mass media and other technological mechanisms. Kedia and Baghat concluded that economic development and technological change foster field independence and abstractive thinking, the dominant mode in most western countries.

East Asian nations tend to score much higher on the associative measures.9

In another extension ofHofstede's work, Doktor (1995) asked Anglo and East

Asian chief executive officers to participate in problem-solving exercises and to graphically depict their approach to solving the problems. He found that the executives of Asian companies tended to engage in episodes of business activities for far longer 61

duration than their Anglo counterparts. In addition, the Asian approach to solving the problems was quite different from the Anglo approach. Anglo managers took a functional point of view; while Asians were far more systematic and environmental.

Anglos reported thinking about a problem in terms of its principal or primary causes.

They tended to build a cognitive model, which usually consisted of a linear model of four to five primary causal agents and the effect or resulting solution.

In contrast to the Western managers, circularity, rather than linearity, characterized the Asian problem-solving rule. They saw all elements of a problem as both influencing and being reciprocally influenced by all others. In their drawings, the

Asian's causal arrows did not point in one direction. Doktor concluded that Asian style of thinking is more oriented to synthesis than to analysis. Asian problem-solving approaches were characterized as systemic and integrative, while the Anglo's were classified as analytic and linear. The Asian's notion of cause and effect often was more complex than the Anglo counterpart. The Asian problem-solving models took much longer to process information, but were longer-term in their orientation. 10

Similar findings are reported by Marshak (1994) who compared the efficacy of different styles of organizational development found in Asian and Western countries.

Marshak hypothesized that Western approaches to organization development (for which he used Kurt Lewin's model as a proxy) would be more successful when called upon to create change toward a specific goal and less successful when addressing 62

continuous change, especially in the absence of clearly stated goals. This would be particularly true in cultural settings with similar assumptions about change.

Marshak's second hypothesis was that a Confucian approach to change would be more successful when called upon to pursue continuous enhancements without need of specified problems and less successful in challenging the natural order of things. Again, this would be particularly true in cultural settings in which the participants hold similar assumptions about change.

From the analysis, Marshak concluded that both hypotheses could not be rejected on their face value. His description of the features on which the two approaches to organization development differ are shown below in Table 3.

Table 3.

Comparison ofLewinian/Organization Development (OD) and Confucian/East Asian Attitudes Toward Change

Lewinian/OD Confucian/East Asian Chan e is: Change is: 1. Linear 1. Cyclical 2. Progressive 2. Processional 3. Destination-oriented 3. Journey-oriented 4. Disequilibrium-creating 4. Equilibrium-maintaining 5. Planned and managed 5. Observed and followed 6. Unusual: deviated from static state 6. Usual: change is constant From: R. J. Marshak (1994) "Lewin Meets Confucius: A Re-View of the OD Model of Change," Journal of Applied Behavioral Science, Vol. 29, No. 4, p. 409.

Marshak surmised that attempts to focus on setting and achieving clear-cut goals in Asian societies would be resisted if attention were not paid to observing the proper way of doing things. Likewise, calls to take a stand and speak out against the 63

system in Asian organizations would be resisted, because they would threaten the natural order of things. 11

As we have seen, considerable research has been done to identify differences among various cultures and how the underlying variables influence economic organization and economic performance. I now to turn to a specific discussion of the major cultural influence in East Asia--Confucianism.

CONFUCIANISM

Definition

Confucianism has been called a worldview, a social ethic, a political ideology, a scholarly tradition, and a way of life. 12 As a multi-faceted concept, Confucianism has affected East Asia for over 2500 years.

Even though Confucianism is dominant where there is a high population of ethnic Chinese, its values are more explicitly developed in Singapore and Penang,

Malaysia than in China, as we shall see in the balance of this study.13 As a moral system, Confucianism is concerned with the quality of relationships between man and man, as defined by five virtues: humility/benevolence (ren); righteousness (yi); propriety (Ii); wisdom (zhi); and trustworthiness (xin). In addition to these virtues, it also focuses on five hierarchical relationships: 1) father/son; 2) ruler/ruled;

3) husband/wife; 4) elder brother/younger brother; and 5) friend/friend or equals in relationships.14 64

Confucianism is distinguished from religion by three factors: I) it contains no

Deity, only rules of conduct; 2) it does not compete with religions; and 3) it has no large-scale institutional place of worship. 15 According to Hofstede, in essence,

Confucianism provides lessons in practical ethics for daily living without any known religious source. 16 In daily application, Confucianism emphasizes education, titles, thrift, moderation, kindliness, and respect for seniority. Obedience to hierarchy is mandatory. 17 This need for hierarchy raises the possibility that economic growth in

East Asia may not even be possible without an active state to promote and guide the development process.

Family

In Confucianism, the family is the basic unit of society and is the prototype of all social organizations. As such, it meets basic needs of individuals and provides an environment within which people socialize and play out their Confucist-defined roles.

The emphasis on family also provides Confucianists with their conception of the purpose ofbusiness--the long-term enrichment and preservation of the family--and carries over to defining the relationship with government. According to Gordon S.

Redding:

Confucianism constrains the expression of individual desires and encourages the group sharing of limited resources. The family and loyalty to the family are of supreme importance. The family functions as 'a rational collective' to insure individuals against disaster. This idea of the family carries over to the concept of the state--it is in essence the super-family... fulfillment comes from the very structure and dynamics of the relationships and emphasis on belonging. 18 65

In order to buffer against the tendencies of the state toward despotism, the family is the protector of the individual against the state. Welfare has traditionally been the responsibility of the family, and schooling has reinforced the rigor of duty to family as a way of stabilizing the state. 19

The interplay between the family and the state creates a "soft authoritarianism," combining a market-oriented economic system with a kind of paternalistic authoritarianism that persuades rather than coerces. 20 The resulting regime is economically liberal but politically quasi-authoritarian. Second, soft authoritarianism is communitarian, "emphasizing conformity to group interests over individual rights." In this regard, soft authoritarianism reveals the influence of

Confucian values that champion order, a strong but moral state, and the needs of society as a whole over personal freedoms and limitations on government." 21

Comparison to the West

There are a number of principles underlying Confucianism which are different from Western values. First is the strong group orientation which emphasizes kinship and close personal ties, group pressure exerted through shame, and conflict resolution through intra-group mediation rather than the legal system. Individuals are perceived as part of a network of unequal relationships organized hierarchically with complementary obligations. Individualism is seen as selfishness. The social needs of the workplace ranks higher than needs for self-actualization and autonomy (danwei).

Interpersonal connections (guanxi) overpower formal organizational structure in 66

many cases.22 Virtuous behavior consists of treating others as one wants to be treated. 23

Second, the Confucianist ideal of life is characterized by humanism, harmonious social relationships, and spiritual supremacy based on naturalness and simplicity. Virtue in one's life consists of trying to acquire skills and education. Third, an adherent to Confucianism has an individual character with the traits of pacifism, contentment, calm, strength of endurance, knowledge, mental discipline, and a reliance on common sense. Fourth, Confucianists rely on a problem-solving approach which is subjective, intuitive, and implicit. It emphasizes "reasonableness" vs. "reasoning"

(Doctrine of the Golden Mean), is more realistic, human, and more truly appreciative of the appropriate situation. 24

Fifth, Confucianism holds a conception of time different than that of Americans who see time as a limited resource. The Confucianist perspective on time is much more reserved and concentrates on non-linear spiritual enrichment. Moments are to be enjoyed since life and nature will go on. Time is valuable only when it is used to achieve the ultimate human reward--peace and tranquillity. 25

A Confucian ruler is expected to exercise his ascripted powers with moral rectitude, thereby fulfilling the role of a Confucian gentleman (junzi). Thejunzi, as the ideal leader, is upright, beyond reproach, someone whom the people can trust, and is committed to the public good. 26 This is in contrast to the West where individuals who 67

show leadership capabilities are then made into leaders, reflecting the concept of reward based on achievement. 27

Another positive interpretation of Confucianism is offered by Moody, who notes that the Western concept of justice is closely bound up with rights, although certain western cultures, such as the United States, may have more of a fixation on rights than others. The classical notion of rights focuses on the individual.

Confucianism considers the individual not as an isolated person, but as a human in relationships with other human beings. Society is not a contract among previously unconnected individuals. Rather, society, especially the family portion, is the state of nature, and human nature is manifested through relations with others. Almost all of these relations are hierarchical. Although Confucianism assumes the inherent or natural quality of all persons, this does not at all imply equality of status.28 Moody believes that the West can learn from Confucianism and the East can learn from the West:

The Asian values talk often turns on contrasts between Asian collectivism and the good of the whole, as opposed to the Western dignity of the individual and his rights. Yet it is surprising how little the Western attitude has come to attribute responsibility to the individual for whatever he might do, except as responsibility is assigned by the state or allocated in compromises among lawyers. It is difficult to distinguish any true order of things, but it does seem likely that we are social beings, materially dependent upon each other. Asian governments should perhaps allow those subject to them more freedom in behavior and more say in how they are ruled, and perhaps Western societies should accord more recognition and authority to the responsibilities people owe each other. 29 68

Economic Development and the Role of Labor

According to Hung-chao Tai, the interaction of Western capitalism with

Oriental culture has exerted a significant and positive impact on the economies of East

Asian countries. It has influenced the organizational character of enterprise, the relationship between management and labor, the disposition of surplus income, and the value attached to human relations. However, these economies are profoundly different from their Western counterparts. Tai characterizes the East Asian model of economic development as affective, in that it emphasizes human emotional bonds, group orientation, and harmony. In these respects, it stands in contrast to the Western model of development, referred to as a rational model, which emphasizes efficiency, individualism, and dynamism. 30

In the affective model, self-cultivation is the pathway to harmony. While

Confucianism has often been downgraded for its denigration of profit making, Tai argues that only profit making that upsets harmony is viewed negatively in Confucist thought. Failure to recognize this fact was a shortfalling of Weber and Parsons, who, he says, forgot that productivity is a way of practicing virtue. However, an emphasis on pursuit of material gain for its own sake would be viewed as upsetting harmony.31

The rational and affective models have differing effects on business organization, employee behavior, work ethic, and human resource development. In the affective model, says Tai, the company is both an economic and social organization.

The Asian company functions as both an economic and social enterprise. Management 69

maintains a paternalistic relationship with employees. Loyalty is expected and given.

The affective model is human-centered, and managers are often involved in the familial activities of employees. As a result, the workforce is industrious and compliant. The employer's social investment helps maintain workers' morale and avoids discontent.

The Asian company influences employee behavior by both economic and social means. The standard compensation package provides wages based on an employee's skills, which are assumed to be dependent on length of . Additional pay is provided in form of a bonus derived from company profits. The bonus is an important incentive to group performance. Social controls can be intangible or concrete.

Employees are actively encouraged to show their emotions, feelings, and concerns.

Loyalty and dependability are seen as more important than creativity and skills.

Employers develop trust, subtlety, and intimacy with employees.

The Confucian emphasis on diligence, frugality, and savings has also influenced economic growth. People make best use of whatever the physical environment offers them by exerting their own efforts. Life has its meaning in continuance of the family, and efforts are focused on this world. Individuals forsake current enjoyment for the future of their family. Individual diligence leads to accumulation of savings which, in turn, helps restrain and reduces the cost of capital borrowing. With the resulting large reservoir of savings, East Asian nations were able to shift from labor• intensive economies to capital-intensive ones.

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Of special interest to this study is the Confucian emphasis on the development of human resources, drawn from its belief in the perfectibility and educability of human beings. Confucianism espouses the idea of universal education, teaching that in education there are no class distinctions. The group-directed quest for knowledge has been cited by some as the single most distinctive feature of these societies. Further, this devotion to education and emphasis on savings are seen as very key differences with the West.32

In modern times, the application of the affective model has enabled East Asian societies to borrow the West's technology, wed it with human-centered culture, and achieve almost unparalleled economic performance. In this blending, we see the reflections of the cultural tendency to rely on complex modes of thinking as identified by Ralston and Marshak. Quoting Roderick Macfarland, Tai says:

If Western individualism was appropriate for the pioneering period of industrialization, perhaps post-Confucianism 'collectivism' is better suited to the age of mass industrialization.33

Similarly, Grace Goodell, another advocate for the Confucian model of economic development says that the East Asian experience reverses many of the basic tenets underlying the traditional understanding of capitalism. These tenets are:

1. That individuals are defined in terms of a single functional role, and econornic resources considered apart from their social context constitute modern society's primary units of interaction and exchange;

2. The value of all assets, inputs, and outputs of economic production and government administration can be expressed in monetary terms;

3. Choices must be made based on ranked priorities;

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4. Business and government transactions must be open to all legitimate players;

5. Mathematics and formal laws should provide the model of how society organizes its public life according to impersonal logic, purified of subjective and social elements; and

6. Predictability requires that transactions be formally rational and publicly visible with a minimum of ambiguity and discretion.

Goodell believes that the experience of East Asian nations should increase the appreciation for how capitalism can thrive in a variety of circumstances.34

This concept of guanxi mentioned earlier, is important to understanding one element of East Asian economic development--the nature of the business enterprise.

Xin and Pearce define guanxi as follows:

Guanxi literally means a relationship between forces, objects, or persons. It also can have the sense of social connections or dyadic relationships based implicitly on mutual interests and benefit. Once guanxi is established between two people, each can ask a favor of the other with the expectation that it will be repaid sometime in the future. Guanxi draws on shared identifications with family, hometown, region, school, or place.35

Guanxi-based features of significance to this study include the underlying concepts of reciprocation and time orientation. Reciprocation, measured on dimensions of self-loss versus self-gain, translates to repaying personal debts at a higher level than required.

The long-term time orientation translates to the fact that debits and credits are never in equilibrium. To achieve equilibrium would mean the end of the guanxi relationsJ,..ip.36

These relationships, based as they are on the concept of interconnectedness, have been operationalized into networks of overseas Chinese businesses. These business networks play important roles in the economies of Malaysia, and to a lesser

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degree Singapore, in addition to other countries in East Asia. Many of these companies are diversified conglomerates that include an in-house bank and form vertically integrated networks stretching from raw materials to distribution.37 So strong is this sense of collective identity within these networks that Redding suggests:

It (East Asia) is ... psychologically one region if not legally one country since it concerts an otherwise disparate group of entrepreneurs into a significant economy, whose power is normally hidden from view due to the simple fact that it cannot be represented in national .38

The Overseas networks have both their admirers and detractors. On the positive side, they are seen by some to be the 'engine' of economic progress in East

Asia, or at least the fueI.39 As we learned in Chapter I, John Naisbitt views the networks as the organizational paradigm of the 21st century. However, others see them less favorably, believing them to be examples of favoritism and nepotism. Critics note that their weaknesses include: built-in limits on expansion; difficulty in managing succession after the firm founder passes from the scene; their perpetuation of gender inequalities; and their vulnerability to fission.40

The concern about vulnerability to fission is well illustrated in the rippling effects of the 1997-98 financial and monetary crises that began in Japan, then spread to

Thailand, and subsequently affected all of East Asia and the world markets. These problems were undoubtedly intensified through the interconnectedness of the overseas

Chinese businesses throughout East Asia.

Of particular note to this study is the situation in Malaysia where ethnic•

Chinese comprise about one third of the total population. It is widely argued that they

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dominate the commercial sector and 60 percent of the stock market, leaving the public sector to the ethnic Malays (bumiputra) and the professions and labor organization to the Indians. One estimate is the Chinese control between 60-70 percent of the locally• owned economy in Malaysia. 41

Even though the population in Singapore is approximately 75 percent Chinese, the penetration of direct foreign investment has been so pronounced that as much as

55 percent of the population works in foreign-owned companies. Although the overseas networks are somewhat active in Singapore, it can be questioned whether the type of distinctive "Chinese management-orientation" argued for in the other locations is as apparent in Singapore. 42 What is becoming more prevalent throughout East Asia, including Singapore, is alliances between the overseas networks-based firms and

Japanese and U.S. firms.

Hofstede (1993) believes these networks lack all the characteristics of modern management. They tend to be small, cooperating for essential functions with other small organizations through networks based on personal relationships. They reflect other Confucian-based values such as a distrust of outsiders and a reliance on kinfolk.

Their way of doing business is adapted to their host country in order to minimize the persecution that ethnic minorities often encounter. Overseas Chinese prefer economic activities in which great gains can be made with little manpower, like commodity trading and real estate. They tend to focus on one product or market, with growth by

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opportunistic diversification. Flexibility is achieved through control at the top by the paternalistic structure inherent in Confucianist hierarchy. 43

One observer believes that the tendencies of Chinese families to form relatively small, flexible firms, able to respond to rapidly changing markets and motivate maximum effort for modest pay, are most suited to low-to-medium technology industries operating in an export-oriented environment. The test, he says, will come when such economies are called upon to transition to high technology-based economies and such family-based businesses may prove to be obstacles. 44

In fact, some adaptive changes are already occurring. overseas Chinese firms are coming to understand that they can no longer rely on the traditional paternalistic style of management. Strategies that are being implemented include bringing in outside professional management, forging strategic partnerships with non-network companies, public stock offerings, and of decision-making authority to operating units.4 5 Although change may occur, guanxi is not likely to be abandoned as an important East Asian value in the foreseeable future. Even if it is attached to Western values in some form, guanxi appears to be, using Hofstede's analogy of an "onion," one of those values at the core that is resistant to change and cannot be peeled away. 46

While Chinese overseas businesses are very important to an understanding of business and economic development in East Asia, there are also other forms of business organizations. For example, we already have referred to the important role that multinational corporations from Japan, the U.S., and Europe have played in East 75

Asian economic development. Other well known enterprise-types include the Korean

chaebol and the Japanese keritsu. In addition, Williamson (1998) has identified three

other types of firms that are especially relevant to this study: 1)Bumiputra companies,

large conglomerates in which majority ownership is held by ethnic Malays; 2)

Singapore Inc. companies, backed by equity investments from the Singapore

government involved with developments throughout East Asia; and 3) National

champions competing on a Pan-Asian basis, such as Sime Darby in Malaysia which

controls a network of 200 companies with 32,000 employ ees.47

What is significant about these different types of firms is that each type has a mission substantially different from the general purpose of the firm as historically seen in the U.S.--to maximize shareholder value. The bumiputra firms in Malaysia, for example, are serving as a means of accumulating wealth for historically disadvantaged population groups in Malaysia. The Singapore, Inc. companies are attempting to create wealth for the government to reinvest in jobs and infrastructure development in

Singapore. National champion companies like Proton (Malaysia's auto manufacturer) reflect both an import substitution goal as well as a rallying point for national pride in the country's ability to build cars and compete globally. These differences will play out in the roles that the workforce development organizations play in Singapore and

Penang. 76

INFLUENCE OF ISLAM

In both Singapore and Penang, Chinese are in the ethnic majority. However, the Malays are the largest minority population group in both places, and most of them are Muslims. Furthermore, Penang, the subject of a later case study, is the only state in

Malaysia with a Chinese majority. As such, it exists in a country where Islam is the majority religion and a dominant cultural force. It is reasonable, therefore, to briefly examine some of the influences of Islamic cultural influences and their beliefs.

Islam is a religion founded on the belief that there is One and Only God, called

Allah. It is also built on the pillars of justice (adl) and goodness (ihsan), whereby all believers undertake the mission to establish this justice and goodness on earth, in order to insure that the permanent abode in the hereafter is blissful, pristine, and comfortable. Material pursuits must not transgress the limits of justice and goodness, neither must they jeopardize the spiritual, moral, intellectual, and physical strengths of mankind. It is not capitalism; however, active and global economic prowess should be a noble objective for Muslims, since economic success would be one proof of the truth of islam.48

There are three general principles which are, in theory, intended to dominate the economic behavior of every Muslim:

1. The Belief in the Day of Judgment and the life hereafter. Wealth is a blessing of Allah that can be used for good or evil. Everyone is urged to strive for it, but the means for doing so is strictly defined in the Koran. is associated with disbelief.

2. The Islamic concept of riches or wealth. The best method for attaining wealth is through one's own efforts and not by income generated by others' efforts. 77

All persons are exhorted to work and to avoid becoming a burden to their families. Followers should work for their own food.

3. The Islamic concept of success. Defined as obedience to Allah, not by the accumulation of wealth. The utilization of natural and human resources made available to an individual is not only a privilege, but a duty.49

In the past decade, interpretations of the Shariiah (Islamic law) have led to a distinctive version of Islamic economics. Perhaps the most visible example is the emergence of a separate banking system based on the principle of riba in which the practice of charging interests on loans is prohibited as is the paying of interest on deposits. Also, insurance, arbitrage, speculation, and indexation are alien concepts under the Shariiah. 50

While risk sharing is acceptable, the charging of, or paying of, interest is considered particularly oppressive. Those with wealth should contribute to the support of those who are worse off, especially the poor, the needy, or the destitute. Islam enjoins cooperation, consideration, harmony, and mutual assistance. No reward should be received without effort, as this violates Islamic notions of justice. Earning money through the efforts of others is considered idleness.51 The good Muslim businessman should be guided by his conscience and by God's written instructions to do the right thing by other people. He should pay a decent wage, charge a fair price, and be deeply restrained in how he spends his profits. 52

Critics of Islamic economics say its main purpose is not to improve economic performance but to prevent Muslims from assimilating into the emerging Western• dominated global culture. They say that, in pursuing cultural protectionism, Islamic 78

economics depends minimally on controlling the way Muslims behave in the marketplace. The chief instrument for fighting assimilation is the guilt that Islam fosters by characterizing certain universal economic practices as heretical. As a result, guilt-ridden Muslims seek atonement for economic choices they possibly perceive as sinful by contributing to religious causes, supporting religious movements, and undertaking acts of religious piety. As a result, there is a the tension between Homo

Islamicus and Homo Economicus, resulting in what Kuran refers to as "clashing selves' in the Muslim world. This also inflates the perceived religiosity of the Muslim world and magnifies the apparent constituency for extending Islam's influence and domain. It is the collectivist morality of medieval Islamic civilization. 53

Within Malaysia, there has been a further tension between those values which have their roots in Islam, and those related to the feudal society in the pre-colonial era.

The Islamic values emphasize equality, social justice, respect for individual rights, rule oflaw, security, order, and education. In contrast, the feudal systems have emphasized wealth, grandeur, power, position, military right, authoritarianism, hierarchy, social rigidity, and patronage. 54 The influence of the feudal values continues today. The tensions between the feudal and Islamic values are reflected in Malaysia's national economic policy, which is seen as blend of capitalism and nationalism, referred to by some as crony capitalism. 55

Although Islamic values taken as a whole are clearly different than the individualistic values of the West, many of them--discipline, frugality, moderate life-

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style, and honest work--are quite consistent with capitalist pursuits. Others, like the decision making process of consultation and consensus known as musyawarah and muafakat, are more collectivist oriented. 56 At the same time, many of the feudalistic values which still permeate life in Malaysia seem less benign. Over the years, leaders often criticized the Malays for lacking self-reliance, punctuality, self-sacrifice, public spirit, and a capacity for work. 57 Views like these may have their roots in the feudal heritage which saw the role of the people as loyal subjects, simple and indolent, and linked to the land. In this conception of people, they are best told what to do by the feudal elite. These kinds of perspectives, in fact, provided the springboard for the political career of Prime Minister Mohammed Mahathir who, in his 1970 book the

Malay Dilemma, criticized his people for being lazy, having laid around in the sun for too long.58 This may help us understand why the Malaysians scored highest on

Hofstede's measure of power distance.

Conclusion

Up until recently, the rapid economic growth in Singapore and Malaysia had led its leaders to trumpet the superiority of the Asian values as a means of achieving economic development. Singapore's boldness in confronting the West resulted both from justifiable pride for having transformed the country into an economic powerhouse and the blunt-speaking propensities of Lee Kuan Yew, Singapore's former prime minister. Although Singapore's smallness means that by itself it is non• threatening to rest of world, several factors have emerged that raise the prospect of

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convergence between Communist China and states like Singapore and Malaysia around a common ideology, possibly united against the U.S.59 These include the

''Look East" orientation of Malaysia and the aspirations of China to mimic the soft authoritarianism of Singapore, coupled with Singapore's heavy investments in China.

What we have seen thus far is that there are clearly differences in how East

Asian cultures approach economic development and business practices. Many of these differences are culturally-based. However, the link between these cultural values, particularly as they are attributed to Confucianism, and superior economic performance is less clear to many observers. In the next section we will consider some of the alternative interpretations of the role of Confucianist values in East Asian societies and their economies.

INFLUENCE OF CONFUCIANISM--A BROADER PICTURE

Unanimity does not prevail on the causal link between Confucist values and economic growth. Many refutational studies have been written and in continuing, I will review some of them to uncover the counter-plots in the cultural narrative. Because the set of values under consideration is perhaps most developed in Singapore, much of the following discussion is specific to that nation. In the course of the discussion, sources of Islamic influence also will be identified. The refutations are organized around the following five themes:

1. The Confucianism link to economic success is logically indefensible;

2. The Confucianism rationale is only situationally effective;

3. Confucianism is being manipulated by the state;

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4. Confucianism is not a static set of concepts; and

5. Confucianism is an incomplete explanation.

1. The Confucianism link to economic success is logically indefensible.

Dernberger cites Redding' s work, which he sees as seeking a middle ground between the 'culturalist' (Confucian values explain the miracle) and 'institutionalist'

(economic variables explain the miracle). Redding demonstrates that the East Asian value set is: 1) definitely different from Western values; 2) reflects the influence of a wide variety of sources, including other religions; and 3) can explain what he calls

'petty' capitalism (family enterprise), but not successful large-scale industrial enterprises or modem corporations. 60

Others argue that the weight of theory and evidence suggests core Asian values are neither necessary nor sufficient for rapid growth. The most common argument cited is that the lack of progress in imperial China and Korea--quintessential Confucian regimes--bears testimony to this.61 In Max Weber's studies of religion in China, the lack of tension in Confucianism was described as follows:

...completely absent in Confucian ethic was any tension between nature and deity, between ethical demand and human shortcoming...hence there was no leverage for influencing conduct through inner forces freed of tradition and convention. This was seen as the determining factor for the failure of the East to industrialize and to produce capitalism.62

More recently, scholars have begun to assert that Confucian values are effective to economic development, particularly those that emphasize: 1) pre-eminence

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of education; 2) need for accomplishment; 3) dedication to work; 4) family and obligations; and 5) de-emphasis of self.63 However, at this level of abstraction, such values do not appear to be substantially different from those of the Protestant Work

Ethic which holds that all work (from the highest to the lowest), was a "calling". As a way of life, the Protestant ethic was one of piety, frugality, discipline, prudence, the strenuous devotion to work, and delayed gratification. Its built-in restraint against consumption also led to capital accumulation, which served as a source of investments .64 It is not clear, then, that such values are particularly Confucianist. As

has been noted, once the Asian/Confucian values are so diluted to this level of generality, they lose their distinctiveness and become values which can be expressed in any society.65

According to Chan, Confucianism was clearly used as a legitimator for

Singapore's economic development efforts in an ex post facto manner. He says when embarking on economic development, Lee Kuan Yew had viewed Singapore's Chinese heritage initially as an obstacle. There is, he says, little symmetry between Lee's rugged economic development strategy and the Confucian mold of harmony. Chan argues that Lee needed an over-arching theory for his program of social engineering, and the Confucist scholars were only too willing to play their traditional role in justifying it.66

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2. Confucianism is only situationally effective in support of economic development.

Vogel identifies a series of five situational factors which he believes must be taken into account beyond Confucianist values: 1) U.S. aid to East Asian nations; 2) destruction of the Old Order; 3) a sense of political and economic urgency; 4) an eager and plentiful labor force; and 5) the Japanese model of industrial development.

While these factors alone help explain much of East Asia's success, when tradition and culture are factored in, a more complete picture emerges. In this context, what Vogel calls a neo-Confucian ethic is important to the story of Singapore and the other "Asian

Tigers."67

As defined by Vogel, this ethic consists of three interacting elements: 1) meritocratic elite; 2) an entrance exam system; 3) the importance of the group; and 4) self-cultivation. The combination of the five situational factors with the four neo•

Confucianist elements, when further combined with other global factors such as consumerism, export-orientation, and the cycle in which success breeds success paint a much more complex picture of East Asian economic success.68

Charles Hampden-Turner argues that the Confucian values have been in the right place at the right time. They have proven particularly supportive of economic development in those countries that are playing "catch-up" capitalism, such as

Malaysia. 69 He contrasts catch-up capitalism with "pioneer" capitalism. Hampden•

Turner's description of the different features of both types is shown in the following table:

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Table 4.

Features of Development in Two Stages of Capitalism

PIONEER CAPITALISM CATCH-UP CAPITALISM Time Factor Earlv industrializer Late industrializer Development Strategy Innovate across a broad spectrum Catch-up in those areas seen as of entrepreneurship most valuable Historical Role of Generally ignorant of business Generally well-informed of what is Government developments feasible technologically Social Policies Imposed retroactively on business Included in concerted plans to industrialize Labor Relations Usually poor, since catch-up Usually good, since all grow countries put pressure on labor wealthier as nation moves from costs, which leads to attempted lower to higher wages wage cuts Dominant Ethic Competitive, since "best solution" Cooperative, since "best solution" remains to be discovered already found to work Emulation needed Role of Government Referee and regulator of Coach and facilitator of competition cooperation From: Charles Hampden-Turner, (1994). "Getting wiser about the Asians," Director. Vol. 47, No. 11, p. 47.

The question raised by Hampden-Turner's schemata is whether or not the

Asian values will support economic growth beyond the catch-up phase. As we shall see, there are indications captured in some of the other refutational arguments, and indeed in the actions of East Asian governments, that it may not. For example,

Singapore's Prime Minister Goh Chok Tong recently noted: ''We must get away from the idea that it is only the people on the top who should be thinking, and the job of everyone else is to do as told."70 This indicates a shift away from the hierarchical control orientation in Singapore.

Another characterization of the effects of Confucianism on East Asia is that of

Khun-Eng Kuah. Kuah believes that the values underlying Confucianism are of

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practical value to a newly developing nation-state such as Singapore. As the following statement indicates:

Confucianism is seen as an important ideological tool for social engineering as well as an asset to promote economic development and modernization. As a tool, Confucianism provides a set of moral and ethical values that legitimize the perpetuation of a highly centralized and authoritarian form of government. 71

Kuah says the government was acting on the proposition that an understanding of the

Confucian teac ngs and the proper observations would result in stability within the family, society, and the state. On this basis, the Confucian ideology was seen as the best alternative available--at least for the time being. However, he notes that while the ideology of Confucianism seems to work for the Chinese, the same cannot be said for the 16 percent Malay, the 7 percent Indians, and the 2 percent other ethnic groups in

Singapore's population. Since the Singaporean state must contend with plurality and cater to needs of others if it wants racial harmony, Kuah argues that Singapore may have to disguise its label and make it at least universal under a different name.72

3. The Confucianist values are being manipulated by the state.

The noted political scientist Lucian Pye has written:

An ethical-moral dimension of the Confucian sense of legitimacy seems to make the East Asian governments feel that they not only have the right to intervene in people's lives but they have a definite obligation to do so if it can help improve people's condition.' At one time such interventions tended to be detrimental to growth, but that is no longer the case now that governments know more about how economies grow.73

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This statement appears to justify the role of Singapore's strong government intervention in their economy both on the basis of its Confucianist values and because it now has knowledge about how its economy works. Not everyone agrees.

Among the harshest critics of the link between Confucianism and economic success are those who believe that Confucianism is a tool that is being used by the state for purpose of social control. To them, the Asian values hypothesis is really a way of justifying the current political order in parts of East Asia. As such, say Islam and Chowdhury, like all state-sanctioned ideologies, it is not intended to be a carefully constructed, intellectually rigorous proposition. In Singapore's case, these values are simply a way of imposing social cohesion from the top.74

In Singapore, these manipulation arguments can be partly dated from August

1980, when the Singapore government released two previously confidential reports dealing with workers' attitudes. They revealed that many employees were lacking in loyalty and proper spirit, that they were job-hopping, reluctant to do shift work, and adhere to narrow job specifications. In response, Prime Minister Lee Kuan Yew admonished Singaporeans to develop a group orientation to the national culture captured in this quotation:

We can build up this team spirit, this esprit de corps, where every individual gives of his best for the team. The team, the nation, in tum, takes care of the individual, fairly and equitably. The art of government is the art of building up this team spirit.75

Subsequently, in 1982, the government began a campaign to promote a

Singaporean ethos in the secondary schools. It installed a curricular program with five

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options: 1) Buddhist studies; 2) Bible studies; 3) Hindu studies; 4) Islamic studies; and

5) world religious studies. Confucian studies is a secular subject offered as a sixth option. With 77 percent of the population of Chinese ancestry, it was expected that

Confucianism would help check the powerful influence of materialistic and individualistic values on young Singaporeans.

Ironically, Singapore had not always been entranced with Confucianism. As of

May 1971, soon-to-be prime minister Lee Kuan Yew commented that: "The English• educated do not riot." 76 Once achieving power, according to Chan, Lee adopted

Confucius as the:

...ever-ready fig leaf for hegemonists seeking legitimization. In his brave new world, what is necessary is not democracy, but good government, defined by Lee, where presumably, like in Confucius's ideal state, all shall be trained to know and keep their places.77

Of further interest is Lee Kuan Yew's statement of 1992 in which he said:

Values are formed out of the history and experiences of a people. One doesn't learn what is right and wrong out of a book. One absorbs these notions through the mother's milk.78

Lee's statement runs counter to the heavy emphasis that Singapore has put on values instruction in its schools, perhaps demonstrating Islam and Chowdhury' s proposition that state ideologies need not demonstrate intellectual rigor.

Foreign scholars invited by the Singapore government recornmended that

Confucianism be brought up to date and reconciled with other ideals. For example, the

Confucian preference for family members (nepotism) had to be modified in order to accommodate meritocracy, and the family hierarchy precept was modified to reflect a

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parent-child relationship that is more respectful of relationship than subordination. At the same time, the scholars recommended that the Confucian-based value of the young looking after the old be continued and encouraged since Singapore is a non-welfare state.79

To institutionalize the process of updating values, the Institute of East Asian

Philosophies was formed, and informally called the 'house sage' by Chan. It has the permanent charge of identifying when those values integral to Confucian virtue should be amended or changed and when they should be reconstructed and reformulated into a new set of Confucian rites and norms, in accordance with industrial social change. 80

Whether evil or not, there is nothing secretive about the Singapore government's strategy to mold its citizens' values. Lee argues that firm government control is part of Singapore's economic development strategy to leapfrog the region and link up to the developed world. In order to do so, he says:

We had to change people's habits... to get their companies to come here and export back to industrial countries. That was one strategy which meant we needed a better-educated, cooperative workforce. So we had to change attitudes from a communist, noncooperative unions to cooperative unions. And some multinationals, like Hewlett Packard, didn't want any unions...so the infrastructure was put in, and the people's behavior had to change because it was a rough-and-ready society...They responded because they knew that if we didn't change, we could not make a living...we would perish.81

In the refutation which follows, we see a very emotional response in which the use of innuendo and ad hominem attacks on intellectual opponents are obvious.

The alleged linkage between Confucianism and the apparent economic successes in a number of East Asian economies enjoys near axiomatic status. Some claim...the role of Confucianism is analogous to the role of Weber's

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Protestant Work Ethic in Europe and the West. Confucianism is a political legitimating agent--a role that it has played for over 2000 years. Scholars who advocate such a linkage may be also be guilty of politicization, if not also poverty, of scholarship. 82

Throughout history, says Chan, changes in the interpretations of Confucianism have really been functions of the socio-political contexts of the re-interpreters and have always been functions of ideological, or the felt political needs, of the political masters of the re-interpreters.83

According to Chan, going back to 551-479 BC, Confucius's fervent hope was that the future should be like the past--that the decaying feudal society around him should return to its halcyon days, when kings were kings and people knew their places.

Han Fei (280-233 BC) condemned such ideas as the ways of antiquity and called their practitioners 'stump watchers'.84 From this comment we see that Confucianism is an intensely conservative system of values. Such a system is difficult to change, as

Redding notes that the:

...passivity induced by a system which places the individual in a powerfully maintained family order, itself inside a powerfully maintained state order, itself seen as part of a natural cosmic order (Taoist and Buddhist traditions), and all dedicated to the maintenance of the status quo. When the only true authority is tradition, and when deviant behavior meets heavy sanctions from an early age, when deference to elders is automatic, and when dependence on those same elders is nonnegotiable, then all the ingredients are present for producing a social system characterized on the one hand by an impressive stability and on the other hand by a dehabilitating incapacity to adapt, innovate, and change. 85

Chan argues that there is an increasing convergence of interpretations about the role of Confucianism on both sides of the Taiwan Strait. Scholars outside China, in spite of their differences in ethnicity and nationality, share a common world view with

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their colleagues in China--a version of national socialism. Confucianism, he says, has never been concerned with economic development; rather, it has always been concerned with political legitimization and compliance. 86

4. Confucianism is not a set of static concepts.

Another set of refutations claim that the effects of Confucianism on economic development cannot be isolated, because Confucianism, as a set of values, is in a state of constant evolution. Ezra Vogel argues that current trends indicate fundamental change is occurring in East Asian countries. Trends causing this change include: the end of cheap labor; the accumulation of significant financial assets; the growth of financial and other services; and a more vocal public. The type of society which existed through the rapid industrialization--with bureaucratic, authoritarian governments, eager workers who worked for low wages, companies that made decisions without regard to finance, and tight links between national and corporate interests--is already being rapidly transformed. 87 We will consider the direction and degree of this transformation below.

Lodge, too, concludes that national economic, political, and social systems are being forced to converge. He identifies two global forces that are bringing about this change: 1) intensifying competition among the different systems; and 2) pressures to preserve ecological integrity. 88 Lee somewhat agrees with this view, although from a longer-term perspective:

So 100 years from now, I'm sure that Europeans, East Asians and Americans will all arrive at something approximating universal values and norms (human behavior not rights). The only exception might be the Muslims, because of

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their strict injunctures to punish criminal behavior. They have to train a whole generation of young minds with a scientific approach to the solving of problems. Inevitably that critical scientific mentality must bring about a change in their perception of core values. But it is a long and slow process.89

Systematic attempts to track the kinds of converging changes that Vogel,

Lodge, and Lee say are occurring, or will occur, in values have recently been conducted. Ralston, Holt, Terpstra, and Kai-Cheng (1997) undertook a study asking whether a set of universal managerial work values were emerging as the world economy integrates. This study evaluated work values across nations in terms of their convergence, divergence, and what he called crossvergence. They hypothesized three possible outcomes:

I. Convergence. As nations become industrialized, they will embrace common values with regard to economic activity and work-related behavior. Western management techniques, behavior, and business systems will comprise the forces for change, and managers of global companies will be the change agents.

2. Divergence. In this scenario, national culture, not economic ideology, drives values. Even if a company adopts capitalism, the value system will remain unchanged.

3. Crossvergence. One possible definition of this outcome is an integrating alternative similar to the "melting pot" philosophy. A broader definition views crossvergence as something different, rather than something in between. The interaction of culture and ideology forms something unique both in terms of values and economic ideology.90

In testing his hypotheses, Ralston, et al measured the various managers on the following dimensions--Individualism/Collectivism; Openness to Change/Conservatism; and Self-Enhancement/Self-Transcendence. They defined these dimensions in terms of ten subdimensions: 1) Power; 2) Achievement; 3) Hedonism; 4) Stimulation; 5) Self-

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Direction; 6) Universalism; 7) Benevolence; 8) Tradition; 9) Conformity; and 10)

Security. Clusters of these sub-dimensions were developed as indicators of the major dimensions.

From this work, Ralston, et al concluded that dimensions of work values among managers were indeed changing. He found a crossconvergence on the dimension of individualism/collectivism, based on the scoring on the sub-dimensions comprising individualism--achievement, hedonism, stimulation, and self-direction; and those measuring collectivism, and in particular, benevolence. They also identified crossconvergence on the dimension of openness to change/conservation, based on measurement of the sub-dimensions of stimulation and self-direction, tradition and conformity, and security. A divergence on self-enhancement/self-transcendence, based on the sub-dimensions of self-direction, conformity, hedonism, and achievement, was found.

Ralston, et al' s findings support neither divergence nor convergence conclusively. For this reason, they concludes that neither culture wars nor a homogenized global management culture are likely scenarios. However, there has been, and will continue to be change in values held across many cultures primarily through crossvergence91

Evidence supporting the concept of crossvergence has been reported by James

Mittelman. In discussing the interaction between local cultures and globalization, he argues that the two are actually combining to create new and distinct cultures. People

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seize aspects of globalization and localize them, creating such crossvergences as

Singlish (Pidgin English), and fast food restaurants customized for local markets. Of special interest to this study is Mittelman's example of Malaysian efforts to inculcate economic globalism with the ethical and moral values of Islam and to preserve certain times of the year for celebration of indigenous culture. According to Mittelman, the crossvergence occurs through a process whereby local peoples renegotiate the effects of global capitalism to fit with their local cultures.92

5. Confucianism is an incomplete explanation for East Asian economic success.

Another argument against the preeminence of culture in explaining economic success comes from Lam, Patiel, and Shannon (1996). They argue that most studies that focus on the impact of Confucianism fail to explore the breadth of Chinese culture and the peculiarities of Confucianism's impact on society. There are other dimensions of Chinese culture present in East Asian societies, including Taoism and Buddhism, which have challenged the orthodox culture of Confucianism with its stifling restrictions and stereotyped behavior. These influences have rejected the primacy of central authority, legitimized rebellion as a means of escaping domination, glorified the rebel, and trusted in magical formulas to transform economic and social reality. Since these different cultures have always existed side-by-side and have interacted with, and inspired, one another, to emphasize Confucianism overlooks the interactive effects it has had with the other cultural or religious influences. 93

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Lam and associates are especially critical of the role that Confucianism's concept of patriarchal hierarchy has played in economic development. They remind us that a main belief of Confucianism is glorification of the exercise of authority by an educated elite who claim superiority and the right to rule by virtue of their wisdom. In such a society, one achieves social mobility through the channel of formal education.

At the center of this theory is a belief in the importance of order, hierarchy, and correctness. The duty of all a ruler's subjects is to obey and conform him or others in higher hierarchies. This leads to a sort of "cognitive formalism" that is a barrier to modernization.94

Furthermore, they argue that Confucianism itself is hostile to entrepreneurship and cite four supporting reasons: 1) it disparages merchants, placing them at the lowest societal status; 2) its stress on ritualized social behavior runs counter to the flexibility and initiative required of entrepreneurs; 3) its emphasis on rote learning of classical documents and texts does not translate to systematic learning to the economy; and 4) the focus on education as a way entering employment in the state bureaucracy has siphoned talent away from the economy and stifled private sector economic activity by subordinating it to the bureauc racy.9 5

The combination of shame as the primary standard for moral behavior and the highly stereotyped relationships expected between superiors and subordinates creates the cultural concern with maintaining face. To admit fault could cause the patriarch to lose face and undermine his legitimacy. As organizations grow larger and the distance

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between personal loyalty and intimate relationships grows, the premium on orthodoxy and face increases. As more outsiders are hired, tensions and cracks begin to appear within the organization. The patriarch often reacts like an emperor and punishes non• conforming behavior. Consequently, many large firms become more focused on internal rivalries than on the marketplace. As an ideology, Confucianism, with its emphasis on loyalty and harmony, serves to suppress these conflicts, leaving them unresolved. According to Lam, et al, this is in contrast to Western firms where the conflicts among competing functions are purposively managed.96

Other observers believe that an emphasis on Confucianist values neglects the broader rich intellectual heritage of East Asia. For example, while acknowledging the importance of the Confucianist heritage, Tung identifies a range of other intellectual influences which have influenced East Asian business practices.97 These include several classics on the art of warfare such as: The Art of War, by Sun Tzu (2500 years old); The Book of the Five Rings, written by Samurai Miyamoto Musahi in the late

16th, early 17th centuries; The Three Kingdoms, a popular Chinese fictional classic written by Lo Kuan-Chung in the 14th century; and Thirty-six Stratagems, based on principles of/ Ching (The Book of Changes).

From her reading of these works, Tung identifies 12 key management principles and strategies that affect how East Asian managers and executives conduct business. I will consider some of these principles later in Chapters IV and VII, but my point for the moment is that many of these principles have little or no connection to

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the Confucianism. This is particularly true for those related to implementing business strategies, such as the reliance on tactics like deception and taking advantage of a competitor's weaknesses.

Tung notes that, while the East Asian countries may derive their business sense from the same philosophers, they may apply the learnings quite differently. As an example, she cites the different reactions that the Japanese and Chinese may have to a seemingly hopeless situation. The Chinese may prefer escape, while the Japanese would often choose death. As we have seen in recent months, a number of Japanese businessmen have exercised this option in the face of financial difficulties. Citing this difference, Tung points out that the Japanese might avoid public displays of emotion, while the Koreans condone it. From her perspective, the lesson is that broad cultural stereotypes of East Asian values should be avoided.98

One final argument on the incompleteness of the cultural explanation comes from those who believe that culture is mediated by other factors. For example, Van de

Vliert and Van Yperen argue that ambient temperature substantially determines work attitudes. They say that, to the extent that workplace temperature can be controlled by appropriate heating and cooling, the management of productivity can be improved. 99

Such an argument might help explain the timing of economic development in East

Asia, as it accelerated in the 1960s after air conditioning became more widely available in the tropical climates. To a degree, such an argument also calls into question the

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criticisms that Malathir made of his people for their lack of productivity in his book

The Malay Dilemma.

However, Peterson and Smith conclude that the effect of ambient temperature on role stress (such as work) is largely mediated by its contribution to the historical evolution of cultural values.100 Thus, while it cannot be said that temperature is more important than culture in determining work performance, it is clear, that other factors mediate and influence the effects of culture on economic development.

CONCLUSION

We conclude with residual ambiguity about the nature and direction of the relationships between cultural values and economic development. To help in thinking through this ambiguity, the work of Hamilton and Biggart is instructive. They too have searched for ways of explaining organizational structure in East Asia and have reached conclusions that are relevant to this study.

In their view, profit and efficiency arguments drawn from the economics paradigm are too specific and narrow to account for different organizational forms.

They believe economic models can predict organizational structure only at the most superficial level. Likewise, the Confucianist argument alone is an unsatisfactory explanation, because culture is a broadly-based cognitive factor that affects society in general. For that reason, they believe that it explains nothing in particular.

Furthermore, as we have seen, East Asian societies have been deeply influenced by other value sets such as Buddhism, Taoism, and other folk religions in addition to

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Confucianism. Thus, in Hamilton and Biggart's opinion, the cultural explanation is not able to do is distinguish the many differences that exist among these societies, including their organizational structures. They conclude that organizational structure is situationally determined .101

In order to move toward greater clarity of understanding, the bridging themes among and within the various story lines must be identified. This is the task that I take on in the next chapter. I will be looking for the influence of the cultural and economic factors on the structure and functions of the workforce development organizations in

Singapore and Penang. Hamilton and Biggart's concept of situationality will be a key factor in the reciprocal translation of the various paradigms.

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ENDNOTES

1 Avner Grief (1994) ·-cultural Beliefs and the Organization of Society: A Historical and Theoretical Reflection on Collectivist and Individualist Societies," Journal of Politics and Economics, Vol. 102, No. 5, pp. 913-916.

2 Geert Hofstede and Michael H. Bond (1988) "The Confucius Connection: From Cultural Roots to Economic Growth," Organization Dynamics, Vol. 16, No. 4, p. 6.

3 Hofstede and Bond, p. 12-13.

4 Richard H. Franke, G. Hofstede, and M. H. Bond (1991) Cultural Roots of Economic Performance: A Research Note," Strategic Management Journal, Vol. 12, pp. 171.

5 Hofstede and Bond, p. 19.

6 Franke, et al, pp. 165-172.

7 Hofstede and Bond, p. 17.

8 Hofstede and Bond, p. 21.

9 Ben Kedia and Rabi S. Baghet (1988) "Cultural Constraints on the Transfer of Technology Across Nations: Implications for Research in International and Comparative Management," Academy of Management Review, Vol. 13, No. 4, p 566.

10 Robert Doktor (1995) "Differences Between the Conceptualization of Cause and Effect Relationships Found Between Asian and Anglo Managers," Human Systems Management, Vol. 14, No. 2, pp. 113-118.

11 Robert J. Marshak (1994) "Lewin Meets Confucius: A Re-View of the OD Model of Change," Journal of Applied Behavioral Science, Vol. 29, No. 4, p. 409.

12 Wei-ming Tu (1993), "Confucianism," in A. Sharma (ed.) Our Religions, San Francisco: Harper, p. 146.

13 Peter R. Moody (1996) "Asian Values," Journal of International Affairs, Vol. 50, No. 1, p. 182.

14 Fan Xing (1995) "The Chinese Cultural System," SAAf Advanced Management Journal, Vol. 60, No. 1, p. 16.

15 George C. Lodge (1995) 1.\;Janaging Globalization in the Age of Interdependence, Oxford, UK: Pfeiffer & Co., p. 107.

16 Hofstede and Bond, 1988, p. 7.

17 Richard D. Lewis (1994) "Wizened and Wiser," Afanagement Today, May, p. 100.

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18 Lodge, p. 105-106.

19 Lodge, p. 106.

20 Denny Roy (1994) "Singapore, China, and the Soft Authoritarian Challenge," Asian Survey, Vol. 43, No. 3., p. 231.

21 Roy, p. 231.

22 Xing, p 17.

23 Hofstede and Bond, p. 8.

24 Xing, p. 19.

25 Xing, p. 19.

26 Khun-Eng. Kuah (1996) "Confucian Ideology and Social Engineering," Journal of Contemporary Asia, Vol. 20, No. 3, p. 374.

27 Robert Westwood (1997) "Harmony and Patriarch: The Cultural Basis for Paternalistic Headship among Overseas Chinese," Organization Studies, Vol. 18, No. 3, p. 452.

28 Moody, p. 179-181.

29 Moody, p. 192.

30 Hung-chao Tai (ed.) (1989). Confucianism and Economic Development: An Oriental Alternative, Washington, DC: Washington Institute Press, p. 15-17.

31 Hung-chao Tai, p. 18

32 Hung-chao Tai, pp. 25.

33 Hung-chao Tai., p. 26.

34 Grace Goodell (1996) "Another Way to Skin a Cat: The Spirit of Capitalism and the Confucian Ethic," The National Interest, Vol. 42, pp. 67-71.

35 Katherine R. Xin and Jone L. Pearce (1996) "Guanxi: Connectedness a Substitution for Formal Institutional Support," Academy of Management Journal, Vol. 39, p. 1645.

36 Irene Y. M. Yeung and Rosalie L. Tung (1996) "Achieving Business Success in Confucian Societies: The Importance of Guanxi," Organization Dynamics, Autumn, p. 60.

37 Peter J. Williamson (1997) "Asia's New Competitive Game," Harvard Business Review, Sep.-Oct.,. p. 64.

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38 Gordon Redding (1995) "Overseas Chinese Networks: Understanding the Enigma," Long Range Planning, Vol. 28, No. 1, p. 62.

39 Martin K. Whyte (1996) "The Chinese Family and Economic Development: Obstacle or Engine?" Economic Development and Cultural Change, Vol. 45, No. 1, p. 9.

40 Whyte, p. 9.

41 Westwood, p. 448.

42 Westwood, p. 449.

43 Geert Hofstede (1993) "Cultural constraints in management theories," Academy of Management Executive, Vol. 7, No. 1, p. 86.

44 Whyte, p. 21.

45 John Barnathan and Peter Engardio (1995) "Asia's New Giants," Business Week, Nov. 11, p. 64-68.

46 Yeung and Tung, p. 64. 47 Williamson, p. 199.

48 Aidit bin Haji Ghazali (1994) "Consumer Credit from the Islamic Point of View," Journal of Consumer Policy, Vol. 17, p. 443- 445.

49 Sud.in Haron (1995) "The Framework and Concept of Islamic Interest-Free Banking," Journal of Asian Business, Vol. 11, No. 1, p. 35.

50 Timer Kuran (1996) "The Discontents oflslamic Morality," American Economic Review, Vol. 86, No. 2, p. 439. ·

51 Ghazali, p. 449.

52 Economist (1994) "The Cash Flow of God," Aug. 6, p. 8.

53 Kuran, p. 438-439.

54 Shaharuddin Maarut (1988) Afalay Ideas on Development: From Feudal Lord to Capitalist Times. Kuala Lampur: Times Books International, p. 149-150.

55 Christopher Lingle (1996) Singapore's Authoritarian Capitalism: Asian Values, Free Market Illusions, and Political Dependency, Fairfax, VA: The Locke Institute, 146.

56 Ravon V. Navaratnam (1997) Afanaging the klalaysian Economy: Challenges and Prospects, Selongor Darul Ehsan: Pedanduk Pub., p. 181.

57 Navaratnam, p. 152.

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58 K. Raslan (1997) "Two Asian Leaders." F'ar Eastern Economic Review, VoL 160, No. 26, p. 224.

59 Roy, p. 241.

60 Robert F. (1996) "Capitalism and the East Asian Miracle'' in G. T. Yu (ed.) Asia's .New World Order, Washington Square, NY: NY University Press, p. 49.

61 Iyanatul Islam and Anis Chowdhury Asia Pacific Economies: A Survey. London and New York: Routledge, 13 J.

62 Khun Eng Kuah Confucian lOei:HoJ; and Social Engineering," Journal of Contemporary Asia. Vol. 20, No. 3, p. 152.

63 Ku.ah, p. 381.

64 Daniel Bell (1996) Protestant No. 3, p. 36.

65 Islam and Chowdhury, p. 131.

Chan (1996) "Confucianism Development in East '"Journal Contemporary Asia, Vol. No. 1, p. 39.

61 Ezra F. (1991) The Four Little New York: Harvard Un.iv. p. 85·91.

pp. 92-102.

69 Charles Hamnlde1r1 (1994). "Director. Vol. No. 11, pp. 44-47.

70 Lewis Kraar LeeKwm 4, p. 102.

71 Kuah, p. 374.

72 Ibid., p. 382.

Vol. No. 3, p. 41.

75 Thomas J. (1989) an.d Modernization: The m2at10re Bureaucracy in Hung-chao Tai (ed.), Confucianism and Economic Washington, wa:s1u1uucm Institute Press. p. 215.

i6 p. 37.

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78 Lee Kuan Yew (1992) "What Kind of New Order in East Asia," New Perspectives Quarterly, Vol. 9, No. 1, p. 6.

79 Kuah, p. 375-381.

8° Chan, p. 38.

81 Kraar, p. 105.

82 Chan, p. 28.

83 Chan, p. 29.

84 Chan, p. 30.

85 Lodge, p. 108.

86 Chan, p. 37.

87 Vogel, 1991, p. 108.

88 Lodge, p. 109.

89 Lee, p. 6.

90 David A Ralston, D. Holt, R. Terpstra, and Y. Kai-Cheng (1997) "The Impact of National Culture and Economic Ideology on Managerial Work Values: A Study of the United States, Russia, Japan, and China." Journal of International Business Studies, Vol. 28, No. 1, p. 183.

91 Ralston et al, p.202.

92 Noraini Shariff (1998) "Globalization Not Totally Good Says Visiting Don," New Straits Times, Feb. 24, p. 6.

93 Danny Lam, Jeremy T. Patiel, and John H. Shannon (1996) "The Confucian Entrepreneur? Chinese Culture, , and Intellectual Property Piracy in Taiwan, Asian Affairs: An American Review, Vol. 20, No. 4, p. 206.

94 Lam, et al, p. 206.

95 Lam, et al, p. 207.

96 Lam, et al, p. 208.

97 Rosalie L. Tung (1994) Strategic Management Thought in East Asia," Organization Dynamics, Vol. 22, No. 4 p. 65.

98 Tung, p. 65.

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99 E. Van de Vliert and N. W. Van Yperen (1996) "Why cross-national differences result in overload? Don't overlook ambient temperature," Academy of .Afanagement Journal, Vol. 39, p. 986.

100 Mark F. Peterson and Peter B. Smith (1997) "Does National Culture or Ambient Temperature Explain Differences in Role Stress? No Sweat," Academy of}vfanagement Journal, Vol. 40, No. 4, p. 930.

101 Gary G. Hamilton and Nicole Woolsey Biggart (1988) "Market, Culture, and Authority: A Comparative Analysis of Management and Organizations in the Far East," American Journal of Sociology, Vol. 94S, p. S87.

CHAPTER IV

BRIDGES ACROSS PARADIGMS

As I have shown in the past two chapters, many stories have been told to explain economic development in East Asia. Within the economics paradigm, the main characters are variously market forces, developmentalist states, something in between these two, inexorable global forces, or negotiated interpretations. In the cultural narratives, the East Asian experience was explained in terms of Confucianism, or new variations of it under the rubric of Asian values. Islamic concepts added another interpretative dimension. A series of refutational narratives contended that the cultural explanation is too general, false, incomplete, or, even if true, a negative force. I concluded Chapter III noting that the concept of situationality is important to gaining a clearer understanding of what these various interpretations mean.

In this chapter, my goal is to make some sense of the narratives in a context of situationality. By situationality, I mean that at certain times, in certain places, people acted to create certain types of organizations to accomplish goals. These actions were based on both historical understanding of what might work, a present understanding of opportunities and constraints, and perceptions about an uncertain future.

I will employ two interpretative frameworks in this task: 1) reciprocal translation; and 2) social construction theories. The reciprocal translation process will help understand what metaphors may have influenced decisions about organization.

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The social construction theories of Granovetter, Giddens and North will help in understanding the process of organization development. Because these frameworks are central to the balance of this study, they are described in more detail below.

THEORETICAL TOOLS

Reciprocal Translation

First, treating the narratives as literary translations, I will reduce them to metaphors that are basic to the upcoming accounts of the workforce development organizations in Chapters V and VI. In doing so, I will use reciprocal translation, a technique developed in the field of meta-ethnography, to identify key ideas and concepts that can be translated across paradigms.1 These metaphorical reductions will then be translated into a set of questions that will serve as the interpretative framework for the case studies.

I will enrich the reciprocal translation process by employing the strategy of interplay to assess the dimensions of those concepts that cross paradigms.2 Crossing paradigms involves identifying those ideas that either converge or diverge between paradigms, i.e. contrasts and connections. The interplay strategy enables the simultaneous examination of ideas and concepts along three dimensions: 1) generality and specificity; 2) clarity and ambiguity; and 3) stability and instability. 3

Interplay strategy emphasizes the interdependence between generality and specificity and the tension between the two. To Schultz and Hatch, this implies that researchers need to conceive of the two in terms of one another and, contextuality can

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be recognized only from a position of generality and vice versa.4 This conception helps us understand how more general explanatory concepts such as market forces can exist concurrently with more specific explanations of East Asian success such as developmentalist states. While the former addresses an outcome--the general performance of an economy, the latter addresses the function of a specific actor in the economy--the government.

Likewise, there are relationships and tensions between the dimensions of clarity and ambiguity.5 Questions about whether the surface manifestations in East Asia express or represent deeper (cultural) essence are evident in the narratives we have considered. While clarity is emphasized by the kinds of deductive analysis seen in the economics paradigm, ambiguity is emphasized in the associative mode of analysis employed by many culturalists. In examining the various metaphors, I will consider the degree to which these two perspectives reflect commonalties.

The range between stability and instability of various interpretations is the third dimension that can be evaluated through the interplay strategy. According to Hatch and Schultz, both functionalism and interpretativism produce static views of culture, regardless of whether analytical processes are convergent or divergent. Convergent processes focus the research on finding singular points of view that result in a stable representation that, in turn, yields a stable appreciation of culture; divergent processes generate additional points of view that undermine the stability of earlier representations and therefor yield instability of interpretation.6 I have already

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employed this technique of undermining stability in the discussion of the counter• claims against the argument that cultural values are deterministic. As we proceed, the interplay of the metaphors from the paradigms on the three dimensions will be helpful in identifying further issues to be considered in the case studies.

Social Construction Theories

Under the general framework of social construction theory are three mid-range theoretical tools that I will employ to bridge the various explanations for East Asian success. The include theories of: 1) structuration (Giddens, 1984) 7; 2) social

8 9 embeddedness (Granovetter, 1992) ; and social learning (North, 1994).

Structuration Theory

Most often associated with the sociologist Anthony Giddens, the particular contribution of structuration theory to this study is that can bridge both the interpretative explanations culture and the structural explanations of economics.

Some scholars have defined structuration as a second order concept that creates transition zones among paradigms. 10

The bridging capabilities of structuration theory have been described by

Whittington. 11 He sees structuration theory as helpful in explaining how individual human actors as members of, and operating in, multiple social systems and structures, draw upon one or more of these systems/structures for their corresponding rules and resources. For example, a particular individual could be simultaneously a member one or more non-voluntary/voluntary groups based on their gender, religion,

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profession, or national cultures and might behave differently in each group. While this can result in contradictions, it can also result in change. 1 2 That individuals function in multiple roles and have varying zones of agency in each of these roles helps explain how seemingly conflicting metaphors across paradigms can exist simultaneously.

According to Yates, structuration theory helps deepen understanding by incorporating both individuals and institutions. It avoids institutional determinism and gains a dynamic aspect by recognizing that individuals have the ability to act in ways other than those that reinforce the existing social or organizational structures. In this context, ongoing work practices, not just single events, are important to understanding change.13

To Yates, structuration is not a positivist theory. It does not provide causal models or hypotheses to refute, nor does it supply a recipe for research. Rather, she says, structuration is a way of understanding.14 Giddens himself has been quoted as saying that "the theory should be utilized only in a selective way...more as a sensitizing device than as providing detailed guidelines for a research procedure." 15

Structuration theory is concerned with the process by which individual actors make sense of their environment and how their interpretations are reflected in social systems at any given moment. One premise of this theory is the duality of structure, meaning that the structural properties of a social system are both the medium and the outcome of the practices they recursively organize. The process of structuration occurs through three modalities: 1) interpretative schemes (knowledge basis); 2)

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norms (rights and responsibilities) and 3) facilities (patterns of autonomy and dependence). These interact to create institutions, or the rules and resources that are organized as properties of social systems. 16 These institutions, in turn, influence the nature of the organizations that are created within societies. The reader will recognize a similarity between these modalities and the "modes of regulation" concepts described in Chapter II' s discussion of regulation theory.

A foundation of structuration theory is that institutions, in and of themselves, do not have agency--or the power to make things happen. Says Giddens on this point:

Humans are knowledgeable agents, operating in specific contexts, not just pawns of forces--whether economic or social--larger than they are. Structures exist only as they are enacted by human agents, the structural properties of social systems are reproduced chronically across time and space. Structures comprise rules and resources which human agents draw on and reproduce as they act and are both enabling and constraining. 17

In this conception, structures are the result of the momentary definitions attached to them by various actors (real people). In turn these institutional definitions influence how people with agency act on a daily basis. Giddens refers to this process as instantiation. The relationship of particular actors to society becomes less one of passive embeddedness, and more a matter of active engagement. 18 The concept of agency will be useful in understanding the processes of interaction among various interest groups that instantiate workforce development organizations.

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Criticisms of structuration theory.

Stucturation theory is not without its critics. Even with Giddens' own caveats, the theory has been criticized by Mestrovic for: a) over-emphasizing the significance of agency; b) being a static theory unrelated to continuity with the past; and c) having application only in the sociological study of Western societies. 19 Since the structuration theory is a major tool employed in this study, these criticisms must be addressed.

I argue that the concepts underlying structuration can be applied to non•

Western settings, in the face of Mestrovic' s claims it is not possible given the biases of

Giddens' toward limiting its use to the sociological study of Western cultures. I address this concern by including Granovetter' s social embeddedness theory in my theoretical tool box.

Social Embeddedness

Granovetter is particularly critical of interpretations based exclusively on economic paradigms. He criticizes what he calls the "New Economic Imperialism," for attempting to "erect an enormous super-structure on a narrow and fragile base." 20

He says:

A more solid foundation can be constructed on the basis of three classic sociological assumptions: 1) the pursuit of economic goals is normally accompanied by that of such non-economic ones as sociability, approval, status, and power; 2) economic action (like all action) is socially situated, and cannot be explained by individual motives alone; it is embedded in ongoing networks of personal relations rather than carried out by atomized actors; 3) economic institutions (like all institutions) do not arise automatically in some form made inevitable by external circumstances, but are socially constructed.21

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As with structuration theory, an important part of this focus is a sociological theory of the construction of economic institutions. Granovetter believes that such a theory must make dynamics central, in contrast to most neoclassical-classical economic work on institutions (which like many branches of economics), emphasizes the comparative statics of equilibrium states.22

Furthermore, Granovetter stresses the contingencies associated with historical background, social structure and collective action, and the constraints imposed by already existing institutions. The dimension of collective action is important and explains that:

Economic activities are carried out not by isolated individuals but by groups that entrepreneurs get to cooperate in such larger entities as firms, industries, and inter-industry groups. In other words, I recast the problem of economic institutions as one involving the mobilization of resources for collective action.23

Economic institutions do not emerge automatically in response to economic needs; rather, they are constructed by individuals whose action is both facilitated and constrained by the resources available in social networks in which they are embedded.24 Collective action through entrepreneurial initiative will be particularly evident in the case studies of Penang.

The principal concern raised with structuration theory concerns Giddens' over• estimation of the concept of agency as evidenced by mass atrocities in countries where individuals have had very little ability to influence their destiny. From an individualistic perspective, it seems that the citizens of Singapore and Malaysia do have more

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restrictions on their agency than do most Western societies. Both societies have highly hierarchical social structures, and Malaysia, as we learned earlier, has the highest power distance rating of any country in the world on Hofstede's scale. Nevertheless I will show in the case studies that citizens in both places still have some degree of agency. I suggest, therefore, that there are zones of agency that may vary in size from country to country. The boundaries of these zones also may expand or contract depending on the roles that individuals are playing at a particular time. Furthermore, the exercising of individual agency in East Asian countries appears to involve decisions to participate in collective actions, consistent with the group-orientation values of these societies.

Social Learning

Douglas North adds a third set of theoretical concepts that will help deepen the understanding of situationality. According to North, the speed and direction of economic change is a function of the rate of social learning. The direction of economic change, however, is a function of the kinds of payoffs that societies attribute to acquiring different kinds of knowledge. 25 These concepts will be helpful in understanding the speed and scale of the skills upgrading that has occurred in

Singapore.

Another of North's contributions to social construction theory that will be helpful in this study is his dismantling of the rationality assumption that underlies neoclassical economics. In his opinion, people cannot act rationally in their self-interest

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when decisions are being made in a context of uncertainty. In a context of uncertainty,

social learning is important. Such learning is influenced by two sources: past history in

which culture is a unifying force; and 2) interpretations of present experiences. North's

concepts add the dimension of time to this analysis.26 In this regard, they will be

helpful in understanding how organizations adapt to change--a strength attributed to

East Asian countries in the revisionist narrative described in Chapter II.

For the purpose of this study, structuration theory, social embeddedness, and

social learning theories are sensitizing devices. They hold the potential for addressing

some of the weaknesses of the other paradigmatic approaches we have examined thus

far. They will be drawn on throughout the reciprocal translations that follow and in the

remainder of the study.

Reciprocal Translation

In applying the tool of reciprocal translation, I am searching for those metaphors, defined broadly as key ideas and concepts, that communicate the essence of each story. The immediate goal is to identify those metaphors within each paradigm that ultimately can help understand the influences on workforce development organizations in Singapore and Penang.

Economics Paradigm Metaphors

Table 5 lists the metaphors which were used in the various economics narratives to interpret the ideas underlying East Asian success. These narratives include: I) the market friendly narrative of the World Bank; 2) the neoclassical

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narratives; 3) the revisionist narratives, and 4) the nee-Marxist/ Schumpeterian

narratives.

Table 5.

Listing of Economics Paradigm Metaphors by Narratives

Neo-Marxist/ Middle Ground Neoclassical Revisionist Schumpeterian

Getting basics right Open to free trade Competent bureaucracy World system Stability/Reliability Flexible labor markets Industrial policy Social struggles Market Friendly Total Factor Infant industries Subordination Export-oriented Productivity (TFP) Cost/Benefit Taylorism Educational advantage Output growth Led the market Fordism Productivity Factor accumulation Latecomers Regimes Equitable growth Reduce state role Taming and harnessing Deskilling Transaction costs Equilibrium Leadership Technology Contest-based ()ne-shot increases Support and incentives Imperialism Early educational Efficiency Vision Core advantage Perspiration/inspiration Strategic role Periphery Savings Deferred gratification State as axis Semi-periphery Technology Schooling as ordinary Mobilize assets Exploitation input Strategy rni.tch points Stability Utility maximizing Resist vested interests Crisis decisions Market distortions Modes of regulation Economic individuals Ability to learn Toyotaism Market failures Catch-up mode Modes of accumulation Laissez-faire Technological Technology imperative Growth accounting Competitive assets Virtuous circles Capacity to respond Continuous learning Sequenced changed Speed of response Production networks

General Observations

A number of metaphors obviously bridge across several of the narratives.

Productivity, education, labor, and technology are readily apparent. For this reason,

they will be included in the reciprocal translation across both the cultural and

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economics paradigms that is reported below. Prior to that, however, a few general observations about the economics metaphors will provide additional context for the reciprocal translations.

First, two of the narratives attribute outcomes in East Asia to inanimate forces--one to market forces and the other to global forces. In the neoclassical interpretations, economic development is best left to market forces. Doing so will result in equilibrium and efficient allocation of resources and virtuous circles result. In contrast, in the neo-Marxist and Schumpeterian interpretations, large scale global forces are at work which transcend any particular nation-state. These forces are exploitive and precipitate social struggles which require adaptation at the local level.

While one is subordinating and the other is virtuous, in a sense, both the neoclassical and neo-Marxist narratives reflect what some have called the "metaphor of the machine" that dominates modernity. 27 This implies that individuals are under the control of forces which they cannot influence. However, the theory of structuration and its underlying concept of agency enable consideration of perspectives that diverge from this metaphor and allow for more human influence. The theory of social embeddedness adds to this the element of collective action as a means of exercising agency.

Second, all the narratives characterize a role for the state of one kind or another. In the neoclassical perspective, the ideal role is laissez faire, but the metaphor of a referee is acceptable to ensure that the rules are followed. In the revisionist

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narrative, the state's role is much more expansive, particularly in the early stages of development. In the middle ground narrative, the role of government is to be friendly to the market and focus on "getting the basics right." These metaphors for government reflect different interpretations of how control is maintained within societies. It is significant to note, however, that when agency is exercised in these metaphors, the state is its source.

This is important to this study of workforce development organizations, because it influences what lessons may be transferable to other settings. On face, it is dear that government is the dominant force in both Singapore and Malaysia in terms of exercising social and economic control-- at a degree both unacceptable and not feasible in the United States. However, my central assertion is that agency in East Asia is being exercised through organizations that lie between the state and the individual and there is much to learn at the organizational level. This assertion will be explored in the metaphors of the cultural narrative and tested in the reciprocal translations and case studies.

Cultural Paradigm Metaphors

In Table 6, the metaphors employed to convey meaning in the Confucianist,

Islamic/Feudal, and counter-narratives are compiled. Those metaphors listed under the counter-cultural heading are drawn from the six categories of cultural refutations examined in the second part of Chapter III.

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Table 6.

Listing of Cultural Paradigm Metaphors by Narratives

Confucian Narrative Islamic/Feudal Narrative Counter-narratives

Harmony Consultation and consensus Stifling Natural order Serving Allah Anti-democratic Group-oriented Equality Conformity Moral relationships Individual rights State ideology Rules of conduct Rule of law (Shariiah) Controlling Practical ethics Education Social engineering Hierarchy Discipline Perpetuates power structure Family-based Frugality Suspicion of strangers Group sharing Power Dampens individual creativity Collectivism Position Stereotyped behavior Conformity Hierarchy Inhibits entrepreneurial Face Patronage behavior Relational networks National capitalism Suppresses constructive dissent Simplicity Cronyism Lack of legal framework Discipline Atonement Simplistic Perseverance Guilt Rote learning Time is not a scarce resource Clashing selves Coercion Headship Reactionary Equality of individuals/ Authoritarianism inequality of status Social rigidity Education as self cultivation Education as control Loyalty Under-utilization of talent Deferred gratification Forced savings

General Observations

Within the cultural narratives is implicit acknowledgment of Hofstede's definition of culture as "mental programming" of the mind. This conceives of culture as stable patterns, established within a person's mind and shared collectively with other individuals in the society.

In contrast, some of the counter-narratives, particularly those which focus on the changing nature of values, reject programming of the mind as an appropriate

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metaphor. For example, some believe that people are not programmed, rather they are responding to incentive structures in their environment. In this, they reflect more of the postmodern stance held by Beaurillard which argues that:

Any fixed meaning is now replaced by a network of floating signifiers that offer momentary seduction rather than the ability to store and transmit meaning. 28

If seduction can be equated with responding to incentives, then this perspective is similar to social embeddedness theory which holds that meaning is constructed through a social process of collective interpretation. As we will see, this collectivist orientation has significantly influenced organizational structure in both Singapore and

Malaysia.

Not all of the counter-narratives, however, reflect the concept of that meaning is determined through collective interpretation. Several of them draw on more individualistic conceptions prevalent in the West. These interpretations tend to view collectivist, group-oriented activity as social control rather than as a positive force. To some degree the same concern plays out in the Malaysian metaphor of"clashing selves" used to described the tensions between Islamic and feudal-based values.

Combining Metaphors

In the Confucianist narrative, the concept of stable patterns is reflected in the metaphor of natural order. This reflects a converging view with the concept of the equilibrium in neoclassical economics, the concept of regimes in New International

Division of Labor (NIDL) and regulationist theories. All these interpretations share the

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same sense of determinism that the metaphor of the machine described above conveys.

Again, as the reciprocal translation will show, these interpretations do not allow enough flexibility to accommodate the degree of agency that we will see reflected in case study organizations.

While there is some convergence among the economic and cultural metaphors, we also see considerable divergence. The concepts of harmony and order in the

Islamic and Confucian narratives contrast with those of domination in the NIDL narrative and those of competition in the neoclassical and revisionist narratives. This divergence will be explored further in the reciprocal translation.

Combining the metaphors of the economics and culturalist paradigms identifies several factors which will be important to gaining understanding workforce development organizations. Some I have already mentioned specifically, while other have only been referenced. On the basis of their frequency and their relevance to the case studies, I have selected seven of them for reciprocal translation. They are: 1) control; 2) government; 3) labor; 4) education; 5) firms; 6) productivity; and 7) attitudes toward change.

Assessment dimensions

Each of the seven factors will be considered on three dimensions: 1) the intent;

2) the operationalization; and 3) the outcome. By intent, I refer to the general purpose underlying the metaphor. Operationalization refers to how the metaphor was applied and the outcome is indicates the result. As we shall see, at a given point, any particular 121

metaphor can be considered on any one of these dimensions. Tables for each of the bridging factors follow along with my interpretation of their meanings.

Control

Table 7.

Control Metaphors

Narrative Intent rationalization Outcome Confucianism Natural order Hierarchy Fulfillment/ Harmony Neo-Confucianism Compliance State ideology Preserve order

Neoclassical Equilibrium Market forces Efficiency

Revisionist Industrial policy Developmental Competitiveness state Middle-ground Market friendly Coaching Reliability

NIDL Capital-seeking Mobility Periphery Domination return Regulation Mode of Negotiated regime Stability accumulation Islamic/Feudal Harmony Consultation Consensus

In neoclassical economics, the control is exercised through the market mechanism. In revisionist economics the state is the medium for control; while in the

NIDL narrative, control is exercised through a division of labor driven by the conduct of capital seeking the highest return. In regulation theory, the mode of accumulation is operationalized through a negotiation process among competing interests to create stability. In the culturalist narrative, control was portrayed as either reflecting the values held by the people (power distance in Malaysia or hierarchy in Singapore) or an ideology promulgated by the state to force compliance. 122

Again, common to most of these conceptions of control is the notion that people are buffeted about by forces beyond their ability to influence. The metaphor of domination in the NIDL theory reflects this orientation. The regulation theory concept of negotiated order questions this assumption although it sees the negotiations occurring only in reaction to larger forces, i.e. crises of capitalism. The social construction theories of structuration, social embeddedness, and social learning all question the concept that there are "forces beyond control," as we shall see in later chapters.

If the metaphors of the various paradigms are translated into one another, parallel meanings become apparent. First, the Confucian concept of harmony parallels the neoclassical outcome of equilibrium and the market-friendly metaphor of stability/reliability. It also is similar to the outcome of stability in regulation theory and to the outcome of consensus in the Islamic narrative. There clearly is a desire indicated for some measure of certainty and order in these translations. As we will see in the case studies, this desire translates to the importance of planning in both places.

In the case studies, I will look for how the metaphors for control have influenced the agendas of the specific organizations. We also will be interested in how the metaphors for control affect interactions with other organizations. Such questions as who sets the organization's agenda and to what degree is shared control evident governance will be asked. 123

Government

Table 8.

Government Metaphors

Narrative Intent rationalization Outcome Confucianism Peak of hierarchy Benevolent control Natural order

Neo-Confucianism Maintain order Intervention in people's Soft authoritarianism lives Neoclassical Referee Establish basic rules Laissez-faire

Revisionist Tame and harness Coach Developmental state market forces Revisionist National developer Industrial policy Infant industry protection Islamic Serving Allah Capitalistic nationalism Wealth accumulation

Closely related to control in most of the narratives is government. As we see,

in Table 8, both converging and diverging meanings of government are apparent. To

understand this ambiguity, bridges between paradigms can be built by abstracting a

particular concept to a higher level to assess its meaning and utility in another setting.

For example, at a higher conceptual level, government can be taken as a proxy for

leadership.

In moving to a higher level, we see a great deal of convergence among the

narratives. In the Confucian narrative, government is at the peak of the family-based

hierarchy, and leadership is an ascripted concept referred to in Chapter III as headship.

Leaders are expected to act benevolently toward those in their care and the outcome is

harmony. In the neo-Confucian values set, the conception of government has been

reinterpreted and used as a justification for wide-spread intervention in the personal 124

affairs of citizens to maintain order. Likewise, in the economics paradigm, the revisionist argument that infant industries must be protected explicitly borrows on the family hierarchy metaphor to justify state intervention in the economy.

Alternatively, the metaphors for government can be deconstructed into their component parts and the parts examined for relevance. Government is not a faceless monolith--it is made up of various agencies and departments, all of which employ people. For example, many of the workforce development activities in Singapore are conducted by Statutory Boards which, although ultimately accountable to the government, generally have an independent, tripartite governance structure comprised of representatives from business, labor, and government. In Penang, an intermediary organization between firms and education has been created for workforce development in which the national government seems to be a junior partner at most.

In the.case studies, the role of government will be closely examined. Is it the dominant force in explaining or interpreting workforce development strategies and organizations in Singapore and Penang? What is its relationship to other sectors of society--workers, education and training organizations, and other intermediary organizations? The answers to these questions will help in assessing the transferability of any lessons learned to U.S. regions. 125

Table 9.

Labor Metaphors

Narrative Intent rationalization Outcome Confucianism Care for family Save and work hard Security

Neoclassical Flexible labor markets Factor of production Growth accounting

Revisionist Endogenous Factor Skilling and upskilling Growth NIDL Core/periphery Comply with regimes Exploitation relations Islamic Prove Allah's rightness Work hard Accumulate wealth Regulation theory Deal with crises of Negotiated regimes New mode of capitalism accumulation

In neoclassical economics, labor is defined simply as a factor of production.

The deployment of labor is best left to the market clearing process which will ultimately reflect an appropriate match of skilled workers with available jobs. In revisionist narratives, however, the market is presumed to be imperfect, and state interventions are necessary to insure that workers and their skills match up with the job requirements on a timely basis. In the most expansive version of these interventions, new growth theorists contend that the state can and should influence the direction of economic development by targeting the development of certain skills sets in the labor force. As we will see in the case studies, Malaysia and Singapore are both pursuing such strategies to a high degree.

The concept of regimes in NIDL theory appears to have a reciprocal translation in the nee-Confucian value set. Recall that these regimes are the decision

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rules that determine how labor is organized and managed. In the Fordist and Taylorist regimes, a compliant, hard-working labor force was required during the mass production stage of capitalism. This concept of the regime is similar to the values of hard work, loyalty, and group orientation that have been attributed to the Confucianist narrative. This raises the possibility that the same set of values or regimes may not work in circumstances beyond the stage of mass production in an economy. Indeed, we will see that new regime of"Toyotaism" is envisioned as being necessary in order for workers to participate in the next stage of Singapore's industrialization.

In examining the workforce development organizations, we will look for how the various metaphors for labor play out in the approaches to education and training.

Our interest is in identifying the effects interpretations have on the mission, operations, and outcomes of the organizations.

Table 10.

Education Metaphors

Narrative Intent erationalization Outcome Confucianism Self-enlightenment Timeless pursuit Continuous learning

Neo-Confucianism Way to get ahead Achievement Degrees/diplomas Neoclassical Individual investment Static input Enhanced human capital in aggregate Revisionist Learning Skills upgrading Competitiveness

Neo-Marxist Meet needs of capital Rote learning Repetitive routine/ compliance

Islamic/Feudal National development Skills Training Meet industry needs Regulation theory Toyotaism Teamwork Flexibility

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In traditional Confucianism, education was valued as the path to self• enlightenment. In the neo-Confucian view, education has meaning as a means of overcoming class restrictions and, in its most current conception, is seen as a way of getting ahead. In the Islamic/feudalist narrative, education is seen as a way of supporting national development.

Even though the metaphors in the narratives different covey different meanings, they all converge on the benefit of education to individuals. Similarly, in the neoclassical economics paradigm, education is seen as an ordinary input into the growth equation. The benefits of increased education are appropriated by individuals in the form of higher wages, but their individual decisions to pursue education lead to a socially optimal outcome in the aggregate. This translation from individual action to collective benefit is very evident in the new growth theory. In this theory, education is seen as a key determinate to economic growth. Therefore, a directive state role is warranted to encourage (or require) more of it. In some of the counter-narratives, requiring more education was seen to be part of a sinister strategy to exercise social control. These metaphors share the concept of education as group control.

All of these metaphors for education exist simultaneously and influence behavior, depending upon the role an individual is playing at a given point (e.g. parent, family member, worker, citizen). In terms of Whittington's interpretation of structuration theory, we see that the various activity systems of individuals--

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community, economic, domestic, political, and intellectual--all carry in them the value of education. 29

As we will see in the case studies, the convergence of the seemingly ambiguous interpretations of education have a significant influence on the participation rates in education and training programs in Singapore and Penang. They all reinforce and converge toward the interpretation that more education is better. For this reason, we will be particularly interested in how these interpretations play out in the mission, operations, and outcomes of the organizations.

The Firm

We turn now to examine the metaphors that convey the meaning of business enterprise, or the firm, in the various narratives. As the reader will recall from both

Chapters II and III, economic development in East Asia has gone through several phases in each of the countries, generally moving from import substitution to an export orientation. Multinational corporations have been important actors in this transition and have affected the nature of firm structure and mission. Table 11 shows how these influences are reflected and the metaphors for other types of firms in the two countries.

As we learned in the discussion of the culturalist paradigm, the metaphor of guanxi and, in Malaysia, other Islamic concepts have influenced the nature and roles of business enterprise in East Asia. When these metaphors are reciprocally translated, it is evident why a strong government role in economic development is more accepted in

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Table 11.

Firm Metaphors

Narrative Intent rationalization Outcome Confucianism Preservation of family Relational Overseas networks

Islamic Serving Allah National champions National capitalism

Revisionist Production Network agglomeration Division of labor

Neoclassical Profit maximization Capitalism Shareholder value

Regulation theory Regulationist Modes of conduct Regimes

NIDL Multinational Seek low costs Footloose corporations

East Asian societies than in the United States. To a degree, the state ownership or subsidy of companies that serve as national champions reflects the position that government is at the top of the family hierarchy. In this position, the state has a responsibility for preservation of the family and its honor. In this crossing of paradigms, there is an indistinguishable relationship between nation-building and economic development.

The role of multinational corporations is highly significant to both Singapore and Malaysia. Both places have used attraction of these companies as a pillar of their economic development strategies. They are both, therefore, vulnerable to the relocation of the multinational corporations to lower cost places in East Asia or elsewhere. However, exercising agency, both countries have used the multinationals as a means of generating jobs for their people and are attempting to capture the technologies from them to transfer to their indigenous firms.

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In reviewing the case study organizations, we will be interested in what kinds of businesses benefit the most from the training activities. In addition, we will examine how the various metaphors for firms influence the missions of the workforce development organizations. The level and type of businesses involvement in the affairs of the organizations will be instructive in this regard.

Productivity

Table 12.

Productivity Metaphors

Narrative Intent erationalization Outcome Confucianism Guanxi Minimize labor Maximize family resources Revisionist Developmentalist state Technological Competitiveness imperative Neoclassical Growth accounting Efficiency Total factor productivity Regulation Mode of regulation Negotiated order Stability

In the discussion of the economics paradigms, increases in productivity were seen as central to economic progress. In the neoclassical model, this progress is reflected in a measurement referred to as total factor productivity (TFP). As we will see the case studies, this TFP metaphor has come to dominate the discussion of economic development issues in Singapore and Malaysia.

If we force the metaphor of Overseas Chinese networks into the economics paradigm, an interesting translation results. Recall that one purpose of these guanxi• based networks was to achieve a high rate of return using as little labor as possible.

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This was based on the need to minimize labor because of the limited number of family members. This outcome can be translated into the metaphor of TFP, a metaphor we saw extensively in both the "market-friendly", neoclassical, and revisionist narratives.

In these narratives, TFP has do with the efficiency with which labor and capital are employed, while in the culturalist translation, it has to do with how well the family resources are used.

Thus, within and across these paradigms, achieving efficiency is apparent as an important bridging concept. Knowing that efficiency is achieved through innovation, better management, technology, or skills enhancement of the workforce, we will be able to see how these metaphors are reflected in the workforce development strategies and organizations in Singapore and Penang. One interests to be explored in the two case studies will therefore be to identify any strategies for encouraging technological diffusion and innovation. The ways in which these strategies are related to the skills enhancement goals of the organizations will also be examined.

Cha.nge Management

Confirming the modern cliche that change is the only constant in life, change is a common concept across many of the narratives. In the cultural paradigm discussion, we learned that Asian managers appear to have a different orientation toward change than do managers in the West. In Asia, the perspective is longer term and reflects a willingness to adapt to changing situations as part of the normal course of events.

Whether this willingness to accept change carries over to situations in which the

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natural order is challenged is less clear as Confucianist values also exhibit a conservative orientation.

Table 13.

Change Metaphors

Narrative Intent rationalization Outcome Confucianism Journey Constant/Circular Adaptation

Neo-Confucianism Destination Necessary State-d.irected

Individualistic Goal-oriented Managed Achievement

Nco-classical Equilibrium-seeking Laissez faire Efficiency

Revisionist Developmentalist Tame and control Strategy switch points

NIDL Profit-seeking Mobility of capital Periphery domination

Regulation theory Crisis of capitalism Renegotiation New mode of accumulation

In the revisionist narrative, proponents argued that the state's ability to recognize those points at which its strategy should be switched was a key to the economic success of some East Asian nations. This capacity also referred to as adaptive efficiency. This has a reciprocal translation in the Confucian values narrative, as change is a continuous process and in the Asian values set which holds that intervention in people's lives to change behavior is acceptable. In Singapore, for example, the Confucian values were reconstructed at the point where the state's economic development strategy was switched from import substitution to an export orientation in order to create a more diligent and hardworking labor force.

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CONCLUSION

Throughout the narratives, it was argued that the questions of how the East

Asian economies have been able to achieve success have not been satisfactorily answered. From the reciprocal translations and the metaphorical reduction, we can see some of the "hows" and "whys." Even more specificity will be gained from examining the workforce development organizations. Although the reciprocal translations of the metaphors reveal some ambiguity across interpretations, they also yield some converging concepts that can be used to interpret the experience of the workforce development organizations. At the present level of analysis, some of the tension between stability and instability of the interpretations that Schultz and Hatch say is inherent in cross-paradigm analysis still remains. This is particularly evident in relationship to the role of government Asia. For this reason, I will focus considerable attention on government in the case studies to see if more stable interpretations can be specified.

To summarize, to assist with taking this process of exploration further along, the following questions will be addressed in the case studies:

1. What metaphors for control characterize the agenda and operations of the specific organizations? Here we are interested in who sets the agenda and how the organizations are governed. Is control shared in any way? What are the ongoing interactions between the organizations and other parties that influence what the organization are and may become?

2. Is government the dominant force in explaining or interpreting workforce development strategies and organizations in Singapore and Penang? How does government relate to other sectors of society-...workers, education and training organizations, and other intermediary organizations?

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3. What are the metaphors in Singapore and Penang that shape the role of labor in the two places? What influence do these concepts have on how the workforce development organizations fulfill their missions?

4. How do the various metaphors for education and training in East Asian countries play out in Singapore and Penang, Malaysia? What effects do these interpretations have on the mission, operations, and outcomes of the workforce development organizations?

5. How do the various metaphors for business enterprise (the firm) influence the nature of workforce development activities in Singapore and Penang? What is the role of businesses in the organizations we are examining and how are they engaged?

6. Is increasing productivity seen as a priority in the two case studies? What are the strategies for encouraging innovation and technology transfer? How are they related to the workforce development activities of the organizations?

7. How is change viewed within the organizations? Are there pivotal events that have altered their strategies and purposes. How is the change process managed? Are there any strategy switch points evident in the history of the organizations? What changes are contemplated in the future?

Knowing the answers to these questions will help extract situational lessons which then will be assessed for transferability in the concluding chapter.

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ENDNOTES

1 George W. Noblit and R. D. Hare, (1988) Afeta-Ethnography: Synthesizing Qualitative Studies, Sage Publications: Newbury Park: CA, p. 38.

2 Mary Jo Schultz and M. J. Hatch (1996) "Living with Multiple Paradigms: The Case of Paradigm Interplay in Organizational Culture Studies." Academy oflvfanagement Review Vol. 21, No. 2, pp. 529-557.

3 Schultz and Hatch, pp. 544-549.

4 Schultz and Hatch, p. 545-546.

5 Schultz and Hatch, p. 547.

6 Schultz and Hatch, p. 547.

7 Anthony Giddens (1984) The Constitution of Society, Berkeley, CA: University of California Press. Mark Granovetter (1992).

8 Mark Granovetter (1992). "Economic Institutions as Social Constructions, Acta Sociologica, Vol. 35, No. 1, pp. 3-11.

9 Douglas North (1994). "Economic Performance through Time," American Economics Review, Vol. 84, No. 3, p. 362.

10 Schultz and Hatch, p. 534.

11 Richard Whittington. (1992) "Putting Giddens into Action: Social Systems and Managerial Agency." Journal of Management Studies, Vol. 29, No. 6, pp. 693-712.

12 Whittington, p. 695, 705.

13 Joanne Yates (1996). "Using Giddens' Structural Theory to Inform Business History," Business and , Vol. 26 No. 3, pp. 163-164.

14 Yates, p. 161.

15 David Held and J. Thompson (1989). Social Theory of Modern Societies: Anthony Giddens and His Critics, Cambridge Press: London, p. 294.

16 Giddens, p. 25.

17 Yates, pp. 160-161.

18 Whittington, p. 704.

19 Stjepan G. Mestrovic (1998). Anthony Giddens: The Last Afodernist, London: Routledge, pp. 3-4.

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20 Granovetter, p. 4.

21 Granovetter, p. 4.

22 Granovetter, p. 4.

23 Granovetter, p. 6

24 Granovetter, p. 7

25 North p. 362.

26 North, p. 362.

27 Alan Scott (1997) "Modernity's machine metaphor," British Journal of Sociology, Vol. 48, No. 4, p. 562.

28 Schultz and Hatch, p. 542.

29 Whittington, p. 705.

CHAPTERV

WORKFORCE DEVELOPMENT STRATEGIES AND ORGANIZATIONS IN SINGAPORE

In February 1998, I had the opportunity to visit Singapore to study two workforce development organizations, the Skills Development Fund (SDF) and the

Institute for Technical Education (ITE). My visit occurred during the height of the monetary and financial crises sweeping East Asia, providing a context for this study that avoids distortion from the East Asian miracle syndrome.

To gain an understanding of the history, status, and challenges confronting the two organizations, I posed the questions developed in Chapter IV to their senior staff

Their responses are reflected in this case study. I supplemented these two-hour interviews with conversations with business executives and scholars.

SDF and ITE are only two parts of a complex network of workforce development organizations Singapore which includes the Productivity and

Standards Board and the Economic Development Board, among others.

Unfortunately, I was not able to all of the relevant organizations. Where I could not, I have drawn upon previous work of scholars who have studied various aspects of the workforce development system in Singapore.

Little more than 30 years since its independence from British Colonial rule,

Singapore's national product (GNP) capita has matched that of the highly

1 138

industrialized nations. In this extraordinary period of growth, the GNP grew at a rate

of nearly 8 percent. Low inflation and unemployment rates make this small nation one

of the most rapidly advancing industrialized countries of the world. Ninety-six percent

of males and 86 percent of females are literate, and more than half the population is in

the labor force.1

In January 1997, the Organization for Economic Cooperation and

Development (OECD) reclassified the republic as a "more advanced developing economy." Savings make up almost half of the , and unemployment is low at 2.7 percent. Nearly 20 percent of all citizens own a personal computer, the average life span matches that of Americans, and the infant mortality rate is lower than that of Switzerland.2

Yet, economic development in Singapore is not a new phenomenon. In fact, in a review of Singapore's economic history, W. G. Huff notes by the late 19th century

Singapore was already a large, modem city, and by 1959 when British colonial rule ended, it was a metropolis. Thus, as it entered the 1960s, Singapore already had substantial amounts of physical and human capital, the experience of considerable industrialization, relatively high per capita income, and effective government.3 Many of these assets developed as a result of the role of Singapore as a major center of commerce and trade.

Notably, prior to 1959, the colonial administration had restricted itself to the maintenance of peace, stability, and an atmosphere conducive to future progress.4 139

However, in light of the Japanese occupation during World War II, the end of post•

war British colonial rule in 1959, and the brief membership in the Malaysian

Federation which ended in 1965, Singapore was anxious about its future. With a

predominantly Chinese population, its very survival as an economy and as a nation

seemed threatened by the surrounding Muslim countries. With a population of then

only 2.8 million, a land area only three and a half times the size of Washington, D.C.,

and sizable ethnic minorities, the country seemed very vulnerable.5

This vulnerability, according to some observers, enabled Singapore to develop a strong state apparatus, which, staffed as it was by technically competent officials, and led by Lee Kuan Yew's People Action Party, was able to develop a vision for economic development that has largely succeeded.6 These observations echo the metaphor of "policy acceptance conditions" mentioned in the previous chapter as an important way of adapting to change. As the conditions were right, Singapore was able to make economic development its highest priority and even t9day refers to itself as "Singapore, Inc.," in recognition of this continuing emphasis.

Even in the context of vigorous economic development, the emphasis on peace and harmony continues in Singapore. Within its small area of about 238 square miles, many ethnic divisions, religions, and cultures co-exist. The overall population of about three million persons is comprised of 77.5 percent Chinese, 14.2 percent Malays, 7.1 percent Indians and 1.2 percent other ethnic groups. Public buildings of worship for 140

Christians, Hindus, Sikhs, Taoists, and Confucians are located throughout the city.

Singapore's official languages are Chinese (Mandarin), Malay, Tamil, and English.7

The state is very conscious of its diversity, particularly during the present financial crisis in East Asia. Although advancement in Singapore is based on meritocracy, there is a recognition that some individuals will be disproportionately affected by competition and change. In this context, racial harmony and social cohesion are seen as important to avoiding social stratification that could lead to political instability. Avoiding this prospect is presented by the government as a collective challenge to all Singaporeans.8

After 1959, three broad phases of industrialization in Singapore, each of which was heavily influenced by the state, can be identified. First, from 1959 to roughly

1978, the focus was on introduction of labor-intensive industries, with minimal demands on education and training (indeed Singaporean education levels were somewhat behind some of other East Asian countries) in which the aim was full employment Secondly, from 1979 to 1987, the government concentrated on the introduction of higher value-added production with attempts to reduce the significance of low wage labor in the economy. This was accompanied by a widening of programs to ensure adequate human resources. Thirdly, from 1987 to the present, the focus has been on the promotion of growth in knowledge-based service industries during which time financial services have developed, manufacturing has shifted to the hinterlands, and higher education and work-based skills enhancement have been emphasized .9 141

During these latter two phases, organized labor underwent significant changes in Singapore. Many observers attribute much of Singapore's economic success to the flexibility of its labor markets, partly because of suppression of organized lab or.10 As a prelude to the review of workforce development organizations, a brief review of this viewpoint will be helpful.

Labor Market Flexibility

Since 1963, organized labor in Singapore has been closely aligned with the ruling People's Action Party (PAP) through the National Trade Unions Congress. The

PAP's intent was to ensure industrial harmony in order to attract industry. Consistent with that goal, the role of organized labor has diminished as a collective bargaining force over the years. The Trade Union (Amendment) Act of 1982 redefined the unions' role primarily as social and welfare organizations and only secondarily as a means of organizing and representing workers. 11

Following the Japanese model, workers and their representatives were encouraged to look to their companies' internal consultative channels--Work

Excellence Committees and Quality Control Circles--for the resolution of conflict and productivity problems. These mechanisms diminished the relevance of unions, in particular those organized along occupational and industrial lines. In 1989, 76 unions

(more than 95 percent of all unions) affiliated with the National Trade Unions

Congress (NTUC). Of these, 41 were general, industrial, or occupational unions representing 71.8 percent of all union members. The remainder were house unions, 142

organized at the company level. Although their power has weakened, union membership has climbed from 20 percent in the early 1980s to 28 percent by 1990.

This is apparently due to the perception that unions could deliver benefits distinct from those won through collective bargaining . 1 2

Sharma and Luh define labor market flexibility more broadly than suppression or control of unions. They say Singapore's economic performance can be attributed to the flexibility of its labor markets, which they characterize as responsiveness to pressure and adaptability to changes across a range of factors, including work practices, employment relations, production systems, and organizational design.13

They describe four Singaporean strategies which have been employed to achieve flexibility:

1. Numerical flexibility. Ability to respond to changes in demand and output by altering inputs. Tactics include: part-time, temporary, short-term contract, and casual employment. The most common mechanisms employed by the Singaporean government include controlling foreign workers' participation through immigration policy, raising the retirement age, and encouragement of female labor force participation.

2. flexibility. Altering the traditional distribution of working time in order to enable workers to match their productivity and skills with the times they are physically and psychologically best suited to work. The mechanisms used in Singapore include part-time employment, flexi-time, job sharing, and a shorter work week.

3. Pay flexibility. Moving away from strictly time-based pay to a productivity or performance-based pay system. Since labor accounts for 70 percent of total cost, Singapore has been very aggressive in using compensation policy as a flexible tool.

4. Functional flexibility. Involves broadening the tasks performed and the skills deployed by employees. This has to do with opportunities available for education and training. 14 143

Although all four of these strategies are important, the latter two--pay flexibility and functional flexibility--have had a major effect on workforce development. They are especially important to this study and are reviewed in more depth below.

In the modem era, wage policy has evolved on a parallel track with the economic development goals of the Singapore government. From 1965-1972, national economic considerations were not much of a factor, and wages were set on the basis of negotiations between employers and employees, and the unions where relevant.

From 1972 through 1978, the Orderly Wage Increase Policy was in effect, overseen by the National Wage Council, which was established in 1972. During this time, in the context of a tight labor market resulting from full employment, the Council made recommendations for wages, and voluntary compliance was generally high in the private sector. 1 5

In 1979, the Peoples Action Party initiated its Wage Correction Policy with the intent of moving from labor-intensive manufacturing exports to skill and capital intensive exports. The National Wage Council recommended wage increases of 14-21 percent from 1979-1981. This recommendation backfired as real wage increases were outpacing productivity increases. In manufacturing, unit labor costs increased by 40 percent, and Singapore began to lose international competitiveness. The result was a downturn in the economy with negative growth rate in the 1985 GNP and loss of

120,000 jobs between 1984-1985. 16 144

Although the policy was implemented at the onset of a world-wide recession, it was generally recognized as a mistake. To ameliorate the effects, in 1986, the state reduced employers' contributions to the Central Provident Fund from 25 percent to 10 percent, equivalent to a total wage cut of 12 percent.

In 1987, a flexible wage policy was instituted. A tripartite committee, representing business, labor, and government was formed to make recommendations for recovering competitiveness. The recommended wage system was designed to have basic wages reflect the value of a job and to provide a measure of stability in workers' income through wage supplements for length of service, experience, and seniority.

This system is now supplemented with two flexible wage systems--one based on profit-sharing and the other on productivity increases, which are now used by more than 70 percent of Singapore's companies. The effect of these policies has been to further reduce the role of the National Wage Council.17

All of the Singaporeans I spoke to indicated that the Wage Adjustment Policy was a pivotal event in the development of workforce development policy. It raised the issue of worker training to a high priority on the national agenda and served as the catalyst for the development of a range of organizations charged with skills training.

Workforce Development System

Many of Singapore's training institutions are modeled after the German and

Japanese systems of skills development, but have been modified to fit the Singaporean situation. The result is a three-tiered system for supplying trained workers for 145

manufacturing and service industries. The system includes training for high-level professional and research manpower, providing mid-level technical, management, and service manpower; and upgrading and updating the skills of current workers on a regular basis. 18

This training system evolved over time. The organizers learned that, even under ideal circumstances, it is difficult to persuade companies to invest in on-the-job training (OJT), because employees who benefit from it often leave before their employers are able to recover their investment through productivity gains. In

Singapore, training programs established under the Vocational and Industrial Training

Board (now ITE) failed to provide enough skilled workers in the 1960s and the response was to encourage more firms to invest in training on their own. Workers then were required to contribute 4 percent-of their earnings monthly to a fund that employers could draw on for reimbursement of training expenses. When it became clear that the private sector itself could not provide enough skilled workers through

OJT, public training centers were established, funded by a levy on business equivalent to 1 percent of their total wages bill. 19 This recounting of shifts in policy once again recalls the "strategy switch point" metaphor described in the economics paradigm and is reflected in the organizations I will now examine more closely.

BASIC EDUCATION SYSTEM

In 1992, the Singaporean education system was reformed by the government and expanded to include six years of primary education and four years of secondary 146

education. While participation is not mandatory, the high value placed on education by Singaporeans, reinforced by the state, now results in nearly universal graduation from secondary school. At the present, there are about 40,000 students in the secondary education system. In 1996, 68 percent of secondary school graduates continued on to post-secondary education, a dramatic increase from the 16 percent who did so in 1980.20

The system of primary and secondary education is based on streaming, meaning that late in their primary education, students are placed into one of three streams--special, express, and normal. In the U.S., this practice of streaming is often referred to as tracking. Depending on the stream they are in, all students must attain various levels of competencies in science and mathematics. As we learned earlier, curricula in moral and religious ethics are also part of the basic system. In my interviews, I was told that there is sufficient flexibility within this system for students to move laterally into a more advanced stream if they show motivation and demonstrate achievement. I also was assured that this kind of lateral movement does indeed occur.

Students in the special stream are expected to attain superior marks in mathematics and science and to achieve Level One proficiencies in both English and

Mandarin languages. Students in the express stream are expected to attain Level One proficiency in English and Level Two proficiency in Mandarin, while those in the normal stream will attain Level Two proficiencies in both English and Mandarin. 147

The special stream students are those who have demonstrated high potential

and will ultimately attend one of Singapore's two universities, either the National

University of Singapore or Nanyang Technological University. Following graduation

from secondary school, special stream students first will attend 2-year junior colleges

in preparation for enrollment in the universities. Competition for the limited number of

admission slots at the two universities is intense. Only a range of 10-15 percent of the

students in the system are in the special stream.

The express stream consists of those students who are expected to attend one of five polytechnic colleges. These three-year colleges are intended to provide students with advanced technical skills, which will prepare them to enter the workforce or to attend university. There are four polytechnics, each of which specializes in selected occupational tracks. About 40-50 percent of secondary school graduates are expected to attend the polytechnics by the year 2000.

Primary and secondary education is changing, or more aptly, is being changed.

Although the primary and secondary education systems have succeeded in producing highly literate and numerate graduates, there is concern in Singapore that the past emphasis on rote learning in the schools will not serve the future well. Concern has been raised that graduating students are not creative enough and therefore may not be able to function effectively in an economy based on knowledge and innovation. In fact, the issue was raised specifically in an interview with an expatriate employer who 148

complained about the lack of lateral thinking capability in some of his past

Singaporean employees.

Consequently, in 1996, the government announced a five-year, S$ l. 5 billion program to modify curricula and instructional methods to include innovative thinking skills. Edward de Bono, an internationally known "guru" of creative thinking as a teachable skill, has consulted for the government. 21 His books were prominently displayed in the book stores I visited while in Singapore. There is some skepticism that this effort will make much difference as captured in this quotation from the Economist:

''But the new emphasis on changing thinking patterns of a highly-disciplined population is unlikely to give rise to a culture of Bohemian spontaneity." 22 However, the general goal seems to be in line with other policy initiatives to increase research and development in Singapore and to increase focus more attention on building a strong base of information technology. From this vantage point, the initiative provides yet another example of Singapore's willingness to change the order of things.

Although primary and secondary education levels have increased significantly,

Singapore still lags behind developed countries in post-secondary and tertiary educational attainment. Higher education means greater capacity to absorb new technology and greater earning power. Strong incentives to increase tertiary education have resulted in increased enrollment in the polytechnics from 11,000 in 1980 to

40,360 in 1993 and from 9,200 to 30,020 in universities over the same time period. 149

By 2020, the majority of Singaporeans are expected to attain at least a post-secondary

or polytechnic education. 23

Beyond primary and secondary education, a range of organizations have been

developed to provide newly trained workers to companies and to re-train and upgrade

skills of current workers. 24 These initiatives include: programs to upgrade the basic

skills of the workforce, particularly for those who left the educational system early;

setting output targets for the educational system; apprenticeship schemes modeled on

a Dual System; training levy on employers engaging workers in lower rates of pay; and

skills deepening for those in OJT.25 These efforts are overseen and administered by

several different Statutory Boards and institutes, including the Economic Development

Board and the Productivity and Standards Board.

ECONOMICDEVELOPrvIBNTBOARD

The Economic Development Board (EDB) has been a dominant force in

Singapore's economic development. It has attracted multinational corporations to

Singapore by offering a wide array of incentives and subsidies. As a result of these efforts, over half of the inward-oriented foreign direct investment transactions in

Singapore have occurred since 1985.26 In 1997, the EDB was instrumental in attracting S$8.5 billion of fixed investments, up slightly from S$8.1 billion in 1996. Of these investments, 70 percent were of foreign origin with 27.9 percent from the U.S.,

23.9 27 percent from Japan, and 23.9 percent from Euro pe. 150

Much of the investment was made by the multinational corporations, which now employ 22 percent of Singapore's manufacturing workforce and tend to dominate the economy. Linkages between large and small companies are weak, and smaller firms historically have not benefited from productivity improvement strategies. While there are thousands of smaller companies, a recent study of the aspirations of Singaporean university graduates indicated that only 5.4 percent of the university graduates with degrees in business desired to work in the small-to-medium sized firms. This is compared to 51.4 percent who desired to work for multinational corporations.28

The EDB has been attempting to address the problems of smaller companies by promoting technology transfer between manufacturers and suppliers, and between expatriates and local employers. Singapore has attempted to link trade and investment policies with domestic industrial policies through the Local Industry Up-Grade

Program (LIUP).

The LIUP focuses on creating horizontal linkages among local companies to increase their global competitiveness. Assistance is provided through four phases: 1) in early stage/start-up phase by providing technical assistance to upgrade management capacity of business; 2) in the growth phase by matching a local business with a transnational corporation, which is expected to provide technical assistance and financing to its smaller partner; 3) in the expansion phase by assisting the local company with developing new products or name brand identity; and 4) in the "going overseas" phase by providing assistance to companies planning to move production 151

overseas. As of 1994, the LIUP involved 32 transnationals in partnership with 170 companies. 29 In 1996, administration of this program was assumed by the Productivity and Standards Board.

Because Singapore has limited land for development, the EDB is extending its economic development activities to nearby countries through a regionalization program. Because of the inexorable movement toward a high-wage, high-operating cost environment, Singapore is becoming less attractive to companies that rely on less• skilled workers. Rather than fight this process, the EDB is participating in it by investing in Malaysia, China, Vietnam, and Indonesia. In this way, Singapore continues to offer a full range of opportunities to attract multinationals.30

In 1996, the EDB announced two other programs focused on supporting the regionalization process. First, it established and is operating an International Business

Institute to help train people to participate in the regionalization drive. Second, it has helped organize a scholarship program to enable the managerial and specialist staff of promising local enterprises to attend university courses. These courses will help them expand to levels that enable them to become more engaged in regionalization. 31

With branch offices throughout the world, the EDB is an important source of information on developments that might affect Singapore's global competitiveness. It the collected intelligence through a networked training system which includes several other organizations--the Productivity and Standards Board, and one of its major 152

programs, the Skills Development Fund, and the Institute of Technical Education.

These organizations are the subjects of the case studies to which we now turn.

PRODUCTIVITY AND STANDARDS BOARD (PSB)

Created in 1996 through a merger between the National Productivity Board and the Singapore Institute of Standards and Industrial Relations, the PSB has the overall responsibility for training Singapore's existing workforce. As a result of the merger, PSB assumed oversight for the Local Enterprise Upgrading Center, previously administered by the Economic Development Board and described above.

PSB's current mission is to raise productivity to enhance Singapore's competitiveness and economic growth32 Interestingly, PSB's current agenda is heavily focused on increasing Total Factor Productivity (TFP), a concept which was highlighted as important to economic growth in several of the economic narratives reviewed in Chapter II. Clearly, the Singaporean' s have heard the criticisms of Young and Krugman. This statement captures the priority currently accorded to the concept ofTFP:

After 35 years of input-driven growth, Singapore has reached a watershed. We cannot depend on labor increases to generate future economic growth because of its limited supply; nor can we rely solely on increase in capital investment to generate growth. From a factor-driven and investment-driven economy, we are advancing to the next stage of our competitive development-• an innovation-driven economy. In the developed countries, this stage is propelled by total factor productivity (TFP)--that is the efficiency and effectiveness with which we use our labor and capital resources to generate economic growth, as opposed to a mere increase in these factors.33

TFP can be increased in five ways, according to the PSB's 1997 annual report: 153

1. Manpower development, that is improving the educational and skill levels of the workforce;

2. Economic restructuring, that is ensuring industries are upgraded and are productive;

3. Realizing the productive potential of capital inputs, which is affected by the economy's capital structure, that is investments in productive machinery and equipment vis-a-vis infrastructures;

4. Technical progress, that is cultivating positive work attitudes and ensuring technology investments lead to commercializable products; and

5. Intensity of demand, that is the extent to which demand for Singaporean goods can be sustained.34

PSB justifies the focus on TFP as a way of obtaining more rewards for everyone-• higher profitability for firms, higher wages and bonuses, a better work environment and job security for employees, and a higher standard of living for all.35

Echoing the need to focus on increasing TFP, Wong notes that, as Singapore moves toward a more advanced economy, productivity will need to increase (in the past growth has been fueled more by investment). At the macro-level, productivity in

Singapore is driven from four related components: 1) technological progress; 2) economies of scale; 3) optimal resource allocations; and 4) education upgrading. At the micro-level, comes from cost and times-saving management, quality control, entrepreneurial, team, and individual endeavors.36

There is a constant need for the city-state to adjust its workforce to changing circumstances. A more upgradable and redeployable workforce with multiple skills is 154

seen as essential to lead Singapore into the next century. In this context, Wong raises the concept of regimes which we considered in the economics paradigm chapter. He identifies a need for Singapore to shift from the Fordism regime which stresses work process repetition where large numbers of semi-skilled workers are involved to

Toyotaism which combines craft and mass production and avoids the rigidity of mass production. In order to do so, workers need skills which help them adjust to the flattening of organizational structure and increased horizontal mobility that are fetures of the Toyotaism regime.37

According to Wong, the key workforce development challenge confronting

Singapore is to increase productivity in the service sector. In 1994, services absorbed

67 percent of the Singaporean workforce. While low value-added services employed

39 percent of the workforce, they added only 9 percent to the GDP. The ways to increase productivity in the services, he says, are through development of skilled manpower and an enhanced information and knowledge base technology. Information technology can be used to increase service productivity two ways: 1) design of more effective organizational structures; 2) processing information horizontally across work teams. The major potential for these applications is in Singapore's retail sector.38

The EDB has targeted service development in four clusters thought to be of a higher value-added. These are: 1) regional headquarters; 2) logistics; 3) communications and information; and 4) life-style services. At the same time, the

National Computer Board's goal is to transform Singapore into an intelligent island by 155

2000 when business, government departments, schools, and homes are expected to

exploit the information infrastructure. In addition, a new Cluster Development Fund

has been established to encourage initiatives from the information technology and user

community to develop innovative ideas, improve services, and increase the market

potential of Singapore's products.39

It is clear from this discussion of the EDB that Singapore has closely linked its

workforce development efforts to its economic development agenda. Much of the

financing for the efforts to make these linkages is provided through the Skills

Development Fund. While in Singapore, I had the opportunity to meet with its senior

staff and the results of my discussions with them are included in the following case

study.

SKILLS DEVELOPMENT FUND (SDF)

Background

The SDF was created through the Skills Development Levy Act, enacted in

1979 and most recently amended in 1996. It is presently managed by the PSB. The primary objectives of the SDF are to: increase employers' demand for training and the supply of highly skilled people; and increase the productivity of workers by raising their skill levels. The organizational structure and the programs operated by the SDF are shown in Figure 1.

The SDF supports up to 80 percent of the costs of employer-based training by taxing the payrolls of firms which employ workers earning less than S$1,000 156

(approximately US$700) a month. Initially, the Act stipulated that one percent of payroll would be collected from employers for each worker earning less than S$750 month (approx. US$525). That amount was considered the line of demarcation between skilled and low or unskilled labor. To account for inflation and to raise the level of skills even more, the wage threshold was raised to its current level in 1995.

In 1995, the levy raised about S$19.7 million. These resources were used to finance employer-based training throughout Singapore. The effect of the SDF is to make it less expensive for employers to train their workers than to employ low or unskilled workers. In fact, the more employers train in this system, the more they gain.

Even a small company that can only send one or two workers for training receives more in training benefits from the SDF than it would be taxed for those two individuals if it did not train them. 40

In 1987, because employers had begun to use the SDF's resources to train their managers instead of front line workers, the SDF stopped all support for professional, postgraduate, senior management, and other training that was not considered directly relevant to work. It now generally supports only the training of workers below management levels. In addition, the SDF does not provide support for entry-level skills training and considering this to be the task of the employer. However, other agencies which are part of the training network, including the EDB, PSB itself, and the Institute for Technical Education do address these issues. 157

Figure 1.

Structure and Programs of the SDF

SDF Training Skills Courses Company t------++-----: Development, _..• Industry-Based Training Fund Centres National Training Program• mes ....

SDF Training Incentives Training Grant Scheme Approved-In-Principle Training Voucher Scheme Introductory Voucher Scheme Management Develop· ment Grant Scheme Training Leave Scheme Worker Training Plan Training Needs Analysis Consultancy Grant Scheme

From: SDF Materials compiled by by Dennis Tachiki, (1994). Developing Human Resources for Sustainable Economic Growth: Public Policy Lessons from Japan, the Asian NIEs, and DPEs. Tokyo, Japan: Sakura Institute of Research. p. 53. 158

The SDF promotes training for any worker by providing subsidies to employers for their training expenses. The SDF provides the highest levels of support to encourage training in skills considered most critical, such as quality and other high-performance, work-related skills. The Fund provides from 30 to 80 percent of course fees and minimizes employer transaction costs through on-line processing of applications, technical support, and evaluations. 41

The SDF has achieved impressive results since its inception in 1980. At that time, the number of training places covered was 11,000. In 1995 it was 461,000, a number equivalent to about 30 percent of the workforce. In 1988, the average training investment per Singaporean employer payroll was 1.8 percent; by 1995, this figure had grown to 3.4 percent. 42 The SDF goal is to reach 4 percent, based on a benchmarking study of best company training investments in the world. The SDF reaches 63 percent of all companies with less than 10 workers, 85 percent of companies with less than 50 workers, and 100 percent of companies with workforces between 99 and more than

500 workers, for a total of 38,040 companies. In 1996, the SDF processed an all-time high of 53,803 requests for training support and committed over S$71.88 million to those it supported. 43

Governance

As a program of the PSB, the SDF is ultimately accountable to its tripartite governance structure. An earlier case study of the SDF completed by the Education

Development Center reported that important decisions in this body are reached in 159

private. Important decisions are reached among the stakeholders through consensus and behind the scenes, and are only announced after they have been accomplished.

Because Singapore is such a small country, most leaders know each other personally and interact with each other in many social situations as well as business settings. 44

This is an example of the network style of relationships based on guanxi, which some culturalists say is an important contributor to East Asian success.

Because the state has pledged zero unemployment, the SDF must find ways to deliver services in an even more productive manner as the demand for training continues to increase. The SDF appears to be leveraging resources effectively and is providing a wide range of services for a low administrative cost. It manages some

90,000 transactions per year with a staff of 49 workers. Collection oflevy revenues is administered by the Central Provident Fund and requires only 5 workers, as the monitoring of payments is done electronically through payroll records.

Special Programs

In addition to providing training grants to employers, the SDF has initiated special programs to improve the training infrastructure in Singapore. A number of programs have been developed to address high priority workforce development needs.

First, the Basic Education for Skills Training (BEST) course teaches workers functional literacy and numerical skills equivalent to 6 years of primary school education. The Worker Improvement through Secondary Education program (WISE) is a follow-up to BEST. The goal is to raise a worker's literacy and numeracy levels 160

to equivalent Certificate of Education "N' level (secondary level) in English and mathematics. 45 Both the BEST and WISE programs are administered by the

Institute for Technical Education and are discussed in more detail in the case study of this organization later in this chapter.

Second, through the Training Leave Scheme (TLS) and Training Voucher

Scheme (TVS), the SDF provides financial incentives to small to medium-sized companies to encourage training of mature workers. The TLS provide employers enhanced financial incentives to upgrade skills of mature workers with no formal education. Since these workers generally have families and cannot stay after wor

SDF provides grants to the companies which to subsidize the lost working time when training is conducted during work hours. Also, the TVS provides small-to-medium sized companies (SMEs) with training vouchers to enable their workers to attend training courses at a net fee, meaning that they pay only the portion not covered by the

SDF.46

In his assessment of East Asian of workforce systems, Tachlki noted that there are several options available increasing the efficiency of training programs. The options include consolidation, improved quality, or privatization. He cited the SDF's

Approved in Principle Scheme (AIP) as an example of privatization. Under this scheme, the SDF provides SMEs with a Hst of pre-approved training programs offered by prefeITed providers. qualify for AIP status, the provider must maintain good training facilities and receive good ratings from trainees. Most of the training programs 161

are either industry-based (16 training centers), national training programs (11), or private organizations or companies. This is an example of using existing programs and facilities in the private sector to provide training in specific skills. In such instances, the government role can thereby be limited to building and maintaining facilities and updating curricula. 47

Market-driven

The SDF is clearly focused on insuring its programs are responsive to market needs. Through an extensive network of industry training centers in which multinational companies share space and expertise with local firms, training is closely linked to domestic and international market requirements. There are 16 such training centers, one for virtually every industrial sector. In addition, the EDB, as mentioned earlier, provides important intelligence to the SDF to identify future skill requirements based on the clusters economic development strategy. Experts have identified core skills needed for each of the clusters. Of particular interest at this time are precision engineering, factory automation, production design, broadcasting, and logistics.

To ensure that its programs remain at "state of the art" levels, the SDF conducts periodic benchmarking and other information-gathering exercises to find out what skills will be required in the future. The SDF solicits industry expertise to develop and provide training programs, and is advised by a technical committee. It also works with the Singapore Institute of Labor Studies, an arm of the country's trade unions to solicit labor advice on skills training needs. The SDF uses the rate of 162

demand for training as an indicator of successful performance and knows it is doing a good job if it receives many proposals. Further, the SDF periodically reviews each training scheme to see if it matches the guidelines and conditions set out. One particular scheme was dropped because employers felt a set of training activities was

ki I 48 ta ng too ong.

High Standards

The SDF has raised the bar for training in Singapore by encouraging competition among firms for training funds as a means of improving the quality of requests. Companies must submit a worker training plan with their proposal to the

SDF and compete with each other for access to financial support. This process has enhanced the quality of proposals. The SDF publishes an extensive list of pamphlets to help firms find out what training is available, its effectiveness, and what they must do to get it.

Companies must be clear on what competencies they want workers to achieve, and each training proposal must have clear deliverables. To meet SDF approval, the training proposed must have clear outcomes and a method of evaluation. The training must be part of a company's annual Worker Training Plan, which is submitted to SDF for approval.

Portability of Skills

The SDF supports the development of skills that are portable among firms and regions. The SDF provides enhanced support for training schemes that focus on highly 163

portable workplace skills, such as quality processes, teamwork, and related skills. The training infrastructure (inter-firm training centers, industry training centers) is such that the skills acquired are likely to be highly portable among firms and regions.

Portability of skills is further supported, as Singapore is host to a number of multinational corporations. As earlier mentioned in the discussion ofEDB, Singapore encourages its companies to locate overseas, partly because its own labor force is small in size. This regional strategy is executed through a special training scheme to bolster Singaporean firms outside the country which help ensures that skills of workers are portable among surrounding countries. 49

Continuous Improvement

The SDF monitors training quality of all programs it supports. The evaluation activities are performed by its internal evaluation section, by the monitoring and disbursement section, and by senior staff members, and by the PSB board. Moreover, through its review of the training plans proposals of companies applying for funds, and through employer feedback, the SDF learns a great deal about training needs and quality issues. This helps the SDF staff improve its own knowledge base and employers are provided with extensive materials on how to evaluate the effectiveness of training drawn from SDF's learnings.

The quality of trainers is carefully monitored. They are assess based on participant evaluation, course content, quality of facilities, and the passing rate of students. Trainer quality is reviewed by the training providers and the technical 164

committee which represents union, employers, and government. The Fund maintains a list of trainers in the country who are drawn from consulting firms, universities, training institutes, or commercial schools. In addition, the PSB provides training for trainers through its Institute of Productivity Training. However, such training is not compulsory and employers appear to be free to select their own trainers, provided the program is acceptable to the SDF.50

To extend the reach of its programs, the SDF also has developed national programs for mass training, such as videos for local and distance learning. For example, in 1995, the SDF spent more than S$20 million to develop its "Fast

Forward" video-based learning system, which includes curriculum and videos. The learning system includes programs such as "Easy Math," ''English," and "Successful

Supervision." Companies purchase the videos which can be shown at work, home, or community centers.

Technology Transfer to Smaller Firms

In accordance with Singapore's emphasis on increasing TFP, the SDF is focusing resources on speeding up technology transfer from multinationals to SMEs by building joint training centers, creating partnerships, and developing teachware with major corporations such as AT&T, Andersen Consulting, Festo, IBM, Motorola,

Phillips, Seiko Instruments, SIA, and Prima. Technical assistance is being provided to

SMEs to help them identify established and proven training programs, and through a flexible delivery system. In addition, the SDF assists SMEs with overcoming barriers 165

to training, such as poor cash flow (using training vouchers), tight production scheduling, and difficulty with completing paperwork.

Even though there is a heavy emphasis on technology development and transfer, I was told in an interview that Singapore has no delusions about its ability to develop technological capabilities that will approach those of the United States. This statement reflects the reasoning behind this view:

There are not likely to be any Intels developed here. Rather, the purpose of our upgrading efforts are to ensure that we are technologically current enough and have the necessary skills in our workforce to attract outside investment. Our hope is that the EDB can continue to annually attract new investment on the order ofUS$5 billion, knowing that we are going to consistently lose some of our economic base to lower cost parts of the region. 51

Current Issues

I was told by SDF staff that funding is one of the critical issues presently facing them. 52 The Training Levy Act stipulates the employer tax can go up 4 percent in good years, such as it did in 1982, and in a recession down to 1 percent, as it did in 1985.

The income ceiling can also be increased, as it was from S$750 to S$1,000 in 1995.

An average of S$129 (US$99) a year is spent on each individual training slot.

As wages have increased overall in Singapore, there are fewer companies below the wage threshold at which the levy takes effect. Therefore, a key and politically sensitive issue, particularly in times of economic downturn, is whether the wage threshold should be raised above its current salary level of S$1000 per month or, alternatively, whether the levy percentage should be increased. Of note is the fact that 166

the SDF has accumulated substantial fund reserves over the years, possibly to serve as a rainy day fund in anticipation of difficult times. Such times may have arrived.

In confronting the current economic downturn, the SDF is shifting more attention and resources to training those workers who are being displaced. SDF staff told me they are working closely with 27 companies to finance training of workers targeted for layoffs. Presently, the SDF, the Institute for Technical Education, EDB and the NTUC are collaborating on skills upgrading for likely-to-be displaced workers the companies. The intent is to avoid the prospect of structural unemployment.

To coordinate these kinds of efforts, the Ministry of Labor has organized a panel on retrenchments which includes representatives from the SDF. The panel is advising companies on how to reduce variable wage costs that might enable them to avoid layoffs and assisting with job matching for redundant workers. It is also advising employers to use the slowdown in their businesses as an opportunity to train and retrain their staff 53

Developing the SDF required a society-wide commitment and broad consensus on the part of employers, workers, organized labor, and various government ministries to invest in upgrading the skill levels of Singapore's current and future workforce.

The social partnership underlying the SDF is represented in the membership of

Singapore's PSB which plays a catalytic role by bringing employers, trade unions, and government together around a common agenda. In an interview conducted by the 167

Education Development Center two years ago, the head of the employer association revealed that:

The strategy of taxing employers for using unproductive labor, pooling the revenues gained, and encouraging competition among firms to induce demand for higher quality training, has the full public support of the country's employers and trade unions, who often argue among each other in private before reaching consensus. 54

In this statement, we see the advantage of deconstructing the metaphor of government as a controlling force. When reduced to its component parts, more avenues for participation in decisionmaking are available in Singapore than might be perceived from a Western perspective.

Although staff suggested that the SDF is only replicable in small countries, it would seem that a payroll tax on less productive labor might be a promising strategy for a variety of countries and settings, perhaps in support of regional workforce development. For example, Malaysia also has instituted a skills development fund, which has helped advance the efforts of the Penang Skills Development Center.

What may be more difficult to replicate is the agreement among employers, unions, and policymakers to forgo short-term gains in exchange for the long-term benefits associated with a higher-skilled workforce. 55 Here, we see the Confucian• based cultural tendency to defer gratification in effect. We will return to consider some of the lesson learned in the closing chapter, but we now turn to the second case study in Singapore--the Institute for Technical Education. 168

INSTITUTE FOR TECHNICAL EDUCATION (ITE)

In 1992, ITE was reorganized by the Ministry of Education to function as a formal tertiary-level education institution. ITE hopes that it can attract a significant portion of the 40-50 percent of the students in the normal education track to enroll in the career training programs it offers. Since 1973, ITE and its predecessor organizations have trained over 160,000 graduates in various technical skills.56

The position of ITE within Singapore's vocational education and training system is shown in Figure 2. Its current mission is to maximize the human potential of

Singaporeans through excellence in technical education so as to development the quality of the workforce and enhance Singapore's global competitiveness. 57 The organization's principal functions are:

1. To promote and provide technical education to secondary school-leavers;

2. To upgrade the technical skills of the workforce through continuing training and education;

3. To promote and regulate industry-based training and education in technical skills; and

4. To regulate and develop the certification and standards of technical skills. 58

To fulfill its functions, ITE now offers two major, full-time programs for secondary school graduates. First, about 25 percent of its students participate in apprenticeship programs modeled on the German system. There are presently more slots available at companies than there are students interested in the apprenticeships. The remaining 75 percent of the students are enrolled in the second program which involves attendance 169

at one of the 11 technical institutes administered by ITE which offer training in engineering, business, and technical skills.

Figure 2.

Vocational Education and Training System in Singapore

Nalionnl Nnnyany U111vcrs1ty fo<.linolo91cal ot Singapore U111versity

t t t I I

Institute of Technical Education z Polytechnics C'(l 0 -0 Junior Nanyang C: Certificate in Industrial National Technical Certificate Industry Colleges Ngee Ann () 0 Business Technician Certificate in Apprenticeship Training - fa-: t t t i i t t (/) z t -0 C: 0

C'(l Primary (6 Years) .a:s

From: Song S. Law (1996) Dynamics and Challenges of a Vocational Training System--The Singapore Experience, Singapore: Institute for Technical Education. Paper 2. p. 24.

As of 1997, ITE employed 1827 persons. Of these, 1187 were in academic positions and 640 worked in administrative positions. There is an obvious commitment to quality. Staff participation in Work Improvement Teams (quality circles) is at 100 percent. In 1996, over 95 percent of the staff participated in training themselves, with an average of 31.8 training days per staff member. 59

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Governance

The governance of ITE, as with many other Singaporean organizations, reflects a tripartite structure. The board of governors consists of 7 representatives of government, 10 members from businesses, and 2 representatives of organized labor.

The government representatives include the executive director of the Productivity

Standards Board and a senior consultant for the Economic Development Board, providing for a level of continuity between ITE and the other workforce development oriented organizations in Singapore. ITE also obtains advice and counsel about training needs and certification issues through a network of Technical Advisory

Committees made up of industry specialists and employers. There are currently seven of these committees covering the automotive, electrical, printing, electronics, mechanical, and precision engineering skill areas.

Special Programs

In addition to the major emphasis on training secondary school graduates, ITE provides several programs aimed at skills upgrading of the current workforce. The two most notable are BEST and WISE, mentioned earlier in my discussion of the

Skills Development Fund, the source of financing for both programs.

My interviews confirmed the earlier point that, to the degree Singapore has an illiteracy problem, it is focused on the older workers over age 40. These workers entered the workforce prior to the intensive commitment to primary and secondary education that characterizes Singapore policy today. Many of these workers are

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relatively poor. Further, they are at risk of losing their jobs in an economy that is focused on upgrading of skills, because they are unable to absorb higher levels of skills training. Thus, both BEST and WISE are addressed at upgrading the basic skills of the current workforce.

BEST is the acronym for Basic Education for Skills Training. It provides basic numeracy and literacy courses that help individuals upgrade their skill levels to the secondary level. During 1996, 21,563 training places were filled through BEST, and a total of 212,144 adults have enrolled since the program began in 1983.60 WISE is the acronym for Worker Improvement through Secondary Education. This program enables adults to advance their proficiencies in English and mathematics to higher levels. In 1996, 15,328 training places were filled through WISE, bringing the total of individuals served to 75,605 since the program began in 1987.61

Tachiki points to ITE's Certified OJT Center as an innovative education strategy. It also is aimed at addressing the age gap--those individuals who entered the workforce in the late 1960s and 1970s when the kinds of educational opportunities that currently exist in Singapore were not available. The innovative aspect of this program is that the ITE certifies private companies to provide OJT. Under this scheme, the Singaporean government provides companies with S$2.00 per training hour as an incentive and compensation for training these workers. Singapore's government estimates that this will extend the productive working life of 500,000 workers.62

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Other programs are offered to workers who wish to upgrade their skills or acquire new skills. These include evening and week-end courses addressed at specific populations. For example, the Modular Skills Training Program (MOST) provides skills upgrading leading to certification of specific competencies. The Training

Initiative for Mature Employees (TIME) is offered in four languages and is aimed at skills upgrading for older workers (over 40) who might be displaced by advancing technology. Finally, the Adult Cooperative Training Scheme (ACTS) enables younger adult workers (under 40) to achieve national skills certification through an apprenticeship mode of training.

Current Issues

Although Singapore has developed an extensive system for technical training, many students opt out of the system to attend universities overseas, partly at the urging of their parents, who desire for their children to have degrees. In perusing the daily newspapers during my short visit, I saw advertisements for two major college fairs. At both of these fairs, around 15 or so U.S. universities were visiting Singapore to recruit students whose parents were uncomfortable with their child's stream placement. Universities from the UK and Australia also actively recruit in Singapore and elsewhere in East Asia. While many of these students probably would attend the polytechnics if they remained in Singapore, some portion of them are potential ITE students.

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ITE also would like to attract more of the 32 percent of secondary school graduates who do not pursue post-secondary education. ITE therefore confronts a dual challenge in attracting more students into technical education, particularly in view of the occupational shortages that are confronting firms in some of these industries.

This is a situation not unlike the U.S., where vocational education is not seen as desirable by many students and is not encouraged by their parents. As a result, occupational shortages occur for lack of a pipeline of qualified workers, often in very well-paying jobs.

In response, ITE has undertaken a marketing campaign which involves extensive use of the media to make students aware of the career opportunities for which it can educate. Also, outreach programs to the secondary schools have been instituted. This situation calls to mind the old adage that, a horse can be led to water, but it cannot be made to drink. It also raises the possibility that the Singapore government is not as controlling of its citizens·' decisionmaking as perceived in the

West.

In the interview, I was told that another major challenge confronting ITE is to cut down the time it takes to develop a new skills training track. This need is driven by the demands of a rapidly changing economy.63 Up till now, it has taken from 12-18 months from the time a need was initially identified to when a training response was actually implemented. During that time, skills standards are developed, curriculum

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designed, and equipment and facility needs addressed. ITE has established a goal of cutting the time needed to develop a new program to 6-9 months.

To shape its new role as a tertiary-level education institution, ITE developed a strategic plan called ITE 2000. The plan focuses on five goals: 1) becoming an effective, relevant and responsive training system; 2) developing a physical environment compatible with a post secondary technical institution; 3) developing a conducive campus environment; 4) attracting and retaining a professionally-qualified training staff; and 5) improving the public image and recognition of technical training. 64

The goals are supported by 8 strategies and 21 specific programs deemed to be crucial to restructuring the success of the vocational education system in Singapore. 65

Substantial progress has been made already toward achieving some of these goals. For example, my meeting with ITE staff took place at an impressive new facility which opened last year as part of the effort to create an physical environment and image reflective of its expanded role in Singapore's education and training system.

NEW MINISTRY OF MANPOWER

When I asked SDF and ITE staff about other challenges confronting their organizations, I was alerted that some major changes were in process, but that they were not able to divulge the details at the time. Therefore, as I prepared to leave

Singapore, quite impressed with the workforce development organizations I had seen,

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I was only mildly surprised to read in the newspaper that the government had announced the creation of a new Ministry of Manpower as of April 1, 1998.

The new ministry will be created through a reconfiguration of the current Ministry of

Labor with an expansion of its purview and powers. Its mission is to:

...develop a globally competitive workforce in a sustainable manner. It will perform both promotional and regulatory roles in balancing Singapore's manpower needs. The Ministry's roles will include manpower planning to be a knowledge-based workforce, ensuring harmonious labor relations, attracting foreign talents to augment the local workforce, regulating the admission of foreign workers while they are in Singapore, and providing a welfare structure conducive to the workforce. 66

The ministry will have six major functions: 1) manpower policy and planning;

2) manpower development; 3) international talent promotion; 4) labor relations; 5) management of foreign manpower; and 6) labor welfare and services. The various workforce programs of the Economic Development Board, the Productivity and

Standards Board, and the Foreign Talent Unit under the prime minister's office will continue under the day-to-day administration of those organizations. However, they will operate under the policy direction of the new ministry and ultimately will be funded through the ministry's budget.

Commenting on the new ministry, the National Trade Unions Congress statement said: "As knowledge advances, the state cannot educate only the young and leave skills upgrading to bosses and individuals." 67 Perhaps this statement is an indication that the consensus underlying the some of the workforce development

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organizations was not as strong as previously believed, and labor feels the need for a stronger alliance with government to protect its interests.

The formation of the new ministry may also be, in part, a response to an issue which seemed apparent to me as an outside observer--programs for every issue one could imagine were scattered through the collection of boards and agencies in

Singapore. The new ministry may bring more coordination and coherence to the system, thereby eliminating costly duplication of programs. From this vantage point, the creation of the new ministry may reflect motivations similar to those of some of the job training reform bills currently under consideration in the U.S. Congress, which would consolidate approximately 80 categorical grants into block grants to the states in order to improve efficiency and effectiveness.

I conclude this list of hypothetical musings with one more speculation. It might be that the government has decided to pull in the reins on a system that has become too decentralized to control. In times of crisis, such as East Asia is currently experiencing in its financial and money markets, it would not be unexpected that the state would reassert its authority over this and other systems. This might be the position of some of those who consider the government as a sinister force which over• controls the lives of Singaporean residents. If true, it also would detract from my claim that government in Singapore, when de-constructed to its component parts, is much more participatory than believed in the West.

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Whatever, the motivations for the new ministry, they reflect the tendency toward continuous change that seems to characterize Singaporean public affairs.

Furthermore, the formation of the ministry does not detract from my conclusion that the Singaporean workforce development strategy is highly sophisticated and effective, as I will explain later in my concluding chapter.

CONCLUSIONS

In Chapter VII, following the case study of the Penang Skills Development

Center, I will return to assess the Singaporean workforce development organizations through the theoretical framework I proposed in Chapter IV. However, before moving on to Penang, a few closing observations are in order. First, I could not help but be impressed with the scale of the Singaporean workforce development activities. Large numbers of people have been trained through organizations like ITE and the SDF. The state seems to have lived up to its motto that "people are our only resource" in a significant way.

Secondly, Singapore appears to have operationalized the somewhat nebulous concept of what it means to be a learning region. Thirdly, I was impressed with the frequency with which organizations were restructured, merged, or programs shifted from one organization to another. As Law notes, for example, the system of vocational education was restructured three times, an average of a major restructuring every 10 years.68 The new Ministry of Manpower is yet another example of the seemingly constant change.

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To Felstead, Singapore is most representative of a new way of organizing

training systems found in East Asian nations. In this, what he calls, the "third way," the

starting point is the country's training needs, not those of industry. The needs of

individuals are seen as secondary and needs of employers as too short-term. Therefore,

the training agenda is based on the government's definition of what it wants the

country to be in 30-40 years and then considers what skills the workforce must have to

realize that vision. 69 Felstead's point is seconded by Aring in her evaluation of the

SDF. As she notes, "perhaps the most unique feature of the SDF is that it is an

"instrument of achieving the state's economic goals while finding ways to remain

relatively independent of the short-term needs of capital and labor." 70

In combination with other investments, the SDF has helped Singapore to

leapfrog several generations of industrialization in a time span of less than 30 years.

This "defies conventional market approaches which suggest that training is best left to

individual employers who would seek to maximize their own good through company

specific training, or to job seekers, who would seek to maximize the transferability of

skills to ensure the widest portability of skills. In the Singapore model, training is seen

as the most direct route to economic growth, which is the engine that drives the

State's role in society.71

Writing from a Japanese perspective, Tachiki agrees with this assessment, noting that while Japan's modern education system developed over nearly a century, almost all of the rapidly industrializing East Asian countries have already made

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progress beyond Japan's initial educational building blocks within the post-war period.

He projects that Singapore should approach the developed countries on most human capital formation indicators soon after the beginning of the 21st century.72

Tachiki argues that the World Bank report (which we considered in Chapter II) over-emphasized the role of formal education in promoting economic growth, and a more balanced picture would include the role of international education, post• employment training, and transnational corporations. Taken together, he says these additional factors have contributed to a compression effect. He defines this effect as the rapid development of a country's modern education system based on learning from the experience of other countries to accelerate development. The compression effect has contributed to the human resource advantage enjoyed by East Asian countries over other developing regions in the world.73

Given the short duration of my visit, I was unable to spend enough time to reach specific conclusions about the organizational cultures of the workforce development organizations. However, I am able to draw on the observations of Edgar

Schein who spent considerable time with the EDB. Schein reports that a set of six assumptions were shared by Singapore's leaders about economic development. They were:

1. The primacy of people. Since Singapore is a small country with no natural resources, people are viewed as the nation's most important resource. Therefore, it is important to pick the best of them and to develop citizens to their maximum potential.

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2. Dynamic civil service. Growing out of the legacies of the value accorded to exemplary leaders in Confucianism (recall the junzi) and the British traditions of a uncorrupted civil service, the assumption that a favorable climate for investors requires a government and civil service which are competent, incorruptible, and which operates with a clear set of rules;

3. Political stability. Economic development must precede political stability; but, long term economic development requires political stability; and political stability requires firm, but benign controls that permeate all of society;

4. State capitalism. A strong role for the state in shaping development policy is necessary and appropriate up to and including state ownership of enterprises in some cases;

5. Sector collaboration. The goal of building a nation could be achieved only through strong collaboration among business, labor, and government.

6. Strategic pragmatism. Without compromising the vision and strategy, it is necessary to be innovative and practical in implementing the plan.74

Operating within these assumptions, the EDB created an organizational culture. It reflected a shared vision, teamwork, individualistic groupism, boundarylessness, modulated openness, nonheirarchic hierarchy, cosmopolitan openness, and a strong commitment to organizational learning. 75

I am not able to judge whether or not all of the characteristics Schein saw in the EDB culture are present in each of the case study organizations. However, it did appear to me that the commitment to having competent staff high at both the SDF and

ITE. Furthermore, the strong commitment to learning as an priority was evident in both organizations. The "boundarylessness" feature also was evident in the propensity of the organizations to form alliances with others. In Schein's view, the assumptions, while specific to EDB, influenced how most other development-related organizations

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in Singapore were organized and managed. Since PSB, SDF, and ITE all are part of the same network, recognizing that some variations in sub-cultures may have developed. 76 Therefore, it seems reasonable to assume that the assumptions have influenced them to a significant degree. These observations, along with mine, indicate there is obviously something different in Singapore's workforce development organizations. We will return to probe more deeply on what it is in Chapter VII.

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ENDNOTES

1 Monika Aring (1997) "Case Study of Singapore Skills Development Fund," Compass to Workforce Development, Boston, MA: Education Development Center, p. 3.

2 Aring., p. 3.

3 W. G. Huff (1994) The Economic Growth of Singapore. London: Cambridge Univ. Press., p. I.

4 Huff, p. 4.

5 Aring, p.4.

6 David Ashton and F. Green (1996) Education, Training, and the Global Economy, Cheltenham, UK: Edward Elgar, p. 160. and Huff, op cit., p. 4.

7 Aring, p. 4; and M. S. Chung (1996) "A New Gateway to 21st Century Asia," Business. Korea, Vol. 13, No. 8, p. 46-50.

8 Straits Times (1998) "Domestic harmony vital to Singapore's survival and prosperity," Feb. 23, p. 31.

9 Ashton and Green, p. 161.

10 Iyanatul Islam and A Chowdhury (1997) Asia Pacific Economies: A Survey, London and New York: Routledge, p. 87

11 Ng Sek Hong, N. S. and C. S. May (1993) "Transition to More Cooperative and Consensual Pattern of Labor-Management Relations: Singapore and Hong Kong Compared," Asia Pacific Journal of Management, Vol. 10, No. 2, p. 219.

12 Hong and May, p. 2.

13 Basu Sharma and L. L. Luh (1994) "Labor Market Flexibilities as HRM Strategies: The Example of Singapore," Journal a/Asian Business, Vol. 10, No. I, pp. 61.

14 Sharma and Luh, pp. 61-65.

15 Sharma and Luh, p. 68.

16 Sharma and Luh, p. 69.

17 Sharma and Luh, p. 69.

18 Viswanathan Selvaratnam (1994) Innovations in Higher Education: Singapore at the Competitive Edge. Washington, DC: World Bank Technical Paper. p. 5.

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19 David Lim (1994) "Explaining the Growth Performances of Asian Developing Economies," Economic Development and Cultural Change, Vol. 42, No. 4, p. 839.

20 Straits Times, (1998) "Polytechnics...," Feb. 23, p. 34.

21 James Kynge (1996) "Efficiency, hard work...now for a spot of creativity: report on the brainwave behind Singapore's latest attempt at self-improvement," Financial Times, Oct. 26/27, p. 3.

22 Kynge, p. 3.

23 Wong Tai-Chee (1997) "Workforce Productivity Enhancement and Technological Upgrading in Singapore," ASE4N Bulletin, Vol. 14, No. 1, p. 49.

24 Training and Development (1994) "Best-in-the-World Practices," Vol. 48:6, No. 6, pp. 56- 57.

25 Alan Felstead (1995) "What are they up to?" Training Tomorrow. Dec. 1, p. 19.

26 Dennis Tachiki (1994) Developing Human Resources for Sustainable Economic Growth: Public Policy Lessons from Japan, the Asian N!Es, and DPEs. Tokyo, Japan: Sakura Institute of Research., p. 53.

27 Economic Development Board, Singapore, 1997.

28 Hee Ang Teo and J. T. F. Poon (1994) "Career Choice of Undergraduates and SMEs in Singapore," International Journal of Career Management, Vol. 6, No. 3, p. 24.

29 Tachiki, p. 29.

30 Wong, p. 54.

31 Wong, p. 51.

32 Productivity and Standards Board (1997) 1996-1997 Annual Report, Singapore, p. 2.

33 Productivity and Standards Board, p. 2.

34 Productivity and Standards Board, p. 5.

35 Productivity and Standards Board, p. 12.

36 Wong, p. 49.

37 Wong, p. 52.

38 Wong, p. 53-54.

39 Wong, p. 55.

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40 Aring, p. 7.

41 Aring, p. 1.

42 The Skills Development Fund (1996)Annual Report 1995/96, Singapore, p. 4.

43 The Skills Development Fund (1997) Annual Report 1996/97, Singapore, p. 4.

44 Aring, p..4

45 Tachiki, p. 26-27.

46 Tachiki, p. 26-27.

47 Tachiki, p. 26-27.

48 Aring, p. 6.

49 Aring, p. 6.

50 Aring, p. 6.

51 Interview with Patrick Daniels, editor of the Business Times, Singapore, Feb. 26, 1998.

52 Interview with Ng Siew Pin, The Skills Development Fund, Singapore, Feb. 23, 1998.

53 Straits Times, (1998) "CPF savings may be released in prolonged recession," Feb. 28, p. 35.

54 Aring, p. 3.

55 Aring, p. 9.

56 Institute for Technical Education (1997) Annual Report 96/9 7, Singapore, p. 53.

57 Institute for Technical Education, p. 1.

58 Song S. Law (1996) "Dynamics and Challenges of a Vocational Training System--The Singapore Experience," Singapore. Institute for Technical Education, Paper 2, p. 12.

59 Institute for Technical Education, p. 47, 51.

60 Institute for Technical Education, p. 30.

61 Institute for Technical Education, p. 31.

62Tachiki, p. 15-16.

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63 Interview with Tan Hong Choon, Institute for Technical Education, Singapore, Feb. 23, 1998

64 Institute for Technical Education (1997) "ITE2000 Plan," Singapore.

65 Law, p. 21.

66 Singapore Ministry of Labor (1998) Media Briefing on Ministry of Manpower, Feb. 25, p. 2.

67 Straits Times (1998) "NTUC welcomes new Manpower Ministry," Feb. 27, p. 3.

68 Law, p. 11.

69 Felstead, p. 19.

70 Ar'mg,p.2.

71 -Aring, p..2

72 Tachiki, p. 13, 31.

73 Tachiki, p. 13, 31.

74 Edgar H. Schein (1996) Strategic Pragmatism: The Culture of Singapore's Economic Development Board, Cambridge, MA: MIT Press, p. 162.

75 Schein, p. 225.

76 Schein, p. 225.

CHAPTER VI WORKFORCE DEVELOPMENT STRATEGIES AND ORGANIZATIONS IN PENANG, MALAYSIA

This chapter begins with consideration of workforce development strategy and

issues in Malaysia and concludes with a focus on the Penang Skills Development

Center (PSDC). As background for this chapter, I visited Malaysia in February 1998 and

visited with staff of the PSDC and the National CAD/CAM Center of the Standards and

the Industrial Research Institute of Malaysia (SIRIM). My discussions with them were

guided by the questions I developed in Chapter IV.

BACKGROUND

In 1948, Malaysia, while still under British colonial rule, was organized into a federation, comprised of nine sultanates that were vestiges of the feudal society. In

1957, the Federation of Malaysia became an independent state with its own constitution. By 1963, the Federation of Malaysia included Malaya, Marawak, Sabah, and Singapore, the latter of which became independent in 1965. Today, as a federated, constitutional monarchy, Malaysia consists of a federal territory and 13 states, one of which is Penang. Penang has a population of about 1.2 million persons who represent about 6.2 percent of Malaysia's total population.

Although the powers of the sultanates have diminished significantly in

deference to the national government, they still play an important role in the country.

As states, each of them now has its own constitution. They are responsible for

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controlling land use and therefore have an important role in setting development policy. Penang is one of the Malaysian state governments that has been especially aggressive in promoting economic development. Because of this federal system of government, the Malaysian experience may be of particular interest to regions in the

United States which also function in a context of multiple levels of government.

As Malaysia moved from the status of a colony, there was a great deal of goodwill toward the British. The Malaysians did not have to fight for their independence. Consequently, there was no nationalization of British assets following independence. Many British institutions and administrators stayed behind; consequently, many Malaysian organizations even today reflect a strong British influence. 1 This is especially true in the vocational education system which is based on the five-level British system of National Vocational Qualifications.

As has Singapore, the Malaysian economy has exhibited extraordinary growth since independence, particularly during 1988-1994 when its annual growth rate averaged 9 percent.2 This growth has resulted in a substantial reduction in poverty and a marked rise in real wages. In 1970, number of people living below the poverty in

Malaysia was 1.1 million persons; in 1990 it was 600,000 persons. Even so, there are still thousands of Malaysians living in the kampungs (Malay villages) who are economically marginalized. Better education is viewed as a key to continued progress in reducing their poverty.3

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By 1980, demographic statistics showed that income distribution was still widely unequal, but some progress had been made toward equalizing economic opportunities. Underemployment and unemployment were considerably higher for the country's Malays than for Chinese or Indians, and Malay women were 75 percent more likely to be unemployed than men. However, by 1996, overall unemployment was very low--2.9 percent.4 As we learned earlier, growth with equity was seen by the World

Bank as a reason for labeling the East Asian economic development success a

"miracle."

Planning and Economic Development Strategy

In Malaysia, the government's economic strategy and the policy debate have many elements in common with the Singaporean experience. The lack of many large, indigenous industrial concerns pushed Malaysia to adopt the Singaporean route of attracting multinationals corporations during its drive for economic growth from 1960 to the present. At the same time, Malaysia has attempted to avoid being dictated to by the multinational corporations.5 This, in part, has occurred through government mandates promulgated through various government policies and plans.

Economic planning in the post-British era was aimed at promoting growth, price stability, and alleviation of poverty; later versions of national plans focused on building infrastructure, raising rural incomes, raising standards of living, and then on industrial developmen t.6 As an example, the New Economic Policy (NEP) was developed in 1969 as a response to serious race riots over poverty and income

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disparity. It resulted in an aggressive affirmative action policy to increase the economic

power and participation of the bumiputras. While it is recognized that Malaysia cannot

have full and open competition at this time since some ethnic groups are not ready, the

general view is that protected individuals and companies ultimately must learn genuine

lessons from market competition.7

Although the NEP expired in 1990, its tenets have been continued in the

National Development Policy (NDP). This new policy calls for corporations to achieve

hiring targets for bumiputras (30 percent in the short-term, moving to 51 percent by

2010). The effect has been to create a serious shortage of qualified bumiputras to meet

the mandated quotas.8 In addition, the policy limits foreign ownership positions in

Malaysian companies to 30 percent, with the goal of achieving 51 percent indigenous

ownership by 2020. However, the ongoing financial turmoil in Malaysia has resulted in

temporary relaxation of some of these provisions, particularly those limiting foreign

ownership ofbumiputra companies.9

Two other policy plans are of relevance to this study. They include: 1) the

Look East Policy, instituted in 1981, under which the national government decided to seek aid, technical assistance, and training from the Japanese government and private sector to support industrialization and promote and inculcate a Japanese-type work ethic; and 2) Vision 2020, the national Economic Development Plan aimed at achieving full industrialization by the year 2020. Adopted in 1991, the first phase goal · is to attract high technology foreign companies; the second phase goal is to learn

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process and product technologies from these companies; and the third phase goal is to

use the acquired technologies to exercise greater control over the Malaysian economy.10

Vision 2020 is in its 7th Plan phase. The 7th Plan differs from earlier plans in its emphasis on raising productivity, calling for an increase in total factor productivity

(TFP) as a means of continuing prosperity. As used in Malaysia, TFP equals the optimal use of labor and capital, referring to the marginal output generated as a result of new technology, upgrading of technology, innovation, improved management techniques, and enhancement of workers' skills and education. 11

The seeds for the issues addressed in the 7th Plan go back to the time when the currencies of Japan and other newly industrializing Asian countries like Taiwan and

South Korea were appreciating against the dollar. Other Southeastern Asian countries were then depreciating their currencies against the dollar. Consequently, many manufacturers in Japan, Taiwan, and South Korea found it necessary to move some stages of their production offshore. Malaysia, and especially Penang, was a major beneficiary of this movement. Foreign investment accounted for approximately one• third of all Malaysia's domestic capital formation from 1987-1989. The subsidiaries of foreign companies are the source of nearly all manufacturing exports from Malaysia at the present time. 12

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PRODUCTIVITY AND TECHNOLOGY

Industrialization in Malaysia differed from Japan because it was achieved primarily on the basis of "learning" rather than "innovation." The country's primary competitive advantage was low wages. This has meant a continued dependence on imported technologies. According to Bernard and Ravenhill, Malaysia is not an example of a goose in the "Flying Geese" metaphor described in Chapter II. This is because its development strategy_ did not build on an experience of import-substitution.

Rather, new exporting industries were grafted onto an economy in which small manufacturing companies are noted for inefficiency and rent-seeking. The result has been what is called "technologyless" industrialization. There is a continued dependence on the subsidiaries of multinational corporations for manufactured exports. In 1990, foreign-controlled companies contributed 99 percent of Malaysia's electronics exports, 80 percent of its rubber product exports, and 75 percent of the textile and apparel product exports.13

Much of Malaysia's industrialization has occurred in the Export Processing

Zones (EPZs) set up by the government to attract multinational corporations.

Observers of this process say most EPZs are notable for the lack of backward linkages to the local economy. They tend to be linked more often with other companies within the zones or in other zones. In Malaysia, the share of local procurement in the overall output of subsidiaries did not increase substantially. For example, less than one-half of local procurement by Japanese companies was purchased from Malaysian companies.

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A barrier to purchasing more is the ability of local companies to meet quality standards, partly attributed to low educational levels of the workforce and a lack of indigenous research and development capacity. 14

Concerns such as these have not gone unnoticed, particularly in Penang. All

EPZs have entered a "learning race" designed to attract as much high-end work as possible to the country. Inside an EPZ, mechatronics (the fusion of electronics and mechanical engineering) are developed by companies. Outside the zone, infant industries like the national champion Proton (Malaysia's automobile manufacturer in alliance with Mitsubishi) are protected and take advantage of the mechatronics. 15

Proton provides a unique example of one approach that the Malaysian government has taken to raising the level of its technological expertise. It bought 80 percent of Lotus, a sports car manufacturer in the United Kingdom, in order to acquire that firm's research and development capacity in engineering.. This will enable Proton to increase the local content of its cars and reduce the royalty payments to Mitsubishi, which is presently the major supplier of parts for the vehicle. 16

Like Singapore, Malaysia has attempted to work with foreign governments to gain help with technology transfer and advanced skills training. However, these efforts have yielded minimal results so far. A collaboration with Germany graduated only 90 people 1996. The Malaysian-French Institute has capacity for only 600, while the Japan-

Malaysia Institute is still being planned. Advocates for this type oflinkage believe that the U.S., UK., Russia, and Singapore should be encouraged to set up

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similar institutes where skills shortages exist. In addition, existing requirements that the multinational corporations help with technology transfer should be closely monitored; if the multinational is uncooperative, then tax relief and other concessions should be reduced.17 One example of the effort to tie multinational corporate investment to technology transfer is the National CAD/CAM Center, a program of the

Standards and Industrial Research Institute of Malaysia (SIRIM).

National CAD/CAM Center (NCCC)

SIRIM is an aggressive effort by the Malaysian government to create a sophisticated research and development capacity in industrial technologies. One of its newer programs is the National CAD/CAM Center (NCCC). It was formed as the result of an agreement between the Malaysian government and the Boeing Corporation to promote technology transfer from multinationals to indigenous firms. I had an opportunity to meet with an official of the NCCC to discuss plans for diffusion of advanced manufacturing technologies into Malaysian firms.

The NCCC has developed a state-of-the-art training facility located on the

SIRIM campus in Shah Alam. Partnerships have been developed with various software companies whereby programs are installed on their computers for six months to a year.

This enables NCCC to expose companies to software that companies cannot afford to purchase untested and to provide training in advance of the purchase.

The center holds numerous forums and training sessions, many of which are poorly attended, especially by representatives of small-to-mid sized enterprises

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(SME's). I was told that they have had a difficult time attracting these firms to participate in collaborative training. The following reasons were cited:

1. The staff are so busy their managers will not allow them time off from production to attend training;

2. Managers are reluctant to expose their staff to other companies in joint• training sessions. They are afraid either that their workers' weaknesses will be revealed or that good workers will be poached as a result of their exposure to competitors; and

3. The case establishing the need for training in advanced technologies has still not been made to them, partly because there is still a great deal of tacit knowledge among the workers of manufacturing firms. I was told that some machinists are still using sketches on the back of envelopes to guide their work and producing parts at high standards on that basis.18

NCCC does not yet have remote learning capabilities that might enable it to overcome some of the reluctance toward group training, although the Multimedia

Super Corridor that is being developed by the national government may add this capacity. The center is banking on its Web page site as a key component of its marketing strategy. There is concern, however, that many of the target firms do not use the Internet regularly as a means of gathering information.

The central message gained from this visit is that technology must be pushed out by organizations like SIRIM; and the pull of the market has not yet been created among many SME's. This is a message similar to that heard in the United States. As we will see in the discussion of the Penang Skills Development Center, new ways of creating this "pull" are being tried with some success which rely on more decentralized methods of learning.

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LABOR POLICY ISSUES

To meet acute labor shortages, Malaysia has been importing foreign labor in both skilled and unskilled categories. Because of this situation, wages have sharply increased relative to productivity. In 1994, wages increased 10 percent, while productivity increased 2 percent. This had the effect of increasing inflation from 1.7 percent in 1993 to 3.7 percent in 1994.19 The situation was even worse in 1996, when wages in manufacturing increased 11.5 percent against a productivity increase of 2.2 percent.20

Serious concerns have been raised in Malaysia about the lack of productivity of many workers. For example, one former policy maker laments the arrogance and lack of discipline of workers who demand higher wages that are out of line with productivity. He applauds that Human Resources Minister Lim Ah Lek who has suggested that employers' associations and unions meet more often to discuss implications of this problem. 21 This reflects the consultation and consensus orientation to problem-solving in Malaysia.

Presently, there are over one million foreign workers in Malaysia. To encourage more reliance on Malaysian workers, the government has decided to withdraw tax incentives for labor-intensive industries. While supportive of this move, some observers caution the government to remember there still are shortages in professional and technical fields that hamper production and restrict growth. The following actions are suggested to address the manpower situation:

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1. Institute crash training programs to churn out more skilled workers (electricians, plumbers, masons, and carpenters). Provide more attractive training incentives to the private sector.

2. Recruit foreign workers in critical professions on short-term contracts who can leave when the economy slows down;

3. Rein in unduly high wages, which when the economy slows down, will increase unemployment.

4. Bring more women into the workforce by using part-time and flexi-time jobs and telecommuting;

5. Increase flexibility and reduce bureaucracy to allow spouses of foreigners to take jobs; and

6. Upgrade incentives for training and upgrading of skills substantially to entice employers into higher levels of training and career improvement. Tax concessions need to be more attractive for training, and matching grants to companies for in-house training should be provided.22

Organized Labor in Malaysia

The union density in Malaysia is presently about 14 percent of the workforce.

This compares to the U.S. percentage of 10 percent and to Singapore's level of 17 percent. In Malaysia, the union wage premium is 15-20 percent as compared with ranges of 5-20 percent in developed countries. 23

The recent history of unions in Malaysia is dominated by political concerns that arose during the 1960s about the real and perceived linkages between organized labor and communism. 24 For this reason, Malaysia does not have any labor federations closely associated with the government and therefore able to mobilize the workforce to meet government imperatives as is the case in Singapore. The Malaysian government has attempted to by-pass the Malaysian Trades Union Congress and its

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once-important, but now declining affiliate, the National Union of Plantation Workers

and the Congress of Unions of Employees in the Public and Civil Services. To do so, it

has sponsored the Malaysian Labor Organization (MLO). Affiliates of the MLO are

more representative of the industrialized future than those of the traditional

federations. 25

Malaysia has tried to follow Singapore's example and attempted to avoid the

low wage trap by attracting high value-added, high technology production through its

human resource management policies. As an element of this strategy, there have been

attempts to control labor unions on the grounds they deter foreign investment. As part

of the Look East Policy, in 1980, Prime Minister Mahathir encouraged the formation

of Japanese-style enterprise-based unions. In the export-oriented electronics sector,

unions were banned as part of the incentive package to attract new investment. This

ban was particularly relevant to Penang, where much of this investment occurred. The

ban was lifted in 1988 due to international pressures, but even then, membership was

restricted to plant-level unions. 26

Critics of Malaysia's policies toward organized labor have characterized its policies as "autocratic flexibility," in that they constrain the power of unions to achieve the flexibility in work practices that is needed for modern industrial development. 27

Kuruvilla indicates that the lack of organized labor's political clout at the national level, coupled with the fact that other mechanisms were in place to help with the economic advancement of the bumiputra, provided the state with the legitimacy to

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enact policies that "apparently trade off labor and union rights for increased foreign

investments in the export sector." 28 Overall, the present stance toward unions is one of

firm resistance to national-level unionization, but grudging acquiescence to company•

level unionization in the exporting sector where management generally sets the

agenda.

PRIMARY AND SECONDARY EDUCATION

As in Singapore, the foundation of the workforce development system in

Malaysia is its primary and secondary education system. In 1996, the term of universal education was extended to 11 years from the previous 9 and was expanded to include pre-school. The Malaysian education system is guided by the National Philosophy of

Education, which is a blend of Islamic and Confucian values. It is stated as follows:

Education in Malaysia is an ongoing effort towards developing the potential of individuals in a holistic and integrated manner, so as to produce individuals who are intellectually, spiritually, emotionally, and physically-balanced and harmonious, based on a firm belief and devotion to God. Such an effort is designed to produce Malaysian citizens who are knowledgeable and competent, who possess high moral standards, and who are responsible and capable of achieving high levels of personal well-being as well as to contribute to the harmony and betterment of the family, the society, and the nation at large.29

Primary school is not mandatory, although 99 percent of the eligible age group is enrolled. The curriculum emphasizes reading, writing, arithmetic, thinking skills, and values. In National schools, Malay is taught as the primary language and English as the secondary language. In national-type schools, Tamil or Chinese is taught as primary and English as the secondary language. Students may take from 5-7 years to complete

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primary school, and their progress is measured through achievement tests. A school• based assessment was recently added to insure that students adequately understand the practical aspects of Islamic education.

Secondary education is divided into two levels. In the upper level, an additional two years, students begin to specialize in the arts, science, technical, vocational, or religious disciplines. Specific schools are designated for the various topics: academic schools, generally for the university-bound students; technical schools, with graduates expected to continue studies in science and technology-related courses leading to diplomas or degrees; vocational schools, which provide a foundation of knowledge that enables students to enter polytechnics or universities; skills training, which provides for one- or two-year certifications leading to employment in the industrial sector; and national religious schools focused on Islam.30

Suggestions for School Reform

The concern about lagging productivity has led to calls for changes in the education system. One observer says that it must be modified to emphasize more qualitative and technological instruction. In the past, the system has emphasized quantitative education. Furthermore, it is suggested that school dropouts should be sent to technical and trade schools in order to avoid wasting human resources. It is suggested that more recognition should be given to teachers, including higher salaries and higher social status in order to attract high caliber individuals to the profession31

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Given the shortage of high-skilled workers, higher rewards are advocated for graduates in science and engineering. Science should be encouraged from the primary level onward. There should be more scholarships for science and technology at the expense of the liberal arts, business, and law. It also is suggested that the Malaysian salary structure be revised. At present, liberal arts graduates have better career prospects than science and engineering graduates. For this reason, too many students are taking the easy way out. Increasing salaries for science and technology teachers is also an option.32

The tensions between economic development and culture are evident in other prescriptions. While acknowledging that it is important to strengthen the Malay language as a means of consolidating national identity, to increase productivity by absorbing world knowledge, it is necessary to improve English language skills.

Workforce Development Issues

A study completed by Malaysia's National Productivity Council found that

77.4 percent of the training organizations in the country are in the private sector.

Many of them act as coordinators rather than direct providers, however, as 75 percent use external resources. 33

To increase the number of government-run training programs, the Training

Division of the Division of Manpower Development in Malaysia created 10 major training institutes. These include the National Apprenticeship Scheme through which the skills of industrial workers are upgraded over a three-year period under 201

sponsorship of their employers. The program consists of 18 months of training at the

Institute and 18 months doing on-the-job training (OJT).

Also, a two-year Trade Skill Certification Program has been developed for students after they graduate from secondary school. It involves 66 weeks of institutional training and 22 weeks of OJT, after which a Skill Proficiency Certificate is awarded. Other programs include: specialized, on-site training of three months for skilled and semi-skilled construction workers; an eight-hour, weekend course in basic industrial skills; and module-based training for instructors and advanced skills offered through the Center for Instructor and Advanced Skills Training.34

Because of the public sector's previously weak performance, and the great need for training, Navaratnam, a former deputy secretary-general with the Malaysian

Treasury and the former chief executive officer of Bank Baruh, suggests that even more encouragement and support be given to training institutes in the private sector.

While public institutional intake is expected to increase by 6.1 percent by the year

2000 from the current level of 43,100, he believes this increase is insufficient. In 1995,

65 private skills-training institutes produced 8300 graduates in mechanical, civil, and computer engineering and information technology. At the same time, there were only

3200 graduates of evening technical classes at government educational institutions.

They are grossly under-utilized and must be made more attractive to the private sector.35 202

In 1992, the government introduced the Human Resource Development Fund

(HRDF), modeled on Singapore's Skills Development Fund. Organizations with more

than 50 employees are required to contribute 1 percent of their payroll to the HRDF.

The effect of the 1 percent tax on firms is larger in Malaysia than in Singapore,

however, since each one can only take back 60 percent of its contributions. Kuruvilla,

1996, p.645. These funds are used to: 1) retrain workers to equip them with the latest

and sp cialized skills; 2) upgrade skills to facilitate technology transfer and

development; and 3) inculcate training as a culture within industry. The HRDF is

managed by a 14- member Human Resource Development Council with

representatives from business, government, and other education and training

organizations.

Various training schemes are available through the HRDF whereby companies can receive reimbursements of 50-80 percent for authorized training expenses. While initially the HRDF was confined to the manufacturing sector, in 1994, its program offerings were expanded to include service firms and S:MEs. The main beneficiaries so far have been electronics and electrical firms, many of which are located in Penang.36

Between 1993 and 1996, the HRDF spent only RM$140 million to train

639,000 industrial workers. Believing that this is not at sufficient scale, Navaratnam recommends that the HRDF restriction on funding training only at companies with at least RM$5 million paid into the fund be lifted. This would meet the need for training

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where it is greatest--primarily small companies which take a long time to accumulate enough capital to reach the current threshold of paid-in capital.37

The government has begun corporations to provide incentives to large to train the workers of SMEs, especially those that are part of their outsourcing channels. In addition, certain groups of industries are also being encouraged to start their own training institutes.38

Other suggestions for improving the linkages between economic and workforce development are proposed by Navaratnam:

1. Policy of reinvestment, although flexible, must be further improved;

2. Reluctance to approve work permits for foreigners must be relaxed further;

3. Shortage of skilled workers and professionals has to be rectified by introducing more imaginative training and educational schemes; and

4. Higher tech industries and research and development could be given more liberal incentives (it is better to give now and reduce later than to deny now).39

Messages such as those from Navaratnam are apparently being heard.

Improvements in productivity new technologies and a more skilled workforce are called for in this statement from Prime Minister Mahathir Mohamad:

We must fully believe in our ability to invent and produce world standard products. To do so, professionals such as product and packaging designers, engineers, and material scientists are essential manpower...clearly our colleges and institutions of higher learning must be fully geared for the important task of producing the required technocrats...iflocal expertise is not available, steps must be taken immediately to create the required pool of resources. Overseas training should be considered if it is necessary and this is a top priority. 40

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Throughout the time I spent in Malaysia, anxiety was evident in the media

about the prospect of serious economic problems. Concern was raised about

impending layoffs. For example, one newspaper article focused on those companies

that might choose to dismiss workers without proper notice and justification, saying:

Many corporations and individuals seem unprepared to make the adjustments and mental shifts that these rapid changes necessitate....some are exploiting the fear of the economic slowdown. While profits will suffer, that is no reason for employees to be clobbered by a company's irrational fears or desire to milk an extra ringgit and sen from unwarranted retrenchment. Retrenchment should be a last resort and the country's labor laws should not be flouted. Emulate Matsushita's management policy...increase training and human resources expenditure in time of slowdown so that it (the labor force) will be more than prepared when the economy recovers. 41

That same day, an extensive article in the "help wanted" advertising section described step-by-step procedures an employer should use when downsizing the workforce. The message was that retrenchment is a traumatic exercise, and the risks and problems can be overwhelming if a company handles it badly. Downsizing should be done with care, empathy, and dignity because post-event productivity of the remaining workers is important, as well as concerns about law suits from retrenched workers.42

Even so, in the face of budget cut-backs, the emphasis on 7th Plan strategies is likely to remain. These are: economic growth based on productivity and quality; encouraging large-scale industries to increase exports; automation in place of labor• intensive industries; strengthening research and development; and an emphasis on information technology.

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According to the Chief Secretary to the Government, Tan Sri Abdul Halim Ali,

the move to more value-added industries while being less dependent on labor must be

expedited, not only because it would help boost productivity, but also due to the large

presence of foreign workers in the country. He says:

Training and education must be continued as we know the importance of producing skilled workers, especially in fields where they are still lacking....Malaysia must take a high technology approach since it is no longer the only country which offers cheap labor. Our products will become less competitive due to rising production costs, thus the need to shift to capital• intensive industries. . . workers could be retrained and re-deployed to areas where there is a demand for manpower like in the Multimedia Super Corridor and information technology... .in this era of globalization, those who do not master the language (English) will lose out...want proficiency in both Bahasa Malaysia and English. 43

PLANNING AND STRATEGY IN PENANG

Malaysia's economic performance primarily has been led by growth in two specific places--the area around Kuala Lampur and in Penang. The growth in these two places has both raised the aggregate statistics used to calculate national economic performance and generated real wealth, some of which has been re-distributed throughout the country.

The state of Penang's share of employment in manufacturing is higher than any

East Asian country, even that of Singapore.44 After speculating about possible reasons for Penang's development success, Hill concludes that there must be a set of predisposing and facilitating factors as a base which, when combined with local initiatives from the public and private sectors, promote economic growth. Among the predisposing factors is Penang's historic strength as a center of international trade,

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commerce, and tourism, which when combined with good infrastructure, made it a

natural location for the internationally-oriented manufacturing that took place there in

the 1970s.45 Our focus now is on those local initiatives that have taken advantage of

these predisposing factors. For the past 30 years, these efforts have been overseen by

the Penang Development Corporation.

The Penang Development Corporation (PDC)

The Penang Development Corporation (PDC) has the lead responsibility for implementing the Penang state plan entitled Penang: Into the 21st Century: A strategic plan to build a fully-developed, post-industrial society. This is a plan for the state specifically, but it is set within the framework of Vision 2020, Malaysia's national plan mentioned earlier. The aim of the plan is to build an economy which is "dynamic, progressive, and resilient" with a high-technology, competitive manufacturing sector which complements the multinational companies. The goal is also to continue building a sophisticated, broad-based services sector well supported by the latest technologies and to further modernize the shrinking agricultural sector to increase its efficiency.

The plan identifies six major challenges confronting Penang:

1. Moving to more capital, skill, and technology-intensive manufacturing;

2. Diversifying by increasing inter- and intra-industry linkages and stimulating greater local entrepreneurial dynamism;

3. Encouraging a culture dedicated to excellence;

4. Fostering a skills-intensive workforce;

5. Developing into a premier regional research, design, and development center for manufacturing; and

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6. Enhancing the participation of the indigenous bumiputra and other economically-disadvantaged groups in the manufacturing sector.46

At present, 46 percent of Penang' s GDP comes from manufacturing, much of which is in multinational corporations, especially in the electronics sector. This figure has risen from 13 percent in 1970. Manufacturing is projected to employ 50 percent of the workforce by the year 2000. The GDP shares of agriculture, mining, livestock, and forestry are expected to decreased from 20 percent in 1970 to less than 2 percent by the year 2000. Reflecting the shifts to higher wage employment, the GDP per capita in

Penang grew from RMI 747 in 1970 to RM502I in 1990. 47

Although, initially focused on promotion of the manufacturing and textile industries, the PDC is now developing a 61-hectare Technoplex focused on bio• technology, automotive and environmental engineering, pharmaceuticals, and research and development. About 50 kilometers east of the Technoplex is the RM$500 million

1448 hectare Kulim Technology Park. This high-tech new-town will include support institutions for education and research and development, as well as housing and leisure facilities. To qualify for location in these parks, companies must document that 7 percent of their employees are science or technology graduates, and I percent of their total sales are invested in research and development. 48

Even with these constraints, the development scene in Kulim is quite dynamic.

Intel, Hewlett Packard, Taiwan's Acer, and Digital have all located facilities in the park. Quantum is shifting its production from Colorado to Penang with employment

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expected to increase from 200 to 800 workers in one year. Intel has opened its seventh building and Seagate and Dell are also opening facilities. France's Alcatel is using

Penang as a regional distribution center. Wafers Emas, a subsidiary of

Taiwan's Hualon Corporation, is taking 12 hectares in the new park. Semi-Fab of

Germany plans to spend $700 million on a silicon wafer plant.49

Historically, the advantages of Penang have been: 1) low labor costs (US$2 per hour vs. US$7 per hour in the United States); and 2) its low land costs ($3-6 per sq. ft vs. $16 per sq. ft. elsewhere in Malaysia). In addition, Penang has good infrastructure, and a range of development incentives are available. For example, high technology investors are exempted from corporate income tax for five years, and an investment tax allowance of 60 percent on capital expenditures is allowed. There are also other incentives for research and development and staff training. Overall, with no danger of hyperbole, it can be said that Penang demonstrates a decidedly pro-active business environment. There are problems, however, related to the workforce.

Workforce Concerns in Penang

As with Malaysia as a whole, Penang has encountered problems with an inadequate supply of skilled labor, particularly in its semi-conductor industry.

Compounding this problem, trained technicians are often hired away by firms in

Singapore. As in the rest of the country, many students in schools are opting out of math and science for what some say are easier courses in social science and business. 50

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Wages have been rising at 10-15 percent annually, more than double the gains

in productivity. As labor costs rise to levels of nearby Singapore, Thailand, Philippines,

China, and Indonesia are competitors for low-skilled manufacturing jobs. In

response, Prime Minister Mahathir Mohammed has called for Malaysians to become

"workaholics."51

In a tight labor market, many firms have taken extraordinary actions to take

care of their workers. For example, Intel inaugurated free bus service for its workers,

triggering this benefit to become the norm for many companies in the EPZs of Penang.

They also provide kindergarten for children of their employees, paid for by the

employer on a sliding scale based on wage levels.

Because many of these plants have Chinese managers, the benefits provided to

employees are seen by some as related to the Confucian value set we considered in

Chapter III. In this culture, workers do not have rights or entitlements. However,

leaders give more to a family than they think it deserves, expecting reciprocity--in this

case loyalty and productivity. 52

The PDC has become increasingly selective in the types of companies it seeks to attracts to Penang. Low technology and labor-intensive investments are now are steered to other states. The PDC targets attraction of industries that are high-value added, capital intensive, technology intensive, non-labor intensive, and non-polluting.

In order to succeed at this self-limiting strategy, an important requirement for the future will be a well-trained, well-educated, and resourceful labor force. The PDC has

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developed a long-term plan to ensure these needs are met, the Penang Skills

Development Center is an important actor in implementing the plan.

PENANG SKILLS DEVELOP.MENT CENTER (PSDC)

The Penang Skills Development Center (PSDC) is concerned with providing training and educational resources to the four EPZs and four industrial complexes in

Penang. There are 650 factories employing over 170,000 workers in these areas of the state. In approaching the workforce challenges in Penang, Singapore's efforts are viewed as a model, as indicated in the following statement from Boonler Somchit, the

Executive Director of PSDC:

These trends leave Penang with one option--to remake itself in Singapore's image as much as possible. Singapore has raised the effectiveness of its workforce many levels above the Malaysian workforce, but we have to become like them.53

In September 1987, the American Business Council met in Penang to discuss the problem of skilled labor shortages in the manufacturing sector. Subsequently, the then Chief Minister of Penang, YAB Datuk Lim Chong Eu; the state government; and the Penang Development Corporation initiated a series of meetings with the chief executive officers of major manufacturing companies to discuss the establishment of a contemporaneous skilled manpower training center. In April 1989, a Protem

Management Council was elected for the PSDC, it was chartered as a nonprofit organization under Malaysian law, and it held its first meeting in May 1989.

Figure 3 indicates the diagnosis by PSDC staff of the situation they confronted in 1990. It classifies four types of problems, method, man, machine, and environment.

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Taken together, the specific issues within the problem areas were seen as contributing

to a lack of adequate human resources to support Penang' s development.

Figure 3.

Fishbone Diagram of Challenges Confronting Penang in 1990.

METHOD MAN

0 0 CCXJRSES TAUGHT 0 LAG TIME IN TOO TI1EORETICAL TECHNOLOGY

OUIDAJED EQUIPMENT Eb.'lJIPMENT LAG STRINGENT IN TRAJN!NG B&!IND INDUSTRIAL REQUIREMENTS INSTITUTlONS S!A."IDAAO BY INDUSTRIES INOUSTRIAl.lWJON Of INCREASED NEIGHBOURING STATES -----1 DEM.AND MACHINE ENVIRONMENT

From: Boonler Somchit. (1997), The PSDC Experience. Paper presented at a conference of the industry-government smart partnership for human resource development, Nov. 24-25. Bangkok, p. 4.

Hewlett Packard, Hitachi, and 22 other foreign companies located in the Bayan

Lepas Free Trade Zone contributed money, equipment, and technical assistance to the new organization. The PDC provided the physical facilities and administrative support for vocational training, and the Universti Sains Malaysia (Science University of

Malaysia) provided academic advice.54 Initially, PSDC borrowed trainers from companies and devised a range of training programs to meet their needs. Now, the full cost is charged for training services, which are continually upgraded and adapted to changing skill needs. 55

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Although the national government was not directly involved in the start-up of

PSDC, it was supportive of the effort. For example, it offered a 200 percent tax deduction for training costs for firms that used the PSDC (and other centers). It also allowed PSDC to import high-level foreign trainers, without requiring work permits.

Based on the experience with PSDC, the Malaysian government is trying to replicate the initiative in other states. 56

Programs

PSDC's short-term objectives are to: 1) meet the immediate training needs of

PSDC's members; 2) establish a mechanism to coordinate and utilize resources available from industry and institutions; 3) position itself as the leading training institution in Penang and to be self-sufficient financially; and 4) work closely with the state and federal governments on the implementation of the HRDF. In the long-term,

PSDC is committed to: 1) providing pre-employment training for school leavers: 2) promoting vocational and technical careers; 3) positioning itself as a leading training institution in the Northern region; and 4) establishing strategic alliances with other training organizations.57

PSDC conducts activities in three program areas. It offers courses for workers to continually upgrade their skill levels to keep pace with technological progress in factory automation and manufacturing processes. The instruction offered in these courses raises the educational level of the existing workforce to prepare its members for the needs of the factory of the future. In some cases, training is paid for by

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companies seeking skilled workers; in others, the PSDC gives scholarships to school•

leavers. In addition, PSDC provides pre-employment training to prepare the future

workers for occupational competence. Finally, PSDC provides training consulting

services to interested firms and organizations.

Control and Governance

The PSDC board is dominated by private industry, with some representation

. from technology institutions. The only representative from central government is with

a quasi-governmental agency the SIRIM.

PSDC currently has 65 member companies, 80 percent of which are foreign.

Firms from the United States and Malaysia comprise about two-thirds of the membership. There are also 9 Japanese firm members and 7 companies from Europe.

A wide range of industry types are involved: agriculture (1 member); consulting (2 members); electronics (27 members); engineering (10 members); haulage (1 member); medical (3 members); packaging (1 member); plastics (2 members); semiconductors (9 members); and textiles (2 members). It should be noted that a substantial number of the members are in the electronics and semiconductor industries. This agglomeration of firms provides a critical mass of demand for similar types of training to enable PSDC to organize cost-effective responses.

The willingness to share control is reflected in PSDC's mission statement:

With the rapid development of the manufacturing sector in Penang and the northern region, the state is faced with new challenges in human resources development. There is increased demand for a skilled and trained workforce to meet the stringent requirements of industry. PSDC takes cognizance that

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human resource development for industry must be jointly undertaken by the public and private sectors working in tandem.58

However, this sharing is premised on all stakeholders having some investment, and thus some interest, in PSDC. The state owns the facility; the students pay course fees or receive industry sponsorship; member employers provide equipment, supplies, trainers, and instructional input; and nonmember employers also provide equipment and supplies. 59 Here we see a reflection of the expectation of reciprocity that its part of the Confucist value set.

Trainees

PSDC's enrollment levels and the number of offered courses have steadily increased. In its first year--1989--PSDC offered 16 courses to 307 participants. In

1995, it offered 225 courses to 4408 students. Placement rates for graduates are 100 percent, and there is a demonstrated increase in worker income after training.

Most PSDC participants are less than 30 years old and fall into a middle income level RM900 to RM1500 a month (US$360 to US$600). Between June 1993 and March 1996, the ethnic breakdown of 9677 students indicated 29 percent Malays,

59 percent Chinese, 11 percent Indian, and 1 percent of other ethnic backgrounds. Of these participants, 68 percent were male, and 32 percent were female.60

Graduation/completion rates are approximately 95 percent. All graduates get jobs. Salary increases from training vary by program. For instance, a basic machining course (1 year of training) would raise a worker's income from RM700 (US$280) to

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RMIOOO (US$400). An advanced machining course (an additional 6 months of training) would raise a worker's income to RMI300 (US$520).

Evaluation

The industry members who are part of PSDC assess the quality of the center's performance by two criteria: 1) by the student evaluations at the end of each course; and 2) by the performance of members' employees. The performance is assessed by means of pre- and post-training evaluations. The demand for the center's courses is another indirect measure of its performance, as is the continued participation of member companies. Each year, PSDC holds a conference of its members to look at future trends and training needs. A training needs analysis is conducted and used to prepare a training calendar, which is presented to the training committee, and ultimately, to the management council for final approval. The presence of so many different kinds of employers in PSDC's consortium ensures that skills in courses will be applicable to different types of work. In addition, certain trainers are evaluated by

BTEC, the national certifying body that evaluates trainers for the Diploma in

Engineering program. This ensures that instructors are both engaging and technically correct.61

Finances

Industry, through membership on PSDC's Management Council, determines the training offered at PSDC and jointly funds it. Thus, the courses and their content directly reflect industry's needs in Penang. Members pay a one-time fee to join PSDC.

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Full members pay RM20,000 (approximately US$8000). For their investment in

PSDC, employers receive a guaranteed pool of skilled workers that they know will have up-to-date knowledge about the latest technology and techniques and will quickly integrate into their work environments. 62

The organization's 1995 annual budget was US$385,000, of which only

US$60,000 was from state and national government sources. Since its inception,

PSDC has conducted 2048 courses with 37,282 participants.

PSDC's operating budget, which includes facilities maintenance and staff salaries, is not less than RMlS0,000 a month (US$60,000). The government contributes approximately RMl0,000 (US$4000). The remainder is obtained from course fees. As of 1997, PSDC had collected RM2. I million (US$840,000) in from courses and spent RMI .6 million (US$640,000) for expenses associated with those courses. The cost for each trainee varies depending on the type of study. It begins at RM2.50 an hour (US$1.00) for each person in technical programs and runs less for those in non-technical programs. Expensive programs may cost RM6,000

(US$2400) a year for each of 3 years. Depending on the demand by industry, certain consultants from the United States may be as high as US$3000 a day. The operating budget does not include capital investment or cost of programs which vary year to year.

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Productivity and Technology Transfer

Current technologies are taught at PSDC using the most up-to-date equipment available from industry. PSDC is able to keep up with the rapidly changing technology through its partnerships with industry which provide equipment, information, and expertise. Technology transfer also occurs from multinational members to local companies and from local companies to smaller local companies. Members who are trained at PSDC in the latest technology bring that knowledge to their previous or new workplaces, thus spreading it to firms of all sizes.

To build on the informal technology transfer that is occurring,, PSDC has developed a Center of Excellence. Its goals are to:

1. Form strategic alliances with relevant organizations in pursuit of excellence;

2. Promote intercompany transfer of best practices from successful organizations in an open and sharing way; and

3. Develop programs to upgrade leadership and management competencies to better manage the evolving high technology, capital intensive, and cost escalating business environment (PSDC, COE).

The center will create small, informal networks of company executives who are committed to shared learning. Twelve executives have agreed to participate in the first network, including those from American, German, and Malaysian companies. The

Center, while still in the early stages, could represent an alternative to pulling technology diffusion into Malaysian companies through decentralized networks, rather pushing it out through centralized programs as is the case with NCCC.

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Significance of PSDC

Several external evaluations of PSDC have been conducted. For example, the

Education Development Center reviewed PSDC and concluded that it was exemplary because it is:

...Industry-led; sustainable and self-financed; strong in technology transfer; preparing both skilled and semiskilled workers for high technology employment; and using a portable, multi-skilled curriculum. In addition PSDC has shown measurable results and been successfully replicated. PSDC has been replicated in 11 other Malaysian states. The concept has been exported to Mauritius, Mexico, and Thailand. It is considered a strong model for demand-driven (industry) training that is focused and cost-effective.63

Evaluating PSDC for lessons that Japan might learn, Tachiki concluded that

PSDC's tripartite partnership not only insures that the vocational curriculum keeps pace with the skill demands of the private sector, but also reduces the cost of vocational training (e.g. equipment donations and leasing arrangements with private companies). In this respect, he says that PSDC represents an innovative approach to addressing a major dilemma: the skills demanded by industry change faster than vocational training curricula, especially in high-growth economies. There are two keys to closing this gap: 1) closer cooperation between educational institutions and the private sector; and 2) training focused on developing multiskilled workers.64 Both of these keys are reflected in PSDC's methods.

Another perspective on PSDC is provided by Hampden-Turner. After spending several days in Bayan Lapas Free Trade Zone in Penang, he was impressed with the level of cooperation, noting that there were over 100 partnerships and joint ventures

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among companies in the zone. This commitment was reflected in PSDC in that nearly all members donate equipment, CNC machine tools, and CAD and CAM software, in addition to their direct financing. The idea is to have graduates trained on a company's equipment, and there are generally no "free riders." The equation is high quality plus high complexity at low cost. The commitment is made more realistic, because the Malaysian plants are not competing so much with each other as with the other places where Intel, Motorola, and Hewlett-Packard have plants.65

In evaluating their own organization, PSDC has identified five principles that they believe must guide their efforts in the future:

1. Stay close to both the chief executive officers of member companies and the training community;

2. Deliver value-added products and services;

3. Be at leading edge of training and human resource development;

4. Reduce cost of training; increase quality; develop better delivery systems; and reduce cycle time of program development; and

5. Develop linkages with local universities to articulate certificate and diploma programs into degree programs. 66

From my brief exposure to PSDC, it appears that new training models have resulted from the mix among firms and training participants, facilitated through

PSDC's intermediary role. For example, the Japanese companies emphasize OJT and use very little written materials in training, thereby limiting the transferability of training methods. In contrast, the Germans prefer classroom-based training with a heavy reliance on technical manuals. An in-between training approach is preferred by

220

U.S.-based companies, but it is much more soft-skill oriented and not as technical as

the German technique. The British, in contrast, rely very much on an instructor-led

mode of training linked to a tight curriculum. Students are left to learn on their own

with advancement based on passing exams. Also, the British apparently do not give

credit to students for prior learning, and every training course starts over with the

"basics."

I was told that PSDC has designed training materials and instructional methods

that blend these various training approaches.67 Further, as a result of PSDC's

interventions, some companies were beginning to modify their own training systems.

Some of these lessons are beginning to flow to the United States. For example,

Motorola has applied a number of training techniques related to motivation,

productivity, and innovation in its Penang plant that are now being exported to its

facility in Plantation, Florida. 68

Current Issues

The PSDC staff are concerned about the over-dependence of the organization on BTEC and team-building training programs. Together, these two programs accounted for 62 percent of PSDC's gross margin in 1997-1998. With the prospect of serious downsizing, there is a concern that employer demand for team building training will substantially decrease. Other concerns include the fact that high technology training programs with high levels of capital investment are not generating the expected rate of return, funding cut-backs from the government are possible.

221

Partly in response to these concerns and because of possible layoffs among its members, PSDC is positioning itself as a provider of retraining for displaced workers.

It is working with the national government to organize a demonstration program, which would give it access to unclaimed funds in the HRDF to finance skills upgrading programs for workers who are likely to be retrenched--prior to layoffs. This early intervention is possible because of the high level of trust that PSDC has established with employers.

PSDC's strategy involves efforts to: 1) proliferate its current core programs and 2) develop new and emerging training products related to a) automation; b) total production maintenance; c) information technology design and development; and d) radio frequency, micro-wave production. Each of these new areas is targeted at supporting the industry clusters identified as important to Penang's future by the

Penang Development Corporation.

Most significantly, in my view, is PSDC's plan to gain even larger access to training budgets of member companies than it presently has. This has implications well beyond securing PSDC' s financial base. While it may help do so, it actually will embed

PSDC as part of its member companies' human resource development functions.

Already, some firms have moved their training equipment to PSDC, opening up more production space in their own plants.69

As this embedding process continues, the boundaries between companies and training organizations are blurred by PSDC' s interpenetration70 of the various actors'

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domains. An organizational mechanism for promoting learning on a broad scale within

Penang will be created. As Granovetter argues, the actor whose network reaches into the largest number of institutional realms will have an enormous advantage. The ability to breach traditionally closed spheres of exchange is, says Granovetter, the essence of entrepreneurship.71 This may well be the most significant lesson that can be learned from PSDC's experience, and I will consider it in some depth in the concluding chapter of the study.

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ENDNOTES

1 Ravon V. Navaratnam (1997) lvfanaging the Malaysian Economy: Challenges and Prospects, Selonger Darul Ehsan: Pedanduk Pub., p. 6.

2 Cathleen Corbitt (1997) "Case Study of Penang Skills Development Center," Compass Guide to Workforce Development, Education Development Center, Boston, MA., p. 1.

3 Navaratnam, p. 150.

4 Corbitt, p. 2.

5 David Ashton and F. Green (1997) Education Training and the Global Economy, Cheltenham, UK: Edgar Elgar Pub., p. 183.

6 Navaratnam, pp. 82-83

1 Navaratnam, p. 91.

8 Doug Wolfe and R. Arnold (1994) Human Resource Management in Malaysia: A Comparison Between Japanese and American Approaches," Journal of Asian Business, Vol. 10, No. 4, p. 87-88.

9 Badrul Hisham Mahzan (1998) "Further Liberalization of Economy," New StraitsTimes, Feb. 27, p. 1.

10 Wolfe and Arnold, p. 89-90.

11 Navaratnam, p. 86.

12 Mitchell Bernard and J. Ravenhill (1995) "Beyond Product Cycles and Flying Geese: Regionalization, Hierarchy, and Industrialization of East Asia," World Policy Journal, Vol. 47, p 182.

13 Bernard and Ravenhill, p. 190-196.

14 Bernard and Ravenhill, p. 197-199.

15 Charles Hampden-Turner (1994) "Getting Wiser About the Asians," Director, Vol. 47, No. 11, pp. 44-47.

16 Financial Times (1997) "A strategic acquisition," May 19, p. 25.

17 Navaratnam, p. 90.

18 Interview with Hau Tan Sham (1998) National CAD/CAM Center, Shah Alam, Malaysia, Feb. 24.

224

19 B. R. Virmani and K. Rao (1997) Economic Restructuring, Technology Transfer, and Human Resource Development, New Delhi: Response Books, p. 71.

20 Navaratnam, p. 54.

21 Navaratnam, p. 55.

22 Navaratnam, pp. 57-58.

23 Iyanatul Islam and A Chowdhury (1997) Asia Pacific Economies: A Survey, London and New York: Routledge, p. 87.

24 Islam and Chowdhury, p. 87.

25 Chris J. Leggett and G. J. Bamber (1996) "Asia Pacific Tiers of Change," Human Resource Management Journal, Vol. 6, No. 2, p. 11.

26 Sarosh Kuruvilla (1996) "Linkages Between Industrialization Strategies and Industrial Relations/Human Resource Policies: Singapore, Malaysia, The Philippines, and India," Industrial and Labor Relations Review, Vol. 49, No. 4, p. 644.

27 Fredric C. Deyo (1997) "Labor and Post-Fordist Industrial Restructuring in East and Southeast Asia," Work and Occupations, Vol. 24, No. 1, p. 111.

28 Kuruvilla, p. 646.

29 Malaysia Ministry of Education, "Education System and Structure," Internet, http://eprd.kpm.my/edustruc.html.

30 Malaysia Ministry of Education, Internet.

31 Navaratnam, p. 81.

32 Navaratnam, p. 94.

33 Virmani and Rao, p. 68.

34 Virmani and Rao, p. 68-69

35 Navaratnam, p. 88.

36 Virmani and Rao, p. 70.

37 Navaratnam, p. 89.

38 Virmani and Rao, p. 71.

39 Navaratnam, p. 46.

225

40 New Straits Times (1998) "Innovate or Be Left Behind, Feb. 26, p. 10.

41 New Straits Times (1998) "Only as a Last Resort," Feb. 24, p. 10.

42 Thomas Chow (1998) "Rightsizing, retrenchment in the slowdown, New Straits Times, Feb. 24, p. 11.

43 Ramain Said (1998) Emphasis on 7th Plan strategies stays," New Straits Times, Feb. 24-, p. 12. 44 Hal Hill, (1997) "Regional Development in Southeast Asia: The challenges of sub-national diversity," Journal of the Asia Pacific Economy, Vol. 2, No. 3, p. 281.

45 Hill, p. 289.

46 Mark Johnson (1993) "The Northern States Link Together," Euromoney: Malaysia Supplement, Jul. 9, p. 4.

47 Johnson, p. 4.

48 Business Asia (1995) "High-tech heaven off Malaysia's coast: the pull of Penang," Vol. 27, No. 15, pp. 3-4.

49 Business Asia, pp. 3-4.

50 Business Asia, pp. 3-4.

51 James Kynge (1996) "Penang Finds It Difficult Staying on Top," Financial Times, Aug. 14, p. 8.

52 Hampden-Turner, pp. 44-47.

53 Kynge, p. 8.

54 Dennis Tachiki (1994) Developing Human Resources for Sustainable Economic Growth: Public Policy Lessons from Japan, the Asian NIEs, and Des. Tokyo, Japan: Sakura Institute of Research, p. 16.

55 Sanjaya Lall (1996) Leaming from the Asian Tigers: Studies in Technology and Industrial Policy, London: Macmillan Press, p. 91

56 Lall, p. 92.

57 Penang Skills Development Center (1998) "Update," Penang, Malaysia, Jan. 12, p. 1.

58 Somchit (1997) "The PSDC Experience," Paper prepared for the Industry-Government Smart Partnership for Human Resource Management Conference, No. 25-26, Bangkok, Thailand, p. 8.

59 Corbitt, p. 5.

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60 Penang Skills Development Center, App., pp. 1-2.

61 Penang Skills Development Center, p. 11.

62 Corbitt, p. 3.

63 Corbitt, p. 2.

64 Tachiki, p.16.

65 Hampden-Turner, pp. 44-47.

66 Penang Skills Development Center Business Plan 1998-1999.

67 Interview with Boon1er Somchit, Penang Skills Development Center, Penang, Malaysia, Feb. 27, 1998.

68 Peter Engardio and G. DeGeorge,(1994) "New Global Workforce Importing Enthusiasm," Business Week, Issue 399, p. 123.

69 Lall, p. 92.

7° Ken-ichi Imai (1989) "Evolution of Japan's Corporate and Industrial Networks," in Bo Carlsson (ed.), Industrial Dynamics: Technological, Organizational, and Structural Change in Industries and Firms, Boston and Dordrecht: Kluwer Academic Publishers, p. 125.

71 Mark Granovetter (1992) "Economic Institutions as Social Constructions: A Framework for Analysis," Acta Sociological, Vol. 35, p. 10.

CHAPTER VII

SYNTHESIS AND CONCLUSIONS

It is high time to look to Asia where interesting approaches to training and education are being developed.1

With the above quote, I begin the process of bringing this narrative to its conclusion. In Chapters II and III, we reviewed a number of stories about East Asian economic success. Through the reciprocal translation in Chapter IV, the key metaphors used in these narratives were identified. These metaphors were used to develop seven questions that guided consideration of the lead characters in this story-• the workforce development organizations in Singapore and Penang.

The seven questions included two about organizational issues, control and change management. Another three questions concerned relations among the central players in workforce development--government, firms, and labor. Two questions related to the role of education and training and its effects on productivity. From the case studies, it is clear that there is no single answer to each question and that there is a great deal of interaction among the many responses.

The interaction leads me to again to the concept of situationality which rejects any single explan tion for economic success or the nature of workforce development organizations in Singapore or Penang. In invoking situationality, I stress two points.

First, a number of cultural and economic forces, acting in the same direction, converged on the two places. In combination, these forces created circumstances which enabled rapid economic development in Singapore and Penang. Second, to both

227 228

take advantage of these forces and respond to them, certain organizational processes

were employed to develop workforces that supported and contributed to that

economic development.

The two case studies are a record of how situationality was reflected in the

organization of workforce development in Singapore and Penang. To gain a more

complete understanding of this, I will review the experiences from two perspectives:

I) social construction and related policy implications; and 2) organization and

management implications.

THE SOCIAL CONSTRUCTION OF WORKFORCE DEVELOPMENT ORGANIZATIONS

In Chapter IV, I argued that the theories of structuration, social embeddedness,

and social learning can help in understanding the situationality that underlies the

workforce development organizations we have reviewed. As I noted then, in the

context of the contingencies associated with historical background, social structure,

existing institutional constraints, the challenge to mobilize resources for collective

action.2 This collective action results in creation of organizations that both specify

constraints on human interaction within themselves and act to promote change.

Importantly, according to North, organizations in the pursuit of their goals are the

primary source of institutional change.3 In other words, organizations both become the

vehicles for propagating the values that led to their creation, but also create new

agendas for change through creation of new institutions. 229

In Singapore, the developmental state clearly was the vehicle for mobilizing collective action. This assumed, as a principle of its legitimacy, the ability to promote and sustain development, derived in large part from the culturally-based view that the state is atop the hierarchy of the social structure. Indeed, in smaller countries like

Singapore, it is difficult to imagine significant economic development without the power of the state is to mobilize resources behind it. From this, it naturally follows that a function of the state is to monitor and anticipate changes in the world economy and the productive system and to manage the internal transformation of the society and the economy to accommodate them. This also involves managing the process of skill formation in ways not encountered in the Western nations which tried to link changes in the education system to changes in the productive base--generally after the later had changed.4

In Singapore, the state has attempted to manage and coordinate changes in education and production with the aim of reducing wasteful spending in education, thereby enhancing the speed of economic growth. These goals are reinforced by the cultural propensities to consider group learning and national development as the central purposes of the business enterprise.5

From such a perspective, important roles for the state are to anticipate the type of skill formation required for any upgrading of the industrial base and to insure that an adequate skill base is available. According to Ashton and Green, to achieve this goal meant developing an effective education and training infrastructure, which in

230

addition to providing a mechanism of social (moral) control, could accomplish three other tasks: 1) provide basic skills in math, language, science, and technology required by industry; 2) ensure that technological skills required for the most advanced forms of production were transferred from older countries and their multinationals and reproduced internally; and 3) anticipate changes in skills required for the next phase of adaptation to world markets and provide the mechanisms whereby these skills could be generated in advance of the demand for them from employers.6 This third point is particularly relevant to this study because it reflects a position substantially different from that of neoclassical market advocates. I will return to consider this difference further below.

In Singapore, the political leaders believed that the state could not afford to leave the process of work-based learning to the actions of employers as had the leaders of older industrial economies.7 Consequently, the workforce development system in

Singapore is built on a set of "institutions"--taxes, training plan requirements, certifications, and subsidies--all aimed at encouraging and enforcing a training ethic and practices among companies and individuals. This set of institutions has been remarkably successful.

In Penang, a somewhat different conception of collective action was evident.

The PSDC was created through the collective action of companies and the Penang state government. In one respect, the difference from Singapore is reflective of the federal structure of government in Malaysia. In another, it is reflective of the tendency

231

of people to listen more and shape views accordingly inherent in the "musyawarah and muafakat"--the consultation and consensus process of decision making said to be prevalent in Malaysia.8

The PSDC represents an innovative approach to addressing what Couch has called the "paradox of collective action" in a firm-dominated economy, whereby individual profit-maximizing companies are looked to for solutions to collective problems.9 Couch argues that the same processes that are taking actions down to the company level are also taking them up to global levels. In a world of rapidly changing and highly competitive markets, considerable reliance is placed on firms finding their own competitive niches; there is little public policy can do to make an autonomous contribution. Achieving capacity for collective action at a cross-national level is slow and painful, while private collective action by firms can be achieved more quickly and flexibly. In Couch's view, both the firm and the global economy are levels that escape the reach of public collective action.10 However, the experience of the PSDC indicates that an effective intermediary, operating at an appropriate scale, can function as a bridge between the firm level and the global forces. In doing so, it is promoting collective actions that both provide jobs for people and support firm competitiveness.

The rapid industrialization in Singapore and Malaysia was both supported by, and led by, a parallel upgrading of workforce skills. The reader will recall Tachiki's observation that the workforce development organizations contributed to the rapid upskilling of the workforce through learning from other places--what he called the

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compression effect. This supports North's view that the speed of economic change is a function of the rate of learning. However, the direction of change is a function of the expected payoffs to acquiring different kinds of knowledge. 11 This notion of payoffs helps explain how the multiple interpretations of education have reinforced one another and accelerated the speed of change. These payoffs are reflected in the large scale participation of workers in training activities and increasing levels of educational attainment in Singapore and Malaysia.

Another of North's contributions to social construction theory is his dismantling of the rationality assumption underlying neoclassical economics as a means of understand social learning processes. Although the rational-choice framework assumes that individuals know what is in their self-interest and act accordingly, North believes this is false when choices are being made under conditions of uncertainty --the conditions that have characterized the political and economic choices that shaped (and continue to shape) historical change.12 Under conditions of uncertainty, Scott and

Storper tell us that: a) individual workers will tend to limit their own investment in improving their own skills for fear they will not be properly rewarded and b) employers will tend to underinvest in training because they can never be sure that the workers will remain on their payroll. 13 Thus, in Singapore and Malaysia, the state is constantly reinforcing the importance of continuous learning and quality as a means of reducing uncertainty for their citizens and businesses.

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These messages from the state reinforce ideas, ideologies, myths, dogmas, and prejudices that people already hold, but they also contribute to change. This common cultural heritage provides a means of reducing divergence among people in the society and a means for inter-generational transfer of unifying perceptions. Accordingly, we must acknowledge that Confucianism, Islamic influences, and other deeply ingrained cultural values have had a major effect on the structure and organization of the workforce development organizations in Singapore and Penang. However, as we also have seen, these values are not the only sources of influence, nor are they immutable.

Under conditions of uncertainty, decisionmaking also is based on experiences from the physical environment. Thus, both Singapore and Penang also have heavily invested in gathering intelligence that can be used to reduce uncertainty.

POLICY IMPLICATIONS

From their review of East Asian training systems, Ashton and Green identified four lessons for the West. First, there is a need to ensure that the primary and secondary educational system are producing high levels of achievement in the field of basic intermediary-level skills, such as language, math, science, and technology on which work-based learning can build. Second, post-secondary training should be focused on integrating practical on-the-job training with the theory of learning. Third, policies should fully involve employers in the delivery of skills for high-value-added production, but should not leave them in a position to monopolize the definition of needed skills. Fourth, systems should be in place to encourage and reward employees'

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commitment to lifetime learning. This commitment must be broadly supported by all

sectors of th e commum·ty--not J·ust government. 14

Ashton and Green identified three policy options for older industrial countries such as the United States. First, measures should be taken to create a closer set of linkages between economic development policies and the main components of the education and training systems. Second, reforms of education and training systems must be related to the demands of the productive system at the appropriate phase of its development. The focus, they said, should be on the skills required for the next stage in the of development of the productive system. Third, programs to enhance the learning abilities of adults, such as those seen in Singapore focused on older adults aged 40-50, should be undertaken by governmen t.15

Weakness of Government

Ashton and Green's recommendations for achievement-oriented education stand in stark contrast to the current state of primary and secondary education systems in many U.S. urban areas. They are considered by many to be focused on the skills needed for the past stage of industrial development, rather than those required for the future.

In the United States, the relative autonomy of education and training institutions makes it hard to pursue a unified workforce development policy. This is in contrast to Singapore and Malaysia where the government has considerably more control over more of the system elements. For example, the content of education is

235

directly controlled by the state and it has been easier to develop skill standards that must be achieved through primary and secondary education. The inability to develop such standards in the United States is evident in the continuing policy debates about the appropriateness of national education standards. Furthermore, there has been a discontinuity between the skills and competencies which are taught in the education system and those taught in the training system in the United States. Both Singapore and Malaysia have been able to overcome these controversies and gaps through more authoritarian means than are likely or appropriate, from a Westem individualistic perspective.

According to Ashton and Green, this weakness of governments in the West precludes the kind of centralized management seen in Singapore and Malaysia, partly because there are too many vested interests to overcome. In my view, a pervasive suspicion of government, particularly among businesses, is more likely the reason. In either case, my thesis is that the management of workforce development systems at the regional level may be more feasible than either national or state approaches. At the regional level, there is the potential for face-to-face interaction that can build trust among the various stakeholders in the system.

It also may be possible to socially construct strategies through negotiation processes and to manage their implementation through a network editing function of the type performed by PSDC. In such circumstances, a centralized management structure would not unnecessary.

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Making Linkages

Tachiki draws several lessons for Japan from his evaluation of the experiences

in Penang and Singapore. They include the need to create linkages between large

companies and smaller ones in two ways: I) backward linkages to large companies to

sharpen skills of managers and workers to compete on the international level; and 2)

horizontal linkages to sharpen competitiveness of small and mid-sized firms. He also

advocates partnerships which link academics, executives, and the public sector in

tripartite arrangements which target workforce development on the needs of specific

places such science parks. 16 Taken to a more abstract level, these suggestions reflect

the need for regional learning networks tied to external sources of information to

ensure their continuous currency.

Linkages such as those proposed by Tachiki are difficult to achieve. Earlier I

noted Couch's paradox which observes that the pursuit of a high level of vocational

skills is a collective goal, but the principal source of these skills is at the firm level.

Therefore, governments must defer to firms to determine what skills are necessary and

through what means they should be obtained. There are serious limits to what

governments or other collective actors can do alone to engineer appropriate

investments in vocational training, because businesses are equipped to maximize their

own profitability, not collective objectives.17 The PSDC model, I believe, holds

considerable promise for resolving this paradox and in helping to create the kinds of linkages called for by Tachiki.

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Need for Competency

Brokering and sustaining these kinds of networks requires highly competent staff Recall that Campos attributed the competency of bureaucracies as a being a key to the East Asian economic success. In both Singapore and Penang, the high levels of staff competency in the workforce development organizations were a key factor in their effectiveness. In particular, the EDB was characterized by Schein as staffed with extraordinarily capable individuals. My on-site observations confirm that the SDF and

ITE in Singapore, and the PSDC in Penang, share this attribute.

In this context, if public agencies are to work more closely with businesses, then they must have their respect. They must work more closely together with firms from a position of authority, based partly on channels of funds allocated authoritatively, and partly on decisions rooted in extensive knowledge. Agencies therefore must have adequate resources and expert staff with long-term commitments to this field of work.18

The present model of public agencies in the United States, where they are fighting for their own survival and more worried about protecting their turf than skills requirements, does not fit this need.19 For this reason, the creation of a regional partnership, involving government, but not staffed by it, along the lines of the PSDC, seems more feasible in the U.S. than a government-operated agency. In either case-• government agency or an intermediary--the respect that comes from adequate funding and competence is critical. 238

Commonalties with U.S. Regions

In the case studies, we saw issues common to the East Asian countries and the

United States. For example, as the ITE case study indicated, students are not pursuing apprenticeships at high levels. This is a widespread problem in industrialized societies.

As Couch notes, at the individual level, young people face uncertainty and difficulty in choosing between general education and apprenticeships. Consequently, more youth are pursuing higher education, which in the aggregate may turn out to be a poor choice-- at least for the economy. 20

One effect of these choices is a shortage of skilled workers in many technical areas, simply because there are not enough students pursuing these career paths. How this dilemma is addressed, without discouraging the pursuit of advanced education is a challenge. Community colleges are undoubtedly a key institution in addressing this dilemma in the U.S. Also, the school-to-work programs in operation in the U.S. hold some promise in overcoming the problem, as they present entry into the workforce as but another avenue to advanced education. The efforts of Singapore and Penang to address this issue should be closely watched.

Differences From U.S. Regions

We also saw major differences between the East Asian countries and the U.S.

Therefore, it is important to identify the limitations of what can be learned from the experiences in Singapore and Penang. For example, both Singapore and Malaysia have far fewer school leavers entering the workforce with inadequate skills than is the case 239

in many U.S. urban areas. For the most part, both of these places have public education systems that are graduating literate students. To the degree that there are basic skill deficiencies among workers, they tend to be in the older worker category

(overage 40). Because of demographic trends, Singapore, in particular is devoting substantial resources to skills upgrading of this population group to extend their productive work life. As the U.S. workforce ages, extending the worklife of older workers also will become an important challenge in many places. The Singapore programs provide an instructive model.

To return to my earlier point, Singapore and Penang do not have large numbers of the structurally unemployed as do many urbanized regions in the United

States. The employment needs of this group are not likely to be met directly through the kind of human capital investment strategy seen in East Asia. Furthermore, unless the case can be made that investments in the upskilling of the current workforce will help address the problem of the welfare-to-work mother in Northeast Ohio or any other U.S. region, it may be difficult to achieve political consensus on strategies for doing so. An important link, I believe, is the emphasis on "learning by doing" which I discuss in more detail later in this chapter. This enables employees to move up the career ladder which, in turn, opens up more entry level positions for lower-skilled individuals.

Even with this link, however, Couch again cautions that many individuals will be forced to compete for low-productivity opportunities that will not require high

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levels of education except as the filtering device through which, by definition, many of

them will not pass. In this context, greater consideration must be given to alternatives

such as public services as sources of employment, and attention must not be diverted

from efforts to create low-skilled jobs for the hard-to-employ.21

Finally, Couch reminds us that only a minority of the population is involved in producing internationally-traded goods and services in places like the United States.

As the productivity of the workforce increases, the number of employed will shrink in these areas, and large increases in production and sales will be needed to secure significant advances in employment. 22 For some time, Singapore and Penang have been able to meet this challenge. The current economic crisis may test the limits of their organizations, but, based as they are in people investments, my prediction is that they will survive. I make this assertion in large part because of the management principles that have guided these organizations.

IMPLICATIONS FOR MANAGEMENT AND ORGANIZATION

What Management Practices are Transferable?

The hypothesis that performance in organizations is higher when management practices are congruent with national culture is broadly supported by the research of

Newman and Nolan. From their work, they conclude that organizational culture cannot overcome national culture and the transferability of management practices from one culture to another therefore may be limited.23

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As evidence of their findings, Newman and Nolan note that the more collective, long-term orientation of the Japanese culture argues in favor of management practices that are very effective in Japan, but which have not achieved such high performance results in the United States.24 While this statement is specific to

Japan, the same observation might hold true for Singapore and Penang, as they also are collectivist-oriented societies. Reflecting this view, it has been noted that:

The emphasis in Singapore on long-range economic policy as the starting point for an integrated workforce development system will fall on less-than-fertile soil in the U.S., hindered by individualistic values, resistance to expanded government intervention, extensive personal and economic freedoms, and persistent opposition to higher taxes.25

However, research findings from other sources add ambiguity to the above conclusions. For example, in recent studies, Hofstede cautiously reported that: specific management systems can be effective in highly diverse national cultures and that, irrespective of national culture, interdependencies induced by the control systems can affect organizational performance. 26 Additionally, Lillrank, who also studied adoption of Japanese management practices, such as time-based competition and quality management in the United States, reached a similar conclusion:

Although organizations do not transfer well in their original packaging, the core idea or the function of an organizational innovation can be abstracted and then recreated in an application that fits local conditions. 27

The quality control circle concept was initially transferred to the United States and Europe through a low abstraction, demand-driven channel that did not carry the organizational and strategic significance of the innovation properly. In a hostile

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environment employing a different management paradigm, the quality control circles died rapidly. However, as the fundamental ideas behind the quality control circle movement started to come through a higher abstraction channel, unique Westem applications started to emerge. 28

If Lillrank' s observations hold, then for purposes of this study, higher abstractions of the organizational concepts underlying the workforce development organizations in Singapore and Penang must be identified in order to assess their transferability. I already have identified several such concepts through the reciprocal translation process used in Chapter IV. From this analysis and the two case studies, I suggest that there are five such high-level abstractions: 1) the primacy of people; 2) productivity through continuous learning and technology; 3) planning and strategy linkages; 4) pragmatic change management; and 5) place-based workforce development.

Although there is considerable overlap and interaction among these abstractions, each of them is discussed separately below. Each of the discussions concludes with a proposition in which I translate the relevance of the principles for regions in the United States.

THE PRIMACY OF PEOPLE

Many of the East Asian countries have a history of early commitment to human resource development even prior to the post-1960s boom. The region has long been viewed as relatively scarce in natural resources, but relatively abundant in human

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resources. 29 In Singapore, the common refrain is "people are our only resource," and the emphasis on education and training clearly reflects this view.

Many scholars now believe that the acquisition of knowledge and skills are a main challenge and central opportunity to achieve full employment in industrialized countries. Couch cites three reasons for this belief 1) educational demands for most jobs seem to be rising; 2) economic competitiveness will be achieved with higher levels of skill which differentiate workforce from low-cost producers; and 3) individuals who achieve higher levels of education are more likely to secure more prosperous futures for themselves. 30 In its most ambitious statement, this translates to a utopian future which Couch portrays as:

a learning society, one "almost without unskilled, low-productivity people, in which all mindless and physically-damaging jobs have been robotized; everyone in the workforce has a source of occupational pride in their skills and knowledge; and income differentials are compressed through the market• compatible device of reducing the relative scarcity of high-level skills.31

These expectations reflect a shift from a Keynesian demand-management strategy to a supply-side collective action to upgrade skills through education and vocational training.32 This position reflects human capital theory which posits a direct link between an individual's endowment of education and productivity. This position is reflected in Singapore's strategy.

As discussed in Chapter II, these endogenous growth theories (also called new-growth theories) depart from the traditional economic theories which treat technical progress as exogenous and incorporate human capital in the production 244

function. 33 Human capital becomes an endogenous factor that drives the process. As

Ogawa and associates note, the commitment to investment in human capital has generated externalities in East Asia such as the rapid adaptation of imported technologies and the related, rapid advances in productivity. 34 On this point, Lucas flatly concludes that:

The main engine of growth is the accumulation of human capital--knowledge-• and the main source of differences in living standards in nations is differences in human capital. Physical capital accumulation plays a decidedly subsidiary role. Human capital accumulation takes place in schools, in research organizations, and in the course of producing goods and engaging in trade.35

Controversial Approach

Islam and Chowdhury agree that human-resource development plays an important role in economic development, but only to a point. They say:

One ventures into more controversial terrain when the proposition becomes prescriptive: that through deliberate investments in training and education one can change the comparative advantage of an economy from low-skill, labor• intensive products to more skill-intensive goods and services, thus attaining rapid, internationally oriented growth.36

The following statement from the Asian Development Bank reflects a similar perspective:

Human resources alone are not sufficient. Sustained economic growth depends on how well these resources are developed and how efficiently land, labor, and technology are mobilized. Educated manpower may be wasted if capital and raw materials are lacking, if economic policies are inappropriate, if entrepreneurship is lacking, or if political structures are unstable. 37

The general view from the neoclassical economics perspective seems to be that policies to encourage continued skill upgrading are almost certainly necessary to both 245

economic and social advance. However, human capital is only one proximate determinate of economic growth that reaches its full potential when supporting factors are present.38 The question is whether they are as sufficient as many in the political world would hope.39 Singapore appears to have answered this question in the affirmative.

As I noted in Chapter II, in the case of conventional human capital theory, the returns to education and training are appropriated by individuals through higher earnings. To the extent that both the formal education and training systems and the labor market operate efficiently, utility maximizing decisions at the individual level will lead to socially optimal investments in human capital.40 As has been argued, however, the assumption that labor markets will work efficiently is not valid under conditions of uncertainty, and market failures result. This in turn creates a role for more active public policy in which various measures could be designed to rectify such market failure.41 This is how Singapore and Malaysia appear to have diagnosed the challenges to their workforce development needs.

The productive role that human resources play in economic development is challenged by those who believe in the screening hypothesis, that is, education and training have value to the degree they function as a screen to allocate workers into various jobs in society. They believe education is simply a tool for replicating class structure and to instill diligence and respect for authority. 42 On the basis of its emphasis on streaming, the education system in Singapore could be criticized on the 246

grounds that it is merely a screening mechanism. Further, both the Singaporean and

Malaysian education systems are clearly aimed at instilling respect for authority.

The education system is not as controlling, however, as might be perceived in the West. As I reported, students are opting out of their pre-ordained streams in both places to pursue higher education--in many cases outside their countries. Also there is some lateral mobility between streams. Thus, both Singapore and Malaysia are faced with the challenge of developing market and incentive structures to address the resulting labor shortages in technical occupations. How this is done should be of interest to places in the United States which share and confront similar challenges.

Whether human capital is considered endogenous or exogenous, both

Singapore and Penang consider primary and secondary education as the foundation for their workforce development strategies. Unless individuals are literate, they are not able to function effectively in the workplace, nor are they able to absorb new skills that are needed to increase productivity and support competitiveness. The commitment to education is deeply ingrained in the cultures of the two places. As we saw, a number of interpretations--self-fulfillment, getting ahead, and social control--have converged to create an ethic that more education is better. From a Western perspective, the challenge is one of structuring institutions that encourage expression of a similar ethic.

It is difficult, as Couch says, to see any major democratic alternative to a prolonged and intensified commitment by governments to publicly-funded education as part of a learning society strategy. 43 In this context, my first management proposition is:

Proposition l: Those regions which imagine that they can compete in a global economy must focus attention on developing their people resources to higher skill levels than in the past. This will require: a) ensuring that new entrants to the workforce have sound basic skills; and b) more expansive use of incentives to encourage skills deepening and upgrading of the current workforce than are presently available in the United States. The market will not address this latter issue on its own.

PRODUCTIVITY THROUGH CONTINUOUS LEARNING AND TECHNOLOGY

Now that easy money is no longer available in East Asia, both Malaysia and

Singapore are forced to look to efficiency improvements as a means of sustaining growth. As the case studies indicated, both Singapore and Malaysia have identified increasing TFP as a high priority and this is reflected in the agendas of their workforce development organizations. Substantial commitments have been made to skills upgrading and technology diffusion among smaller-to-mid sized firms as a means of achieving this goal through the PSB in Singapore and SIRIM in Malaysia.

Advocates of this theory emphasize the spill-over effects of "learning by doing," to the extent that the capacity to engage in the latter is enhanced by the former. The theoretical assumption is that externalities in human capital are typically combined with returns to scale in production. 44 Most relevant to this study, the new theories endogenize the rate of technological advance through human capital accumulation, most notably through formal schooling or through informal skill development on the job.45

According to Lucas, little is known about the relative importance of these different modes of accumulation, but for understanding periods of very rapid growth in

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a single economy, learning on the job seems to be by far the most central concept. For such learning to occur on a sustained basis, it is necessary that workers and managers take on tasks that are new to them, to continue to move up what has been called the

"quality ladder." For this to be done on a large scale, the economy must be a large

scale exporter.46 This argument reflects the experiences of both Singapore and Penang.

Endogenous growth theory models technological progress, or the growth of

TFP, as a function of the level of education or human capital. As such, human capital

may directly influence productivity by determining the capacity of nations to I)

innovate new technologies suited to domestic production and 2) influence the speed of

catch-up and diffusion of technologies from abroad. Thus, an additional role for

human capital may be as an engine for attracting other factors, such as physical

capital.47 As indicated in the Singapore case study, capitalizing on this possibility is clearly the strategy being pursued by the EDB which uses the availability of skilled workers as a major marketing ploy in its business attraction efforts.

Van Elkan (1996) points out that the stock of human capital may be augmented either by imitation or innovation. Productivity in imitation depends on th difference between the body of world knowledge and an individual's stock of human capital (knowledge gap), while productivity in innovation depends on past behavior in doing. The dynamic path followed by a small country is characterized by an initial period of imitation--for which there exists a catch-up opportunity--followed by a shift toward innovation as the knowledge gap is reduced and the economy's technical

249

maturity rises. In a growing world economy, late developers experience higher growth rates than earlier developers upon opening up. As the labor force gains more technical sophistication, the investment advantage evolves from imitation towards innovation. 48

The shift in the pattern of investment from imitation to innovation--and the slow-down in growth that accompanies it--accords well with the experiences of both

Singapore and Malaysia. Since the cost of imitation is negatively related to the size of the knowledge gap, countries which are farther from the world technology frontier will have relatively large imitation opportunities, relatively small catch-up costs, and relatively high initial growth rates.49

Although th.e cost may be lower, research results from Singapore do not seem to support the hypothesis that latecomers to industrialization will be able to shorten the learning process by capitalizing on the accumulated experience of the forerunners.

One possible reason for the low diffusion of knowledge is the reluctance of the technology owners to transfer it. The comparison of learning curves in East Asia reinforces the importance of learning. Latecomers to the industrialization game do not necessarily enjoy shortcuts and thereby have steeper learning curves. While technical expertise is transferable, skill and dexterity in operation and production can only be attained through practical experience. 50

Organizing the process of learning on a large enough scale to support economic development is a major challenge. However, both Singapore and Penang have produced impressive and large scale results in increasing the practical experience

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in their workforces. Through various incentives they have sustained a commitment to

continuous learning among their citizens and firms. The lessons of this experience lead

me to my second proposition.

Proposition 2: Productivity increases and technological currency are essential to sustained competitiveness. These are best achieved through continuous "learning by doing" activities which tie education and training into the workplace in concert with efforts to promote diffusion of technology.

PLANNING AND STRATEGY

Recalling the discussion in Chapter III, there is a deeply ingrained commitment

to the importance of strategy in East Asia derived, in part, from values drawn on the

ancient classics on the art of warfare.51 These values evidence themselves in the plans,

strategies, and tactics which countries like Singapore and Malaysia have employed in

pursuit of economic development. A giant chess game representing the economy, with

the state employing deception, gambits, and other tactics to do what must be done to

win, might be an appropriate metaphor.

We also learned of the cultural propensities for East Asians to look for interdependent relationships between apparently unrelated systems and to search for understanding of the long-term implications of their actions. These are strategic planning skills, and we saw them described by Schein in the EDB under the rubric of

"strategic pragmatism." Early in formulating its development strategy, Singapore was quick to see the close connections between demographic dynamics, human capital deepening, and economic growth. 52 251

Both Singapore and Penang have linked their workforce development strategies to their economic development goals. Over time, the industrial development strategies and the human resource development strategies within these countries have converged to a large extent, although how each has accomplished this varies somewhat. 53 Singapore is pursuing a clusters strategy that has identified those industries that are important to the country's economic future. Their education and training system have been organized to ensure that the human resources are available to support the economic development strategy.

How strategy is developed is, perhaps, a key difference from the West.

Viewed from above, both Singapore's and Malaysia's strategies seem very much to be top-down visions. In both Singapore and Malaysia, dominant national leaders have set the agenda, and reinforced it through their control of the administrative bureaucracy and the media. However, as we learned earlier, even under these circumstances, individuals, operating within varying sizes of zones of agency, have been able to collectively act to create and shape organizations that reflect their needs.

From an individualistic perspective, the citizens of Singapore and Malaysia have more restrictions on their agency than do most Western societies. Both societies have highly hierarchical social structures, and Malaysia (as we learned earlier), has the highest power distance rating of any country in the world on Hofstede' s scale.

However, if viewed from an Asian perspective, agency is being exercised in a different way-- through the group. With goals of stability, harmony, and safety through 252

conformity, the sorts of collective actions necessary to support economic development are, perhaps, easier to develop than in the West.

However, at the ground level, actual implementation of the strategy is shaped by the tripartite governance structures that oversee the statutory board. In Penang, the top-down approach of the national government is mediated by the state government, which has developed its own plan and created a development corporation to implement it. It is further mediated by PSDC, a non-profit organization, with its own business-dominated board.

In Singapore, the strategy for workforce development can be characterized as a market-driven approach to skills development. This can be contrasted with the

PSDC approach, which is more of an employer-driven model. In Singapore, the government takes the lead in defining what skills are needed and solicits advice from employers and workers through the tripartite system and other consultative mechanisms. In Penang, the needs of the employers drive PSDC's agenda and they are directly communicated into the organization through the membership structure and governance system. On this basis, the third proposition is as follows:

Proposition 3: Planning and strategy are essential to economic competitiveness. A vision is necessary to mobilize the kinds of collective action necessary to achieve change. In the U. S. regions, the necessary vision is likely to emerge through negotiations among business, government, and other constituencies than it is through an industrial policy mandated by the state or national government. 253

PRAGMATIC CHANGE MANAGHvffiNT AND ADAPTATION

Based on his modifications to neoclassical economic theory, North concludes that adaptive efficiency, rather than allocative efficiency, is the key to long-term growth. He notes that successful political and economic systems have evolved flexible institutional structures that are a part of successful evolution. Likewise, according to

Clark, the capacity to adjust efficiently to changing circumstances has become the vital determinate of long-term growth in East Asian countries.54

According to North, it is important to add the dimension of time to gain a better understanding of how change occurs. Two factors influence response to change:

1) how a given belief system filters information derived from experiences and 2) the different experiences confronting individuals and societies at different times.55

In Chapter III's cultural narratives when we examined the belief systems that filter response to change in East Asia, flexibility, and the ability to adapt to changing fortune and circumstance were identified as important values. Also, patience, a focus on understanding long-term implications, and the importance attached to developing and nurturing human relationships, were deemed to be important. In part, these values grow out of the Confucian belief that change is a cyclical process. If misfortune is encountered, one should wait patiently until the situation reverses itself 56 This cluster of change-related values clearly was reflected in the organizations studied in

Singapore. 254

In Chapter II, the abilities of the various countries to responded to change was identified as an important contributor to their economic success. In interpreting the significance of change management, various metaphors were used--strategy switch points and adaptive efficiency, for example.

The commitment to change management was evident in the case studies, particularly in Singapore where it has adopted an aggressive stance toward change. A brief recounting of examples supports this view. Since the 1960s, the vocational education system in Singapore has been totally revamped three times. PSB is the result of the merger of two organizations in 1996. We also saw that programs were shifted from the EDB to PSB. New programs, responding to retrenchment, were developed in both Singapore and Penang. Finally, major new organizations, such as the Singapore

Ministry of Manpower, were created. Overall, the picture that emerges is one in which change is not feared, but perhaps is welcomed and encouraged.

In North's view, the continuous interaction of institutions and organizations in the economic setting of scarcity is the key to institutional change. In this setting, competition forces organizations to continually invest in skills and knowledge to survive. The kinds of skills and knowledge acquired will shape perceptions about opportunities and hence choices that are made.57 Although he argues that there is not enough knowledge presently about how to create short-term adaptive efficiency, this assertion can be questioned on the basis of the experience in Singapore and Penang. 255

Their ability to adapt seems to be reinforced by two key management practices: 1) intelligence gathering and 2) interpenetration of networks.

Intelligence-Gathering

In the guanxi-related values, gathering intelligence and information is intended to help understanding true intentions and focus on building and sustaining lasting relationships.58 Both Singapore and Penang have given intelligence gathering a high priority both within their own areas and externally. Externally, this is done through benchmarking of workforce development efforts on a global basis in order to ensure they are informed about best practices and emerging issues in workforce development.

Intelligence gathering in both places is facilitated by the presence of multinational corporations which expose them to international best practices. Internally, both

Singapore and Penang have deep probes into their constituencies. As we saw, the SDF has been a mechanism for encouraging and reinforcing a widespread training ethic among Singapore's companies. It is kept current on their needs through its review of the training plans and proposals submitted by companies. The PSDC is essentially embedded in its constituency through its membership-based organizational structure.

These intelligence gathering mechanisms are important to maintaining the vitality of the industry clusters in both places. St. John and Pouder argue that unless outside linkages are nurtured, local industry clusters are likely to lose their competitiveness over time and will respond dysfunctionally to environmental jolts.59 256

This leads to the second feature of change management in Singapore and Penang--the

interpenetration of networks.

Interpenetration of Networks

According to Bernard and Ravenhill, the international competitiveness of East

Asian firms has been spurred by organizational learning through networks. These

networks are anchored in written and unwritten conventions that are an amalgam of

Westem and Asian institutions, norms, and practices that are every bit as important as

modern technologies and regulatory frameworks in accounting for economic success. 60

A similar perspective is provided by Amsden, who notes that the technological

learning that occurs within these networks is an essential feature of East Asia's ability

to endogenize its international competitive edge.61

In Singapore, the networking was evident in the constellation of organizations

that are involved in workforce development. Schein used the term "boundarylessness"

to describe the functioning of that network. In Penang, the PSDC is embedded in two

camps--companies and education and training organizations--and functions as an

intermediary with a third--government.

PSDC's position is reflective of what Imai refers to as interpenetration, meaning that organizational boundaries become fuzzy when markets and organizations interpenetrate one another. In its efforts to capture a larger portion of the human resource budgets of its members, PSDC aspires to achieve even more interpenetration.

In interpenetrated networks, says, Imai, the function of designing structure is

superseded by the concept of "editing the network."62 Editing the network involves: the provision of a milieu whereby employing, combining, and assembling various actors and by introducing entirely new elements, a new synergy among them can be created.63 PSDC is functioning as a network editor and, in this role, is creating new synergy. For example, as we saw in Chapter VI, drawing on the experience ofits member corporations, PSDC developed new models of training based on the blending of German, American, Japanese, and Malaysian instructional techniques. From these experiences, I suggest a fourth proposition.

Proposition 4: The ability to quickly, but strategically, adapt to new circumstances and needs is necessary in a changing global context. This requires a pragmatic attitude toward change which sometimes some old ways of training and creates new network-based processes that enable informed, quick responses to emerging needs.

THE IMPORTANCE OF PLACE

quoting llill earlier, I noted that most analyses economic development in

East Asia have taken place at the country level. For this reason, regional development is all too often ignored in assessing the socio-economic performance, unfortunately, I believe, to the detriment of its explanatory power.64

Because of their comparable size, I have considered Singapore and Penang to be roughly equivalent to U.S. regions. Because both are export-oriented places with heavy emphasis on manufacturing in their economies, I must exercise caution in drawing any universal conclusions. However, for those U.S. regions that share these economic features, the experience is quite relevant. Furthermore, both places are

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changing toward more knowledge and skills intensive activities in both their service and manufacturing sectors and their efforts to do manage the change process merit close scrutiny from all U.S. regions

Because it is a self-contained country, Singapore must view workforce development from a place-orientation. Penang is building off of the industry agglomerations that exist in the state and is using their workforce needs to drive its economic development agenda. As we saw, both have adopted approaches to workforce development that reflect the endogenous growth theory. That is to say, both places are investing in skills upgrading as a means of stimulating economic growth.

As we saw, both Singapore and PSDC have undertaken efforts to focus their development activity on particular places--mainly in large scale technology and industrial parks to promote the kinds of learning and spillover that is possible within regions. One key to these efforts is the existence of a large enough agglomeration of firms that share the need for occupations or skill sets--a point which was clear in the case of PSDC. It has a core group of members which share the same needs, thus enabling it to structure cost-effective training responses.

Neither Singapore nor Penang presently have all the labor resources needed to sustain economic growth within their boundaries, and have linked immigration policy to their workforce development policy. Both are importing workers to meet address labor shortages at both the· high and low-end skill levels. This practice will be altered

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in light of the economic crisis in East Asia, particularly with regard to unskilled workers who likely will be sent back to their home countries.

The importance of spatial considerations in economic development is likely to increase. There are expectations that regions will become the key units of performance in the world economy. Several recent theoretical arguments have been advanced to address these issues. For example, Scranton notes that:

1. Industries do not so much locate at particular sites as they create places at the same time as they expand their activities;

2. Geographic specificity (spatial division of labor) and the practical masteries specific to different trades are central to the continuing renewal of capitalism; because these masteries are embodied in people and organizations, sprouting and expansion does not happen just anywhere; and

3. Territorial production complexes are increasingly important as territorial modes of organization involve specialization, scope economies, flexible contracting, shifting technical alliances and amassing of rich labor pools.65

Likewise, Porter believes that these industry agglomerations, or clusters, create dynamic efficiencies that revolve around the rate of learning and the capacity for innovation. 66 Scranton's two points concerned with the spatial division oflabor and amassing labor pools, and Porter's ideas about learning and innovation, are central considerations in what the workforce development organizations in Singapore and

Penang have been able to accomplish. They confirm Scranton's conception of space as a determinate, an outcome, and a medium of social and economic action and structure, rather than as a neutral and passive platform for business initiatives.67

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Storper and Scott believe the regionalization of economic policy is necessary

to economic competitiveness in the contemporary world economy. They describe

three ways that regions may influence competitiveness:

1. Supporting or inhibiting transactions among industry agglomerations that lead to effective interfirm relations;

2. Promoting or inhibiting technological diffusion and innovation through informal learning; and

3. Facilitating labor market exchange and insuring the skills of the workforce are continuously matched and upgraded to meet industry needs.68

As was demonstrated in the case studies, both Singapore and Penang have been aggressive in addressing these issues.

According to Storper, regions (and other groups of actors, like firms in a sector, or intersectoral technological space) are candidates for a hybrid system of policy governance. They create smaller and more cohesive 'spaces' of coordination in which the firms and public actors who act in such spaces can organize around strategic projects with spillover and learning effects.69 How to develop these hybrid forms of policy management in U.S. regions in the context of a multitude oflocal political jurisdictions and levels of government is a complex challenge.

In this regard, functioning as it is within a federal system of government, the experience of the PSDC is particularly instmctive. The promotion of spillovers and learning effects is a central role that PSDC has played in Penang in its capacity as a

"network editor," In this sense, the PSDC represents a hybrid system of policy governance. It is a model which U.S. regions may wish to closely examine for

261

relevance to their own situations because it does not require a centralized governance structure.

Within these regional spaces, say Scott and Storper, labor training to ensure the adequate levels and quality of labor for economic activities is a public good that is not often produced efficiently in the market. Efforts to address this market failure though regional training centers can, they say, enhance regional competitiveness. I would argue that the SDF, PSB, ITE, and the PSDC, have played such a role. On this basis, I present my fifth and final proposition.

Proposition 5: Place-based workforce development is essential to competitiveness. Urban regions in the U.S. represent an appropriate geographic scale at which training needs can be aggregated and sufficient resources mobilized to support economic development.

CONCLUSIONS

summary, Singapore and Penang have developed long-term economic development strategies which link their trade and industry policies. They have used their education and training policies to ensure the skills needed to support these economic development strategies are available. These policies reflect the perspective that the direction of economic development can be influenced by investments in the skills of people. Economic and cultural incentives encourage and direct, these investments. Effective organizations have been socially constructed to accomplish these purposes. They are capable of adapting readily to changing circumstances, and able to communicate common goals and coordinate relationships among the

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component parts of government, education and training organizations, labor unions, and firms.

I have offered five propositions for management and organization of workforce development in the United States. These propositions are based on five principles of management gleaned from the experiences in Singapore and Penang. I refer to them as the five "Ps": 1) primacy of people; 2) productivity through continuous learning and technology; 3) planning and strategies; 4) pragmatic change management and adaptation; and 5) place-based workforce development.

Despite significant differences in the cultures of the U.S. and the places studied in East Asia, my thesis is that these management principles, abstracted as they are to a higher conceptual level, may well have transferability to a lower level than the nation• state--to regions in the United States.

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ENDNOTES

1 Alan Felstead (1995) "What are they Up To?" Training Tomorrow, Dec., p. 19.

2 Mark Granovetter (1992). "Economic Institutions as Social Constructions: A Framework for Analysis, Acta Sociologica. Vol. 35 No. 1, p.6.

3 Douglas C. North (1995). "The Address: Economic Theory in a Dynamic Economic World." . Vol. 30 No. 1, p. 10.

4 David Ashton and F. Green (1997). Education, Training, and the Global Economy. Cheltenham, UK: Edward Elgar. p. 227.

5 Charles Hampden-Turner (1994). "'Getting Wiser About the Asians," Director, Vol 47, No. 11 p. 46.

6 Ashton and Green, p. 157.

7 Ashton and Green, p. 157.

8 Ravon V. Navaratnam (1997) Managing the Malaysian Economy: Challenges and Prospects, Selangor Darul Ehsan: Pedanduk Pub., p. 181.

9 Collin Couch (1997) "Skills-Based Employment: the Philosopher's Latest Stone," British Journal of Industrial Relations, Vol. No. 3, p. 371.

1° Couch,, p. 371

11 Douglas North (1994) "Economic Performance Through Time,'' American Economic Review, Vol. 84, No. 3. p. 362.

12 North, p. 361-362.

13 Michael Storper and A. J. Scott (1995). "The Wealth of Regions: Market forces and policy imperatives in a global context," Futures, Vol. 27 No. 5, p. 511-512.

14 Ashton and Green, p. 185.

15 Ashton and Green, p. 185-187.

16 Dennis Tachiki, (1994) Developing Human Resources for Sustainable Economic Growth: Public Policy Lessons from Japan, the Asian and DPEs, Tokyo: Sakura Institute of Research, p. 38-39.

17 Couch, p. 367-370

18 Couch, p. 367-370.

19 Couch, p. 378.

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- "'0 Couch, p. 372.

21 Couch, p. 381

22 Couch, p. 386.

23 Kathleen L. Newman and S. D. Nolan (1996). "Culture and Congruence: The Fit Between Management and National Culture," Journal of International Business, Vol. 27 No. 4, p. 774.

24 Newman and Nolan, p. 774.

25 Training and Development (1994) "Best in-the-World Practices," Vol. 48, No. 6, p. 57.

26 Geert Hofstede (1993) "Cultural constraints in management theories," p. 224.

27 Paul Lillrank, (1996) "The Transfer of Management Innovations from Japan," Organization Studies, Vol. 16, No. 6, p. 988.

28 Lillrank, p. 988.

29 Naohiro Ogawa, G. W. Jones and J. G. Williamson (eds.) (1993) Human Resources Development Along the Asia-Pacific Rim, Singapore: Oxford Univ. Press, p. 3.

3° Couch, p. 381.

31 Couch, p. 367.

32 Couch., p. 368.

33 Iyanatol Islam and A Chowdhury (1997) Asia Pacific Economies: A Survey, London and New York: Routledge, p. 89.

34 Ogawa et al, p. 3.

35 Robert E. Lucas, Jr., (1993) "Making a Miracle," Econometrica, Vol. 61, No. 2, p. 270.

36 Islam and Chowdhury, p. 90.

37 Islam and Chowdhury, p. 91.

38 T_s1_am and Chowdhury, p. /03 -/ OJ...

39 Couch, p. 368.

4° Couch, p. 90.

41 Couch, p. 90.

42 Couch, p. 91.

265

43 Couch, p. 381.

44 Islam and Chowdbury, p. 90.

45 Ogawa et al, p. 3.

46 Lucas, p. 270-271.

47 Jess Benhabib and M. M. Spiegel (1994) "The role of human capital in economic development: Evidence from aggregate cross-country data," Journal ofMonetary Economics, Vol. 34, p. 154 and 166.

48 Rachel van Elkan (1996) "Catching Up and Slowing Down: Learning and Growth Patterns in an Open Economy," Journal of , Vol. 41, p. 96.

49 Van Elkan, p. 110.

50 Toh M. Heng and L. Low (1995) "Estimating and Comparing Learning Curves in Three Asian Economies," Asia Pacific Journal of Management, Vol. 12, No. 1, p. 30.

51 Rosalie Tung, (1994) "Strategic Management Thought in East Asia," Organization Dynamics, Vol. 22, No. 4, p. 59-64.

52 0 gawa et a1, p. 3.

53 Sarosh Kuruvilla (1996) Linkages Between Industrialization Strategies and Industrial Relations/Human Resources: Singapore, Malaysia, The Philippines, and India," Industrial and Labor Relations Review, Vol. 49, No. 4, p. 636.

54 Gordon L. Clark (1994) "The End of an Era: Asian NIEs in the Global Economy," Growth and Change, Vol. 25, No. 4, p. 487.

55 North (1994), p. 359.

56 Tung, p. 62.

57 North (1995), p. 10.

58 Tung, p. 64.

59 Richard Pouder and Caron St. John (1996). "Hot Spots and Blind Spots: Geographical Clusters of Firms and Innovation," Academy ofManagement Review, Vol. 21 No. 4, p. 1221.

60 Mitchell Bernard and J. Ravenhill (1995) "Beyond Product Cycles and Flying Geese: Regionalization, Hierarchy, and Industrialization of East Asia, World Policy Journal, Vol. 47, p. 209.

61 Alice H. Amsden (1997) "Editorial: Bringing Production Back In--Understanding Government's Role in Late Industrialization," World Development, Vol. 25, No. 4, p. 476-477.

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62 Ken-ichi Imai (1989) "Evolution of Japan's Corporate and Industrial Networks,'' in Bo Carlsson (ed.), Industrial Dynamics: Technological, Organizational, and Structural Changes in Industries and Firms. Boston and Dordrecht: Kluwer Academic Publishers. p. 123.

63 Imai., p. 146.

64 Hal Hill (1997) "Regional Development in Southeast Asia: Challenges of sub-national diversity," Journal of the Asia Pacific Economy, Vol. 2, No. 3, p. 263.

65 Phillip Scranton (1996) "The Significance of Spatial Theory for Business Historians," Business and Economic History, Vol. 25, pp. 65-71.

66 Michael Porter (1996) "Competitive Advantage, Agglomeration Economies, and Regional Policy, International Regional Sciences Review, Vol. 19, No. 1-2, p. 86.

67 S cranton, p. 70.

68 Storper and Scott, pp. 509-512.

69 Michael Storper (1995) "Competitiveness Policy Options: The Technology-Regions Connection," Growth and Change, Vol. 26, p. 304.

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