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WINDOW ON ASIA

Asian Business: What We Must Learn

Asian business have learned to effectively utilize government incentives. In Bangla desh, even when Government extends helping hands, such assistance are not very easily translated into expanded manufacturing outputs. This is because unlike south-east Asia, our business enterprises tend to be uncompetitive at the global market place.

Shahed Latif
EXPORI'S from Thailand will hit 40 billion dollars in 1993. The per capita export from Thailand would therefore assume three times the size of per capita Income of Bangladesh. Exports have been rapidly Increasing despite continuing recession everywhere in the world except Asia, east of Bangladesh. In these booming Asian economies, there are no recessions, only the rates of growth have declined from above 10 per cent to around 5 to 6 per cent per annum which Is slow growth to those countries. In South Asia, Bangladesh in particular, the growth rates were never anywhere near 6 to 8 per cent per annum.
Such performance has been primarily due to very rapid growth in manufacturing, entirely within the private sector. It has been the vigorous Aslan business expanding at breakneck speed and strong enough not only to overcome barriers of econoniic downswing but forge ahead with increasing sales abroad. Obviously, there are many things to learn from Asian business.
It is the highly competitive nature of Aslan business at the root of all success, unlike the uncompetitive nature of Bangladesh business at the root of all evils. In spite of gloomy global forecasts. Thailand's total 1993 export is expected to reach 40 billton dollars, up 17.4 per cent from this year largely due to two factors: (1) the ability of the existing manufactured exports to maintain the export growth rate of around 13 per cent: but more significantly, (it) emergence of new manufactured products accounting for half the increase in exports. At the same time, the exports of the traditional agricultural and mineral products will grow at only half a percentage point, indicating a declining share of only 16 per cent of the total merchandise exports from Thailand.
Implicit in the statistics juoted above, are the lessons hat we must learn from Aslan justness. In case of existing manufactured exports, textile ncludtng garments occupy the argest snare of around 26 per :tnt or 6.26 billion dollars against our exports, of gar- . rnents only, of around one billion dollars. Some of my friends Involved with the garment industry told me that the future is very bright for them ind within the next few years garment exports should increase to 3 billion dollars.
Regardless of this rapid expansion, the net gain is only In cutting and making of garments. thus retaining only one
quarter of the export earnings while three out of four dollars would be leaked abroad for mport of fabrics and other materials. Thailand at the same imc may lose garment exports o us which they would more han make up by export of tables to us. In fact they might lot lose on garment exports as well by moving into upscale narkets The process through which this is done contain an mportant lesson for Bangla-lesh business
We would be exporting heap, mass — produced shirts while Thailand is already iwltching over to expensive rinds of designer shirts where ■utting and making charges ire much higher and therefore ncreastng labour costs could >c met. In addition not only rages are high, productivity la ilso of a higher order. Hence he labour coat per unit of hirt is not that high.
The three billion dollar larment export target can be ulffllcd since such explosive growth rates were feasible In ountries like Thailand — so 'hy not In Bangladesh. But ignificantly more Important rould be the ability of our arment manufacturers to iring about continuous im-irovements in terms 'of qual-ty. product upgrading and unit alue. Let me quote an example t this point. Recently some of he manufacturers have found ut that If free lunch is pro-ided to the workers then the ncreasc tn productivity, par Icularly at closing hours be->re end of the work day, is riuch more than the cost of he food. Perhaps eye tests of workers doing more compli-ated works might similarly icrcase productivity as well as uality. Simple innovations Ike better lighting or sitting rrangements of the workers mu Id bring about improvements. Of course there is no cnylng that continuous im-irovcments of machineries, quipment and hand tools and tlcmpts to introduce new ;arment items followed by kill development are at the oot of the success of newly ndustrializing countries in loubling exports every two to hree years. This is how sue-essful business operates in sia — cast of Bangladesh.
Not only that — we must get way from exclusive cutting . nd making of garments only. Kit of the 6.26 billion dollars forth of Thai textile Including
garment exports, the Import content is barely 10 to 15 per cent for raw cotton and ehem leal fibres: otherwise fabrics and most of the accessories are locally produced and not mnly for the local garment industry. There Is a manufactur Ing town In China devoted only to the manufacture of buttons of every conceivable type for use locally and as well as abroad. The textile spinning, weaving and finishing industry jf several south-east and cast Asian economies account for billions of dollars worth of exports every year. We must graduate from pure cutting and making of garments to textile manufacturing and It is not »nly exports, the textile Industry as a whole can easily become the single largest source if additional employment for the Industrializing (If at all) Bangladesh of the very near fu-
ture. The present world recession must not deter us: let us follow rest of Asia through quality Improvement and upgraded products at lower cost.
The other Important lesson from the Asian experience Is [mergence, in spite of reces-lion, of new export products, n Thailand, the surge in exports despite global slowdown would be maintained due to he entry of many new Items >uch as television tubes, elcc-.ronic calculators, telephones, acsimile parts and accessories ind containers. With rapid rise n income, wages are increas-ng; so south-east Asia Is prickly moving towards more echnology intensive products, jrimarily those which belong o the modern world of elec-ronics. On the other hand, why don't wc concentrate on lew exports which are highly abour intensive but less so in erms of technology and capi-
As for example, gems and cweliery export from Thailand iccount for around one and a laif billion dollars. It is a highly labour Intensive industry. the international market Is Fairly large and we possess the age-old tradition of gem stone setting and jewellery making, though not of gem stone cutting and polishing, which
rould however be acquired very easily Our labour cost is less than half of Thailand. In addition, 1f easy availability of ready made factories together with utilities as well as case of exports are ensured, there are no reason why our businessmen must not come forward. Manufacture of artificial flowers, varieties of plastic products. leather goods including •hoes, knocked down furniture from Imported woods and numerous other products are all highly labour intensive with very little capital and low levels pf technology. We must concentrate on these new lines of manufacturing following the early experience of modern Aslan business. What Is the delay?
Aslan business have learned to effectively utilize government incentives. In Bangladesh . even when Government.
extends helping hands, such assistance are not very easily translated Into expanded manufacturing outputs. This Is because unlike south-east Asia, our business enterprises tend to be uncompetitive at the global market place. Here lies the crux of the problem.
A very significant characteristic of the Asian business that I am referring to is the dominant role of the overseas Chinese community whose business acumen have been behind the vigorous economic growth of Thailand, Indonesia and Malaysia: while Singapore, Hong Kong and Taiwan are all Chinese any way. The leading business families of the overseas Chinese communities are spread out all over south-east and east Asia. As a result, when manufacture of garments, shoes and plastics or electronics became more expensive in the newly industrializing economies like Hong Kong and Taiwan — due to rising wage levels, the entrepreneurs moved to ASEAN countries very easily through family connections. The pattern has been so obvious. The massive inflow of investment of around 30 billion dollars that entered Thatlakd during the boom year of 1989, had tn one way or an-
other. some,sort of Chinese connection. To a large extent, the investment could be broadly defined as of Chinese origin where capital was trying to find greater rates of return by changing its allegiance from one part of the family to another Those were more In the nature of intra firm or family transfer of an unique Chinese kind Even the Japanese investment coming in large volumes to south-east Asia had some from of Chinese connection for example, the local Thal partner of the Japanese investor is of Chinese origin and the same Japanese Is involved with another branch of the same family In Singapore or I long Kong. Given the dy rutmic role of one community In the Asian growth miracle. It •feme that the lack of overseas Chinese in south Asia might have been a factor behind our limited growth success. An important lesson lo learn from this Is that it Is not impersonal enterprise management and business growth. Aslan bus! ncss is very much dominated by the family where family members move across national frontiers to manage family ori ented business conglomerates.
This is the very significant aspect of Aslan business that we usually lend to overtook. Wc must realize that entre preneurlal talent neither grows on a tree nor It could be' taught In the classrooms. It Is as Illusive as a women. I am firmly of the view that 1t is through association, partnership and visible demonstration that our national entrepreneurs might bloom one day on the scale that we find in the newly industrializing countries today. Bui how It could come about? Yes. that Is the most important lesson that wc must learn from Asian business.
Since we lack traditional business communities like overseas Chinese, we must look elsewhere among those business groups who are foreign In origin but had an Interest In the past In our part of the world. Take for example the old British Investors who started leaving since 1947. They are still involved in the t*a sector but many have left and foreign companies have totally abandoned jute, agroprocessing and pharmaceuticals. in the old days even the
foreign company. There arc
tton and fertilizer industry The inland navigation was dominated by the Inchcape
Banking and insurance bus: ness. The oil and the petro prior to 1972 were all either wc u ,h-*
aging foreign investment while many of the investor* have left or tn the process of leaving Bangladesh The net effect may therefore be zero or in the negative So the first policy in this respect should be lost tract foreign investment by first and foremost encouraging those companies who have the ihe country from the past Second. special Incentives should be provided lo those earlier investors who plo
the past In this connection ft may be noted that I am not including the past Indian or Pakistani investor* since by no means they were foreign investors at the time the Investments were made but they may be welcome to make new investment if they wish to do so
I hope my intentions of making the proposal Is clear. Foreign Investment In the massive scale required would never be forthcoming through policies and programmes adopted so far. The strategy suggested is to recall past for-X Investors and create the base for attracting other new investors. The- recall process Is particularly Important since we arc hardly known to Asian business In particular. No doubt such foreign companies will be very few but they could be 1n a position to provide Important demonstration effect lo other Investors, both domestic and foreign If for example ICI, ESSO and Siemens, three leading multinationals with past investment In BCD invest tn a big way in chemicals. petroleum and electronics. thetr spread effects arc bound to be substantial through association and demonstration. Many other companies will then consider Investment in our country including the overseas Chinese from south-east and cast Asia.
The world has totally changed with the end of the cold war. There are no possibility of East India Company would take us back to 1757. It is economics and not pplitics al the forefront today. There- . fore Thomas Bala has returned to Czechoslovakia — why not CALTEX or Spencer ft Co bark to Bangladesh?