Kishore Mahbubani, Permanent Secretary Ministry of Foreign Affairs, Singapore: The Asean Magic
Jukka Leino, Ambassador Embassy of Finland, Singapore: Development trends in Asia and its relations with Europe
Matti Vinha, Managing Director Nordstock Oy, Finland - Malaysia Society: Introduction in Video Seminar in the Parliament
Edward Tang, The Straits Times, Singapore: Future of Asia and Europe linked, says Mahbubani
Paula Tiihonen, Doctor of Administrative Science: Politics must respond when the economy demands globalisation
Sung Ryan Lee, Director of the Asian Department Korea Institute for International Economic Policy: Widening the co-operation between Korea and Finland by concentrating in competition benefits
Jorma Julin, Ambassador Embassy of Finland, Republic of South Korea, Seoul: The Challenges and Opportunities presented by East Asia for Finland
Jukka Lahtinen, Managing Director, Avaintulos Oy, Lecturer of Marketing at Tampere University: Asia Pacific - World Trade Growth Centre
Park Tae Ho, Vice President, Korea Institut for International Economic (KIEP), The Korea Economic Daily: A Video Conference with the Finnish Parliament
Markku Markkula
A world first on the parliamentary level:
TECHNOLOGY FACILITATES MEETING OF CULTURES AND DEEPENING OF UNDERSTANDING
Life is a constant process of learning new things - of experiences and reflection that help me by adding depth and meaning to my own actions. To be able to understand other people and other societies, we need open discussion and must have a genuine interest both in the views of others and in the cultures in which their lives are embedded. And there certainly is a lot to be learnt from others, especially those with different cultural backgrounds. That applies even if what I learn is seldom something that I could embrace unaltered and use for my own purposes. However, I am continually learning new ideas and perspectives from others, and this helps me to add depth to my own actions and value-based choices, thereby enabling me to ponder different alternatives. That is part of the philosophy of life that I embraced before becoming a Member of Parliament and to which I cling as I encounter new tasks in new administrative practices.
I suppose it is fair to say that the Parliament of Finland is not much different from equivalent institutions in other countries. The national economy and the welfare of our citizens are the things that concern us. The everyday routines of legislatures are full of debate and deliberation of well-drafted bills, following procedures and methods of work that tradition has shaped. Decision-making as such functions well, but every Member has the right - and also the duty - to ponder whether we could develop our ways of working and make an even weightier contribution to supporting and developing national and international wellbeing.
A special feature of our Parliament is its Committee for Future Affairs, an administrative body comprising seventeen deputies. Rather than its work being confined to deliberating Government bills, it enjoys moderately wide room for manoeuvre and independence in conducting its activities. The Committee's remit specifies three tasks: to draft Parliament's submission on the Government report concerning the future, towards that end to study future research methods as well as to organise evaluation of the effects of technology as an aspect of the work of Parliament.
It is envisaged that the Government report on the future will comprise two parts. The first will focus on outlining changes in the international environment in which Finland operates and especially on the challenges that developments in Europe are posing for Finland. The second part will concentrate on strengthening economic growth and the threats facing it, on the future of employment and the work-centered society, as well as on fundamental choices that will have to be made in restructuring the welfare state.
The Committee has considered it essential to base its own work on a sufficiently broad assessment of international development. With our national discourse very strongly EU-centred, there is a danger that we in Parliament may choose the easiest course and come up with the questions and answers that we believe the media and citizens want to focus on and hear.
It appears unlikely that the very high unemployment that has persisted for years in Finland will be solved by ordinary means, even though our people's educational level is one of the world's highest and we are spending enormous sums of money on retraining the unemployed. Without doubt, we must dare to question some of the values that prevail in our society today and we must also have the courage to seek completely new policy lines to be followed in reshaping the fundamental structures of our society. An international point of view informed by a broad range of cultural insights and facts provides the solid foundation essential for this deliberation and discussion of values.
Video conferences have been used by numerous companies and universities since the latter half of the 1980s. Now that they are becoming a commonplace feature of active international communication - and especially since we represent a nation that is in the vanguard of adopting advanced telecom technology - it is natural for us in the Finnish Parliament to use video conferencing equipment to aid us in our work. Our two-day video seminars with representative of Singapore and South Korea have been very rewarding.
The keynote addresses and other contributions made by representatives of Finnish companies, universities, research institutions and organisations as well as by the other participants were an important part of the overall benefit that the seminars yielded. A further positive effect was the initiation of a substantial discourse between Members of Parliament and persons with expertise in relation to or a keen interest in Asian affairs. That discourse will certainly continue and deepen, because each seminar was an occasion to establish new contacts. In addition to the experts from Singapore and South Korea, the Finnish ambassadors Jukka Leino and Jorma Julin made important contributions to the success of our work. Thanks are due to them on behalf of all of us who participated.
I see no point in including facts about the history, present situation or likely future development of East and South-East Asia in this foreword. The articles do that excellently. I would, nevertheless, like to sum up very briefly and concisely some aspects of what members of the Committee learned from the seminars:
On behalf of the Committee, I wish to express our thanks to all who made these seminars possible and participated in them. The work will continue, because we have plans to arrange similar seminars with representatives of other Asian countries and for many other activities. Our aim with this report is to add impetus to cooperation between Finland and East and South-East Asia on the level of both countries and individuals. The opportunities are unbounded. It is for each and every one of us to determine for ourselves what benefit and indeed enjoyment we derive from them.
I would like to sum up what the seminar has given us by pointing out the following: We ourselves, each and every one of us Finns as individuals and all of us together as a nation, must find the boldness within ourselves to make choices. Our high-quality skills and expertise are always in demand on the international scene. All that we need now is to be willing and able to come up with solutions that diverge from the ordinary when they need to.
Markku Markkula Member of the Committee for Future Affairs Chairperson of the working group that organised the seminars on East and South-East Asia.
THE FINNISH PARLIAMENT
Committee of Future
VIDEO SEMINAR SERIES: MODELS ON SUCCESS
Part 1: SOUTHEAST AND EAST ASIA
Times:
Southeast Asia seminar June 13th 1996, 8 A.M. - Noon
East Asia seminar June 14th 1996, 8 A.M. - Noon
Places: Video studios:
In Finland, auditorium of Parliament;
In Singapore, Institute of Southeast Asian Studies;
In Seoul, Institute of International Economic Policy
Participants:
Persons invited will broadly represent political life, the research sector, industry, trade, technology and innovative thinking; the media will also be invited
Language:
English, with interpretation into Finnish
1. Background and objective
The primary tasks of Parliaments Committee on the Future, which was established in March, include serving as a forum for discussion of problems which are central from the standpoint of Finlands future. The committee will attempt to accelerate the debate taking place at the level of the highest political decision-making as regards long-term issues of vital importance to the country. Such issues include Finlands economic growth and the enhancement of the countrys competitive standing.
In June 1996, as its first discussion-opener, the Committee on the Future will hold video seminars on the future of Southeast Asia, East Asia and Finland. The programmes will take place in the auditorium of Parliament. The purpose is to investigate the foundations of and future prospects for success in countries comparable to Finland - from the perspective of those who are succeeding. The committee will simultaneously attempt to animate discussion of the success factors of Finnish enterprises in the 1990s and the future.
In autumn the committee intends in similar fashion to investigate the success models of Wisconsin, a U.S. state which in many ways resembles Finland; the Nordic country of Denmark; and New Zealand, which has come the furthest in its socioeconomic reforms.
The seminar presentations and the studies available by special order in conjunction with the seminars will be published in Finnish and English. The seminar publications will create a basis for further work. They will provide comparative data by way of clarifying Finlands potential future strengths and at the same time will help advance the international dissemination of a general awareness of Finland. With the exception of the report of the previous Committee on the Future, nothing about Parliament, for example, is available in English except coffee-table and art books.
Raising the subject of Southeast Asia is justified for several reasons. The Southeast Asian Countries economic growth has been among the wolds fastest for same ten years, and the forecasts continue to be excellent. If Japan is included in the reckoning, eastern Asias share of world trade amounts to about 25 %. US trade with Asia is twice that of Europes. It is predicted that the end of this decade will be a golden age for internal Asian trade. Asia is also acquiring a strong role as a centre for new technology and innovation - while Europe seems to be limping badly in all sectors.
The objective of the video seminars is to bring together Finnish knowledge of Asia, the need for that understanding, and the viewpoints of Asians on the future. What place will Europe occupy in Asias future? Do Finland and Southeast/East Asia have common interests?
Visits by several parliamentary committees to the region represent one concrete reason for choosing Southeast Asia as the subject for the first international success-seminar. In the course of the visits, embassies and Finnish business in particular expressed hope that awareness of Asia could be raised and that dialogue could be accelerated. The modesty of the connections is illustrated by the fact that the region still does not have one Finnish news correspondent - while Brussels has dozens, from the Finnish Broadcasting Company ( YLE) and other media.
From the standpoint of economic growth and the stabilization of prosperity, Japan, South Korea, Hong Kong and Taiwan have been at the forefront in East Asia. Of Finlands Far Eastern trade, two thirds goes to East Asia. This spring several government ministers have visited the area. A large presidential delegation composed of leaders of the trade and industry visited China in April. Throughout Asia, the influence of the Chinese culture of trade can be felt.
In preparing for the seminar, a need has become apparent to deal with such major East Asian economic powers as Japan and China, also. Taking into account the brevity of the preparation period, it will however be possible only to touch upon these countries tangentially at the spring seminar - South Korea being the real focus in East Asia. One possibility is to devide the seminar into two parts, so that in autumn an evaluation seminar could be held once the material from the spring seminar is ready. At the autumn seminar, Japan and China would be brought up as new subjects.
2. Seminar content and practical arrangements
The seminar will have four parts: 1) advance infomercials about Southeast Asia/East Asia in Helsinki, and as needed, about Finland in the Asian studios; 2) presentations by Asian experts on Asias future and relations with Europe, the Nordic countries and thus Finland; 3) 5- to 10- minute speeches by a few Finns (e.g. Nokia, the Technology Development Centre, the Finnish National Fund for Research and Development, the Finnish Foreign Trade Association, some SME as an Asian-trade expert, a representative of the health or education sector, a university-level sector, the newspaper Helsingin Sanomat ); and 4) discussion.
The participants will be invited. As a basis for the seminar, the committee will try to arrange for a political-level assessment of Southeast and East Asias current situation and relations with Europe and Finland. The assessment will be directed at both parties.
Video-conferencing equipment will be installed in the auditorium of Parliament, with a possible link to YLE (Finnish Broadcasting Corporation) for purposes of televising the programme.
From Finland there will also be participation by university-level institutions, several of which the committee visited in spring 1996. Representatives of the institutions will take part in the discussion in the auditorium. Possible YLE television coverage would make it possible, for example, to broadcast the conference to various locales as a part of supplementary university-level education.
Finlands embassies will handle the contacts in Asia. The objective is to establish direct video links to research institutions in Singapore and Seoul - institutions which are studying the regions future problems. In cooperation with the seminar lectures, the embassies will be able to invite parties interested in the subject to the video studios, as will also be done at the Finnish end.
Jukka Leino, Finnish ambassador to Singapore, and Jorma Julin, Finnish ambassador to South Korea, have promised to moderate the seminars in the auditorium of Parliament. Having served for years in the region, they best know both the broad subject matter of the seminar, including the continents culture, and the Asian lectures and their background organizations.
THE FINNISH PARLIAMENT Committee of Future SOUTHEAST VIDEO SEMINAR June 13th 1996
Moderators: Markku Markkula (MP) and Ambassador Jukka Leino Shedule: 8.00 - 8.15 Assembly 8.15 - 9.00 Opening: Finnish perspectives on Southeast Asias economy, trade, science and society in general Marketing lector Jukka Lahtinen (University of Tampere) 9.00 - 9.50 Lectures from Singapore studio; Finnish comments Lecturers: Mr Kishore Mahbubani, Permanent Secretary, Ministry of Foreign Affairs Mr Tan Kim Song, Money Desk, The Straits Times 9.50 - 10.15 Break 10.15 - 12.00 General discussion and seminar evaluation Language: English; the first part in Finnish but interpreted into English
THE FINNISH PARLIAMENT Committee of Future EAST ASIA VIDEO SEMINAR June 14th 1996
Moderators: Markku Markkula (MP) and Ambassador Jorma Julin Shedule: 8.00 - 8.15 Assembly 8.15 Opening: Finnish perspectives on East Asias economy, trade, science and society in general 8.15 - 8.45 Director Veli-Matti Kajova (Finlands Exports) 8.45 - 9.00 Director Matti Vinha (Finland-Malaysia Association; Nordstock) 9.00 - 9.45 Asian Project leader Mari Suvanto (Ministry of Education) 9.45 -10.00 Break 10.00 -11.40 Lectures from Seoul; Finnish comments Lecturers: Tae Ho Park, PhD, Vice President and Sung-Ryang Lee, PhD, Director Korea Institute for International Economic policy 11.40 - 12.00 Discussion and seminar evaluation Language: English; the first part in Finnish but interpreted into English
Kishore Mahbubani, Permanent Secretary
Ministry of Foreign Affairs, Singapore
THE ASEAN MAGIC
When a brief history of the 20th century is written, a few towering figures will be mentioned: Stalin and Hitler, Roosevelt and Churchill, Mao Zedong and Deng Xiaoping. Some organisations that may be named could be UN and GATT, EU and NATO, IMF and APEC. Most historians will forget to mention ASEAN. Pity! For in a quiet way, ASEAN may have done more by quietly improving the lives of the 500 million people of Southeast Asia and, building on this success, reached out and touched the lives of billions more who live in Asia. A brief three-phase history of ASEAN may explain why.
The Cold War: Phase 1
ASEAN emerged as a child of the Cold War. It was founded in 1967 in Bangkok, with the ostensible aim of accelerating "the economic growth, social progress and cultural development in the region".
But the real force that drove the ASEAN countries together was a common fear that the five founding members (Indonesia, Malaysia, Philippines, Singapore and Thailand) had of the communist threat to them. Each had to cope with domestic communist insurgencies, which were then supported, directly or indirectly, by the then two major communist powers, the Soviet Union and the PRC. All ASEAN leaders realised that if they did not work together to foster rapid social and economic development, they could lose the battle to the communists. The wars raging in the neighbouring Indochinese countries provided a daily reminder of the fate that ASEAN countries could encounter if they faltered.
The founders of ASEAN were also aware that the two previous experiments in regional cooperation in Southeast Asia had failed. The Association of Southeast Asia (ASA) was established in 1961 but ran into difficulties soon after its formation and Maphilindo, comprising Malaysia, Philippines and Indonesia, was formed in 1963 but aborted even before it got off the ground. This was fortunate for it meant that ASEAN members began the ASEAN experiment with low expectations. Therefore they proceeded cautiously. No bold experiments were attempted in early years. Instead, very quietly and without much fanfare, the ASEAN countries planted the seeds for future success by developing habits of cooperation.
It was in these early years that the crucial ASEAN concept of "consensus" was born. All members realised that ASEAN could not succeed if any of its members tried to dominate the proceedings. Each would have to be sensitive to the interests of others.
Fortunately for all ASEAN members, the largest member of ASEAN, Indonesia (which alone had a population larger than that of the other four founding members) had an indigenous political culture which encouraged consensus. Two Indonesian words, Mawarah and Mufat describe their culture. It is hard to translate these words clearly into another language. In essence they suggest that all decisions should be made after careful discussion, after the views of all, big and small, are considered - and these decisions should reflect the consensus of all.
Indonesia set the tone. It listened patiently to the views of all, refraining all the time from imposing its will despite being the largest member. It genuinely tried to secure consensus. And this notion of consensus became synonymous with ASEAN. No other organisation, not NATO, nor EU, nor the UN or the Non Aligned Movement (NAM), has been as faithful til to the notion of consensus as ASEAN has been. And this in turn has generated both the trust and comfort of the members in ASEAN as an organisation.
The Fall of Indochina: Phase II
The fall of Phnom Penh and Saigon to the communist forces came as a rude shock to the non-communist members of ASEAN. They were faced with the cold stark reality that a new and more dangerous challenge faced them. It did not help that the new Vietnamese government in Hanoi declared in 1975 that the ASEAN countries had not achieved "genuine independence". This sentiment was echoed by Laos at the Th Conference of the NAM Heads of State or Government in 1976.
The ASEAN countries reacted swiftly. They stepped up the level of ASEAN cooperation by convening the first ever Summit Meeting of ASEAN Leaders in Bali in 1976 under the chairmanship of President Suharto. Both symbolically and substantively this was an appropriate move, for it was President Suharto's strong personal commitment to ASEAN which has ensured that the Indonesia concept of consensus was practised in ASEAN. The landmark ASEAN Treaty of Amity and Cooperation (which in 1995 still remains valid as the key regional agreement to foster peace and stability) was signed in Bali in 1976.
The shock of 1975 was further aggravated by the Vietnamese invasion of Cambodia in December 1978. This brought Vietnamese tanks right up to the border of an ASEAN member, Thailand. ASEAN was thus forced to make a crucial political decision: to bend and accommodate the new power in Indochina or to take a position of principle and stand up and oppose this occupation of Cambodia by a foreign force. Both impulses were present in ASEAN. History could have gone either way. But the ASEAN countries made the courageous decision to stand on principle on this issue.
This was probably the landmark decision in the history of ASEAN. When the ASEAN countries set about to reverse the occupation of Cambodia, the conventional wisdom in most sophisticated political circles was that ASEAN was engaged in a futile exercise. The ASEAN states were acutely aware that the odds were against them. But they persevered. Perseverance in common adversity is an important bonding experience, as soldiers who have fought together in the trenches know so well. Both in the United Nations and in the Non-Aligned Movement, the ASEAN states had to learn to cooperate closely to persuade the international community of the rightness of their cause.
History will record that it was these years of extremely close cooperation on the Cambodian issue from 1979 to 1991 (when the Paris Peace Accords on Cambodia were finally signed) that created real bonds of friendship and trust among the ASEAN countries. This in turn fostered a sense of community among the ASEAN member states (which had since grown to six with the admission of Brunei in 1984).
Cooperation among diverse nation states is never easy. As British Prime Minister Harold Macmillian astutely observed, alliances are held together by fear, not love. The European Union was brought together by the then common fear of the Soviet Union and also the common fear of a return to the two disastrous World Wars that burnt Europe so badly in the first half of the 20th Century. ASEAN too was brought together initially by common fears. But as in Europe, constant cooperation breeds habits of cooperation. And it is these ingrained habits of cooperation that will successfully carry ASEAN through its third and possibly most successful era of cooperation: the post Cold-War era.
The Post Cold War Era: Phase III
It is not a mere coincidence that the most ambitious effort of ASEAN cooperation was launched at the end of the Cold War, or to be precise, exactly three years after the end of the Cold War. This was the landmark decision to launch the ASEAN Free Trade Area at the Fourth ASEAN Summit in Singapore in January 1992.
This was not the first time that the notion of an ASEAN Free Trade Area was suggested. Many such suggestions had been made in earlier years. But they came to nought for a simple reason: there was an insufficiently developed sense of community among the ASEAN states to provide the foundation of a Free Trade Area.
The experiences of the EU, NATA and CER (between Australia and New Zealand) have demonstrated that free trade areas can only be successfully established among countries that have already developed a great deal of trust and confidence in each other, and that already feel a sense of a common destiny. The countries must first feel that they are rowing on the same boat, before they can begin rowing together in the same direction. And, as a corollary, if countries do not feel that they are in the same boat, all regional cooperation will be futile.
Only this vital point can explain why the Balkans of Asia , Southeast Asia, (which is in many ways more diverse in ethnic, religious, cultural and historical terms than the Balkans of Europe) came together at the precise moment when the Balkans of Europe fell apart in a violent fashion. For a Japanese to truly understand how far Southeast Asia and ASEAN have come, try to imagine how long it will take to foster the same sense of community and how long it will take to launch a Free Trade Area in the other half of East Asia, among, say, the neighbouring countries of China, Mongolia, North Korea, South Korea, Russia and Japan. When will there be an ANDEAN (Association of North East Asian Nations) to complement ASEAN?
The Asian Regional Forum (ARE)
ASEAN is acutely aware that it is the only truly successful regional organisation in Asia. Hence ASEAN realises that it has to take the lead in developing a new regional structure to cope with the extremely fluid geopolitical environment that surfaced in East Asia at the end of the Cold War.
Despite its heavy involvement on the Cambodian issue, ASEAN had fought shy of being seen as a political-security organisation. The idea of ASEAN-wide defence cooperation is still taboo (although now at the regular annual "SPECIAL" Senior Officials Meeting (SO), ASEAN Defence Ministry Officials join their Foreign Ministry colleagues to discuss regional security issues). ASEAN does not want to be perceived as a reincarnation of the Southeast Asia Treaty Organisation (SEATO) or an Asian equivalent of NATO. It has not been, is not and possibly will never be a military alliance. Un any case, the general track record of military alliances or military blocs, with the possible exception of NATO, has not been outstanding.
But when the ASEAN Leaders met at the Singapore Summit in January 1992, they realised that there was no choice. Japan had tried, at the July 1991 ASEANPMC, to launch an initiative for region-wide security discussions. It did not take off. Similarly, in 1990, Australian Foreign Minister Gareth Evans had also proposed the creation of an Asian version of the Conference of Security and Cooperation to address regional security problems.
ASEAN realised that it was only an ASEAN invitation that could draw l the major powers to sit together to discuss security matters in the Asia-Pacific because only ASEAN enjoyed the confidence of the major powers as an impartial organisation. This is why the Singapore Summit Declaration of 1992 stated that ASEAN would intensify its dialogues on "political and security matters".
___________
Southeast Asian countries are often referred to as the "Balkans of Asia" because ethnically, religiously, culturally, and historically, they are as diverse, if not more so, than the Balkan states of Europe
This decision was finally translated into reality when ASEAN organised a dinner during the 1993 ASEAN Ministerial Meeting in Singapore to plant the idea of a regional forum to discuss security issues. The dinner was attended by all the prospective members of the ARE. ARE was then formally created a year later in Bangkok. The ARE is a unique forum that brings ASEAN and its Observers, Dialogue Partners and Consultative Partners together. When the ARE meets, all the major powers of the world (USA, Russia, China, Europe, Japan and, soon, India) gather in one room to address regional security issues.
The remarkable thing is the high level of comfort in the room, even though so many of the participants (including the major powers) have many outstanding bilateral problems. The reason is simple. ASEAN has invented a particular kind of "magic" to keep regional cooperation going in a region which is so easily Balkanised. But after having developed this "magic" over the course of 28 years, ASEAN is now in a position to share it with the larger Asia-Pacific region.
The best example of ASEAN's magic is its ability to absorb Vietnam as a member in 1995, barely four years after ending a decade-long tussle with Vietnam over Cambodia. Neither the ASEAN states nor Vietnam changed their domestic political systems. But Vietnam's decision to join the free market system and to support ASEAN's vision of a peaceful, stable and prosperous Southeast Asia qualifies it for membership. ASEAN continues to progress smoothly after the inclusion of Vietnam.
The Fifth ASEAN summit in Bangkok in December 1995 (with Vietnam present) has proven to be the most successful ASEAN Summit so far, with bold proposals emerging to push Southeast Asian and East Asian cooperation even further. And Vietnam boldly announced that it will host the Sixth Formal ASEAN Summit in 1998. Contrast this ASEAN record with the problems that both EU and NATO faced in absorbing the members of the former Soviet bloc in Europe. This gives one a good indication of the "magic" that ASEAN has created to generate faster regional cooperation. If the ASEAN "magic" of peace, stability and prosperity spreads throughout the Asia-Pacific region, all the countries will benefit from it.
Ambassador Jukka Leino
Embassy of Finland, Singapore
DEVELOPMENT TRENDS IN ASIA AND ITS RELATIONS WITH EUROPE
It seems to be a universally typical feature of ambassadors that after a few years' experience in a new posting they find themselves presenting and defending the culture and values of that country to people back home. In a manner of speaking, their role is reversed. However, that is not the case in this article.
The seminars arranged by Parliament's Committee for Future Affairs in summer 1996 were on the themes of Singapore and the Republic of Korea. The choice of Asia as the subject of the first seminars reveals the priorities of the organisers.
Greater and more serious attention is now being focused on Asia when global development trends are being outlined. It seems almost platitudinous to point out that the constant and powerful growth of Asian economies has significantly accentuated the security-policy status of that continent and its importance in the global economy. Yet that is the case.
There are many kinds of yardsticks to choose from. According to the Asian Development Bank, the Asian economies are growing at an annual rate of about 7.6%, making the continent the world's fastest-growing economic region. Gross domestic product (GDP) is a somewhat controversial indicator. A few years ago, South-East and East Asia (including Japan) between them accounted for about 4% of global GDP, compared with North America's 37%. Today the shares are equal and on present development trends South-East Asia (including China and Japan) will account for 40% of global GDP by the year 2020, compared with North America's 18% and the EU's 15%.
Asia is growing steadily in importance. Besides their economies, the self-confidence of Asians is also growing. Having shaken off the era of colonialism, Asia is conscious and proud of its own identity. Western predictions that economic development will inexorably lead to the adoption of the Western model of society do not gain support in Asia.
The Singaporean visionary and Future Seminar panelist Kishore Mahbubani says that nothing in Asia is more improbable than a shift towards "Western" values. He points out that for centuries Europe dominated the course of world history. It conquered remote corners of the world and colonised them. At the same time, however, Europeans also spurred development, by means of, for example, training and education. For that the rest of the world must be grateful.
North America later became the second power centre with a leading role in steering the course of history. The next century will see Asia become a new power factor of at least equal importance. The twenty-first century will also see a struggle for influence between the countries of the Atlantic world and those of the Pacific Rim. It is believed that old Europe will have to fight hard to retain even its relative status.
Mahbubani points out that Western social researchers have difficulty understanding that an unprecedented historical process, involving a fusion of Western and Asian cultures, is under way in South-East and East Asia. For that reason, the argument that Europe's past is Asia's future is not valid. Asians believe that the assertion is probably founded more on a wish that Asia will not succeed than on historical analysis.
Also Singapore's first Prime Minister and the country's iron-willed creator, Lee Kuan Yew, emphasises that Asia's era has now dawned. American news media have for too long been allowed to interpret Asian events in Asian living rooms. Asia is developing, and also the media will become Asianised.
As development advances, Asian traditions and values will strengthen. Asia will still have to learn from the West, but will no longer automatically follow its development models. A restoration of self-confidence has happened everywhere in Asia and also the West must learn to live with that.
Mahbubani sums up his argument by pointing out that Asians have now realised that they must find their own social, political and philosophical norms, anchored in the backgrounds and hopes of the peoples of Asia. He adds that it will not be easy to find new models in such sensitive areas as democracy, human rights and freedom of the press, but that it will have to be done.
Asia's significance for the stable development of world security has been very central in recent decades. The preservation of harmony between China, Japan and the countries of South-East Asia has required the military might of the Soviet Union and of the United States to be committed to Asia.
Since the disintegration of the Soviet Union, Russia's military presence in Asia has been limited, but the United States has promised to retain its considerable military role in the region.
Singapore's former ambassador in Washington, Professor Tommy Koh, has said that the challenge faced by the Asia Pacific region is that of creating a new kind of security order in Asia: it must be founded partially on the old balance-of-power thinking, but will also have to contain components of a new common security structure.
A United States presence is needed, because in the view of all significant states it causes least suspicions. Koh refers to an American assessment to the effect that the US role in Asia means continuing political influence, which will further enhance economic opportunities for American interests in the region.
The American military role does not receive the unreserved blessing of everyone in Asia, but the Asian alternatives are so far limited. It is not believed that Japan will grow into a military power capable of guaranteeing the security of the region. Mistrust of the old conqueror clings tenaciously to life.
Western doubts about the lasting nature of Asian harmony are rooted largely in the view that Asia is very heterogeneous and historically given to conflict. More factors divide cultures than unite them.
Now Asians want to emphasise that the guns have fallen silent and that peace has created the preconditions for prosperity. Raising the level of prosperity is now a more valuable goal than building up military powers.
Japan was the first Asian power to try - a century ago - to break into the modern world. But, in Mahbubani's view, it used European methods, striving to join the club of colonial powers and modernising its economy only in order to strengthen its military might.
Today the countries of East and South-East Asia have a completely different starting point. Asia wants to build up its prosperity depending entirely on itself. The large numbers of people and natural riches of the region give it huge potential for achieving that. In Mahbubani's view, the most stupid thing that the states of South-East and East Asia could do would be to decline this enormous challenge and return to the path of military competition.
The biggest threats to the security of South-East Asia that Tommy Koh identifies are an escalation of tension between China and Taiwan, North Korea's unknown nuclear capacity and a withdrawal of the United States from the region.
Multilateral arrangements and organisations have considerable importance in the development of relations between the countries of South-East Asia. I shall now go on to look at the activities and future prospects of some of the central organisations and systems.
ASEAN (Association of Southeast Asian Nations)
Malaysia, Indonesia, Thailand, the Philippines and Singapore founded ASEAN in 1967, originally for the purpose of supporting cooperation between themselves in economic matters as well as in the cultural and social spheres. The organisation's current tasks mainly belong to three categories: political, economic, and developmental and cultural.
ASEAN's membership nowadays also includes Brunei and, since 1995, Vietnam. In summer 1996 it was decided that Cambodia and Laos will be admitted to membership in 1997 and Myanmar (Burma) was granted observer status.
The main theme at the 5th ASEAN summit in Bangkok in 1995 was the creation of a community of ten South-East Asian states. Owing to the internal situation in the country, Myanmar's membership is not unproblematic. Nonetheless, Asian pragmatism was clearly in evidence when its application was being considered: it was pointed out that internationally acceptable behaviour is a prerequisite for membership, but the belief was also expressed that this could be best achieved through integration rather than by isolating Myanmar.
There is confidence in ASEAN circles that the goal of a united organisation of South-East Asian countries will be achieved. The timetable is not known, but the trend is clear. That is naturally also a political achievement and strengthens the economic development and security of the region.
The members of ASEAN swear by free trade and it is in this spirit that the Asean Free Trade Association (AFTA) has been created, with the aim of making trade within the region free of barriers by the year 2003. An even more ambitious plan, voluntary implementation of free trade by the year 2000, has been proposed, but did not gain general acceptance.
Thus the current goal is that of creating an integrated free-trade area of nearly 500 million consumers with a combined GDP of $600 billion.
Malaysia has proposed the creation of the East Asian Economic Caucus (EAEC), a loosely-structured consultative system for dealing with trade questions. Now, however, after many twists and turns, Malaysia has accepted that the EAEC idea is part of the Asia-Pacific Economic Cooperation (APEC) process. (See next sub-heading.)
The ASEAN countries are coordinating their trade policies. On the agenda of the WTO's first council of ministers, meeting in Singapore in December 1996, ASEAN opposes the deliberation of any matters not directly associated with trade. Such matters include social issues and corruption, items that some Western countries had demanded be put on the agenda.
Although the early life of ASEAN was full of difficulties, which were caused by tensed relations between member states, the organisation has operated successfully on the whole.
Also in the security sphere, some cooperation and documents have been produced within ASEAN. A declaration establishing a zone of peace, freedom and non-alignment (ZOPFAN) in South-East Asia and a Treaty of Amity and Cooperation (TAC) emerged in 1971. ZOPFAN confirms ASEAN's peaceful endeavours, whilst TAC confirms that the principles enshrined in the UN Charter will be observed in relations between the countries.
A treaty on a nuclear-weapons-free zone in South-East Asia was signed in conjunction with the most recent ASEAN summit, although the nuclear powers have not signed the protocol attached to the treaty. The support and encouragement of the United States, in particular, is awaited.
A new security-policy consultation system called the Asean Regional Forum (ARF) was set up at the ASEAN council of ministers in Singapore in 1993. Its membership comprises, in addition to the ASEAN countries, also 18 others, including the United States, Australia, Canada, China, Japan, the Republic of Korea, Laos, New Zealand, Papua New Guinea, Russia, Vietnam and the EU countries. Cambodia joined ARF as its 19th non-ASEAN member in 1995.
ARF is not actually an organisation. Instead, it resembles in some respects the early stages of the European process that eventually led to the OSCE. It is a consultation system, which gathers all of the Pacific Rim states under the same umbrella to discuss questions of security in the region.
A plan to develop ARF was drafted in summer 1995. This envisages the Forum being developed in three stages: promoting confidence-building measures, developing a consultation system for preventative diplomacy and striving to create new conflict-resolution systems.
The work of ARF is still only getting off to a start. It has already drawn criticism from both the United States and some ASEAN countries. The Malaysians have been concerned at the grip that the non-ASEAN countries have in the ARF process. The view in the United States is that the system lacks the necessary executive power.
On the other hand, it has been pointed out that ARF has made it possible to discuss and seek peaceful solutions for, among other disputes, the one involving the Spratley Islands in the South China Sea. These islands are claimed by six states in the region and China has refused to discuss them in any official context.
APEC (Asia-Pacific Economic Cooperation)
APEC was founded in 1989 as the Pacific Rim economies became more interdependent. Its goal was to promote economic dynamism in the region, where the unique economic development now in progress is of considerable importance for the whole of the global economy.
APEC's goals are to sustain economic growth and to promote the welfare of states and citizens in the region. It affirms and develops an open multilateral trade system on behalf of all member economies and is committed to dismantling barriers to trade in accordance with GATT principles.
The 18 APEC members include the ASEAN countries, China, the United States, Japan, Taiwan, Canada, Mexico and Papua New Guinea as well as Hong Kong and, the newest, Peru, which links South America into the APEC circle. The organisation's membership includes all of the Chinese areas, although Taiwan is not represented by the head of state at summits.
A moratorium on the admission of new members will end in 1997. Russia is one of the many countries that have applied for membership.
APEC received a major boost when President Clinton invited the leaders of its member countries to a summit in Seattle in November 1993. APEC as an organisation does not hold summit meetings; instead, its rules state that decisions are to be reached at ministerial-level gatherings.
But Clinton's invitation was political and his example has been followed by all of the leaders of the APEC countries that have held the presidency of the organisation since then. The next summit is to be held in the Philippines in November 1996.
The APEC summits have proved important also in the sense that during them it has been possible to arrange numerous bilateral meetings, which have facilitated discussion of not only APEC itself, but also of relations between member countries and problems that have cropped up in those relations.
Indeed, the summits are important milestones in the history of APEC.
At Bogor, Indonesia in 1994, with President Suharto in the chair, it was noted that free trade is a prerequisite for economic growth. It was decided that the APEC countries would strive, to the extent that their economic carrying capacity permitted, for freedom of trade and investment by the year 2010 in the case of the most developed countries and by the year 2020 in the case of the least developed.
At the next summit in Osaka an Action Agenda for achieving the goals staked out in Bogor was drafted on the basis of meticulous preparatory work by the Japanese. The Action Agenda was a comprehensive programme standing on three pillars: liberalisation, facilitation and cooperation.
Next in turn is the Manila Programme of Action (MAPA), which contains the national action programmes drafted by the member countries themselves and in general follow-up plans for the Osaka Action Agenda.
When Asians discuss their own conceptions of integration, they prefer to talk of organic integration as opposed to European-style legalistic-bureaucratic integration. The basic premise is that all actions must be voluntary, a point emphasised by Malaysia in particular. Indeed, the most essential parts of the Manila Programme of Action will be the programmes drafted by the member countries themselves. Naturally, numerous meetings have been held on a variety of levels in an effort to ensure that the programmes follow approximately the same lines.
One of the phrases that has come into being in APEC parlance is "open regionalism". What this means has not been defined in very exact terms, but APEC officials are eager to emphasise that the benefits that member countries grant each other in the form of removal of barriers to trade can be extended also to third countries - at least on a basis of reciprocity. APEC wants to avoid the accusations of forming a customs union and of isolation that Asians often level at the Europeans.
The Asian conception of integration also includes light structures. The APEC secretariat in Singapore is headed by a director-general from the country that currently holds the chair, a deputy from the country that will take over the chair the following year and a few dozen officials, whose salaries are paid by their respective countries. A score or so of secretaries and support personnel are on the APEC payroll.
On the other hand, as the director-general always points out, matters are resolved in the capitals of member countries. The level on which this is done is either that of senior officials or, in the final analysis, the ministerial. The practice of arranging summits has given the organisation greater political value.
Although the goals stated in the Bogor Declaration relate to the abolition of tariffs and other barriers to trade, it is noteworthy that APEC has also done quite determined, skilled and fruitful work in areas like trade facilitation.
Numerous working groups operate under the auspices of APEC, dealing with matters that include telecommunications, science and technology, tourism, transport, small and medium enterprises, and so on.
One of the organisation's guiding principles has been to work for increased cooperation between representatives of economic life and the officials in member countries who are responsible for formulating trade policies.
EU-ASEAN
The European Union is ASEAN's oldest cooperation partner. Relations began informally as early as 1972, but were formalised only in 1980 when a cooperation agreement was drafted. Meetings on a variety of levels have been arranged on the basis of this agreement, most recently a meeting of foreign ministers in Karlsruhe in autumn 1994.
It has been obvious for a long time that the formal agreement on which cooperation is based is out of date. It emerged in an era when the giving and receiving of aid was still being discussed. The situation today is more one of a dialogue between two groups of equal status.
The Karlsruhe ministerial meeting appointed an eminent persons group to prepare a new plan for stimulating cooperation between ASEAN and the EU. The group completed its report in summer 1996 and the new lines that cooperation should follow are now being formulated within the EU.
The highest in the hierarchy of EU-ASEAN cooperation levels were various ministerial meetings. Heads of state were never involved. On the other hand, good personal relations both in dealings between states and in economic affairs are an integral aspect of Asian culture. Indeed, Asians have felt it a drawback that the heads of state of their countries and of the EU countries have not known each other well enough, that dialogue links have been lacking.
On a visit to Paris in 1994, Prime Minister Goh Chok Tong of Singapore propsed a meeting of European and Asian heads of state to his French counterpart Edouard Balladur. More specifically, the proposal envisaged the initial participation of the EU and ASEAN countries, in addition to China, Japan and the Republic of Korea. The idea of the ASEM had been born.
ASEM (Asia Europe Meeting)
Kishore Mahbubani sees no reason why Europe should not build up its relations with Asia as intensively as North America is doing. Atlantic cooperation need not exclude a development between Europe and Asia. He points out that if both North America and Europe build lasting relations with Asia, the greatest part of the world will be able to enjoy peace and increasing prosperity in the decades ahead.
Prime Minister Goh Chok Tong's proposal that an Asia-Europe summit be arranged was prompted by a need to strengthen relations between the two regions on the highest political level. The EU endorsed the idea of a summit, which was held in Bangkok in March 1996. A representative group of national leaders attended. Finland was represented by Prime Minister Paavo Lipponen and Minister for Foreign Affairs Tarja Halonen.
Different cultures encountered each other in the process of preparing for the meeting. The first matter discussed was what countries would participate and the principle agreed on was that each region/continent would determine its own representation. The final outcome was a kind of practical compromise: the EU and ASEAN as well as China, Japan and the Republic of Korea.
Others would have liked to participate. Those mooted included Australia and New Zealand, Pakistan, India, Hong Kong. Also Russia indicated interest in the meeting. The question of participation will certainly have to be dealt with again in future stages of the ASEM process.
The second question deliberated was the level on which countries were to be represented. The Europeans also wanted foreign ministries to participate, because their involvement in foreign-policy decisionmaking is the rule in the European administrative culture. This is not fully understood in Asia. In their view, a meeting of heads of state is a summit, not a ministerial event. In the end, European foreign ministers attended the meeting together with Asian economics ministers.
There was also a clash of goals when the agenda was being drafted. The Europeans wanted the summit to deal with totalities of matters that had been processed in advance. The Asians' level of ambition was different; what mattered most to them was that the leaders met and got to know each other. What was discussed would be for the participants to decide. In the event, the summit was unofficial in character. Chancellor Helmut Kohl of Germany had cautioned in his speech against changing this character, which was based on unofficial and personal contacts.
A large number of ambitious projects were approved at the summit; there was discussion of rail links between Asia and Europe, youth- and researcher-exchange programmes, an Asia-Europe foundation, meetings of experts, seminars and so on. Agreement was also reached on where the ASEM process should go from here. The ASEM foreign ministers are to meet in Singapore in 1997 and the next summits after that will be in London in 1998 and Seoul in 2000.
The ASEM process got off to quite a rapid start. It will be interesting to see how the process develops. Will it retain its character of Asian unofficiality or will it become institutionalised and evolve into one international summit among many?
Hopefully, a good beginning also augurs a good continuation. The old European culture must meet the old Asian one on a basis of equality and prepared to compete with it. There can be no doubting that ASEAN-EU cooperation and the ASEM process are parallel to and comparatively close to each other. There is a need in EU circles to find the right role for both processes. This work has begun and it is to be hoped that as it proceeds dynamism will increase in relations between Europe and Asia.
To conclude, I should like to return to the beginning of this article. The intention has not been to present Asian ideas and models as solutions to European problems. Europeanism and Finnishism feature success factors that we have every reason to hang firmly onto. On the other hand, we can learn from Asian success factors.
The political and economic ascent of Asia does not pose a threat to Europe, but rather creates enormous opportunities and will support the development of our own societies and economies. Asian academic boastfulness and rising self-esteem will not disturb the situation.
Matti Vinha, Managing Director
Nordstock Ltd Oy
INTRODUCTION IN THE VIDEOSEMINAR IN THE PARLIAMENT
Asia is a multifaceted continent which has three billion inhabitants and includes some of the richest as well as some of the poorest countries in the world. Japan, the region's economic locomotive, stands at the top of the list, with GDP per capita amounting to USD 31,490 in 1993. Next in line are the four economic tigers: Korea, Taiwan, Hong Kong and Singapore. One of the poorest countries in the region is Bangladesh, whose GDP per capita was only USD 220 in 1993.
Singapore is a key centre of trade, finance and transport in the region. As an economic unit, however, Singapore is only half the size of Finland. Many Japanese conglomerates are larger than Singapore (and Finland) in terms of economic size.
A large Japanese corporation can have an international network comprising hundreds of points, with operations established in nearly a hundred countries. A large Japanese corporation may have 500-1,000 subsidiaries, some of which belong to the company's "inner circle" while others operate fairly independently on the outer fringe.
I GROWTH FACTORS
One of the themes of this seminar is the economic miracle of East Asia. I would like to mention a number of growth factors in Asian economies. The most important of these are:
If we look closer at these growth factors, we can well wonder whether recent development has been a miracle or the result of hard work and enterprise, which a favourable population structure and light administration have accelerated. A few comments on growth factors:
In a World Bank report, development in Korea has been described as one of the most noteworthy success stories in the global economy. Korea's industrial history is relatively quite short. In 30 years Korea transformed itself from an agricultural country ruined by the Korean War into one of the world's leading industrial and commercial states.
Korea's economic development began from zero. During the Korean War military forces overran the country seven times, families were split, and old social and economic structures were destroyed. The pack was completely reshuffled. Perhaps Korea's faster economic rise can be explained by a fact that is familiar to anyone who has had to make home repairs: fixing old structures is often considerably more difficult than building something from scratch.
The decision to industrialize the country was made in 1961. The Koreans began to build large industry based on economies of scale which was ultramodern and employed state-of-the-art technology.
When I lived in Korea around the beginning of the 80s, a 60-hour work week in a factory or construction was normal. Saturday is still a working day in Korea, as in many other Asian countries.
Personal taxation is generally much lower than in Finland. Here it is worth pointing out that as an industrial nation approaches a "mature" age and its population grows older, taxation tends to rise, for example in Japan and Korea.
Taxation on capital income and taxation on income from work are normally quite close to each other in Asian countries. An example is Malaysia, where the maximum income tax is 35% and the maximum corporate tax is 35%. When dividends are paid, only an amount equivalent to corporate tax is deducted, and recipients do not need to pay any other tax on dividends. In Malaysia income obtained from a rise in the value of property is not taxed. (Note: tax percentages are indicative.)
II ASIA'S 10 MEGATRENDS, SOME OF WHICH I HAVE ALREADY COMMENTED ON, ARE AS FOLLOWS:
1.
The Asean Free Trade Area (AFTA), which includes 400 million people, is set to become a real free-trade area by 2003, at which time customs duties will be eliminated in trade between members. The plan is quite concrete and Finnish industry should also react to this and establish operations inside the area.
2.
The strong growth in trade and investments within the Asian region intensified in the late 80s, with the end of the cold war providing a significant boost (trade between China and Russia). The economic development of the Asian tigers has depended on these countries' success on export markets. Domestic purchasing power will nevertheless increase as economies grow, thanks to the fast expansion of a middle class with money to spend.
Taiwan has been a less-well-known tiger for Finns. The country's development has included features whose closer examination could be of benefit to us in our poor employment and economic-growth situation. Taiwan as a country (or economic area) is relatively small, though it is not a city state like Singapore or Hong Kong.
Taiwan does not have significant natural resources and its political position puts it at a disadvantage compared with its competitors. For example, some imports from Taiwan to Finland are subject to customs duties amounting to nearly 20%, whereas the same goods can be imported duty-free from South East Asia or China.
Despite its difficult international situation, Taiwan managed to triple its exports between 1985 and 1994, to USD 90 billion. During the same period Finland's exports increased by a factor of 1.8, from USD 18.6 billion in 1985 to USD 34 billion in 1994.
If we had been able to increase our exports at the same rate as Taiwan, Finland's export total would have been FIM 100 billion higher in 1994. And we would have had hundreds of thousands of jobs that were not there.
In Asia's advanced industrial countries, including Japan, nearly 50% of the labour force works in production and manufacturing while the service sector employs slightly over 50%. This structure differs from Finland's situation (and perhaps goals) significantly.
Although Finnish exports are doing well, they should grow much faster. According to Taiwan's experience, we need considerably stronger growth in industrial production and exports.
5.
The Asian countries do not have self-developed technology, with the exception of Japan. In Korea large investments have recently been made in some areas, but Korea and Asia need technology. Finland and the other Nordic countries offer a good technological base in certain fields of industry. There is a demand for technology if the Asian countries intend to succeed in open international competition.
How should exports of technology be priced and how can benefits be maximized? Direct sales of technology are not the most profitable way. Overseas investment is a typical way for the Americans to operate when transferring technology, but Finnish industry has been quite slow to invest in Asia. For example, the Finnish forest industry has not made significant investments in Asia.
Let me say a few more words about cooperation models between East Asia and Finland, which is one of the themes of this seminar.
As I mentioned earlier, large Japanese conglomerates such as Mitsui, Mitsubishi, Sumitomo etc are as large as or larger than Finland in terms of economic size. They have extensive international corporate networks, with hundreds of subsidiaries and agents around the world. For a small nation like Finland the most interesting thing might be to focus export-promotion efforts on a few of these large corporations. Finnish firms could band together to offer subcontracting or components, for instance.
With regard to broader cooperation, I believe the Koreans have a lot of potential as cooperation partners, since we can effectively complement each other. There are even historical reasons for this. It has been suggested that both the Koreans and the Finns once lived in a bend in the Volga, and from here the Koreans moved east and the Finns west. For this reason we also show linguistic similarities.
The Korean chaebols, of which the largest four or five have turnovers roughly equal to Finland's total state budget, are energetically seeking foreign investment projects. Historically Korean investments abroad have been fairly small, but now the Koreans are investing strongly in Europe and the USA as well as Asia.
Korean companies are interested in exploiting natural resources in the former Soviet Union, among other things. Industry in Korea and the rest of Asia will need raw materials, for which Russia is a natural source.
China and the other Asian countries naturally offer similar opportunities to develop and carry out tripartite projects.
Korean companies enjoy good financial resources and mobility. Finland, on the other hand, offers technology in certain areas as well as the benefits of EU membership which can be exploited in projects involving Russia.
Women's Human Development Indicators: Asia and the World
(Women's indicator as % of men's indicator, except for life-span)
Lit.=Literacy; Lif.=Life-span; Emp.=Employed; Exec.=Executives;
Leg.=Legislators; Cab.=Cabinet
Country Lit. Lif. Years Emp. Exec. Leg. Cabinet
Bangladesh 51 55,6 73 5 10 8 Burma 86 59,3 56 n.a. n.a. Cambodia - 73,9 79 n.a. 20 8 China 79 70,4 81 13 21 6 Hong Kong 90 81,8 62 19 5 10 India 55 60,4 34 n.a. 7 3 Indonesia 86 64,5 44 7 12 6 Japan - 82,5 64 9 7 6 Malaysia 86 73,0 55 n.a. 10 7 Pakistan 47 62,6 16 3 2 4 Philippines 99 68,2 44 32 11 8 Singapore 88 77,4 58 19 4 0 South Korea 97 74,9 52 4 1 4 Sri Lanka 92 74,2 36 7 5 3 Thailand 95 71,8 77 29 4 0 Vietnam 93 67,3 82 n.a. 18 5 Asia average 82 69,9 57 n.a. 9 5 Developint countries aver.73 62,9 55 n.a. 10 5 Industrialised countries 79,4 61 Na 12 8
Source: FEER/UNDP Development Report
aa 102/95
Annual Working Hours
City Hours Payed holidays Seoul 2 302 7,8 Bangkok 2 272 8,8 Taipei 2 136 17,0 Hong Kong 2 222 12,1 Singapore 2 044 17,7 Japan 2 017 abt. 14,0 Copenhagen 1 669 25,0 Düsseldorf 1 682 30,5 Madrid 1 721 32,1 Frankfurt 1 725 31,2 London 1 880 22,1 Helsinki 1 732 44,5
Personal taxation
Max taxation % In US$ Hong Kong 16 % 51 000 Singapore 30 % 272 000 Malaysia 34 % 59 000 Indonesia 35 % 23 000 Philippines 38 % 20 000 Thailand 40 % 160 000 Taiwan 42 % 128 000 South Korea 50 % 80 000 Japan 65 % 206 000 Finland 70 % 60 070 62 %
Saving level % from GNP 1993
Hong Kong 30 % Taiwan 28 % South Korea 36 % Singapore 48 % China 36 % Indonesia 38 % Malaysia 38 % Philippines 14 % Thailand 37 % Finland 12 % Germany 23 % USA 15 %
Edward Tang
The Straits Times - Friday, June 14, 1996
FUTURE OF ASIA AND EUROPE LINKED, SAYS MAHBUBANI
BOTH MUST BE READY TO ADAPT TO CHANGES
The future of Asia and Europe are intertwined and both sides must always be ready to adapt to global changes so as to prevent misunderstandings from arising, according to Foreign Ministry Permanent Secretary Kishore Mahbubani. He was speaking in Singapore yesterday at a live video conference with Finnish politicians and bureaucrats in the Helsinki Parliament and a Singapore panel comprising himself and Dr. Tan Kim Song of the Straits Times.
Mr. Mahbubani said: "Asia and Europe are moving towards the same global economy. Hence, adjustments by both parties have to take place." This, he said, was necessary to change fixated mindsets and dispel misperceptions about the economic threats posed by the two continents to each other. He cited the example of Singapore which understood the need to adapt and adjust to new economic challenges.
Faced with strong competition from rapidly-industrialising countries in the region, Singapore shifted its manufacturing base to higher-value-added industries. This mobility allowed it to stay ahead of its competitors and helped prevent potential economic conflicts.
Following this argument, he said that if developed countries were nimble and continued to innovate, they should not be worried about low-wage developing countries "sucking up" their markets. Asia and Europe can enjoy harmonious "win-win" economic relations, he added.
Mr. Mahbubani was responding to MP Paula Kokkonen of the Coalition Party, a member of the
ruling coalition who had asked for his views on future relations between Asia and Europe.
Dr. Tan, a former university economics lecturer, said that national productivity not low wages and the size of an economy, was the determinant of a country's economic success. Quoting a recent report, he said that many Asian countries had "climbed the technological ladder" to produce goods formerly made by the Europeans. But this should not prevent the two sides from trading as the same product had different brands and models. "There is still potential for intra-industry trade", he said.
Yesterday's video conference, which was organised by the Parliamentary Committee of the Future of the People Finland, was the first with an overseas audience.
Paula Tiihonen, Doctor of Administrative Sciences
POLITICS MUST RESPOND WHEN THE ECONOMY DEMANDS GLOBALISATION
In Finland, as in all Western countries, the political system is in trouble. Only 7 per cent of the Finns trust parties, on which the entire system of representative democracy is based. Parliament has long been the least-respected among the various actors in our society. It is difficult to find candidates willing to put their names on the ballot paper in the autumn 1996 local-government elections. The EU interested citizens only as long as the negotiations leading to membership were in progress. Party meetings appear to be attended these days only by functionaries in the line of duty, candidates fishing for votes and public servants hankering for a reward from their party.
Meanwhile, a major revision of constitutional law is in progress in Finland, but the only aspect of this that seems to attract interest is what technical adjustments are being made to 100-year-old articles. Why is it so difficult to recognise and admit that democracy is in a parlous state?
1. Globalisation eating democracy
The development of Finnish society is naturally embedded in the general evolution of the Western countries. The condition in which democracy currently finds itself is due quite simply to the fact that the onward march of globalisation has deprived nation-states of tasks to perform. Parties, parliaments and governments no longer have their traditional instruments of power to wield. Globalisation has advanced faster than anyone was able to predict, and it has not been confined to the economic sphere. Indeed, it has become difficult to think of any sector of politics without international linkages.
National leaders are well aware of how globalisation is embracing capital flows, production and investment, in common with science, technology and innovation. They try to devise national policies conducive to making companies based in their respective countries more competitive in global markets. They also see countries and whole continents waging a major and never-ending competitiveness war. Every action - every political decision or omission of one - is viewed as a move in this big game of success.
Until now, social policy has been regarded as each country's own affair. But it is not. As a borrower, an investment location, a trade partner and indeed as the focus of any economic activity that one can think of, Finland is subject to constant monitoring and evaluation. We are continually being ranked according to criteria of the greatest conceivable diversity and, unlike what happens in the case of the Eurovision Song Contest, how well we do has direct and indirect effects on our lives. International analysts do not limit their assessments to EMU criteria, but rather examine dozens of competitive factors, risks, the health or otherwise of banks and the State's creditworthiness. A system of constant scrutiny has made those who shape domestic policies quite cautious. An unguarded sentence - however trivial - uttered by a minister can be interpreted as a signal dangerous for Finland. Prime Minister Lipponen's growls at those who indulge in loose talk have by no means all been due to morning grumpiness.
Decision-making has become more complex. International ramifications, both short- and long-term, must be weighed up. An excellent example is provided by taxation, something that belongs to the core of domestic policy and national sovereignty. Countries with high taxes do not attract financiers, investors nor permanent investment. Young researchers and experts, who have been expensively trained by our society, will not stay in Finland if their incomes are negligible. On the other hand, good education and a high level of skill can not be achieved without the support of society, and this in turn requires tax income. The same applies to stable conditions in society. Citizens generally like to be able to walk the streets in peace. The first thing that people who provide funds want to be sure of is that they will get their investment back whatever the circumstances. When international classifications are conducted, social benefits are regarded as expenses that must be covered by tax revenue or contributions collected from companies. On the other hand, however, the same economists who call for curbs on social spending would like society to provide their children with good and free education and health care.
2. EU membership as an accelerating factor
Now that Finnish membership of the EU has come to pass, we can admit that the decision to join substantially accelerated globalisation. Finland sought and obtained economic and political stability and security. Quite rightly, citizens wanted us to be in the places where important decisions that affected also Finland had long been made. We wanted to be among the strong. But, we are still not prepared to assess the significance of our membership any further than that. For Europe to be strong, its policies and economy must be efficient and its institutions effective. No community can be strong if it lacks responsible bodies with broad authority to steer development, consult and produce decisions when they are needed. This does not exclude democratic deliberation and control.
Inevitably, a profound contradiction exists between a Europe that is secure and strong in the economic and political senses and national democracy in its present form. For the EU to be able to champion European interests in the global economy better than the nation-states that have lost their power, it must have the instruments with which to act. It must be able to even out inequalities. It must also have the capability to mount a defence against a variety of economic and political disturbances, or even direct attacks. Naturally, it is not only states that must pool their strength; enterprises, banks and insurance companies must all form alliances in their respective ways. A common currency, collective security and defence and, eventually, also to some degree a common social policy are logical future links in the globalisation chain. Given the heterogeneity of Europe, however, whether it lends itself to becoming a coherent monetary and economic area at all is quite another matter.
The position of national parliamentary democracy will weaken within the EU as economic, security and foreign-policy boundaries blur. If monetary and economic union as well as common security and defence arrangements are achieved, there will also have to be agreement providing for foreign policy to be handled collectively, to some degree at least. Europe can not appear in the arenas of the global economy as a multicephalous entity. It has been forecast that in the 21st century there will be at most one European country, Germany, among the world's 20 biggest economies. By what right, then, will France, Britain and Italy participate in the G7 summits of the wealthiest countries?
Only through unity can Europe try to safeguard its interests and act effectively in, for example, its dealings with Asia. There are signs that this is happening. A growing number of European statespersons are proposing that the EU join with the USA in demanding that Asian countries observe the same basic rules of working life (minimum wage, occupational safety, working hours and the right to join trade unions).
It could be imagined that, as it takes on the new tasks that globalisation has brought, the EU would transfer some of the functions that it assumed in earlier decades back to member states. Europe's big political leaders are willing to countenance such a transfer, but officialdom in Brussels is reluctant to relinquish its status and privileges. Then, of course, there is always the reality that legal experts who were recruited young to whittle directives are competent only for this task and ill-equipped to tackle the new challenges that globalisation is posing.
Even though the emergence of an EU state may take years or decades to happen, citizens see or at least sense that power is in the process of being transferred. People in Europe are well-educated and their media are free. Rhetoric and cosmetics cannot mask realities for very long. Faith and confidence in our political system will return if it finds its place in the world of the 21st century and positively regains its authority through new tasks.
3. Politics must respond to economically-determined globalisation
What can be done? It must be openly admitted that the central challenges with which the development of our society has to contend spring from or are associated with globalisation. Problems are generally to be solved on the same level where they have arisen and on which they manifest themselves. It must also be recognised that the democratic and equality models created for nation-states do not work in the global economy, which is not interested in them, either. The political system must defend itself in the same arenas and with just as powerful means as the economic actors.
Unless a counterweight to economic globalisation is created in the form of political globalisation, we run the risk of ending up with a societal model resembling feudalism. Big international investors and companies will dominate the economy and through it society. They will gradually acquire ownership of land, production facilities, labour and research establishments. What is there to prevent them gradually acquiring ownership also of what will probably be the most important source of wealth and wellbeing in the 21st century, information? In place of the lords of the manor who reigned over their bailiwicks in former days, majority shareholders will sit on the boards of major international companies, their only goal being to suck profits from wherever is currently their most bountiful source.
People must be made aware of the problems of globalisation. Organs of state will have to define their new internationalised tasks and focus their actions accordingly. We shall have to begin dealing realistically with those internationalisation-related matters that Finland is in a position to influence and in the deliberation of which we are involved in any event. These matters are no longer exclusively the realm of those entrusted with foreign policy in the same way that they used to be under the traditional division of labour. Globalisation has made foreign policy part of everyday business. Those who take care of trade, industrial, science and technology policies should be at the hub of our internationalised government politics.
The main responsibility for many matters now handled by governments, such as those relating to unemployment, social and educational affairs, will have to be delegated. Very indicative of the way things are going is the fact that several European countries are considering abolishing the ministries responsible for such matters. Indeed, Britain and France have already phased out their labour ministries.
4. Two-level economies and policies to match
Most obviously, the economy - and with it society - is undergoing a bifurcation into two levels, the global and the local. This split will be permanent, also in Finland, and politics and democracy will have to adapt to it. It would be desirable for the principles on which representatives and leaders are chosen to be attuned to the reality of a two-level society.
In the global economy, growth is created, profits generated and new investments made. Innovation and know-how thrive in this context. Finland is coping mainly thanks to high levels of education, knowledge and skills. We are sharing in the distribution of the profits of the global economy mainly by virtue of our exports of information and technology. Without our income from exports our country would grind to a halt. A small nation must specialise and thereby find the market niches overlooked by the big players. NOKIA has demonstrated that by maintaining a scientific lead and responding rapidly to change and opportunity, a company from a small country can be among the world leaders. We must welcome foreign investors and manufacturers, but also foreigners with knowledge and skills. Otherwise we will not be in a position constantly to come up with new ideas and products.
Politics and the State must ensure that Finnish companies participating in the global economy and international companies operating in Finland are provided with the best possible conditions in which to thrive and succeed. In the global economy, one has to compete with the toughness that is called for. There is no other alternative. The preconditions for this include extremely effective education. Why shouldn't we begin school at three and, as an aspect of play, learn English as our second main language?
Even if the globe were to turn into a single big marketplace, the need for many kinds of local and regional economies would not disappear. First of all, there is no question here of a zero-sum game. Growth in the global economy spreads wealth everywhere and an extensive network of subcontractors forms around it. Secondly, most of the goods and services that people need in their everyday lives wherever they are in the world will continue to be provided by local economies. Thirdly, globalisation is prompting a counter-reaction. Distinct economic zones are already taking shape around major metropolises like Los Angeles, Chicago, St. Petersburg, Shanghai and Berlin, partly due to natural processes, but also as a result of deliberate defensive actions.
In Finland, the success of the local economy will depend largely on our ability to create, through voluntary choice and without degenerative protectionism, a vital and functioning local market founded on Finnish work. We need fresh fish every day, and hopefully will also want it more and more.
Every product or service that is naturally part of the local economy in which people live or work should be at least in part locally-sourced. Neither excessively high wages, top-heavy bureaucracy, over-strict hygiene regulations nor anything else should pose an unwarranted obstacle. The wage level obtaining in the local-level economy and the entire framework of business and labour regulation should be examined separately from the global economy.
Nonetheless, local markets founded on self-sufficiency would be mainly private and would operate according to the principles of the free market economy. The only difference is a need to recognise that neither entrepreneurs' profits nor workers' wages can rise to the same level as those obtaining in the global economy if local production and jobs are to be preserved. What is involved is lower-profile markets, the alternative to which would probably be a more clear drift than even at present into the grey zone of economic activity.
Prolonged structural unemployment can be remedied with the aid of local economies. Employment and unemployment are different things. To use simplified terms, it can be said that employment must absolutely be taken care of on the level of the global economy, but unemployment can be tackled only within the framework of the local one.
We have already noted in many sectors that the globalised economy employs only the best Finns or persons with special skills. The great majority - which comprises not only the poorly educated and elderly, but also persons who have failed to adapt to technological development and, as competition stiffens, also increasingly ordinary persons of average skills - seem incapable of keeping up with the pace of competition in the global economy. They can, nevertheless, succeed in their own local market, but only if the State creates the prerequisites. Here, too, a small population must find its own way. No other instance is interested in the matter.
Nowhere do the laws that govern a tough competitive economy reach into the economy of people's everyday lives. Those who have been marginalised due to the pull of the global economy -people still capable of working but now finding themselves in the most deprived position of any group - can be employed with State assistance in local economies. And this can be done without violating the ground rules of the market economy. As long as State subsidies apply only to everyday products and services consumed in people's immediate habitats, we will not be endangering either the success of our competitive international economy nor the standard of our know-how. The market for the high-level knowledge and skills that the global economy demands and the work and workers participating in it will continue to lead their own lives.
5. Western countries and Finland must continue to compete on the virtuousness of their democracy
It was believed that the collapse of communism had proved how seamlessly capitalism, democracy and wellbeing were linked together and that it highlighted their beneficial character. But it did not. Asia is vigorously and proudly seeking its own way.
It has long been taken for granted in the Western countries that our democracy is of such self-evident value that the rest of the world would immediately embrace it if were free to do so. World history shows that it is generally the economically and militarily strong that have defined also societal values and the main outlines of education and culture. The Western countries are losing their leading economic role to Asia. Their military superiority is still indisputable. Yet one question must be asked: Why should Asia embrace the Western world of values and the Western societal model just at a time when that model is suffering a bad attack of hiccups? Asian leaders are asking, with every justification, why democracy, working hours legislation or forest conservation is used as a means of economic competition and why they are expected to eschew what is so far virtually their only competitive advantage, their inexpensive and industrious labour forces.
Asian heads of state who have defended their right not to embrace every detail of Western democracy, because it is self- evident that this would, at least in part, impede their economic development may be right. At least it is understandable when they remind us of what is, in my view, the greatest achievement of the democratic system, from the perspective of ordinary people, that the next few decades will witness: within ten years, the standard of living of tens of millions of Asians will rise to a level that it took countries like England and France centuries to achieve.
After the seminar, I had an opportunity to visit China and attend the third world conference of administrative scientists. One thing that I learned was the importance of governance and stability. Who of us would like to take risk of too rapid progress - even when it comes to the question of democracy - in China of 1,2 billion people?
A matter that also drew my attention and that I regard as being linked to the theme of democracy is the investment choices made by the USA in the 1990s. American direct investment in Europe came to nearly $400 billion in 1995, compared with just over $100 billion in Asia. Why have companies from the world's biggest economy, the American, invested four times as much in the Old World as in Asia this decade?
There are many explanations and I am not the right person to evaluate them. What is essential for the Finns is that they, as Europeans, ponder Europe's relationship with Asia and their own part in it. A point that became very plain in China is that the difference between trade and trade policy as well as between trade policy and other policy is often hair-fine. In the Nordic countries with their superb infrastructure, the explanation for American eagerness to invest in Europe will be gladly sought also in stable societal structures, i.e. as a broad matter of democracy. The perception is that education and health care, efficient energy networks and similar structural features of the welfare state are assets that increase Europe's attractiveness for investors. Whatever is the case, a reassessment of relations between the USA and China may be imminent now that plans have begun to be made for a possible visit to China by the President of the USA.
Just as was the case during the Cold War, the West must once again be able to demonstrate that democratic decision-making is good for people. Only a few years after the fall of communism, the USA and Europe must enter a new ideological fray. We must be able to prove the superiority of our democratic society not only to the so-called enemy, i.e. our rivals, but also to our own forces.
A small country, especially, must compete on quality. It would be to Finland's advantage to achieve a global reputation as a creator of new products and ideas. If we want to profile ourselves as a country with a high level of education and culture, to entice capable people to move to Finland and attract investors, the quality of life will have to be raised. We cannot compete in terms of many material goods. By contrast, we have something to offer where a smoothly functioning society and quality of the basic conditions of life are concerned, things that are often in short supply in other parts of the world. Democracy and respect for people are assets with which we are well-endowed.
Maintenance of local Finnish markets and management of unemployment will not succeed if the State merely dumps responsibility for these tasks on municipalities and regions. Those bodies must also be given power, which must be wielded in a democratic fashion. Why, as part of the ongoing major work of revising the Constitution, has the creation of a new society of citizens not been begun in Finland? Why shouldn't Finland once again be a pioneer in seeking new democratic models?
Finland is one of the few countries in which a democratic political system was implemented immediately upon the attainment of national independence and took permanent root. Finnish women were the first in Europe to be given the vote on a basis of general and equal suffrage (in 1906). We survived a civil war and both world wars. New modalities of democracy are easier to experiment with in a small country, where the starting points are more favourable. Finland also enjoys the advantage of homogeneity with respect to population, language and culture. In countries where there are ethnic or other minorities, the political leadership can not take the risk of allowing conflicts to arise between different sets of interests, something that can always happen when people's rights of self-determination are increased.
In the latter half of the 20th century, Finland has stood out in international comparisons for the speed with which we embrace new technology. The Finns' eagerness to buy and use the latest inventions is often cited as one of the factors behind Nokia's success. Television, telephones, PCs, cellular phones and now the Internet have all spread rapidly in Finland. An essential feature of this development is that virtually all segments of the population, occupational groups and age categories have been involved in this change.
By availing of the latest technology it is possible to make the transition from representative to direct democracy, to decentralise the exercise of power, transfer decision-making to citizens and consult them repeatedly and regularly about their opinions. Referendums, various kinds of trial votes and similar exercises would give the new information technology a content. A national information network is being built in Finland. The information superhighway is an expensive experiment. Increasing democracy is a valuable subject for experimentation.
Western thinkers (led by Etzioni) have in recent times been talking of the rise of the society of citizens and of communitarianism. In many ways, Finland is well-equipped with the prerequisites for transforming some of the talk of recent years into concrete action.
6. Could Parliament function as a new discussion forum?
On 13 and 14 June 1996, the Committee on the Future arranged half-day video seminars in which the auditorium of the Parliament Building in Helsinki was linked directly to Singapore and South Korea by video. In a Helsinki studio, about 150 people interested in Asia listened to Singaporean and South Korean thinkers and futurologists. The next seminars in the series will focus on Japan and China and the state of Wisconsin.
News about Finland rarely appears in international newspapers. However, the Asia video seminar received an astonishing amount of - highly laudatory - coverage in the mass-circulation newspapers of the countries in the region. Our success in surmounting the newsworthiness threshold was doubtless due to many factors, but at base the key contribution was certainly made by media interest in a genuine news item dealing with the kind of things that an innovatively-minded parliament can get done.
What new feature in our democracy did the seminars represent? First of all, by arranging them Parliament focused its work outwards and assumed an active role as a source of initiatives and a stimulator of discourse. This contrasts sharply with the usual rather passive role of parliaments, which merely assume positions on proposals made by governments. The stronger a government, the less it lets its parliament interfere with its proposals. Second, the Committee on the Future wanted to trigger a discourse on specifically Asia's rapidly-strengthening role both in the global economy and in politics and culture. The process of globalisation must be brought to those who make politics. Finland is a high-technology country. Parliament's Asia seminar, implemented with the aid of modern technology, symbolised in its own way the Finns' enthusiasm for innovation and technology.
The Asia seminar is the first in a series which the Committee plans to conduct in a search for success models that would suit Finland. The intention is both to identify the factors that underlie success in countries comparable to Finland and to examine prospects for the future, this time from the perspective of the successful. At the same time, the Committee is trying to increase awareness of the success factors that Finnish companies enjoy in the 1990s and which will also help them in the next millennium.
The underlying aim was to make Parliament a more open discussion forum and to try out new forms of work. Why shouldn't a legislative assembly be able to get away from ostentation and - often rending - power struggles and constitutional disputes and instead find new ways of strengthening its position in our society? Formal, legal authority is not the only form of power. Determining the agenda to be followed in political discourse - selecting the important matters to be included in the national debate - is nowadays an exercise of power. In this respect, Parliament should take hold of the reins.
Heads of state, governments and parliaments in several Western countries are advised by bodies of experts, think tanks, which study politics and evaluate strategic choices. They all have their distinct national features, but share one important goal: that of providing the top political leadership with background information, alternative solution models, assessments of the effects of decisions, or even critical follow-up evaluations of ongoing reform processes. In Finland, only solutions arrived at in the sphere of economic policy are subject to systematic assessment. Even here it is mainly a matter of economic forecasts and, irrespective of which of our various research institutes conducts them, they are all based on statistics compiled by one and the same centre.
Parliament's Committee on the Future has made two openings. It is beginning to organise assessment of the effects that technology will have on Finnish society. Through its video seminars it is exploring the possibilities of a more open culture of discourse in a country where discussion has traditionally been rather stiff and stilted.
-------------------------
(NOTE! This article does not in any way necessarily reflect the opinions of the 17 Members of Parliament who serve on the Committee.)
Sung Ryan Lee, Director of the Asian Department
Korea Institute for International Economic Policy
WIDENING THE CO-OPERATION BETWEEN KOREA AND FINLAND BY CONCENTRATING IN COMPETITION BENEFITS
1. Introduction
I would like to thank Ambassador Jorma Julin and the Future Committee of Finland Congress for inviting me to speak on the East Asian economies, and in particular, the issues concerning the potential cooperation between Korea and Finland. Through this kind of exchange, both Korea and Finland can foster greater economical, cultural, and educational relations that will surely benefit both countries.
In an era of rapid technological advances and global competition, the ever growing economies of East Asia are finding it increasingly difficult to maintain the same growth felt in the past. With virtually no growth of Japan over the past two years, East Asian economies in general are facing a slowing down of their economy. For example, Korea expected economic growth of around 7.5 percent in 1996 in an earlier estimate by the Asian Development Bank, but that forecast is being revised to a value substantially lower, around 6.0 to 6.5 percent, by the Bank of Korea. All other East Asian countries are also lowering their economic growth forecasts.
The problems that the Korean economy faces are typical of many East Asian economies; mainly, a rapidly rising wage rate is forcing these countries to change their industrial base from manufacturing labour-intensive, and low technology products to technologically advanced products. Thus, in order to produce technologically sophisticated, high value-added goods, a country not only needs to develop its own goods through research and development (R&D), but also needs to acquire technology from industrialized countries. Expanding relations with developed countries on many fronts (economical, technological, cultural and educational) will facilitate the transition from low technology to high technology products and also improve the quality of living.
The purpose of this paper is to suggest policies that will encourage closer relations between Korea and Finland. Section II of this paper discusses the common characteristics between the East Asian economies, and briefly analyses the difficulties that East Asian economies are facing. In Section III, recent events in the Korean economy will be explained, along with Korea's future economic goals. Section IV will contain recommendations on how to strengthen relations (economical, technological, cultural and educational) with Finland. Last, in section V, I will provide some brief concluding comments for this paper.
2. East Asian Economies
Since Korea and other East Asian economies have experienced tremendous economic growth during the past three decades, numerous studies were conducted to examine the lessons learned from these countries' experiences. The studies found some common characteristics in these East Asian economies: 1) export-led growth 2) rapid growth with equity 3) high investment in physical and human capital 4) rapid demographic transitions; high to low birth and death rates 5) dynamic agricultural sectors, and 6) cooperation between government and private sectors. This last item includes a) export promotion policy b) creation of comparative advantage through resource allocation (chemical, shipbuilding industry in Korea) c) stable macroeconomic policy d) keeping the economy open to international trade e) creation of a business friendly environment f) increased savings g) oneness to foreign technology, and h) flexible labour markets.
Korea achieved a very high 9.2 percent GDP growth in 1995 and is expected to achieve around 7.5 percent and 7.0 percent in 1996 and 1997 respectively (Table 1). On average, Korea achieved a 7.6 percent GDP growth between 1990 and 1994. China had the highest economic growth in East Asia with 10.2 percent GDP growth in 1995, and is expected to maintain above 8.0 percent growth rate for 1996 and 1997 according to the estimate by the Asian Development Bank. China, Japan, Taiwan and Hong Kong's average economic growth rate between 1990-1994 had been 10.5 percent, 2.1 percent, 6.5 percent, and 5.3 percent respectively.
Korea Taiwan Hong Kong China 1995 9.2% 6.3% 4.6% 10.2% 1996* 7.5% 6.4% 4.5% 8.0% 1997* 7.0% 6.3% 4.5% 9.0%
* Estimate by from Asian Development Bank.
In terms of GDP size (Table 2), most East Asian economies have achieved sizable gross domestic products. Japan ranks second in the world behind the United States; China ranks eighth; Korea ranks eleventh; Taiwan ranks nineteenth; and Hong Kong ranks twenty seventh.
Country Ranking Amount Population (billion $ US) (million) US 1 6,738 259.0 Japan 2 4,591 125.0 China 8 508 1,194.0 Korea 11 380 44.5 Taiwan 19 241 20.9 Hong Kong 27 131 6.1 Finland 30 98 5.1
Source: The World Competitiveness Report, 1995.
Based on purchasing power (Table 3), per capita GDP of the United States ranks first with $24,750 and Korea ranks twenty fifth. Although nominally Japan has the second highest per capita GDP ($36,757 in 1994) in the world, Japan ranks fourth with $21,090 when per capita GDP is based on purchasing power.
Country Ranking US $ Ranking* US $* US 1 24,750 4 25,788 Hong Kong 3 21,670 13 21,742 Japan 4 21,090 2 36,757 Finland 20 15,230 15 19,282 Taiwan NA NA 24 11,482 Korea 25 9,810 25 8,531 China 46 2,120 47 424
Note: * denotes 1994 nominal per capita GDP.
Source: The World Competitiveness Report, 1995.
However, except for Japan, East Asian economies face difficult future tasks as they develop. For example, the rapidly rising wage rate is causing Korea to lose her comparative advantage in labour-intensive and low technology products. Thus, the transition from manufacturing labour-intensive and low technology products to advanced technology products has become necessary to maintain high economic growth. In some industries--namely, computer memory chips, steel, and automobile manufacturing--the transition has been successful. But, in general, the Korean technology base is relatively weak, and Korea thus lacks the ability to shift her basic industrial structure to manufacture value-added, highly sophisticated products.
3. The Korean Economy
Recent Korean economic growth has been led by manufacturing, especially in the export sector. Real value added by the manufacturing sector rose by an annual average of 7.8 percent between 1988 and 1994.
The light industry sector led the economy in the 1960's, but in recent years the heavy industry sector has become more important in the Korean economy. The rapid growth of heavy industry was due to the Third Five-Year Plan (1972-1976) which emphasized the build-up of heavy and chemical industries through investment subsidies.
During the Fourth Five-Year Plan period (1977-1981), the economy grew at a rate of about 5.7 percent, which was low compared to previous periods growth. This was due to a wage spiral, price instability and loss of competitiveness due to excess investment in the heavy and chemical industries. In addition, the second oil shock in 1979 caused the Korean economy to experience negative growth (-3.7%) in 1980 for the first time since 1961.
Korea's growth experience during the 1977-1981 period led the Korean government to set a moderate target growth rate of 7.6 percent for the Fifth Five-Year Plan period (1982-1986). This period achieved a 9.8 percent annual growth due to price stability and a rapid increase of exports due to the appreciation of the Yen. Further, during this period, the government intervened less in the economy.
Korea maintained extremely high growth rate during the Sixth Five-Year Plan period (1987-1991). Although the government target rate was a robust 7.2 percent, the economy surpassed it and maintained a 10 percent annual growth rate. The main economic goals of the period were: 1) become an "advanced economy" with "social welfare and balance growth" 2) liberalize the economy (open up markets, decentralize the government) 3) increase the value-added Korean products, and 4) improve the industrial structure.
As the Korean economy became more mature, the Seventh Five-Year Plan (1992-1996) set a moderate target growth rate and several other major goals that stressed the globalization and internationalization of the Korean economy. Some examples of these goals are: 1) a target growth rate of 7.5 percent (performance shown up to 1995 is 7.1 percent growth) 2) invest in technical manpower development 3) invest in technological development and information, and keep pace with the information age 4) strengthen competitiveness of industry (nurture small and medium sized enterprises) 5) protect the environment 6) improve the social welfare system 7) liberalize the financial markets and services sector, and 8) prepare for national reunification.
Clearly, the Seventh Five-Year Plan put emphasis on how to sustain balanced growth. This was because, as the Korean economy grew, improving the quality of living became more important, and maintaining high economic growth was getting harder. Thus, to maintain high growth, improvement of technological know-how, the increasing of value-added Korean products, improvement of productivity, and geographical diversification of trade and investment flows, became major policy goals. The globalization and internalization of the Korean economy through increased cooperation with advanced countries was meant to improve the Korean technology base. This, in turn, would enhance productivity and value-added nature of Korean products.
In addition, trade and investment activities with emerging market economies in Asia, Europe, Latin America, and Africa, were increased with intention of achieving high growth by shifting labour-intensive production to these countries at a lower cost, and by accessing new markets for Korean products.
4. Korea-Finland Cooperation
In 1981, the total trade volume between Korea and Finland was $46.6 million. In 1995, the figure was $651.6 million, showing an annual growth of 21 percent in trade (Table 4). The major Korean imports from Finland are machinery, transport equipment, while the major Finnish imports from Korea are office machines and electronics. As indicated by Table 4, Finland runs a trade surplus against Korea totalling $425 million. Thus, although the trade between the two countries is relatively small at this point, a continual expansion of trade will no doubt benefit both Korea and Finland.
Year 90 91 92 93 94 95 Export 125.0 167.3 203.4 303.0 393.9 538.3 Import 118.5 176.1 84.1 74.4 86.0 113.3 Trade Ball.6.5 -8.8 119.3 228.6 307.9 425.0
In order to expand cooperation between Korea and Finland, I would suggest the following: 1) increase trade and investment activities based on the comparative advantage of each country; i.e., Korea can offer relatively inexpensive, good-quality consumer products, such as electronics, and Finland can offer Korea its technological know-how in telecommunications and environmental related industries, and 2) increase educational and cultural exchanges between the two countries.
Being in an information age, Korea wants to improve its telecommunications infrastructure, and Finland possesses excellent information technology (Finland ranks second in the world, and Korea ranks twenty second). Thus, collaboration in the telecommunications area between Korea and Finland should be an important agenda for Korea in talks between the two countries.
Korea maintains high investment (1.45 percent of GDP) in the telecommunications sector, the sixth highest in the world, and far outpaces Finland which ranks 33rd (Table 5).
Country Ranking Percent Korea 6 1.45 Taiwan 7 1.28 China 30 0.53 Finland 33 0.52 Japan 41 0.40 Hong Kong 42 0.38
Source: The World Competitiveness Report, 1995.
But the lower investment ranking of Finland does not mean that Finland lacks an excellent telecommunications sector. In fact, it is just the opposite.
Finland does not maintain high investment because she has already established a highly sophisticated telecommunications sector. According to the World Competitiveness Report, 1995, Finland ranks second (Korea ranks twenty third) in the world in terms of telecommunications infrastructure. Certainly, Korean telecommunications industry will benefit greatly by joint research and product development with Finnish companies that specialize in information technology.
As a leading nation in research cooperation between companies and universities, Korea can ascertain from Finland how to manage close research connections between corporations and universities. Increasingly, research and development (R&D) and high management skills are becoming imperative for Korean industries as the economy becomes more developed. Thus, the role of universities is important since universities engage in research that is applicable to industries. Further, universities can provide a training ground for corporate managers to broaden their skills. But the infrastructure of Korean universities is relatively weak compared to many industrialized countries. Thus, learning from a country like Finland, whose research cooperation between companies and universities are ranked first in the world (Table 6), will be valuable to Korean companies and universities.
is insufficient is sufficient(0 through 10) Country Ranking IndexFinland 1 6.19 Taiwan 5 5.65 Japan 7 5.50 Hong Kong 11 4.97 China 24 3.84 Korea 25 3.79 Source: The World Competitiveness Report, 1995.
Culturally, both Korea and Finland have highly motivated young people. Creation of diverse educational and cultural exchange programs for young people, based on both public and private initiations, would enhance the relationship between the two countries.
Women in Korea have had less access to career opportunities than men even though women have had as much educational background as men. As a result, Korea is trying to provide more career opportunities to women. According to The World Competitiveness Report (1995), Finland ranks first in providing women with equal or similar career opportunities as men (Table 7). Korea, on the other hand, ranks forty eighth. Finland can surely share her experiences in women-related policies, helping Korea bring more opportunities for women in society.
do not have similar career have similar career opportunities as men opportunities as men(0 through 10)
Country Ranking IndexFinland 1 7.35 Hong Kong 5 7.03 Taiwan 18 6.03 China 33 5.10 Japan 47 3.33 Korea 48 3.16
Source: The World Competitiveness Report, 1995.
During the last three decades of rapid growth, Korea has neglected the environment. Due to this neglect, many environmental problems such as air pollution, thinning of the ozone layer and the contamination of the drinking water, have become a major social concerns. Finland possess an excellent record in protecting the environment in ways that are compatible with corporate competitiveness (Table 8). Finland has shown that protecting the environment will improve the quality of living and can be consistent with corporate competitiveness. Korea should study Finland's system of protecting the environment, and pursue joint projects that will alleviate domestic environmental concerns.
0: least compatible
Country Ranking Index Finland 2 7.62 Hong Kong 3 7.23 Japan 16 6.50 China 17 6.48 Korea 30 6.00 Taiwan 37 5.68
Source: The World Competitiveness Report, 1995.
5. Conclusion
Given the rapid economic growth of the past, Korea is now in a transition period; Korea is seeking ways to maintain high economic growth and improve the quality of living. To this end, Korea is in the process of switching from producing labour-intensive and low technology goods to technologically advanced products, such as telecommunications products. And furthermore, Korea is addressing many social concerns especially the issues relating to the education, environment and women's status in society.
The reputation of Finland in the areas of telecommunications and the environment is world renowned. Moreover, Finland has excellent joint programs between universities and companies. Korea, on the other hand, produces quality consumer products at relatively low prices. In this respect, Finland and Korea will mutually benefit by expanding relations in all aspects (economical, technological, cultural and educational) based on these comparative advantages of each country.
_________
Wiews expressed in this paper are those of the author and not necessarily the views of KIEP or of the government.
Jorma Julin, Ambassador
Finnish Embassy, Republic of South Korea, Seoul
THE CHALLENGES AND OPPORTUNITIES PRESENTED BY EAST ASIA FOR FINLAND
The unprecedented economic and social development of East and South East Asia has been one of the most significant changes in the world economy and trade particularly during the past ten years. One example is South Korea, where economic growth has averaged as high as 8% annually over a period of 35 years. This development has led to an enormous amount of new demand, wealth and rising living standards. As a result South Koreans are now on a par with the people of Portugal or Greece in terms of earnings, and the same rapid growth will apparently continue in South Korea as well as practically all the other countries of East and South East Asia. In the opinion of nearly every researcher and observer, this can be viewed as a major historical change in the world economy and trade.
Has this change been taken broadly into consideration outside the region and have proper preparations been made for the challenges and opportunities which it presents, or has it been regarded as only a passing phenomenon which does not require a basic revision of ideas on the part of outside actors?
Since all projections envision quite modest growth for Europe in the near future - and in some places no growth at all - Finns should look to the Far East for many reasons. First of all it makes sense to further evaluate and then to inform decision-makers, the media and through these broader civic circles as to what has been the secret of East Asia's economic miracle and whether we can learn any lessons from it and apply them in our own country. I would like to point out that there are no simple answers. This has already been shown, for example, by the World Bank's studies of the Asian tigers: the models used in economic and social policy have varied, though similarities do exist. This theme will be discussed in other presentations at the video conference, however, so I will say no more about the matter here but concentrate on my views as to how Finland should respond to the opportunities offered by the rapid development of East and South East Asia.
As you all know, according to nearly every forecast the Asia-Pacific region and particularly East and South East Asia will play an increasingly important role in the world economy and trade. It therefore makes sense for Finns to give greater attention to this matter. Although a clear increase in interest and activity has been visible on various fronts, it must be admitted that many of our efforts have so far been of a trial nature and in some cases even amateurish. Only in the 90s has activity been determined, long-term and goal-oriented to any large extent. Some of our enterprises took a pioneering approach earlier on, of course. For instance, Ekono Oy began exporting district heat to South Korea back in the late 70s.
It should be pointed out that East and South East Asia not only present opportunities for the future, but also offer potential which can be already be exploited commercially. This is indicated by the following comparison. Last year Eastern Europe, including Russia, accounted for about 11% of Finland's total exports. The figure for East and South East Asia reached roughly the same level. This is probably known to only a few business editors or decision-makers who closely follow Finland's foreign trade. At issue is a significant new development which has taken place mostly in the 90s. So we are already on the right road and proceeding at a fairly good pace.
What opportunities are open for Finns in the Far East? In brief these cover a wide range, particularly involving exports of goods and services, tourism, education services and cultural exports.
The backdrop for great opportunities is the continuing intense economic growth and rising demand in the region. In South Korea, for instance, production plant is being expanded and automated at a rapidly rate. South Korea has actually been the number one market in the world for Finnish paper machines in certain years during the 90s and has been an excellent market throughout the decade. Valmet Papermachinery is just one of many Finnish enterprises for which South Korea has become a main market. Machinery and equipment - generally high-tech products - have made up about 60% or an extremely prominent portion of Finland's total exports to South Korea in recent years. This implies a high degree of processing as well as a large labour input, which have been of benefit to us. The expansion and automation of production plant will continue apace. South Korea and other further-developed countries in the region are shifting from labour-intensive to technology- and research-intensive production while increasing capacity to meet strongly growing demand. At the same time labour-intensive production is being shifted to countries with lower cost levels.
Another area which has been and will remain subject to intense development and growth is infrastructure, including investments in roads, ports, airports, high-speed trains and telecom networks. South Korea, like the other countries in East and South East Asia, has well understood the significance of infrastructure for the development of industry and commerce, and this has led to enormous investments. Finnish participation in such projects, particularly as an supplier of machinery and equipment, is already substantial. Our opportunities would also be much greater in this respect if additional attention were focused on the region.
Thirdly, it should be noted that the rise in living standards in South Korea and other parts of East and South East Asia has created tens of millions of wealthy consumers with considerably more purchasing power than the average Finn or Western European in general. These markets for consumer goods already exist and are growing rapidly. The range of demand is unlimited. South Korea, for instance, is an excellent market for luxury goods which has already been discovered by some Finnish enterprises - though unfortunately only a few so far.
Taking into account these factors and development trends, what should Finland do so that our enterprises, universities and individual citizens can better respond to the challenges presented by East and South East Asia and take advantage of the opportunities which this region offers? The following are, in my opinion, important goals and measures which should be included in an action programme for Finland:
AN ACTION PROGRAMME FOR FINLAND
1. Intensifying export promotion
It would appear that the biggest obstacle to increasing our exports is still inadequate information on Far East markets. To remedy this will require measures on the part of the state. Firstly, the Finnish Foreign Trade Association should focus more attention on the region, which means intensifying and honing advisory and consulting services so as to get more Finnish enterprises moving. Numerous large Finnish enterprises are already well informed as to the increased significance of East and South East Asia, but even many of these have not yet made a more detailed analysis of this enormously large region. The Far East is in many ways a very heterogeneous region, and this must be taken into consideration if marketing efforts are to succeed. Above all, however, bigger and more effective investments should be made in order to involve small and medium-sized enterprises. There are already plenty of examples of success stories in the SME sector.
What is needed chiefly is the multi-faceted mobilization of enterprises in Finland. The state (i.e. the Ministry of Trade and Industry and the Ministry for Foreign Affairs), the Finnish Foreign Trade Association and the media all have their own tasks to perform in this respect, preferably in close cooperation with one another. The Finnish Institution of Export and other educational institutions also have an important role to play particularly when it comes to special expertise in specific fields as well as trade practices. Geographical distance in itself is still a mental obstacle, making it more difficult to start doing business with East and South East Asia than with the rest of Europe, for instance. Naturally the spell which Europe has cast on Finns works in the opposite direction when it comes to increasing interest in other markets and encouraging enterprises to enter these markets. On the positive side, particularly in the 1990s numerous new Finnish enterprises have managed to get a foothold in East and South East Asia thanks to our present export-promotion system, which includes the Finnish Foreign Trade Association, embassies and trade commissioners.
Drawing attention to the greatly increased significance of East and South East Asia at a high level is also extremely important now in order to stimulate and maintain interest and also strengthen confidence among those who are already on the move.
2. Expanding education in Finland regarding East Asia and university exchanges with countries in the region
It is important for Finnish universities to expand and improve educational possibilities so as to increase information about the countries of East and South East Asia as well as their societies, economies, cultures, religions and languages. Only in this way can we diffuse information about the region and create expert cadres to serve in Finnish society and particularly industry and commerce. In this respect the East Asia network university which was recently started by the Ministry of Education is highly welcome. Many Finnish universities and colleges have made a commitment to take part in this cooperation. Specialization will allow more adequate resources to develop teaching and research in each university's own special field. The inclusion of vocational colleges in education related to East Asia, which has taken place under the direction of the Ministry of Education, has also been very gratifying. Numerous Finnish students and even a few teachers have already received opportunities to conduct studies or enter apprenticeships in the Far East within the framework of these two projects. This has produced and is producing many new experts. The main emphasis should now be placed on improving the quality of education and training as well as marketing education and those who have taken part in it to Finnish society and international cooperation partners. It goes without saying that in the future as well as the present, education regarding East Asia will mainly be aimed at students who view this field as a minor subject. Special attention should be focused on encouraging students of economics and technology to include courses on East Asia in their studies.
In improving education on East Asia, attention should also be focused on research in this field, which is badly lacking primarily as a result of insufficient resources. Research regarding the societies and economies of East Asia is in particularly short supply at all levels. If no teachers are available, we cannot expect students to develop very much interest in the region. This matter should quickly be remedied within the framework of the recently started network university.
One example of growing cooperation and exchanges is the way in which Finnish and South Korean universities have concluded a dozen or so cooperation agreements mainly for exchanges of students and teachers. A similar number of new agreements will be concluded this autumn according to plans. Interest is mutual and synergies can be found. Korea's universities and researchers have their own strengths as do their Finnish equivalents. The student exchanges which have gone on between the Helsinki School of Economics and Business Administration and Yonsei University in South Korea provide an especially good example of this. Many Finnish students in the field have had a chance to learn about the economy and culture of South Korea and East Asia at Yonsei.
What most Finnish universities have failed to take advantage of is the opportunity to sell their educational services to South Korea and the rest of East and South East Asia. Tens of thousands of Korean students are enrolled at expensive American, Australian and European
universities. The Helsinki School of Economics and Business Administration is a Finnish pioneer in this respect. It has succeeded in selling - at a good price - teaching modules designed for middle-level managers to Seoul National University in South Korea from its eMBA programme. Teaching is tailored to Korean needs and integrated with S