The Asian Manager, October 1994 Issue by Sherbet Manalili

1994 OCTOBER-NOVEMBER

TI{EAsrex AFTA:

A6REEFIRST, TALKAFTER? /'

.,:/'

THEFIRSTI,OOODAYS OF CA9PERAT'ON,THEAs'AN WAY

. Primeron WorldTradeBlocs . AFTAandTQM . Is AFIA Viable?

. InformationSuperhighway . ExtendingProductLifeCycGs . Environmental in Asia Management

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IVIANAGER OCTOBER-NOVEMBER1994

(1()l'uR st(fRll)s

BUSINnSS ItHl' tllw

AFIA:AgreeFirst,TalkAfter?

CountrvUpdates J

Mari S.Kondo, byProfessor AIM Forthreeyears,theASEANcountrieshavepushed forwardon its tradearea.Thetrick?Tosstheirhats in thering,andworry later.

EditedbyKin Gatbonton-Lichauco AFTA is not the only clubin town.Twelveother groupsarepotentialcompetitorcto ASEAN.

Environmental Management in theAsia-Pacific Region

Marketing

by Professor EtsuInaba,AIM Environmentis not just a socialresponsibility; it's a sourceof profits.Prof.Inabawdtesabout her research in this field.

UPD,lTnS

Francisco byProlessor Roman, lr., NM Prof.Romanoutlinesmarketingtacticsand strategy for the softdrinksand tobaccoindustdes.

olDtNt()Ns

Finance

byProfessor Emmanuel Leyco, AIM Prof.Leycopresents"suitcasebankers."

Information Technology

RDSI.],INC|f

PrimeronWorldTradeBlocs

tI.{N.tGUlltUfUT

byProfessor Alejandrino Ferreria, AIM Prof.Ferreriasumsup eventsin Korea, Japan,and China.

Professor VicforS.Limlingan: AFTArebuttal Professor ReneT. Domingo: AITA andTQM Prolessor G.Gallegls, Jesus Ir.: Dignity= production RobertV. Chandran: Poetryin Growth

byProfessor D. Ortigas,lr,,AIM Gaston Info superhighways like autosuperhighways, speed thingsup, but theycouldalsogetjammed.

28 29 43 50

t}{x)ta RRI rEu HansSupiyo:CorporateFolklore

Prbll8her FelipeB. Alfonso f,dhoFh{hhr RicardoA. Lim Mr|r.gl4 fdhol Kin catbonton'Lichauco Aaloclra€ Publtuhc} & Adverilshg Dlrecao. DeliaC.Gutierre,

Itlr.cror, Ottrralo|! I Chcrlrrlor Millie C. Fener nercrrah .nd Produaalon Amv G. Esrinh Pdll8hlnaf,o.rdReneT Domingo,JesusC.Gall€gos, Limlingan, Ricardo A. Lim,Eduardo A. Morat6, lr.,VictorS. AshokK. Nath

TH. AnA\ MANA.TR A Publcanonot thc Asian Instituteof Managem€ntand the ld€ration of rhe Asian Institutc ot ManaSementAlumni Asscbtion.

|NTf,NNAT!O|A!, IIDPNDSA]TIAIIYE

CopyriAht 1994by The Asian Manager.All rights re$rved R€prlAucdonin any mannerinwholeorh part in Englishor othe! langua8esp.ohibited.TheAsranManager,is poblished bi-monthlvbv the Asinn Inslilute otManageh.nt. Editoial and Advertising Oilice: Asian Instilute ot Management, EUE€nioL6pez Foundation,joseph R McMickhS Campus, l 2 3 P a s s d e R o l a s , M a k a n , M c t r o M a n i l a , P h i l i p p i nTs€ l : (632)89240 1r'25, 89204 35-43,Fax: (632)81792,10.PhoiG graphssour.edbyth€ AIM Lib.a.y. Printedby TimesP.intersPre.Ltd.,Sin8apore The Asian ManagerMITA (P)245l9/9r KDN PP(S)1076/3/93

on8 Lon8. PamelaChoy, Pa.ihc Asia Media, 13A,361363Lckhart Rdd, W.nchai,Hong KonA.Fa\.(852)8345980. ShS.poFt Teddy Tan, Pam Media Serviceslrte.Ltd.83A EaslCesr Road,TayBuanC!an ShoppingCenrre,Singapore 1542.Fat (65)r!{08760.Indon€l.t RamaSlamet,Manaeer, C i h l e t o m m u n r d l o n ' l l B a - B l d \ l A < J d l d r t d1 2 ' 2 0 -o71-c4 r.J.ntsia Fa\ 1622tr7@2000 v.t.r.tdconn,. NE, Advertising Reprsentative,Mediaplus (M) sdn Bhd., l4A lalan sc20 l0 Ddmdn{ra Krm 47400feul'n8 la}a. lielango! Mahysia |rdl. Sul-Conaln€rt Media Sourh Asia (P) Lld., Apartment 1A, Abhi-Anil Awas, Kantipath Kathmandu, Nepal. T€l€x 260ri MEDREP NP, Far.(97/ iamal, 1) 227336.P.Ll.lrr S.l.Salahuddin,Chief Ex(utive. INS

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FIA, the ASEAN FreeTiadeArea,is a much-written topic in newspapers,yet for most peopleAFTA is out-of-sight and out-of-mind,because the issueshavebeenmuddledby technicaldoublespeak,politics,andthedynamicsofAsia. In thisissuewe will attemptto unmuddle,and answersome basic questionson AFTA: Whatis it all about?How will it work? What are its problems?Whatwill happennext?

memberto survive competition. Prof.VicLimlingan,in his opinion,sayseveryonehasforgottenthe role of Japanin AFIA. Youwill seeinteresting, a n d s o m e t i m e so p p o s e d , viewsonAFIA in thismonth's TheAsianManager.

the magazine. We were pleasedwith the enthusiastic andcandidresponses. Thank you for your help.Weplan to askfor your opinionon management trends,throughmore suryeysandwite-in letters. Do writemorelettersto us. Wevalueyour comments and New department: suggestions. Rememberthe Dlanagement Updates [esearch from Asla AIM caseroom?In that room Weintroducea new section We are also showcasing you couldcritiqueand braincalled.Management . In curent research Updates atAIM, in Re- s t o r m a n d e x c h a n g e ideas this sectionAIM professors search lrcm Asla.In this issue freely.Bysendingyour letten to us,you will ljeat TheAsian Manageras a continuationof your AIM experience. In fact, The flrst l,(XX) days wecouldusewriterslikeyouroT AFTA selves,our AIM alumni and Prof. Mari Kondo writes friends.Wewill print your letaboutthe first 1,000daysof ters,and if you want to exAFIA. AFIA, theadvertising pound on an interestingidea goes,is theASEANclub'sanor experience, wdte it up in swer to NAFIA and EU and longerform.Sendusyourdisk otherclubsaroundthe world. or paperdraft,andwe will try Like NAFTA and the EU, to fit it into thenextTfte,4stdr1 AFTAhashadbirth painsand Mnnager . We would be implementationproblems.It honored if you readers seemsthat in any agreement adoptedthismagazine asyour betweenmore than two parown "baby,"and sharedyour ties,thereis boundto besome opinionswith otherreaders. chaos. In the caseof AFIA, however,the membercounMany thanks to tries have employed the We want to thank Prof. u n i q u e A s i a n s t r a t e g yo f MichaelHamlin, Editor-in"Agree First, Talk After," to Chief, and Kin Catbontonkeep the ball rolling. Strong will summarizethe latestin Prof.Etsulnabatalk abouther Lichauco, ManagingEditor,for outsideforces,however,such their specificareas,and give collaborative their excellent work in bringresearch in enviasGATTandAPEC/arecaus- their own interpretationsof the ronmentalmanagement. ing The Asian Mnnager to the Prof. ing this ball to tum this way events. Their views will be Inabasurveysthe bestprac- statusit hastoday.Mike and and that.We must remember frank and refreshing,and ticesof Asiancorporations in Kin haveleftusto pursueother that AFIA, despitethe go-go should keep you abreastof mobilizingtheirpeopleto im- interests. Goodluck,andmore growth of the ASEANtiger t h e l a t e s ti n m a n a g i n gi n plement"clean" programs, powerto them. cubs,represents only2Vaof lhe Asia. Prof. FrankieRoman Asiancompanies We alsothank Mr Ashok areintegraF world's GDPCanAFIA afford casesthecontrastingmarket- ing environmentalprograms Nath, Publisherof the AFIA to be clubbish?Yetdespiteall ing strategiesof Coke and into their strategies and poli- Monitor, for his tremendous the seeminglyendlesstalk, Pepsi,Prof.Noel Leycoex- cies,not merelyfor compli- helpin shapingTfteAsrirnMarAsiancompanies are taking plainsthe mechanics of de- ance,butasa naturalextension agef. into things theirownhands,by r i v a t i v e s ,a n d P r o f . T i t o s of the tenetsof TQM; better F i n a l l y ,i n t h e s p i r i t o f forging aheadwith "growth Ortigaswrites about the in- wastemanagement, betterpro- Kaizen,we will continueto triangles," auniqueAsiancon- formationsuperhighway. until weget ductivity,bettercompetitive- seekimprovement coction.ManagingEditorKin it right for all you readers. But NCSS. Gatbonton-Lichauco writes Buslness revlev and we won't stop there:If and about the differentplayers Countr)' Updatâ&#x201A;Źs when we do delightand surReaderb comments aroundAFIA, the competing Prof.Andy FerreriasumWe took a criticallook at prise you, we will probably t r a d e b l o c s . P r o f . R e n e marizestheChina,Korea,and The AsianManageritself.\Ne haveto improveagain.Thank Domingo statesthat TQM Japanexperiences in Country recentlyaskeda sampleof you againfor your help and mustbe in placefor an AFIA Updates, and Prof, Jess 1,500readersto commenton continuedsuppo . 6

Gallegos and BobChandran give us their regularmonthly opinioncolumns.Wealsowelcomecontributingwriter Mr HansSupiyo,SeniorEditorof SWASembada, a widely-read business magazinein Indonesia.Hansgivesus a BookReaieraon management folklore.

Ocroarn-Novrvsrn1994. THEAshN MANAGER

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AFIA: AGREE FIRST, TALKAFTER? Thefirst 1,000doytofcooperation, theAsianu)ay ByPnorrsson MaruKoNoo

dnyshaaepassed sincethe ASEANFreeT?ade Area(AFTA)

envisioned toenhnnce thecompetitiaeness formedin early1992.ltrDns wrongso early in thegameTDoesASEAN reallyneedAFTA? Whatelseshouldhappmfor

AFTAtoincrmsethecompetitiaeness of ASEANindustryTDoesftwragement need to hnoean "AFTA-mind" to getaheadin theregionT

THE T'ONMATION

OF AI'TA

At the Fourth ASEAN Leaders'Summit in Singaporein Januaryof 1992,the region'sheadsof government agreedto launchAFIA. They signedthe Singapore Declarationand the FrameworkAgreementon EnhancingASEAN EconomicCooperationwhere ASEAN economicministerssignedan Agreâ&#x201A;Źmenton the CommonEffective-Preferential Thriff Scheme. The conceptof AFIA is simple; ASEAN member countriesBruneiDarussalam,Indonesia,Malaysia,ihe Philippines,Singapore,andThailandwill reduceinharegional tariffs on all manufachrreditems, including capitalgoodsandprocessed agriculturalproducts,and removenon-tariffbarriersovera l5-year periodbeginning 1993.By the year 2008,the ASEAN manufachrring marketwill virtually bea freemarket,with remaining tariffs in the 0 to sEara\ge. Three key developments Beforeone cangraspthe full significanceof AFTA to the regionand map out future directions,onemust

understand threekey developments: . TheGeneralagreementon TariffsandTradeGATT aswell asAPECand other hade forums. . Theemergingmarketeconomiesin Chinaaswell asin Vietnam, and India. o The inihal successof Growth Trianelesin the re gion and inha-ASEANinvestment. Let'stakea look at eachdevelopment. GATT and llFf,C Weshould first recallwhy ASEANinitiated AFIA. While ASEAN economieshavebeenrapidly growing sincetheearly80s,thg absolutevalueof suchgrowth is still snall. The region'scollectiveGDP in 1992 amountedto lessthan2%of world GDP.andwasonlv slightly higherthanAushalia's.BuIASEANhasa larger population,about6%of the world's total,or 320million people.With the creationof a free trade area, ASEANcountrieshopeto gain more global hade and investment,in particular, and increasedcompetitiveness,in general. Ocrossn-NowMBm1994. THrAsr,cN MANA.csn

power asa ma]oreconomrc EvenbeforeAFIA was established, China hadalreadybeenattractingmoreforeigndirect investments comparedto ASEAN.The principal motiveof AFIA was to createa marketof 320million people,draw foreigninvestments, andcompeteon a morelevelplayingfield with China. China's economicpotential - and therefore its competitiveness now with ASEAN - has becomeeven more pronounced in the last two years.Vietnam has also been luring foreign direct investmentsaway from ASEAN. Moreover, ASEAN counhies now acknowledgethe emergenceof South Asia as a competitor for foreign direct investment.India, with its growing middle classnow exceeding100million, hasits own capacityto becomea major economicpower.

AFIA has ueflted a market

ol320 millianpeopli ASEANeconomies For exarenot homogeneous. in theregion's1992average ample,thevariance GDP percapitaofUS$1,156 rangesfrornUS$650 for IndoneThecreation siato Singapore's US$16,080. of a freehade areasuchasAFIA in suchdiverseeconomies is a complextask.However,themembersagreedto do soand hadto do with theGATTsituoneof thechiefreasons ationprevailingat thattime. WhenASEANceatedAFTA,the GATTUruguay Roundseemedto go nowhere.Until December 1993, theworld'smajoreconomic playersweresoenmeshed in tradedisputesthattheUruguayRoundwasin seriHad it indeedcollapsed, ousdangerof collapse. those mostadverselyaffectedwould havebeensmallcountries with strong export-orientedpolicies,such as ASEANmembernations. Thethreatofa breakdownin GAIT and in the global trading systemencouraged suchexport-oriented countriesto form their own regionaleconomicgroups.ForASEAN,it wasAFIA. ForhJnately, theworld tradingsystemremainedintact.TheUruguayRound,signedon April 15,1994in Marrekesh, Morocco, providesa frameworkfor theliberalizationof globaltrade.Ironically,however,if implemented asplanned,GATTrulesfor globalhadeand tariff reductions will renderthe tariff concessions the thatAFIA hasbeenofferingsomewhatsuperfluous. Anothermajordevelopment in world hadedirectly with how Asia Pacific EconomicCoophasto do the erationforumis shapingup. TheUSClintonAdministrationis puttingmoreemphasis onAsia,andAPECis fastbecoming the majorplatformfor hadeandinvestmenttalksfor ASEAN. With APECheadedthe way it is, AFTAis in real dangerof becomingmarginalized. At the sametime ASEANnationsarewary of the potentialdominance of APECby theUS,Japan,andChina. Emerging Market Deonomles Another majorreasonwhy ASEANleadersfound urgenryin establishingAFIA is theemergence of China THrAsnu M,qxecrn. Ocrorln-NovrNfilr1994

BothAFIA andASEAN,facetherisk of beingedged out by China,VietnamandIndia. Growth Thiangles and Intra.ASEAN InYestment Onedevelopment thatfed the region'sconfidence to establish AFIA wasthesuccess of thetrianeleofSingapore-Johore-Batam, despitetheshorthistoryof cooperationwithin thethreenodes.Singapore's strength in technologyand financial services, combinedwith Indonesia'sand Malaysia's relatively cheaplabor and resources,made the triangle a microcosmof AFIA. The announcementofAFIA, together with the successfulgrowth tdangles,kindled the ideaof othergrowth hianglesin ASEAN. In addition to the SingaporeJohore-Batamconfiguration, at leasttwo more growth tdanglesareemerging.One "Northem is the Triangle," covering Indonesia'sAcehand North Sumatraprovinces, the Malaysian statesof Kedah, Perlis, Perak and Penang, and the five southern Thai provinces of Narathiwat, Pattani, Yala, Satun and Songkhla; the East ASEAN Growth Area, which connects East Malaysia, Indonesia's North Sulawesi province, and the cities of Davao and GeneralSantosin the Philippines.

NAFTA: lhllc IirsL Agree Inter in theWestern style,just as Agrce Firsto

Talk Atter qS ASEAN'S

peculiarstyle...

Significantly, thesedevelopment effortsarelargely led by the privatesectorsof ASEANcountriesinvesti n gw i t h i nt h er e g i o n . A1'Tl:

AGRID

FIRST, TAI,I( A1'TItR?

ImplementingAFIA, however, hasnotbeenaseasy asconceph.ralizing it. Somewho follow theASEAN's implementationprocesshavecomeup with a new meaningforAFIA-"Agree First,TalkAfter."Theysee ASEANcounhiesas rushedinto making a political

CEPTwill bring. The ASI N countries,therefore, in their "Talk After," ecidedto honor all existingAIJV commitmer . New AIJVs however aresubjectto the new'JEPTrules. (b) Pnoduci Coverage: manrlaetured goods only.

decisions, with little planningand public debate,the "AgreeFirst"asthefirst partof the agenda. Thepoliticalandtechnicalproblemsin implementationwereleft to beresolvedlater, the "TalkAfter" asthesecondpart. TheSingapore Summitoutlinesonly the basicpoints, and mattersrelating to implementationwereleft to be tackledanddocumented aftertheagreement. This is oppositeof the North AmericanFreeTrade Agreernent.NAFIA s mechanicsanddetailsaloneconstituteda thousandpagesand preceeded the agreement. Someobserversnote that NAFIA s Talk First, Agree Later is the westemstyle, just as "Agree First, TalkAfter" is ASEAN'speculiarstyle of pushinga difficult agendaforward. Wefirst look at key principlesof AFIA, which the Bovernment,agreedto, and thenexaminewhat hasso ' far transpired. (a) Common Xflccilve Prelenentlal (CDPI):

lhlk After The interpretationof "simple processing"for agicultural products,however,variesftom country to country.In the processof firming up the list of products for tariff reduction under CEPI, somemembers submitteda lineup that includedmore agricultural productsthantheothers. In addition,thereis serioustalk (after)amongmember countriesof including Servicesand FleshAgricultural Productsin the AFIA scheme.If this happens, AFIA would becomesa full-fledged free trade area, ratherthan thecuffentanangementwhereonly manufacturedgoodsare covered.As of August 1994, the ASEANcountrieswerestill only talkingaboutthis possibility.

Tnrlfl

Agree trlrst.Themain mechanismto operationalizeAFIA is the CommonEffectivePreferentialTariff (CEPDScheme. UnderCEPT,thetariff ratesimposedby membercountries will be reducedto a uniform rangeof rates.The resultinglowertariffswill directlyapply to products manufactured in ASEAN. Iblk Altcr WhenASEANdecidedto go for CEPI,the problem of consistency with the past cooperationprograms arose.For example,under theASEANIndustryJoint Venture(AIJV),a product can enter ihe participating countrieswith a 90%margin of preference,i.e. 707oof the prevailing tariff. The benefit to that an enterprise from suchan arrangementcouldbe muchhigherthan the benefitsthan reducedtariffs in the earlv vearsof 10

Agree llrst.All manufacturingproducts,including capital goodsand processedagricultural products, and goodsoutsidethe haditionaldefinitionof agriculturalproducts,areincludedin the CEPT Scheme. Agricultural productsaredefinedas: . agriculturalraw materials, o processed productsclassified underChapters1 to 24 of the HarmonizedSystemCode, . agriculturalraw materialsandunprocessed productsin relatedHSheadings, and r productswhich underwentsimpleprocessing wiih minimal changein form from the original.

f,cductlon

Programs.

Agtee Tlmt.Topreventany abuseof theCEPTscheme, suchas somecountriesfailing to reducetheir tariffs to reasonablelevels,themembersagreedthatonly productswith a 20%tariff thresholdaresubjectto CEPTconcessions. Thereafter,two programsfor the tariff reduction wereset:theFastTrackProgramandthe Normal Track version.Theirnplementationdatesetfor bothwasJanu'l,'1993. ary o TheFastTrackProgramis applicableto 15product groups:vegetableoils, chemicals,fertilizer,rubber products,pulp andpaper,coppercathodes, gemsand jewelry woodenandrattanfurniture,cement,pharmaceuticals,plastics,leather producis,textiles,ceramics andglassproducts,andelectronics. In thisgroup, i. ) tariffsat 207oandbelowwill bereducedto 0-5% within sevenyears,by 1 January2000. Ocronrn -Novrunrn 1994. THEAsrANMANAGER

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PROGRAMS

General Formrla 0l GEPT TaritfReduction Schedute

FAST ?RACK

NORMAL TFACK

ffi*)'*|+m;bm;;+ffi;t Year Jan.1,199i) 1994 1995 1996 Pedod{y6lr.) 1 2 3 Sourc€:Tn€r'€lA Monitor

1997 4

1998 5

1999 6

m 7

z)01 8 9

20V2 0

2003

2001t 1 1

2m5 1 2

2@6 1 3

2@7 1 4

2oO8 1 5

ii) tariffsabove20%will bereducedto 0-5%within 10years,or by 1January2003. . The Normal Track Programis applicable to all otherproductgroups. i) All tariffswith applicableASEANratesof 20%and belowwill bereducedto G5%within 10years,by 1Janu-

other requirementssuchas mles of origin complicate administraiionof theCEPTscheme. TheASEANChamberof CommerceandIndustry(CCI)hasadopteda proposal to acceleratethe harmonizationof tariff codes, with prioity to be givento productsenioyinghigh volume of intra-ASEAN hade and thosethat fall under ary2003. the fast-trackgroup of 15product classifications. ii) Tariffsabove20%will be reducedin two stages: Despitethe delays,ASEANcountriesarenot movhrst, to 20Vowithin five to eight years (by 1 January ing backtheendingdatesof implementation.As of end 2001);and subsequentlyto 0-5%in sevenyearsaccord- August 1994, the target end of CEPTtariff reduction ing to an agreedscheduleendingon 1January2008.in remainstheyear2008.Morc importantl, ASEANcounorder to promotethecommonalityof tariff ratesin sub- tries are likely to acceleratethe CEPI-AFIA prograrn sequentyears,ASEAN countrieswill reducethe tariff from 15yearsto 10years. ratesin three phasesaccordingto the following tirne schedule: (d) f,xcluslons and hcGptlons: Year2003 15% Year2005 107o AgFec I'lrct .. Year2ffi7 0-5% Thereare GeneralExceptions, PermanentExclusionsand TernporaryExclusionsin the Scheme: llnlk Altor GeneralExceptionsare productsexcludedfor naAFTA was not implementedon the target date of tional security,for the protectionof humaryanimal or January1, 1993as most membercountriesmissedthe plant life and health,or for the protectionof articlesof deadlinefor subrnissionof the list of productsfol in- artistic,historic and archaeologicalvalue. clusionand exclusionin CEPT.After repeatedextenPermanentExclusionsareagricultural products. sionsof the deadline,the final lists wereapprovedat TemporaryExclusionsare sensitiveproducts that the ASEANEconomicMinistersMeetingin Singapore, membersare not yet ready to include in the CEPT in October1993.The mernbercountdesagreedto re- scheme.Theseproductsare subjectto a waiver of any implementAFTA to January1, 1994.Generally,each CEPTconcession; i.e.,they arenot subjectto CEPTtarASEANcountrytook thenecessary stepsto legalizeand if{ concessionin other ASEAN countries.The temDostari CEPTby the beginningof this year By the ihird rary exclusionis alldweda maximumof eightyeirs quartet however,implementationhasbeenlargelydis- (i.e.31 December2000),and itemsstill excludedfrom organized.The major stumbling block lies at the cus- CEPTby that time will be reviewedwith a view to fitomslevel. nally includingthisin theScheme. Onemajorissueat thecustomslevel is that the tariff codesof ASEAN courtries are not harmonized.This lhlk Aftor makesit difficult for eachcountry'scustombureauto The temporary-exclusionlist preoccupiedthe apply th€ right tariff on the dght product. Moreove4, ASEANmembersthemost.Because theagreementwas

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or on the lush islandof Phuker. Of course,flying smooth as silk bereflected on Thai Internationalwill

â&#x201A;ŹTnsi

passedwithout much domesticdiscussion, the exclusion lisi nahrrallybecamethe stagefor impassioned debates in eachcountry.Counhieswith largedomestic marketssuchasIndonesia,Philippines,and Thailand foundit difficultcomingup with a limitedtemporaryexclusions as domesticmanufacturers lobbiedfor exclusion. Tocompoundtheproblem,theseexclusionlists,as well asthecountry-specific CEPTschedules, werepreparedwithout consultingothermembers.Whenthe final CEPTlist wasavailablefor privaiescrutinyin November1993,it wasa sirnplecompilationof schedules of eachASEAN country.Needlessto say,the tariff reductionscheduleof eachcountrywasdifferentfrom that of the rest,andanotherround of debateswithin the privatesectorerupted.

tion mechanism is important,because 40%canmean lessor more,dependingon how thisis computed.The amountof discussion on the rulesof oriein is understandable, ther beinga keycomponent thit detennines the natureof the freetradearea-whether theareawill be a protectionjst or an openone. The high local-contentrequirementis a doubleedgedsword.On the onehandit is boundto attract investments to the regionso that companies cantake advantage of CEPT.If, however,thesupportingor reIatedindustriesremainweak,thenthisrequirementwill work theotherway too ascompanies mayfind it not worthwhileto manufacture in ASEAN.However,low localcontentwill leadto the tradedeflection.For example,if AFIA did not havea localcontentrequirement,goodsfrom non-member countriescouldeasily enterthefreetradeareathroughSingapore, whereim(e) f,ules ol Orlgln portsareduty-free,andthenmoveon to, saylndonesia,wherehightariffrateswouldnormallybeimposed. Agree Tlmt .In this case,tariff protectionfor Indonesiabecomes Thelocalcontentrequirement is 40%. Thiscanbe meaningless. achievedin a singlecountry or on ASEANcumulative The minimum40%requirementis lower than the basis.In other wordstheaggregate ASEANcontentof ASEAN Preferential TradingArrangement, 507o,but thefinalproductshouldbeat least40%for theproduct higherthanthe 357,ratethis samedocumentapplies to be eligible for the reducedCEPTdates.In general, in specialcases. SomeGroupsin to the textilesector, the final manufacturingprocessof the manufacture especially thoseusingfabricsnot madeby any of the mustbe performedwithin the exportingASEANmem- ASEANmembers, fearthattheycannot meetthe40% ber countries, rule.Theylobbiedhard sothatASEANintroducedspeThefull valueof importedmaterials,parts,or pro- cialrulesfor theirrespective industries. A methodrecduce-not just the ASEAN contentof such importsommendedis a substantialtransformation approach, shouldbe consideredin the computationof aggregate underwhich inputssubstantially hansformedwithin ASEANcontent,which shouldbe a minimum40%of ASEANbe considered to fulfill the rulesof origin rethe imported component.This meansthereis no back- quremenr. ward reductionto obtaina "net" aggregatecumulative Despitethefrequenttalk on rulesof origin, thecomASEANcontentvalue. putation mechanismso far remainsthe same,and ASEAN leaderswill probablystay in this talk-after Thl[ llficr modefor sometime.TheASEANCCI is nevertheless TheASEANcountrieshavebeenin constantdiscus- callingfor a reviewof theCEPTmechanism anda consion on how to computerulesof origin. This computa- siderationof alternativeschemes.

land Ar6a(l,000 sq km) (million) Popularion GDP($ billion) GNP($ billion) GDPGmwth(%) PerCapitaGDP($) (%) Unemployment Inflation(o/d : Expons($ billion) lmporb($ billion) ForeignDsbi ($ billion) ForoignResorvo€($ billion)

tNoo 1919 187.6 116 111 6.4 620 3.0

s.2 29 26 70 10

MAL 330 '17.8

THAI 514 56.9

42 40 8.6 2345 5.6 4S 34 37 15 t0

7S 1309 2.2 5.8 28 38 27 18

Sourc€:Frim6ron WorldTrad€Bloca

Ocrosrn-No"Tlrgrn1994. THrAsnr Merecen

T||n ..At'TA-tf tNrD" 01' PRIViITE Ir-TERPRISI.

Taiff coilesof ASEANcountries are not haftrronized. (Neptune Oient Lines) (f ) lon-lariff

Barriers:

lgree first .... TheASEAN mcmbershavedecidedto removeNontariff Llarriers,includin!! Quantitativc Ilestrictions,F'orand otherNon-tariffBarrieignExchangcllestrictions, ers. Ouantitative Ilestdctions Quantitative restrictions (c1uotas, liccnses,etc.)on productsunder the CEPT u'ill be eliminatedif the exportingcountryenSche'mc jovsCEPTconcessions on theseproductsfrom the imporling countrv lle5trrclionsForeisner,hans.e F.rreicni-rch.:rrrge restliciionson ofpaymentsand therepatriation of such pavmentsrvill be reJaxed. Other Non-tariffBarriers(NTBs)Other non-tariff barricrsrvill be eliminatedon a gradualbasisrvithin five vears of the applicabilitv of CEI'T concessionson theirproducts.

A recall of the kev featuresof AFIA and "Agree First,Talk Afhon'this evolvedinto ter" can leacloutsidersto the impressionthat ASEAN is not seriousaboutAFfA. The truth is that all the member counties remain senous about AFIA, convinceclthat it is vital to the region'scompetitiveness. WhileASEANofficialsarep)avinga game "Agree of First,Talk Aftet" the announcement of AFIA certainly changed the mindset and focus of the private sectorthroughout the region. Not', more enterp sesand individuals are paying increasedattention to the prospect of ASEAN countries as trading partners and investmentsites. Oncethe generalcourseof actioni{as determined,the privatesectorimmediately set out in hot pursuit. Intra-ASEAN investmentshavebeenrisingfast,and the trend is especiallv significant this year.

Sampling of reeQnt invoslmenls . hrdonesiantimber tvcoon PrajogoPangestu's BaritoPacific,the country'slargestlistedcompany,took over the loss-incurringMalavsian companv,Construclion and Supplies Holding (CASH). This deal created oneof the worl,l ,' largesttimber-based empire: . Ilenongof Malaysiaand the state-ownedRakvat in lndonesial.ravesetup a M$100million venture capital companv Malindo Ventura Nusantara,to invest in medrum-sizeindustriesin Indoneiia. . Malalrsia'sRobert Kuok and Indonesia'srichest man, Liem Sioe Liong, are forming alliances.Thev recentlvmergedtheir sugarinterestsinIndonesiaand plan to investmore than US$l billion on sevensugarproiects in Sumatra. . May Bank,Maiavsia'slargestbank, is expectedto enter into a joint venture with Nusa Bank in Jakartaby Tirlk ,lfler The issueof non-tariffbarriersis cssentiallyunex- vear'send. . Maiaysia's national car maker Proton has a joint plored,n itl.rthe ASEAN officialstacklingmostlv tarmatters. venture to assembleand sell Proton Sagacars in the iff-related "Anyrvav Philippines. Thcir stanceappearsto be a consistent, . B i g M a l a y s i a n c o m p a n i e ss u c h a s R e n o n g , rve have at leastfive years."However,removal of nonfor ASEAN. Westmont, Ekran,and Hong Leongareworking on varitariff barriersis a real challenge ous infrastructureprojectssuch as hotels in the PhilipIdentifvingand removingof nonlariff barriersis pines. not a shaightforward exercise,becauseNTBs are usu. Singapore'sgovernment-controlledKeppel group allv hiddel. Companiesenjoyingnon{ariff barrierswill i. norr'lhePhrlippine.largest.hip-repaircompanv. pr()bablvtrv to kecp this from the government'sknowl. Metro Pacific,rvhich is controlled by Indonesia's cdge.And evenif theseNTBsareidcntified,assessing Salimgroup through the Hong Kong-basedFirst Pacific, their impact on trade and subsequentresolutionsbv tlre countrics will require patient negotiations.To fa- is emerging as a major player in the Philippines. . SingaporeTelecomis putting US$1billion into a cilitate the removal of NTBs, the ASEAN CCI is projoint venture with Ayala Corporation to install telposing to identifv industry-specificNTBs that could be ephonesas well as digital transmissionand cellular eliminattdthroughregionalindustrvclubs. phone netrvorksin the Philippines. Trr Asr,rrM,rr,rcrtr . Oi ronrt Nor rrtnrn1994

r TheIndonesian companyCitraLamtoroGung Pasada will startbuildinga US$32.2 million extension to theSouthLuzontollwayin thePhilippines. lt is also involvedin a joint venturervith a state-owned Philippine enterpriseto build a US$632.6 million elevated highwavtraversingManila. r Thailand'sBangkokBank,ASEAN'sIargestbank, hastakenstepsto setup a branchin Manila,the first underanewlaw liberalizingentryofforeignbanks into thePhilippines. . ThePhilippine's giantSanMifiuelCorp.hastaken a 49%equity in thebreweryDeltaDjakarta,makerof Ankerbeer. . In Thailand,Singapore wasthetop foreigninvestor in theBangkokstockmarketlastyearandthethird largestin termsof directinvestment. At least100joint venturesbeganbetrveen ASEAN companies in thelast12months.Thesedevelopments illustratethatASEANis on trackto furtherstrengthening AFIA. Therearethreemainreasons for this: 1.ASEAN'spdvatesectoris pushinggovernment for fasterintegration.Business peopleare thrilledb1' theprospects in emerginfigrowthtriangles,andwant furtherderegulationso thev canoperatemorefreelv n'ithin theregion. 2. ASEAN,morethan everbefnre,continuouslv needsthepowerofa solidvoiceat thenegotiation floor of theWorldTradeOrganization andAPEC. Althoughthe world tradeorderdid not collapse, newagendas havesurfaced. ASEAN'srapidgrorth is basedon costcompetitiveness of theirlaborhr thenew WorldTradeOrganization, somewestemcountdes wantthenewCATTagreement to link tradewith workers'dghts.Of course,ASEANopposedsucha move, concerned thatif thatcampaignfor theinclusionof the "socialclause" succeeds, wagesin theregionandother developingeconomies will riseand eventuallverode

thecostadvantages ASEANnow enjovs Thesamethins is truein theAPECforum.ASEAN countries areanxiousto reinforce theirgrouping,which allowsthemto gainmoreleverage by speakingwith a unitedvoice. 3. ASEAN'scompetitionfor foreigndirectinvestmentftom theoutsideis gettingfierce.In thewordsof Singapore's ForeignMinister,"Theemergence of China, VietnamandIndiais divertinginvestments awayfrom ASEAN.Toovercome thisandremaincompetitive, the six-nationgroupingmustpressaheadwith economic cooperation throughits freetradearea"- andin time expandthis to a 450million peoplemarketto include Vietnam,Myanmar,CambodiaandLaos. l(;u\D.t l'oft .l ('()tttDl)'t't't'tl ll ,tt'T.l AFTAhasbeencriticizedas"a little toolittle anda little bit too late."ASEANhasto respondto thiscdticismbv transforming AFIA into something"moreand faster"AsofAugust,severalmeasures werebeingconsideredto makeAFIA moreeffective. Someof thefollowingagendamightsoontakeeffect: Aâ&#x201A;Źcoleration of Thrlff Reduetion Schedule The membersof CATT agreedto cut tariffs on manufactured goodsby one-thirdover a l0-yearperiod. TheAFIA time ftame shouldbe shortenedbecauseit is too long,comparedwith GATT's.ASEAN countriesaremullingthepossibilityofaccelerating the CEPTtariffreductionschedule. TheNormalTrackProgramcouldbe abbreviated to seyento 10vears,from the original10 to 15vears,{'hile the FastTrackProgrammavbe reducedto five to sevenyears,from the '10 currenttimetableof sevento vears.This time. ASfAN members realize theimperaiive of ironingout all thedetailsin the proposedacceleration beforeembarkingon theproposal.SeniorASEANEconomic Of

Poslile Geaeral Formllasf CEPT Taillffiedoctlon Scdub inhe of Aocolordls[

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ficialsareto submittheir respective proposalson how eventualemergence of an Asia-Pacific freetradearea. to accelerate the CEPTduring the 26thASEANEco- The linkageof AFTA and NAFIA was formally disnomic MinistersMeetingin ChangMai, Thailandin cussedat theASEAN-USdialoguein Bruneilastyear, September 1994. and the U.S.will fund a study for implicationsto ASEAN, Incluslon of Dxeluded Scctors Theinclusionof unprocessed agriculturalproducts SouthKorea andservices, bothof whicharein thepermanent excluSouthKoreawantsto link up with theAFIA, though sionlist underthe originalCEPT-AFIAplan,is under this is mainly in the form of SouthKoreancompanies seriousstudy.Also,membersarediscussing the feasi- steppingup theirparticipationin theeconomic growth bility of movingthe scheduledend of the temporary trianglesof the region.TiesbetweenSouthKoreaand exclusionlist forward from the year 2001to 1998.If ASEANhaveincreased over the pastfive years.Each ASEANcanadoptthesetwo measures, thenthescope represents the other'sfourth largesttrading partner, ofAFIA becomes muchwider- andenhances its com- with thevolumeof two-waytraderisingmorethan2,5 pehtrveness. times.About 25%of Korca'soverseasinvestments. Unprocessed AgriculturalProducts;Fleshagricul- moreover, go to theregion. ture productsare excludedfrom CEPT.However,this mayno longerbeappropriatebecause bothGATTand Vietnam,etc. NAFIA allow cutsin tariffson farm goodsoverspeSofar therehasbeenno consensus within ASEAN cific time frames.Indonesiais taking the initiativeof on suchlinkages.Therearealsodiffering interpretations includingnon-processed agriculturalproductsunder amongthesixASEANmemberson how suchlinkages CEPT.Agriculturewill continuouslybe negotiatedat shouldbe worked out. It is likely that AFIA will be theproposedWorldTradeOrganization.Observershave Iinkedwith othereconomies sooneror later However, notedthat if ASEANcontinuesto ignorethis sectorin themostplausiblescenario is thatAFIA willexpandto their regionalfreetradeplan,it might bejeopardizing includeVietnam,Laos,CambodiaandMyanmar,formits own bid to becomea leaderin farm hade negotia- ing the"ASEAN{0." Thisyear,thegroupinvitedViettionsat theWorldTradeOrganization. nam to progressfrom obseruerstatusto full memberServices: Theinclusionof the servicesectorin the ship.However,achralincorporationwill takeat least GATT-URis clear indication of the sector'sinoeased severalyears. impo ancein globaltrading.Indeed,it makesmore sensethatASEAN'stradeliberalizationschemecover Concluslon aswell the free movementof labor,and factorsof proTheimplementationof theASEANFreeTradeArea duction and know-how.ThePhilippinesis taskedwiih hasbeenslowbecause of the "AgreeFirst,TalkAfter" studyingtheFrameworkof Cooperation in theService process. Howevertherehasbeena majorpositiveefSâ&#x201A;Źctorfor the SeniorEconomic Official Meetine.This fect. AFTA has cultivatedthe "AFIA-mind" in the will be discussedin the September AEM meeti-ng,lf ASEANbusiness sectorInha-ASEANinvestmentand everythinggoessmoothly,the Frameworkwill be ap growthtrianglesare prospering.Theprivatesectoris proved at the ASEANleadersSummit nextyear now pushinggovemmentfor moreliberalization.Meanwhile,developments in theGATT-LIRandA?EC,aswell f,x'panded AI'IA as the emergence of China,Vietnamand India, are Anotherway to makeAFIA moreathactiveis to link prompting the ASEAN to makeAFIA more effective. thisto otherregionsor countries. Somemembershave Thegroupis considering boththeacceleration of AFIA alreadyexpressed interestin suchexpansion. mechanisms andexpansionof its scope.Also,AFTAmay be linkedwith otherregions. Australia-NewZealand Althoughseveralvital pointsonAFTAwerethreshed Australiaand New Zealandhaveregisteredtheir out after("talkedaboutafter")the membercountries' interestin linking up with AFIA in the frameworkof a approvalof theagreement, it is progressing. Thisis betie-upbetweenAFIA and theAustralia-NewZealand causeAFIA promiseseachmembercountry the benComrnonEconomicRelationsgrouping.On ASEAN's efitsof regionalcompetitiveness. Continuedgrowthof part, it has beenreported that membersare seriously a collectiveeconomythataccountsfor 2%of theworld's considering extendingtheirtradelinksto includeAus- GDPdemandsthat the regionfurtherpushAFIA tohalia andNew Zealand. wardits goalof competitiveness. NAFTA Singaporehasproposeda link betweenAFIA and the NAFIA or at leasta linkage betweenNAFIA and individualASEANeconomies that arereadyfor a tieup. Singapore seesthis as a possiblesteptowardsthe l8

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CovrnSrony

There aremyrethana dozen tradeblocs in theTnorld todny Eorto sy Krr,rGlrsoNroNLrcHeuco

II\ITRODUCTION

Uruguay Round,protect,patentsand copyrights,and liberalizesworldwide tradein services,garments,semiconductors,telecommunicationsand agriculturalproducts.TheUruguayRoundstartedin 1986,and ended in 1994. Even though the Uruguay Round has been completed,thereis continuing concernin many countries that protectionismmay rear its ugly headonceagain, and forcecountriesto engagein tradewars.

Freerinternationaltradeis generallyacceptedasthe best route to higher living standards,becauseof the tenetthat competitionwill increasequality and lower the cost of goods.To a large extent,the fuhrre of today's globalmarketplacedependsupon the successof effortsto removerestrictionson tradeamongnations. Thefirst tentativestepstowardsstemmirigthetide of protectionismthat swept the industrialized world during the depression of the 1930sweretakenby the . Thc Bmcrgenee of lhade Blocs United Naiions.Under the auspicesof the LIN, the While GATTworked towardsmultilateraltariff reGeneralAgreementon Tariffsand Trade(GAfi) was ductions,therehas beena parallel growth of trading established in Genevaon October30, 1947.Twenty- parinershipsin variousparts of the world. As a result, threecountriessignedtheagreement, in 5January1948. thereare more than a dozentrade blocsin ihe world GATT is a multilateral trade agreementwhich today.Since1990,theseblocshavetried to widentheir strivesfor the abolition of quotasand the reductionof membershipand havetried to enhancecooperation tariffs and duties amongrnernbernations.It also s'ets amongtheirmembers. generalrules,a "codeof commercial poliry" by which membernationsagree,on the basisof "reciprocityand mutualadvantage"to "negotiatea substantial reduc- Tnu j1loProa co0tMuNITY (jc) tion in customstariffs" andotherimpedimentsto hade, and to eliminate discriminatory practicesin intemaAn integratedEC has 344rnillion people and an tionalhade. annualGNPof US$6trillion,about25%of theworld's TodayGATT has more than 100members.AgreeGNP mentsreachedby thedevelopedcountriesareautomatically extendedto imports from developingcountries DO Obleetlves and Coverage under the mostfavorednation(MFN) clause.Under Under the Treatyof Romein 1957,the six members thisclause,aGATTmemberextendsto its partnercounof theEuropean CoalandSteelComrnunity(ECSC) hy anyreductionof import dutiesthatit maylatergrant France,WestGermany,Italy,Belgium,Luxembourg, to imports comingfrom anothercountry. and TheNetherlands- becamethe originalsignatoThe recentlycompletedGATT talks, known asthe des to the EuropeanEconomicCommunity (EEC).

Ocronrn-Novrlrnm 1994. Tur AsrnrvM.qrulcsn

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GreatBritain,lreland, andDenmarkjoinedin 1973,folbringabouttheeconomicgrowthnecessary to rebuild Iowedby Greece, Porhrgal,andSpainby 1980. Europe,hopingthat the economicand socialinterdeThe EC aims to removetradebarriersamoneits pendence suchaffluencewould createwould makea membernations,establisha singlecommercial pJicy retum to war impossible. towardsnon-member countries,coordinatetransportationsystems,agriculturalpoliciesand generaleco- DCt The ldea of a Slngle Market nomicpolicies,removepublicandprivaterestrictions The 12-member EC decidedto fully integrateits on freecompetition,and assurethe mobilityof labor, marketin 1993.Theintentionis to takedown all trade capitalandentrepreneurship. barriersin goods,capitalandservices, creatinga Europeansinglemarketandsuper-economy. DC Implementlng Mechanlsms The communityset up four freedomsfor the citiXC Industrles Scheduled for Speelal Attenzensof Europe:the freemovementof labor,the free tlon movementof goods,thefreemovementof services,and TheEChastargetedspecificindustriesas"special," thefreemovementof caoital. strategicinvestments to be nurturedand encouraged: They createdthree institutions to ensurethese microelectronics, biotechnologtmatedalsciences, telfreedoms;the EuropeanCommission, a kind of civil ecommunications, civil aviation,robotsand machine service;the Europeanparliamentto providea demo- tools,computers andsoftware.Europeturnedtowards craticfocusfor the organizationand a checkon the indushiesand economies characterized bv hieh-techCommission; andtheEuropean CourtofJustice, where nologyandhigh value-added. nationalgovernments couldbe chargedif theybroke the.treatyor failed to makeprogressin turning it into DC Dfreets on ASf,AN realrry Someexpertsfearthat the EC will developinto a "Fortress Europeanleadersthen left it to this mechanismto Europe"andthatits members will erectstrict

Belgium LandAroa (1,0@ sq km) 31 Popula{on.(million) 9.8 GDP ($ billion) 201 GNP ($ billion) 200 GDPGroMh (%) 1.8 Pef Capila GDP($) 2f/.27 Ulsmploymont(%) 8.8 lnfletion(%) 3.5 Expons($ billion) 118 lmports($ billion) 120 ForeignDabt ($ blllion) 106 ForoignRosorvss($ billion) m LandAr6a(1,m0 sq km) Populadon(million) GDP($ billion) GNP($ billion) GDPGrowth(%) Per CapitaGOP($) Un€mploym€nt(oi6) Inflatione/o) Erpois ($ billion) lmpods ($ billion) ForeignDsbt ($ billion) Forobn Re6€rvos(g billion)

lrsland 70 3.5 15 1.7 480t 17.8 3.1 24 21 ;

D€nmad( /tg 5.2 131 125 1.2 25417 10.6 2.4 36 32 = Italv 301 57.1 1150 1127 1.4 20158 9.9 6.1 169 183 245 72

Franco 544 57.1 1194 1118 't.0

Gormany 357 64.1 1574 1585

20929 9.4 3.1 217 252 142

24552 6.3 4.2 403 390 &4 63

Luxemb'g 0.4 9 3.1 223tt8 1.4 3.4 9 334 na

Nethed'ds 42 15.1 291 290 2.1 19303 4.6 4.9 134 126 91 ae

G.Britain Greece 244 132 57.4 10.1 1018 70 1018 70 -2.1 0.5 17744 6978 6.3 8.5 4.5 18.2 185 I 210 22 429 39 4 9 5 Portugel 92 10.6 59 59 2.7 5577 5.0 '|1.3 16 26 18 21

Spain 505 39 527 522 3 13508 '17.3 5.5 59 94 120 61

Source:Primeron World TrodeBlocs

Ocrorrr -Novsuaer1994. THEAsrANMANAGER

barriersagainstthe outsideworld while turning inward.Othersdisagree,sayingthata tightly-knit ECwill benefitASEAN. On theplussideASEANmaybenefitfroma single ASEANexporterswill no Europeanmarket,because longerhaveto tailortheirproductsto suit therequirementsof 12differentbuyers,and that the singlemarket will thereforemake it easierfor them to achieve economiesof scale.The flow of official development asthe from theECto ASEANmayincrease assistance marketgrows. On the minus side,private investmentflows to Mostp vateinvestorsfromthe ASEANmaydecrease. EC will probablyturn inward and investin the less developed or smallerECmembercountriesto takeadvantageof intra-EChade.Or theymay investin Eastern Europe.It is possiblethat the US and Japanwill to theEC. divertsomeof their investments Overhalfof ASEAN'stradewiththeECis in manufacturedgoods,but foodandagriculturalraw material Exportsofhandbags, travel exportsremainsignificant. footwear,plasticarticlesandtoysacgoods,garments, countfor morethan25%of thetotal.All told, mostthinl thai ASEANwill beworseoff with a stronserEC. (}THDN

DI]NOPDAN

BI,OICS

The European Tree lhade llcsoclatlon

(ErTA) EFIA wascreatedby theStockholmConventionand Norway,Liechtensignedby Ausiria,Finland,lceland, EFIA seeksto remove stein,SwedenandSwitzerland. barriersto tradein industrialgoodsarnongits member but eachnationmaintainsits owr commercountries, cialpolicytowardscountriesoutsidethegroup. DFTA Oblectlves and Coveroge The StobkholmConventioncommitted EFTA's membersto a scheduleof tariff reductionsand quota for industrialgoods.It alsoincludedesliberalization capeprovisionsif theburdenimposedon thedomestic economies of individualmemberswastoo great. EFIA establisheda systemfor determiningthe country of origin of goods,to preventnon-EFIAproducts from being shippedto the EFIA country with the lowestexternaltariffs, andthenreroutedto otherEFIA countrieswith higherextemaltariffs.Britain,Denmark and Portugalhavesinceleft EFIA to toin the EC. The Xuropean Xoonomlc Area (DDA) TheECand EFIA haveagreedto mergeinto an exa reality,it will pandedEEA.Oncethe EEAbecomes enlargetheECmarketto 32millionadditionalEuropeans.As a result,theEEAwould bethemostimPortant integratedeconomicareain the world, comprising19 countriesand 380million citizens,a marketwith an trillion. annualGNPof US$7.1

Ef,Ab Stx Obleetlvm . Fre€movementof goodsin Europe.Customsduto tieson indushialproductsand all otherobstacles tradein goodswill be elininated. Any quantitativereshictionsand measureshaving equivalenteffectswill be scrapped,rules of origin will be improved,and the label"EEAOrigin" will be introduced.Therewill be a removalof technicalbarriersto trade,sirnplificationof border controlsand of proceduresgoveming trade in goods,creationof a commonmarketin Publicprocurement,andimplementationof simplifiedproceduresfor tradein processedagricultural products. . Fr€emovementof persons.Therewill be no discrimination on grounds of nationality regardingemployment, remunerationor otherworking conditions. Citizensof theEEAcountrieswill be freeto move,seek andhold employmentanywherein theEEA,andpursueactivitiesasself-employedpersonsanywherein the EEA. . Freedomof establishment. Nationalsof anyEEA ght to s€t up businesses, agencountry will havethe cies,andbranches. . Freemovementof services.EEA guaranteesthe freedomto provide serviceson a non-discriminatory theprincipleof "singlelibasis.Forfinancialservices, censing"will apply to credit institutionsand the principle of "home country conhol" will make the home countryresponsiblefor supervisingthe activitiesin the EEA.A separateprovision includessecuritieshadin& insurance, telecommunications. and audio-visualand informationservices. Provisionson transportarebasedon the principles of reciprocaland mutual accessto the market for the contractingparties,more liberalizationof transPort serviceson a mulhlateral basis,and harmonizationof technicalprovisionsandworkingconditions.All modes of transport - inland, maritime, and air - are covered. . Freemovementof capital.Theagreementprovides a comprehensiveand non-discriminatoryframework for capital hansfers,crossborder investments(direct and indirect), loans,etc. It provides for the abolition not only of exchangeconholsdirectly affectingcapital transfers,but alsoof indirect obstacles. Provisionsarestill beingnegotiatedfor the removal of barriers in agriculhrreand fisheriesthrough bilateral agreements.Additionally. EEA aims to foster intensifiedcooperationin areassuchas envitonment, anddeveloprnent. education,socialaffairs,andresearch

A.MDNICAN I'NEN TNADE T||T NOnlI AGNDDMDI\II(NAI'IA) NAFIA is a tradepactof theUnitedStates,Canada, and Mexico.NAFIA oeated a unified market of 368 hillion with a totalGNPof US$6.5 million consurners, annuallv about28%of theworld'sGNB andan aver'

1994 Tsr AsreNMaucsn . OcroBER-NovEMBER

ageper capitaincomeof USS1Z700. NAFTA Obteatlves and Coverage NAFIA originatesfrom theU.S.{anada FreeTrade Agreementof 1989.As a result,about80%of the goods and serviceshaded betweenthe U.S.and Canadaare now freâ&#x201A;Ź from tadff duties.NAFIA airnsto eliminate barriersto hadeandinvestmentamongthethreecountries. Its objectivesare to stimulateeconomicgrowih, reduceunemplol'rnent,increaseindustrial efficiency through vertical integration and economiesof scale, promoteforeign direct investment,and resolvethe chronicbalance-of-payments problemswithin the grouP. Theaccordcoverstradein goods,energyand services,investment,intellectualproperry dumping, govemmentprocuement,disputesetdement,andenvironmentalmatters.For somegoods,tariff removalwill be immediate,while removalsof tariffs on sensitiveitems will bephasedin. Thereis uniform customsregulation andadminishation,clearertechnicaland healthstandardsfor goods,and a moreliberal investmentenvironment, NAFIA Df,eats on Asf,AN North Americanintegration may adverselyeffect the growth prospectsof ASEAN.Theentry of Mexico, a developingcountry,raisesconcernsfor threereasons: First,Mexico'sexportsto theU.S.andCanadahavea comparativeadvantage,basedon thezerotariff regirne, over similar exDortsfrom ASEAN. Second,in tire long run, theproductionstructureof Mexico could itself be alteredby foreign investment

posinga new competitivechallengeio theASEANand othercountriesis Asia-Pacific. Third, someof the massiveinvestmâ&#x201A;ŹntRowsinto Mexicowill be at the expenseof ASEANand other Asiancourtries.KorearyTaiwanese, andHong Japanese Kong companiesmay likewiseinvestin Mexicofor export io theU.S. Asianinvestorsmayvery well put their moneyinto Mexicanchemicalcompounds,veneer,textilesand clothing, leather,iron and steel,footwear,raw sugaI, peholeumproductsand somemachineryitems.

OTIDN TBAI)D GNOUPINGS

A]\ID ECONO]IIIC

Therearemoretradeblocs.Someareactive,others moribund.Othersareshll hade blocsin nameonly. Latln Amerlca fbee lhade Assoclatlon

(L{r'ra)

LAFIA wascreatedby the Treatyof Montevideoin February1960for ihe liberalizationof tradeamong membersand the developmentof a Latin American commonmarket. Elevencourtries - Argentina, Bolivia, Brazii, Chile, Cblombia,Ecuador,Mexico,Paraguay, Peru, Uruguay, and Venezuela- compose LAFIA's membership. IIIFTA Obleatlves The LAFIA charterreducestariffs and other trade restrictionsover 12 years.A commonlisi of products to be exemptfrom tariffs was to be negotiatedevery Ocrosrr -No!Tr,{nrn1994o THsAsr*l Meuecm

Characteristics and Stages of Economic Integration Ermrnation or lraoe bamers

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threevears.Provisionrvasalsomaclefor a special)ist grantingmorefavorableiermsto le'ssdevelopedmember countries. Tarifi reductionswithin thc group, however,did not move along on scht.dule,and ihe secondstageof the commonlist rvasnot successfullr,negotiated in 1967. The Protocolof Caracasin 1969moveclthe datt for theachievement ofa freetradeareaforwardto i980.In N'lav1969,Chile,Columbia,Ecuador,Peruand Bolivia organizedthemsclvcsrvithin LAFTA as tht Andean group, or Andtan Common Markct. Chilc n jthdren' from this pact in 1976. LAFTA tht'nagrec'dto creatcanothcrorganiTation that rvould better,rcconrmod.rte the differingratesof economicdevelopment,tmong its rnembers.A nen' treatv was signedin August 1980,replacingLAFTA l v i t h t h c L a t i n A n r e r i c a nl n t e g r a t i o nA s s o c i a t i o n (LAIA). The membercountritsof LAIA are the same asthoseof LAFTA. The neu' organizationhowever,also failedto take off. CooperationLatin America,at present,remainsas seriesof preferential trading agreementsbasedon bil a t e r atlr a J e .i r r d u - r r i aal .n J l l l l , t n c r .at g l rcement.. The South lslan Pr.eferentlal Thadr. ,lgreement (S.{PTf) SAPTAw'asorganizedin 1993by Bangladesh, Ind i a , P a k i s t a n ,S r i L a n k a , B h u t a n ,N e p a l a n d t h c V a l d i r e . . T o g c r h ( r h ( \ r e p r e r e nJr g r o u p i n g , ' rL l i billion people$ ith US$379billion CNP,and a percapita

incomeof onlv U55329. The treatr,callsfor membersto import commoditicsirom one...rnother u ith 10'i iess tariff than thoseimposedon gcxrclsfron non-me.mbers.

()'I'||til| (;nol tDI\(;s . The EconomicCoopcrationOrganization(ECO) compostdof Turker,,Iran, Pakishn,anclsct'cnother nations,mostlv from CentralAsia. It has 313 million people,hasU55887billionin CNP,anclUS$2,E3.1 in pcr capitaincome. . The Commonrvealth of Inclependent States(CIS) is composcdof turmerSovietrepublics,hasof 277miilion peoplt',US$l.'12trillio:rin CNP,and US$5,118 in per capltalncome. . TheAndeanpactis composedof fiye LatinAmerican countriesall of rvhom are membersof LAFTA. It has 93 million people, USS10,{ billion in GNP, and l((l

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. TheCulfCooperation Council(CCC)is conposed of six Middle Easterncountries- Bahrain,Kun'ait, Oman, Qatar,Saudi-A.rabia and the United Arab Emirates.It is relativelvsmall,$'ith 22 million pe'ople', but hasUS$141billionin CNP,andUS$116,113 in per capita incomc.rhr'hi!:he.roi ;nr gruupinpl. Manv of thesepotentialgroupingsor blocs,howcve.r, are still in their infancv in termsof organization. Kut CAfbtutt'tnrLichnuco ucerpletlirontPnrrren or l'\'onro Trror Brrx-qlrrlrlislrarl bv Tht Aftn Matiif0r,1993. Octorrtr -\orltrsln

1]994 . TrrrAsrrr Nlrlec;rn

BETTER, BRIGHTER PLACE F(lR BUSIIIIESS TOMEET ITSCUSTOMERS.

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he shortanswerto the questionposed in the titleof this pieceis: Not in its presentform! The long answeris embodiedin thisarticle. AFTAor the ASEANFree TradeAssociationis an economicgroupingwhichseeks to hastenthe economicdevelopmentof its membercountries throughthe useof two economir

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l. Deonomiesof Scale Economicdevelopmentis arrivedatmorequicklyif firms can specializeand achieve economies of scale.Undera free tradeassociation, such conditionsare madepossible by thecreationofa singlelarge marketout of severaldistinct and small markets,i.e.,the mergingof the smalland distinct steelmarketsof Brunei, Indonesia, Malaysia,Philippines,Singapore andThailand into oneASEANsteelmarket. This is done through the removalor theloweringoftrade barriersamongthe association'smembercountries. l. External Thade Barriers Thebenefits ofa singlesubstantialmarketmust,however, redoundprimarilyto thebusiness firms of the member Theworstsituation countries. wouldbefor theASEANcountries to put in all the effort while an outsiderreapsthe benefits.Thus,tradebarriers must be erectedaroundthe membercountriesto prevent suchan occurrence. Thepresenceof tradebaniersprovides furtherimpehrsfor economic integrationasproductswithin the association will enjoya priceadvantage overproducts subjected to tariff dutiesfrom non-member countdes. However,economic principles must still be translated 28

into economicreality.Thusin consideringthe viability of AFIA, we must considernot only its economic viabilitvbut alsotheorganizational mechanismswhich are intendedto promoteAFIA. Our view is that AFTA is not viablein its presentform on economic aswell asorganizationalgrounds. The late PhilippinebusinessmanDavid SyCiponce useda colorfulanalogyto ex-

berwho is fatedto serveasthe group'seconomic lynchpin.In the EEC,this lynchpinwas Cermany;in NAFfA s case,it i s t h e U n i t e d S t a t e so f America.ASEAN does not have such an economic lynchpinasthe populationof itstwomostdeveloped nations - MalaysiaandSingapore aremuchtoosmallto carrythe largerASEAN countries. Civen these factors, M a l a y s i a nP r i m e M i n i s t e r

a strategic plain ASEAN'slack of economic integration.He said, "ASEAN'sproblemis thatit is composed of six partners,five of whom believein marriage and oneof whom believesin free love." By this, he meant that for so long as Singapore believesin freetradeand has imposedlittle or no tariffson goodsimported from nonASEANcounhies, thetwo economicprinciplesenunciated abovecannot apply.

Mahathir,the most economicallyperceptive of theASEAN leaders,has proposedthe inclusionof Japaneitherinto a largerAsiaPacificTradeAssociationor into a strategiceconomic alliancewith ASEAN. Sucha combination wouldenhancethe region'seconomic cotnpetitiveness by transferringthelow technology industriesfromJapanto ASEANas well asby marketingASEANmanufactured products throughJapanese kadingcomNeodfor Deonomic panies;and,mostimportantly, Lynchpins bv allowingJapanto be the Moreoveteconomists have group'seconomic lynchpin. attributedtheexperience of the SucheconomicvisioncanEuropeanEconomicCommu- not alsobe attainedgiventhe nity (EEC)aswell astheNorth presentor8anizationalstrucAmericanFreeTiadeAssocia- tureof ASEAN.Organizationtion's (NAFTA)bright pros- ally, ASEAN resemblesthe pectsto thepresenceofa mem- EEC'sunsuccessful rival, the

EuropeanFreeTradeAssociation or EFIA. Fewnow recall thatin response to theEEC,the non-EECEuropeancountries suchas Swedenand Austria formedtheir orvn tradeassociation,EFIA.Thisassociation lostoutto EECn'hentheEFTA membercountriesopted to jointheEEC. Observers havealsonoted thattheEECedgedout EFIA primarily because it was better organized.The EECappointeda leaderand establisheda bureaucracy which eventuallvservedthe interest of EECas a rvhole.Thus at present,the EEChasa president in the personof Jacques Delors,former FrenchPrime M i n i s t e r ,w h i l e A S E A N i s without a presidentor titular head.And while the EEChas the Brussels-based EECCommissionwith erecutivepon'ers EEC-wide, ASEANmerelyhas a paperASEAN Secretariat basedin Jakartawith simple powersASEANcoordination wrde. In summarythen.we submit that AFTA can be viable only if it takesthe following steps:if it entersinto a strategic alliancewith Japan;transformsthe ASEANSecretariat into an ASEAN Commission basedin BandarSeriBegawan in Brunei;createstheposition of an ASEANpresident;and, namesLee Kuan Yew as the first ASEANPresident.

,,ASfANt is thdt Itroblent

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Octoarn-NotlMsln 1994. I al A>rerMeret rr

lr,l's programmed will usequalityasa competitariff-cuttingproc tive weaponto defend(and essalmsto lncrease delight)itslocalmarket,andto hadeflorvsandfree attack(andattract)theASEAN hadeamongesrex exportmarket. Thesecret oftheTQMcomcountries.With more and goodsavailableto the pany is that bv improving cheaper ASEANconsumelthe argu- quality,it drasticallycutsthe ment goes,AFIA will leadto costsof correcting mistakes, moreeconomicprosperityfor which could accountfor as muchas30%of manufacturing evervonein theregion. T h e r ei s , h o w e v e r ,o n e costs.Costcuttingand comblind spot in this scenario: petitivepricingarejusthappy qualiryWillAFIAimprovethe consequences of "doing"qualqualitvof ASEANgoods? Economicprosperitydoes not happenwith theavailability of more varied,cheaper goodsif theseare mediocre, second-class, substandardor In otherwords,if defective. AFTA promisesmore of the samegoods totheASEANconsumer,then it can enhance and balonly tradestatistics anceof tradefigures.Thismay but not the excitebureaucrats, consumer. ASEANexporterswill not bemotivatedto improvequality because the regionalmarket haslargelythesametastes as their doand expectations mesticmarkets.Manycompanieswill simply exportexist- ity. They are not the pdmary ing domesticproductionwith managementobjectivesof little or no modification,save TQM companies. perhapsfor a deceiving"exThe winning formula is port quality"label.Underthis "improve qualitv > cut nobodyimproves, costs." scenario, Reversing theprocess, as andnobodywins-not thelo- mostASEANcompanies would not theexporter, do,is thetypicalWestern calcompany, kneen o t t h e c o n s u m e rL. o w e r jerk reactionto increased compricesmay be an illusion. If petition.Their formula; "cut qualityisacasualty of theprice costs-> cut oualitv". war,theconsumer suffers. Tolal Quality llanagemenr (TQDI) Only a few enlightened c o m p a n i eps r a c t i c i n gt o t a l (TQM) qualitVmanagement will escapethis viciouscvcle. As a reactionto AFfA's more competitiveenvironment,the TQM companywill accelerate improvement of productquality, processes, and people.lt

is a processstandard,not a product standard,and so it cannot standardizeproduct quality. ISO 9000does not define what is a safeelectricfan, a road-worthycar,a high-qualitv cement,or pure mineral rvater ISO9000doesnotdefine the acceptabledefect ratesfor batchesof goods. Furthermore,althoughISO 9000is a processstandard, it focuseson the presenceor absenceof documentation,qual-

ity systems, andprocedures. [t doesnotendorse anyparticular qualitycontrolsystem, control charts,schoolof thought, or corporate culture.Itsimply checksto seethat you are recordingand monitoringwhat you aredoingfor qualityand if you areusingthis feedback to improvevour processand customerseNice. This means, for example, in tso gfifo thattwo cementcompanies The ASEANConsultative the sameor differentASEAN Committeefor Standards and countriescouldhavetotally Qualitv endorsedISO 9000 differentquality controlsysguidelinesfor ASEANmanu- tems,standards, andformulae, producingfor AFTA. yet bothbeISO9000-ceified. facturers Thespirit behindthe dccision was comrnendable, but Compeaing through whetherit will achieveits ob- quallty jectiveof standardizing ASEAN ThebestwayforASEANto productsis anothermatter improvequalityis notthrough In the first place,ISO9000 AFIAorregionaltrade,but for

THEA5rANMA\AGER. OCroBIR-No\EMBER 199i1

ASEANmanuJacturerc to coop erate,produceASEAN productsof highqualitvandexport themto world-class markets likeJapanandEurope,thereby themselves to worldexposing d;<c

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A survev of Japaneseconsumers indicates that their number-oneanxietyover knitwear imports from ASEAN is that they are "not appropriate asgifts." Soonedefinitebenchmark, and compliment, better than ISO 9000certification to indicate that a product is "world-class" is if it canbe exported to Japan and used for gift-giving. ASEAN needscompetition to produce with world-class quality.Cateringexclusivelyto the ASEAN market will not createsufficient pressure. A good model of cooperation is the Airbus planes produced by a consortium of European countries.The Airbus is now a world-classplane that competeswith the American planes that once dominated the market. The car complementationschemedesignedto produce the ASEAN car is totallv different. Its objective is to cut costsfor the sakeofJapanese multinationals. and not necessarilyto improve quality. Moreover,it is mainly geared for the ASEAN market, and not forexport outsideASEAN. Removing tariff barriers alone will not mean an improvement in the quality of ASEAN goods.Neitherwill establishing qualitv standards lead to improvement if standards are confusing or set too low. AFTA should focus not only on free trade but also on "qualitv" kade, insideandoutside the region. It should encourage companiesin the region to adopt TQM as a new corporatephilosophv to enhancecorporate,national,and regional competitiveness.

SoftDrinks, Cigarettes, Discount Clothing,andLiquor Bv PnorrssonFneNCFCo L. RoueN,Tn.

TIID COI,A WABST PART???

clefurthersuggests thatCrystalPep'si's peculiarformulationof colawith "hints of ginger,andpepper"createdan cinnamon, "uncola"flavor that tumed off the marketit mighthavesought."ln its firsi yeat CrystalPepsiwon just1.1%of thefi8 billion U.S.soft-drinkmarket- only half whatPepsihadpredicted." But Pepsiis nothingif not persistent, andhasthedeeppocketsto be tenacious. The unforhrnatecolawill be relaunched as "Crystal, from the makers of Pepsi...Crystal will bercincamated asa citruscola,"representing the latesteffort to makeinroadson

PepsiandCokehavebeenat oddsfor solong- overa century- thattheyhave seeminglydefiedthenotionof a product life cycle(PLC),thatis, growth,followed bya maturationandsaturation point.The two companiesutilize entirelydifferent strategies to sustaingrowth. 551)oesPepsl llave Tbo llany Products?tt LauraZinn asksthis question, in an articlein BrsnessWeek. Pepsi consumers havegrownaccustomed to Pepsi'spenchantfor experiments.And Pepsihasworkedhard at its hendy image;recallthe current"Choiceofa New Generation" advertisingtheme,with Michael Jacksonas the one-timestar of a star-shrdded seriesofads.RememberPepsiLighl a low-sugar,lemonflavoredcola?Or its testmarketing in North Americaof PepsiA.M.,as a possiblesubstitutefor themoming jolt of caffeine? CrystalPepsiis thelatest(oneyearold) aitemptat productextension to defythePLC. Presumably, someoneat Pepsi HQ thoughtthat a new market nichemight existfor coladrinkers "crystalclear" who mightassociate with health,purity, and "uncola" characteristics.Bul accordingto Zinn, " They got the wrong one, baby.Wrongtaste.Wrongpackaging andadvertising, too."Thearti30

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And lhe Secret of CocaOolat Success ls-. On theotherhand,AsianBusiness Industry Editor Neal McGrathin theJanuary1994article entitled " Si'rup-MakersBold Strategy"posesthe following question:What would happenis someone got hold of Coca{ola's secretrecipeand published it? Surely,it would spell the end of Coca{ola'scommandof the global soft-drinkmarketas slewsof cheapandcloseimitationsflooded the market.Right?McGrath answershisown question: Wrong.A recentlyreleased biographyof the beverageincluded a Cokerecipe,but so far Cokeis goingasstrongasever The secret of Coca-Cola's October-November1994o TheAsianManaeer

s u c c e s s . . . l i ei ns a s t r a t e g y which has establishedthe company so firmlv in the minds of the world'sconsumers that no mere copvcat could hopeto displaceit...The key ingredient in Coke's recipe for success is marketing..."Our overall strategyremainsthe same:To make sure the consumercan' not escapeCoca-Cola,"says RobertGoizueta,Chairman and CEO of theAtlanta-based Coca-ColaCompanv The other kev successfactor is the distribution network, bottlers who are pdmarily independent franchisees, but who r e c e i v es u b s t a n t i a ls u p p o r t

...andtheyhaveanuntap@ marketof 3.5billionpeople

fromCokeHQ in all areas, suchasqualitv control,advertisingmaterials, subsidized promotion e\pense., [indncing, etc. Coke'sown answerto the PLC is to reachout to morepeople."Wearejustbeginningto reachthe 95%of the world's populationthat lives outsidethe US, Coizueta savs."Today, lourl top lb marketsaccountfor 807eof our volume,but coveronly207o oftheworld'spopulation." CokeandPepsihavealreadycaptured an estimated 1.9billionpeople market betweenthem,with Cokewell in thelead. Thatleaves3.5billionpeopleup for grabs, with developingcountfiessuchas India andChinaasthekeygrowthareas. Pepsiseemsfocusedon a productextensionapproach, whileCokeis counting on takingits coreproductto asmanymarketsassoonaspossible. Whichway are you takingyour business?

price cutting maneuver u,orked. Marlboro'sshareof the S47billion U.S. cigarette market, which fell 20'tr before Marlboro Fridav,has reboundedto 25% higherthan it hasbeensince1989. . Philip Morris is now using tficks other than pricerIt recentlyrolled out the Marlboro Countrv Store,featuring Western wear boots,cowboy hats,beltbuckles,cottonslacks,denim shirts,and leather vestsand jackets,all stencileclwith the Marlboro brand logo. . It is consideringroll-1,our-owncigarettesfor the US market,not just to evoke the "Old West" image, but becauseloose tobaccoand rolling paper are taxed at a lower ratethan the finishedcigarettes. . It is studying the feasibility of selling cigarettesloosein a carton,in order to cut the price bv roughlv 60 cents. . It is developing Marlboro Express,a c i g a r e t t e1 5 m i l l i m e t e r s s h o r t e r a n d cheaperthan the conventionalone, 85 OI,II TRICI(S l.ON millimeter cigarette,to cater to smokers OI,D INIIUSTNIDS who must "take quick smoking breaks while at work". . Anothercampaigninvolvedsending [emember Marlboro Frlday? Tobacco is anindustryolderthansoft- emptv Varlboro pacl: in erchanqe ior drinks.[n April 1993,on "MarlboroFri freemerchandisefrom asspecialMarlboro day," Philip Morris slashedthe priceof catalog."For 130packs,for instance,smokMarlboro.bv 40centsperpacl to regain ers could get a Webercharcoalgrill." marketshare.Onceagain,LauraZinn That'sa lot of tactics.

& ' r i t e s ,i n " T h e S m o k e C l e a r s A t Marlboro"thatit became thebiggestmarketing story of 1993 a symbolof the vulnerability o[ big brand:in thepri.e'90s.But it'snow conscious, value-minded clearthat as a market-share gambit,the

tend to associatehigh price with "quality." It is all the more surprising to read in Asia$'eek,that... ...Customersu'ho used io frequent designerboutiqueshavebeen f l o c k i n g t o t h e . . . m e n ' sd i s c o u n t store... a blockfrom thc Cinza'smain shopping street...r,r'hich boastsnot oniv the world's priciestreal estate, but manv of its most fashionableand expensiveshops...for racksof suits, most under $300,abouthalf the cost in a mainlinestore.A discountstorc, ou,nedbv retailerAovanaCoronow sells a fifih of thc 10 million suits bought in Japanevery vear. The recessionand the bursting oi "bubble theJapanese economy"hasled to belt-tightening.But Aovama cor rectly pointsout that "...thcbuslness suitis the salaryman'suniform...lt'sridiculous to havespenda month's salarvto buv one. The unsecn sldr. of Japan The averageAsian looksat Japanand seesfree-spendingtourists and "rvorldclass"corporations; theunseensideofJapan is an overrvorkedand (relaiivelv)underpaidmiddle-class. . Takashivamaand Mitsukoshi,two of Cinza t prir ev departmcnt:toresno\r'otfer suits priced under $'100.

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. TherearewholeareasofSeibus huge lkebuluro outletgivenover to bargains. r On anothernote,Denny'sfamilv restaurants, an inexpensivefast food chain in America, is thriving in Japan. Aoyama is using the samestrategyto expand to Taiwan, Hong Kong and rnto Shanghai. One last lesson: M a n y r e t a i l e r sw e r e s h o c k e d when the tycoon opened his (Ginza) store(in lgq2) iust ds the rece'sion was gathering steam. But the inaugurationtumed into a public-relations ma5terstroke. \ew5paperi dnd television had a field day over the thousandsof salarymenwho showed up for the grand opening,which featured suits selling for as little as $20.Says "You Aoyama, don't succeedby doing what others do." Japani5 n!,tlodth to imitdteit5foreign competitors.The Japaneseautomobileindustry has been hit by a rising yen and a "quality declining gap" between its cars D e t r o i t ' s . and According to Larry Armstrong and Hiromi Uchida ("Detroit, Check Your Rearview Mirror," BW 6/6/ 94) To boost sales,the Japaneseare: o increasing cash incentives, selling more cars at low margins to daily rental fleets . adding extra-valuepackages,and . fielding stripped-down models in order to advertisesticker prices. The article suggeststhat Japaneseare staging a comeback. In the first four months of 1994,salesof Japanesecars climbed 167",to reversea two-year slide in U.S. market share. TheJapane*e of coursecontinueto invest in new products, such as high margin sports-utilitv vehicles, areas long dominatedb) Dctroit.The qualitv e.lg,e still givesJapanesecarshigher resalevalues,which in turn allows for lower lease prices. AI,CHOI,IC

I,DSSONS

Lest one think fhat low pice is the norm, turn to the liquor industrv which is older than the tobacco industry, and which facesmany similar problemshealthconcerns, legislation, regulation, and taxation.Oncemore with Laura Zinn, joined by Julia Flinn in "Absolut Pande-

wlI]{T

IS IT ALI, A"BOUT?

To wrap up the tidbits,bearin mind thatmass-marketingwherepricingshategy counts,either up or down-is still alive and well in Asia,because the middle-classis thriving, and because Asian countries arebigin numbers. Forinstance, Indiais a developing countryandits middleclassmakeup only25%of thepopulation.Thatpercentage translates to almost monium"(BW11l22l93): 250 million people, equivalent to the enThe industry's Big Three (Seagram, tire population the of United States.As International Distillers, and Zoher Abdoolcarim, Economics Edrtorat Guinness)...share anunshakable faith Asian Business, reports in the March4, in thebig, priceybrand.Sure,value"Middle Class,Top conscious consumers areabandoning 1994articleentitled Dollar": premium-priced lineof tobacco, food, growthraises Sustained economic andhousehold products. Butthespirit percapitaincomes. Peoplehavemore companies continueto get a dispromoneyto spend.Muchof thismoney portionatechunkof profitsfrom a flows back into the local economy, handfulof high-endlabels. whichgrowsfurtherandcreates even greaterindividualwealth.SoundfaFor example,high-endlabelslike miliar?Its the wheelof fortunerollChivasandMartellmakeup 14%of sales ine throueh manv Asian of Seagram but turn in 59%of theprofits. countries...This cycleof prosperity is And in caseof "carryingcoalsto Newcass p a r k i n g . . . t hrei s e o f t h e m i d d l e tle,"lDV setupanofficein Moscow, which "...isnow selling class...ln a recentreport,HongKong's 650,000 casesto AmerrCrosbySecuritiespredicted:"councan-made Smirnoffto Russians, at about triesin the regionareexperiencing a $8 a half-litterbottle,2sr" morelhan in rapidconsumer boomwhichis likely New York." to gatherevengreatermomentumrn thenextfive to 10years."

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C e n e r a l i z a t i o nssh o u l d b e t a k e n with skepticism. ButthegrowingAsian m i d d l ec l a : si s n o w h e r en e a rm a t u r a tion or saturation,and opportunities existat bothendsof thepricespectrum. L o w p r i c e sc a n b u i l d m a s s - m a r k e t share.Indofoodscontrolsthe lndonesian noodle market.But in Kuala Lumpur "...vousee...premiumcoffee, freeze-dried coffee,eveninstantcappuccino." Marks& Spencer and Sogo sellside-by-side with Dutchhypermarket discounterMakroin Taiwan,Thailand. Valaysia. and Indonesia. "Makro'spile-'em-high-and-sell-'emcheapstrategy hashit a chordwith even affluentAsians."It alwayshelpsto keep abreast of newideas;but it doesn'thurt to seeif old ideascangivenewlife to a

Prlf. fran(iirc L. Ronnn.lr. spetializes in iterrutionalbttsiness tLtith a sub-specializn, tionin agribusiness exporfs.

October -November 1994o The Asian Manaser

Bankingin Asia Suitcase By Pnorrsson EuvaNurLA. Lrvco he openingof Asian financial How will local banksmeetthe new Inflation,interestratefluctuations,and marketsto the world hasintro- challenge?They may go into consortia increasing interdependence of economies duced a new breed of intema- with other banksto improve their opera- havemadederivativeproductsattractive tional "suitcasebankers,"who tionsandproducts.Throughcompetition, investments.Forexamplgimportersfrom are rushing to ASEAN and In- customersaretheultimatewinners.Com- Asiancountriesare sensitiveto exchange dian cities,and usingHong Kong astheir petition to underwrite proiectscould re- rate fluctuations. When Thailand'scurbaseto focus especiallyon China deals. sult in lower loan ratesfor corporations. rencydepreciates, forexample, it will cost Morgan Stanleyand GoldrnanSachssay Competitionfor depositorscouldleadto Thai irnportersmore to purchasetheir they want to Biveclientsin the regiona higheryieldsfor thesavingpublic. materials. Importerscan protect their global expertise rather than just eamingsby buying a forward contract. peoplein localoffices. Prlclng Derlvailves compartmentalized For example,a Thai importer canlimit its Morgan Stanley'sHongkong office rs ls trard To Do risk by buying a forward contractto buy largely independentfrom the New York Derivativessuch as interest-only US dollarsat 25 Bahtto $US1, "locking h e a d q u a r t e r isn m a k i n g d e c i s i o n s . collateralizedmortgageobligations,and in" a setrate. If theexchange ratedevalGoldmanSachs,on the otherhand,con- bondswith yieldsthatmovein reverseof ues to 26 or 27 Baht to a dollar,the imtrols small officesin Seoul,Taipei,Bang- interestrates.areiust two of manyinno- porter limits its exposureto the conhact kok and Bombay frorn New York. vativeproductsthathedgeagainstfinan- rate.Ifthe Bahtappreciates to 24.50or 24, Goldmanalsoteamsup with localbanks theThaiimDorterloses thepremium in targetcounhiesto makedeals. for buying the hedgeand potential The suitcasebankersbring in badly currencygains,but at leastassures neededcapitaland technologyto Asia. itselfof predictable cashflows. The region'scapitalneedssoaredmore Locsl capital mark€tsare nova.€ €qually A companyin the USmay issue accessibleto domgstic and lor€ign than20%,to $50billionin 1993,according a USdollar noteout of Londonwith comDanieson a scale ot 0 to I 0 to theADB. Asiandebtissuerscannow a sterlingcunencyswapfeature,to Nav,Zaaland s.21 tap on the US and the Europeancapital neogerrserragarnsr curencymoveHon! Kong a-fl markets.Lastyear,theUScompanyEnron u.K. 8.63 ments. A companymay swap its u,s. 8le built a power plant in Subic Bay, variableinterestobligationswith a Au.tr.lle Olongapo,under thePhilippinebuild-opfixedinterestrateobligation, ro pre:j: Slng6po.€ (BOT)program. Enroniserate-transfer determineits interestcosts.Mean;; Canada Jap!n sueda $105million dollarnoteto finance while,investorsin theseinstruments Phlllpplne! €76 its building,andestablished a Philippinecan hold offsettinscontractsthat Indl. III 6.65 basedcompany,with a local bank and a benefit from both falling and rising ;;; Th.llend localinvestmenthouseowning 35%of the interestrates-a so{alled"spread." uatayeta I 6.ts acuon, Indone.le 5.8s Throughthis,the investor'srisk is Telw.n I ''{6 Localcomrnercialbankers,on theother limited to thedifferencebetween the Korga 3'31 hand,areuneasyabout foreignbanksentwo contracts.Theseinstruments croachinginto their markets. Actually, arelinked to the performanceof the So-.ce The Wodd Cmpernimess Floood 19q4, p.4cr9 local banks have a competitive edge, underlyingassetssuchas interest throughtheirlocalknowledgeandprevirat'es,cunencies,and commodities. ousbankingrelationships.Onecouldcon- cial risk. Comparedto traditional finanForderivativesthatareactivelytraded cludethatAsianswould oreferto dealfirst cialinstruments,however,pricing deriva- New York,London,and Tokyo,pricing is with like Asianbankeis,then foreign tives canvary from dealerto dealer,with no problem.But for thosenot haded,parbanksnext. Theintemationalbanks,how- greatdifferences.taditional securitiesare ticularly with theemergingcurrenciesand ever,canbring in newcapital,testedprod- pricedaccordingto latestmarketactivi- other securitiesof ASEAN,benchmark ucts and technology,and perhapsbetter ties. In casesof illiquidity in certainde- pricesmay be hard to find, becausethere pricing than any of the local banl<s. rivatives,it could be anybody'sguess. is no formal clearingsystemthat collects 34

Ocrorn -Nol,rMsrr1994. Tur AsnruM,rtlacm

or existingmarket-makers information, in thosederivatives. Upsurge In Mutual Tunds ln Asia? Mutualfunds,or unit trusts,are gaininggroundinASEAN. Hongkong had a seven-foldincreasein net new pushingtotal unit retail investments, to $25.4billionlast trustinvestments eryear.WhileotherAsiancountries ercisedtight regulationsover the sale andTaiwanhadro of funds,Singapore bustgrowth,with assetsincreasing657o to $39billion,and155%to $7.1billion, in 1993. Observersatrespectively, tributethisshonggrowthto therising Asianmiddleclassand the ercellent performanceof Asiancapitalmarketsdurine the last half of 1993.The lackluster of Europeanand American oe"rformance marketsalsotdggeredtherushof institutionalinvestorsto Asia. Throughmutualfunds,smallinvestors areableto getsharesin manycompanies to those that are otherwiseinaccessible with little investiblefunds. Howevet unit trustsmaynot immediatelycatchon with "stageof Asians,due to culturaland growth" factors.Asiansgenerallyprefer on theirown. While to makeinvestments Americansand Europeanswill go for trendsfromnameless yieldsandtechnical Asianswill invest portfoliosofcompanies, in known,singlecomPanies.Asianson inthe averagewill havelessdisposable comefor investing,relativeto theirWestem counterparts. Finally, mutual funds in theUSandEuropearedrivenby institutionalinvestorssuchas pensionfunds which arenot and insurancecompanies, asnumerousin theAsianregion.

into the marketwhen highly-leveraged were scoringhigh yields. investments Junkbondscollapsedin thenineties,and burnedtheseinvestors. Wheninterest rateswerelow lastyear,assetmanagers tded to boostyieldsby usingderivatives aspeggedon interestrate movements, rateswouldremain sumingthatinterest low. Wheninterestratesrose,their derivative valuesplungedandtheytookanother beatine. Reiently,the Philippineslisted the Petronsharesin themarketat P9,or $US 0.35,a share.On the first day of trading, sharepdceswentup to P21,thenP24($US specu0.90)a share.AreFiliPinoinvestors latine?Itseemsnot.Petronis a solidbluechipiompany.It wasthefirst stockissue with wide publicparticipation,like Sinlastyear'Itwas governgaporeTelecom's ment-owned,then privatized with the SaudiArabiangiantAramco. Investors consideredPetron'sdominantmarket share,historicalprofitability,andthevalue addedof Aramco.Thepublicwasfamiliar with Pehon,whichhasa widenetwork Wf,ll Street lhemorsr of gasolinestations.Analystsconsider Now. Sobrlety Petron,at P 24lshare,a goodbuy,with a increased Reserve Federal The US to otherbluechips' shortterminterestratesthisyeat andsent 22P-Eratio,compared jittersto themarket.Thishit thebondand averageof 24to 26P-E. equitymarkets,particularlybond invesfunds Many, Sf,ANGHAI frrtrre Global tors and highly-leveraged as a Tlnanclal Oenter the shakeout welcome howevet "pause Those Shanghai's15V"GDPErowthrate in that refreshes." healthy d h i n a ' so v e r a l l1 3 % who did well despitethe correctionat- 1 9 9 3s u r p a s s e C grew stockexchange to soundanalysisof growth. Shanghai's tributetheir success only 12 from in total assets, billion to better underrecords, a $28 track company 112 A-share in 1990, to listed and comDanies fundamentals, of economic standing listinssfor nationalsand 23 B-sharelista strategyof investinglong-term. jumped ings ior foreigninvestors.Twenty-eight investors In theearlyeighties 1994 THEAsrAN MANAGER. OcroBER-NovEMBER

foreignbanksnow operatein the cit, andanother20havependingaPPIication papers.Whenthecentralgovernment allowed the renminbi,China's currenct to trade,they designated Shanghai asthelocationof a comPuter tradingsystem.This ensuredShanghai'smainrolein rnajorfinancialtransactions.Will Shanghaiwill takebusinessaway from Hongkong?Observers think Shanghaidoesnot yet have the necessaryinfrastructureto rival Hongkong. "infrastructure"is a The missing matterof scale.Whiletelecommunications and financialservicesare already in placein Shanghai,theypaleby comparisonto HongKong's.Theseservices mustkeepup with theinfluxof moremultinationals.Thenextstepwould beto somewith themaior how linl thisinfrastructure financialandtransportationhubsof theregion-Tokyo, Hong Kong,andSingapore, andimproveits port facilities.Finally,multinationalshateto live out of suitcases. WhileShanghaimay haveall the hotelcawho are therefor the pacity,businessmen long run will want morepermanentquarters. Shanghaimustoffermoreacceptable housingandliving services. Glok, AsianBusiness, Sources:BusiressWee balInaestor,Asia,Inc. in pubA. Leycospecializes Prof.Emmanuel healthcare publict'inance, Iicpolicyanalysis, issues. development , andinternational t'inance Heis th( currentDiretlorof lheMastersin deyeeprogram. Mnnngement Deztelopment

change,1993 PErcentage Phlllpplne3 HongKong Mrleysla Indon6ta -I

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so!rce: The wor d ComDâ&#x201A;ŹtilivenesReporl 1994 p 416

MeNeclMENt TECHNoLocy Upoaln:INronunnoN

TheInformation Superhighway Br Pnor.C,rsrorD.Onrrr;,rs, Jn.

ConnntLnicntilns itra trctu,lrk tlreallsllutelV incornpntible utitltn strict,llarlclinl hiernrclry.

hat is the ini()rnration sLrpcrhigh-u ai ? Thc clos est thins \\'t'havc to a superhighn'av is INTUINI:l f0r thc moIncnt. Accorclingt0 thc book, "The I\TER NET Companxru,"INTEITNETis... . . . , rl o o s r ' a m a l e , r l o l t h o u s , r n d o sf . r ' n l l \ l r l Hn rc l \ r , r l ' r ! . r h , i n Fn. I l l r , ' n -. , 1 people,rllovtr tht rrrrrLl.-forlatit is be ing rrseelbr,all sortsol peopleerlucalors, librarians,hobbvists, anclLrusincss ptiiplc I \ ' r . r\ . r f l rl \ , , j l U r f , . - \ . l r r r n t , . , r n n ] l r n t caiingu ith e,rchothcr,to acccssing lalu. t b i ci t t t , ' r r l ] . r t r ,r.nn( lr t - - . , u cr .- . . .I n r , r i : i n , discolcringa ir.holesvsternof highl,ivs and high speedc0nnr'ctors that cut hours ofi t our commuiingiimt. C)ra librarvthat II bypasses thelimitations of schedules, geography, vor-rcouldusc.anvtimeol tlteniglttor dat, and organi zatiofial boundaies. rtiih acrc.sot books,tnrl resources,tntl (ESSOMalaysialinks to its USAparcnt) uniimitetlbrorlsing.Or,rn all nirht, non sbp blockpartvrlrth a corncrtablcot kinrlrcclsoulsrvho ttelcotnt \()Lrrpresen(e Hisl0r.r of l\'l'DR\D'] sirrt. \\'a\ th,lt ph\'sic.llhighu,rvscoulci ( l n e c , r na n . r l o g i z rt .h L 'i n f o r n r , r t l o r l scrle its,rlternate anr.trne. lournalistsust' tht I\TER\ET Lrntlrng.rreas. - r r ; ,r l t i - i t i r . r1r , 1 1 1- ' - , . 1 , , , *'- , \ 1 11, 1 io covL'rt()picsfrom corrputerbusinessk) Thus I\TERNET .rclopiecl the name, currcni i.\'!.nts,ar'rdsonlc eYeltcotrdr-lct c.r'-. interstate hichu,rr':r'stenr.iJackin the "lnforurationSupcrhlghnar'" Bothhigh i(ls, PresidentFi:t'nhowerfonstnrftfd a in tcrlir.\\'s r.icctronicallt. \lt clical rt n,rr,s phvsic,rl or lnformation :harethe searchers shart inform,rtionrrrrclrseases... i,ltttsiLrtlnetrrork of hich\\'ar':,for US snnr(,ch,rractcrisiics. Llothir'trc dcfcnscD o c t o r s t r . r n s m i tr r a v o r C . \ T s c . r n borrbersto l,lnelon in c,rsetheir runl,rls oricnttd programsthattook a n holenen imagts...Sturl ents travt.l the INTER\ET l eretlr'strovt'cl. INThIINFT bclr,rnlts litc lifc on thtirol|n. Bothl11\'oi!e conrleciing It.,rrninc aboutotherculturcs,rncl . r - . j' J r - , ,L-( f \ c r c n .D intpror, r 1 ' , r r 1 1 1 1 . r , 1 t , , ,1r'r,rjor , , , , citir.s,or nocles,n ith smallercitv/ ing thcir research....Llusincss peoplecon- A1t.{l'\ET, . 'b,rckrloor"nt'tl'ork. ln tl'rc rrotle's throughieederroads.In both highi,rctcllcnts.lnd.lcceptor.lcrsovL.rthc net- . \ ' l t t ' l ' t . l I l \ t ' r ' r ' \ t I t , r t , . r I r, . , t t r t t r t t t t i \\.rYsonc could get fror]rpoini A to B bV rvork.. catir)n!post wa: tirstrovr'rlin,r ntrclc,rr . t , l t t , r . r rrrol r r l r ' ., ' r t t l l t r , - ci , ' t r t ( \ \ \ L r ! rlar, ARAPNfi I coirlc]fill in, irr mror rne blockcd,bv alir.rnatL. route.s.Both high 36

O t r r u ri - \ L , rr r t r r r r1 9 9 -.1 l t t r A r r c ' .\ 1 r r . r rr L r

Couraq Snnvens SpeNTus DtsreNcs BErwgExTooev'sREALtrns AND Touonnow's OPPoRTLTNTTIES.

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.ft'rt d..l8ncd lu.t to .cwG ncaworkt. Thcy'rc coop.qs€wcr. dcdgnc{ ao,cwG brt.lnc'' - .nd lo hclp you turn icchnology ln yq|. favour. At Comp.q, f,c rmdcrlLnd hos nctworklng Lnp.c{r youa bu.ln6a. la .Ifaclr your ablllty !o *rvc your cirlaom€r!. To kccp your workcB producalvc. To control youa co3lt. To bc compctldYG. so, ln cvcry compaq scwcr, ttc'v. bullt ln edvanccd c.pabllltlcr not only lo cffectlvcly mcca your clrrcnl obrccllvca and budgct icqu|.r cmcn.! b alro lo opcn ahc r.y ao aclrlcvlnS your long-acrrn brr3l'ras 8oalr atrd nccdr. Hcrc'r why you c.rr lnrtt your daaalo comP.q

(tc. .hc y...., L.o h|v. coc c|pabr. p'tc6.a. crpebllltld r|.l lf,c Lt 8rra.d ahcl &rr-h.ndILf .rbt a., rclc ?rb to of(Lc |ntoVmr.$.,D.?dg. ..Gty.rd p'o..dlor.a.b.lc|F b6.ddoo.raEdft. r. b otttdr.| ctbrrb.hbd o|-b ploo.(rlot h66 r&.d opc"dLa .Ftcnt, yoo. .6tdt ro opcr, lndliry-.t rtr..r. il|o rh. .uo of L. lndtuUu.l p..9, provldlos 'trr ?. b.[d. | .hc mr a.ooltr.h.ldvc rrc'E crlfco.t .r.!d.rd bolb o! rf,c |tdl.r't ruppdr ry...o 6r r.fv.tt Phrftrt!. rhd.tt.o I{6,a, h.r rhb ch.. of GEf,In. bc.o b..t d ty P|olnd ou.rcrou, o. boovi.lv.. COMPAQ SBVBII A.REAUIIT VTIII. TO TIELPYOU STAY COMPETITIVE f1EqBUIfi MANAGEAITLITY TO STAY UP 4NI' IUNNING INTEIIIGENT SUB9YSTIMII FOT ACCUNACYA}III AVAII.AITUTY SI'PFORT TIIAT WOIYT I.ET YOU DO\'N

CornpaqAutbotized Dealer

llioital Pro JA'C'E'FFCFATIEI

4/F EquitableBankBldg. Il, OrtigasAve.,GreenhillsSanJuan,MetroManila Tels.:7224560, 7210658. Fax:602941'786 268

ir',rvsare todav ubiquitous and rvell-travcllccl bv its users. Physical highwavs r e l o l u t i o n a l i z e dA m e r i c a n i n d u s t r v . \\'hcn onccrailroadsdominatedtransport,.rtion,highwavs, created a whole new culiure of car ownership.This signalled tht end of the railroads,and rransformed the automobile industrv into a powerful economicforce.In much the sameway,the information superhighway has empowcrcd its users to communicatefasterand hetter,and ha. translormedlhc computcr industry itself into a pol.erful economicforce,and hasundermined heretofore traditional communications media such as TV and radio broadcasting. Fralrrcs of thc Info Supenhighu,ay All a user needs t0 get into INTERNET is a personal computer, modem, and a regular telephoneline t t rd i a l i n t o t h e n e t w o r l .A t t h e r i m ple.t Jerel a u:er can\\ rite mer\dge\ .t; l o o t h c r u 5 c r 5w i t h i n l n t e r n e tA more (omple\ level user\ canaccesc o n l i n ed a l a b a s eosn l e g a l ,c o m m e r . travel,and new\ inforcial,r,r'eather, "les'er" nralion.Some highways'ucL asCompuServeand Prodigv provide rnlormrlionfor a subscription piusinrormationralue-basedfees,but others provide information for free. "nets" iNTERNETandother pror ide \ o f t ! \ . r r et o h e l p v o u n a v i g a t v through the m,rzc,somebetter thdr others.

deal personallywith their customersand fellow workers. Pilfalls of the Info Superhighs'ay Youhaveonlv to look at Bangkok'sand Manila's rush hour traffic jams to app.rreciatervhatthis globalhighway canquickly become.[n Iulv thi. l earTNTERNFTi\ as jammed solid by userswanting to seethe comet explodeon Jupitet causinglong hours of delays on the system. Yes,you

Inlormation tednology...bnovistullyexploited byI local] companies, on a scaleof 0 to 10. Hong

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7.1S 7.ttg 6.96 6.91

fact,theUSgovernment, undertheinitiativeof VicePresident Al Core,is trying to The redefineits rolein thesuperhighway. just takeover this US governmentmav systemwhenit getsout of hand. Superhighual': lmplieations

Managerial

The InformationAge is hereto stay.In the past decade,the information product and service providers have found themielvesincreasingl)closerto user:who, in

turn, havemadesatisfyingthem a highly risky and excitingbusiness. As productlife cyclesshortenand the costsfall,manyhavefallenalong way, few survive and evenfewer p r o s p e r ,t h r o u g hs h e e rs i n g l e prudentacquisitions mindedness, marketing, andalliances, aggressive

and megadollarresearchand development. As old and new players continue to createdemand and fill 6.it5 unsatisfiedneeds,the market grows 6.38 and with it the needto manageinu.K 6.07 formation and information technolClnad 6.0a ogy resourceswisely. $dry!l 5.85 E Is it iust another technology Japa E 5.78 then that must be masteredand put Thrilan 5jf2 to prudent use?Yesand no. Yes,it is Kore 4.8s another resourcethat must be manils:t lndo rEl I ' No, becauseit builds on its aged. Philipplr|c r 4.18 predecessor technologiessuchasthe Itldl I 3.54 plow, the wheel, iron, computers, "The old and telecommunications. p.fO3 TheWoddCompeltivenâ&#x201A;Źss 1994, Sourco: Reporl ways of harnessingthe beastwon't work." So far so good, eh? An unexpected phenomenonalso has been obcan even accessobseruatorypictures on Ben.rflls of the Info INTERNET. But what next?Junk mailers served: that network relationships are transactional,and not social.Informal Superhighs'ay arealreadydeluging unwilling userswith "Communicationsin network "lnforproduct pitches. As communications do skyrocket,mundane a are someonesaid, left to the technology,peopleare tasksare absolutelyincompatiblewith a strict, pa- r4ationis the enemyofboth literatureand "The global in a collaborativestate Hellene Runtagh, intelligence," better informed and rochial hierarchy,"says and cacophony mind. will in fact be garbageat the speed of of CEO, CE lnformation Services.The info All theseconstitutea solid foundation superhighway is the boon of people-em- light." popular for powermenl adherents.It supercharges Contrary to belief,INTERNET exercisingthe managerialskillsneeded in an empoweredorganization.Skillssuch socialnetworkswithin and without the is not run by a big corporation.lnstead it i' a lotr.eand informal,albeitlarge,organi- ar menloring.aligning'taff arounda vjorgauizationby bypassingthe limitations 'chedules, of ge,.rgraphy and organiza- zatien of users, linked only by a hiero- sion, and nurturing relationshipsrequire human contact,so the managermust still glyphic languageand theircomputers.As tional boundaries.It not onlv speedsup be at the centerof a web of relationships. delivery but also allows people to share the INTERNET membershipgrows, howHow does a managerdeal with informaand processthe same information simulever,there will be all sorts of difficult istaneou.lvand interaclivelvfor mission- sues'to address,such as computer secu- tionoverload?First,acceptthefactthat it's rity, 'ownership of data, and governance hereto stay.Then,prioritize your personal critical tasks. \4.rnv orpl,rni./atrons are discovering of tfe system. INTERNET may collapse and organizationalobjectives.Finally, choosewhat to use,what not to use,and thatthey cannow spendmoreoftheir time underthe sheerdemandsof its users,withhow to use what you've got. out a strong, central controlling body. In creating new products and services,and 38

Singapor New Austrell Triwa -

1994 . Tlr Asr,\N MANACER OcroBER-NovENTBER

day,you canbuy five laptops,with 200 ls "Star Tlektt loehnology megabytes ofharddiskeachandcomplete sllll a transporter beam away? The computerindustryplayersare Windowssoftware,and running at 100 pushingtheenvelope of knownprocesses timesthe speedof that originalIBM PC. to getuson to the Of course,within six months,all of these andmaterialtechnology new laptopsvou justboughtwill be outinformationhightay at desktopprices. Topowerthe lowly PC,siliconchips of-date. Intel's It will get worsebeforeit getsbetter will reach500Mhzby theyear2002. Pentiumis at 100Mhz,Digital'sAlphais Takeheart.Whatyou'vegot now is probat 190Mhz,andIBM/Motorola'sPOWEII ably not yet fully utilizedso it will serve PCchipscanhit 400Mhz by 2000.Lasers vou well for sometime.Evermindful of "floods of corporate pavbackconusers'investment and fiber optics will deliver digitizedvideoandsound."Parallel is the computerarchitecProcessing tureto put thesesuperchipsto work in deliveringall this information,at Comput€rlilgracyis generallylo$rihigh greaterspeeds. Storagetechnologies amoogemployees, ofl a scaleol0lo 10 arepushingtheabilityto storeanddeliver continuousdata strcams(such 7.33 Sir€[po|! asvideoandsound).Fornow thefa7.09 HorEXong miliar disk will be the workhorse 6.59 ,,|prn while storageon CDsand semiconT!lwan ductorscontinuesto be improved. flou Ztd! d 6.38 to Whileobi€cttechnologycontinues 6,15 u,s. searchfor the true opensystem,it is 6.(B Audrullr E viewedasa pivotalstep alreadybeing 5.85 Kollr in achievingeffectivecontrolof com5.74 Itrhy!h plex informationnetworks.For the 5.5e PtIhplnr! individualdesktops,it promisesa 5'48 u.K "transparent"way to handlemulti5.4ir ftnrd! mediainformation.Speechrecogni 1.67 Ihaibt|d I tion may soonreplacethe keyboard 4.36 lndo||cch 3.4r for mostusers. hdia I Andhowdoesonegethelpin navigatingthroughthis globalweb of p.m3 Feport 19s4, Solrce: TheWodd Conp€ttv€neas physicaland virtualnetworksthatis promised?With softwarerobots,elecArtificial Life research cerns,software and hardware producers honicbiogenetics. istryingtoproduceane-mailsoftbotwhich a r e g e l t i n g b e l l e r , i t e n s u r i n g will spotpattemsin the way you screen upgradability of their products. Compuand,say,putmemosfromyour ter manufacturersare also getting better youre-mail, "intel- at developing "life cycle extenders"such bosson top of yourto-dolist.Other ligentagents"canroutinelyscanthe net- as add-on cards and companionchips. worksfor the informationyou normally Just to keep us all excited, however, while you manufacturersare making a lot of notse needor for moredirectsearches Intelligent abouttheir new products.Let'stakea peek goaboutyournormalbusiness. virusyou at what somefamiliar industrvplayers are andbenignformsofthedreaded doing: say?Wecertainlyhopenot. "Big

. Blue," IBM, is reorganizing Aequlsltlon paralysis around the client-servermarket aswell as syndrome? "BythetimeI buy it there'ssomething pushing into consumermarkets for mulbetterand cheaper!"[n 1981an original timedia; mobile computersand online IBM PCwith 128Kmemory,no harddisk, services.For the Iattet it has allied with andonlyVISICALCandWORDSTARcost SearsRoebucl to run Prodigy Service Ifyou hadplacedthatmoney C o r p . t t h a s j o i n e d w i t h A p p l e a n d over$4,000. itcom- Motorola to produce the Power PC Chip, insteadin a 5%savingsaccount,let pound for 13 years,and withdrew it to- and an operatingsvstemto rival the Intel1994 THpAslar Malacrn o OcrosrR-NovrNlsrR

Microsoft combination. . Apple is confident becauseof its erperimultimediaand communications enceand continuesto draw adherentsand build new allianceswith the players and users. Novell, Lotus with the popular "groupware" Lotus Notes-and Intel are working with AT&T to develop an electronic information exchangeservice. . Intel is working to put a video conferencingPentiumPCon theconsumer shelvesand is working with telecommunicationsfirms to write PC video conferencingstandards.It continues to work with Microsoft, this time in developing standards for PC programs that work with telecommunications gear. It is rvorking with cable-TVproviders to let the PC tap cable-TVinputs.

. Bill Gates'sMicrosoftCorporationwantsto put a computereverywhereyou go,for everythingyou d o . F o re r a m p l ei ,t i s d e v e l o p i n g multimediaprogramsIor thehome, videoserversfor the homeTV,an onJineservice,reworkingWindows NT,creatinga satellitenetwork.ltis art,linking PCs licensingelectronic to otherofficemachinesand even Gates's investingin Biotechnologies. ' co-founderPaulAllen is investing in evenmorecompaniesthat give andinterconnection on-lineservices, services. So,if you've got a 486PC or higher,a MAC, or a worktation at your desk,neverfearYou'vegot thebasic Therearelots vehicleforthesuperhighway. and of software,accessories, add-onsto turbochargeyour vehicle. Havea goodtrip!Seeyou on thehighway! flrl r, Asinn Bu<p,r References: ,4<rn Week, D. Ortigns,lt.is thePepsiColn Prof.Gaston Heteaches Professor ofBusiness Manag(mtnt. Ttchnoltnd lnfonnntion TQM,Operations olfhe Mnsters Direcfor ogyandis consfnnfly Progt1m. in Btrsittss Manngenent

A QuickLookto TheNorthandEast Bv Pnorrsson Ar.rJANDRrNo J.Frnnrrue r Theachievements Polsed for a Second T[ke-off werehoweveracThisis expected happen to because of companied by anincrease in inflationthat the athactiveness of the homemarketto candisturbthelabor-management peace. Koreahasawillingness foreign investors and exporters taking up The funrre willsee the taming of prices to growroots,insteadof the challengeof the globalmarkets.The anda drivefor international competitivemakingd quickbuck, roadblocks of red tape,inadequate infra- ness,while makingthe homemarketatstructure,andthethreatof highinflation tractiveto foreigninvestors. SomeKorean Tlrm lland of Klm Young Sam arebeingaddressed by Kim YoungSam. firms arerespondingby establishing not WhenKim YoungSamtook office,few In his first 100days,Kim increasedmoney only lowercostmanufacfuringbasesoverthoughtthathehadtheanswersto South supply,loweredinterestrates,expanded seas,but alsoaddressingmarketing,R&D, Korea'snaggingproblemsof growingan- financialincentives for newfactories, and and finance.Thisindicatesa willingness tagonismbetweengovernmentandbusi- relaxedrestrictions on new buildings. to grow roots,insteadof makinga quick . Thisresultedinto GDPgrowthand buck. ness,laborunrest,and a flaggingexport economy.Because of his firm handin deal- a resurgence of themanufacfurinS sectot ing with corruption,andhislighteningup with exportsof steel,carsand electronic Governmentt New Role on sovemment's involvement in business goodsleadingtheway. Thegovernment's effortin trimming and financialmarkets,Korered tapeis still considered as ans seepromisingsignsof laggingbehind.Govemment pelGaplta RealGDP in Production saysthat deregulationis a strongereconomicgrowth, Growth improvedcompetitiveness, process, asit ad(%l (%) step-by-step Growth ofGapita! Goods and lasting labor-manageits role vision proto as a iusts 6.15 mentpeace. vider. Governmentwill also Economists predictthat privatizeor rnerge75of its 133 4.t)6 the economywill be growing statefunded firms, increase by 67" to 7%, up from last theR&Dbudget,andfocuson 4.23 year's4.7Vo. The strongYen electriccars,computerized 2.20 o,92 andtheproductivityimprovesystems,and bioengineering ment of Koreanships,semitechnology projects, U,S. J.Fn Korc! u,s, conductors, and automobiles Evenwith the pressureto Flows deregulatefinance,the govmay result in the country's llumbels of Gomputcrâ&#x201A;Ź l|ircctlnvestment lnward first curent accountsurplusin fearfulof aninllux of p81Pc Penon (0/oot grossfixEdcapitaltormation) emrnent, yeaIS. foreigncapitalthatcouldsend [t]'r Thesearepromisingsigns the zuonspiraling upwards, evenif therearetensions with will pacethe liberalizationat I North Korea.Theroadblocks a ratethatKorea'smacro-ecothat Kim facesarethe toolitnomicrequirements dictate. I o.me 0.74 tle attentionhe hasgivento a Businessmen in Southeast I 0.19 North Koreanthreat, and reAsiamaywantto lookforjoint I calcitrantbureaucrats who reventureswith Koreancompasistfurtherderegulation ofinnies,if their competitorsarealdustriesandfinancialmarkets. ready allied with Japanese source lhe woid cmpâ&#x201A;Źliriwn.ss B.pon 1994ipp 239,263.337 477 companies.Govemmentsin SOUTII I(OBDA

Ocroarr -NoveN{arn 1994. THEAsrANMANAcER

Asia may want to woo the inSoutheast may FDIsthatKoreancompanies creased soonbe makingin theregion.

JAPIIN

Thelapanese haae a genuineconstefiation

to anythingthat threatens itshard-woneconomic anilsocialsecuity. Japan is Tar Behlnd In Computer Llteracy professor TokyoUniversityeconomics YutakaUmezawasaysthatJapanis playing catch-up. Thecountryhasone-thirdas many PCsper capitaas the US. peoOnly 10%ofJapanese business pleusethem,andonly 137o areconnectedto networks,vs.50%-plus in America.Only 107oof all Japanese homesarewiredfor cableTV comparedto 66%of homesin theUS. . The EducationMinistry and prefecturalgovernmentswant to spendUS$2.6billionto place22PCs in eachprimary schooland 42 in eachjuniorhigh schoolby 2000. . MITI hasprojectsto develop computerinterfacesthat respond and hurdle the obstacleof thoucharacters. sandsof Japanese . The Ministry of Posts& Telrecentlydropped ecommunication geographicrestraintson cable-Tv companies. o Theprivatesectoris alsomoving. FujitsuandNEChavevowedto link withe-mailby 1945. everyemployee Are Sogo Shosha llinosaurs? SomequartersarecallingSogoShosha lumberingdinosaursdestinedfor extinction.Doomsayers claimthatthegianttrading firmshaveoutlivedtheirtimeandare in the faceof bloatedand uncompetitive deregulation. ItochoCorp.begsto differ.Thefirm has just restructureditself to meetthe challengesof thenextdecade.Itocho'splanis to useits tradingexpedence to tap new marketsandto moveintohi-techproducts andservices. . lt reducedits numberof business

groupsfrom35to 21andcutmiddlelevel Ratherthanfiringor managers drastically. Itochoshiftedits offeringearlyretirement, managers to whicheversubsidiaryor departmentwasin needof a boss. . lt adopted ind strategy of vertically tegration,but not put all eggsin onebasket.Theotherbasketswould be thecreation of brandnewbusiness. Is Japen Changing for Good? havegiventhe academics Japanese currenttumultuoustimesan important name-the HeiseiReformation-implying thatthecountryis on thevergeof an^rhar niv^rrl

.h,nop

Businessleaders,politicians,and all suggestthat if and when economists changereallystarts,therewill beno stopping it. Fornow,nobodywantsto be that

will change, buta matterof whenandhow The much. apparentindecisionso far is partly the resultof stallingfor time,and partly a reflectionof the country'sgenuine consternation to anythingthatthreatpeople'shard-wonecoenstheJapanese nomicandsocialsecurity. O n e t h i n g i s f o r s u r e .W h e n t h e havebeenmade,Japanwon't be changes any morelike theWestthanit wasbefore. It probablywill identifymorecloselywith But any Asiathanit hasbeenin decades. changeis a gamble.Aligning morewith Asia'sboomingmarketscouldwell turn economy out to makeJapanthestrongest in theworld. CIIINA

Ad agmciescannot pushtoohardon theirrccommettdations

Wlrat to Market There productssell Well-packaged wellin China.Thecountryhasmore than 100million peoplewho are newlyenrichedby market-oriented reforms,andthereareeagerto buy trendyproducts.As a high-quality, result,experienced foreignadvertising and consultingfirms are findin demand.But ing themselves manyChinesefirms do not understandthefunctionof an ad agency, 7MmillionChinese andoftendo not trusttheagency's arenewlymichedby Agencies cannot recommendations. ffiarket oieflt ed refotms. pushtoo hardon theirrecommendations,sincethisrisksits Chinese customer'slossof faceand subseAftertimeconsuming first domino.Japanis lookingfor its own quentrelationships. somelocaltirms ratherthansimplymrm- roundsof compromises, uniquesolutions, havemadegoodprogress. ickingthewaysof theWest. . Dentsu,YoungandRubicam's China It is not a questionof whetherJapan businessdoubledeachyear sincethe Shanghai officeopenedin 1991. . Saatchi& Saatchi estimates advertising spendingin Chinagrew to US$1.93 on 1992. billion in 1993,a 42.5%increase . Increased moneysupply there, forAlthough the opportunities are . Lowerinterestrates realities firms must adapt to Chinese eign . Expandedfinancialincentives andculture. Results . Greatercompetitiveness Is Prosperlty Cr.eaiing . Moreattractivehomemarket a Treer Society? . Stablemarketpdces reformandyearsof double Economic onpage42 Conlinued

Measures lor Economic

Days: lfimbFintHundred

Tur AsnN MeNacrn o Ocroern-NovrNlrrn1994

A QuickLook... Ctntiturtrl fronr Pngt11 digit grou'th have transformedChina's politicaland sociallife,loosening Bcijing's iron grip on the country'sL2 billion citiZCNS.

. An explosionof information technology l.rasallou'ed Chincse to link up rvith the world with far machines,telephone lines, satellite dishes,and personalcomputers. r Market orientedreformsallou,milIions of Chineseto dccide rvhereto rvork and whereb live,insteadof beingtolcl. r Agrorving localmcdia.aligning rvith regionalpowcr brokers,is spotlighting tensionbet$,eenprovincialauthoritiesand Beijing. . Worlers and pra.Jnt. Jr| bcc('nring more vocal,and areprotestingcorruption, Ia1,offs,and taxcs. To containthe situation,Beijing'sleaders have adopted a policv of strategrcretreats.Bv pulling backin certainareas,the leadershope thev can lin.dt socialunrest. The questionnou'is, u'ill thePartytransform itself,asdid autocraticpartiesin Tai wan and SouthKorea? China rvill find its own soiutions,and chancesare thev will oe pragmanc.

Boor REvrEw Hals Surryo, Eorron, SWAMecrzrrr,Inoorrsr,r

legends Corporate & [ore: ThePower ofStorytelling as aManagement Tool

i-$l$-i{

\,."*-'.'S

PegC.Neuhauser McGrarv-Hill, Ner'r'York, 1993 23.1pages

or thousandsof years, stories h,rvc been used as a primary c0mmunicationtool to impart culturalvaluesand normsto the public.Storesareused to educate voung pcople, leu,ard them when they practicethe right valucs, and penalize them if thcy don't. As the author of this book says,ivithout the tradition of storvt r l l i n g , .r n t c u l t u r er. rh e l h e ri t i s t h ec u l trire of a traditional ethnicgroup or a large corporation,rvill have a difficult time pro, tecting and preser\.ingthcscYalues.

workplace.Storiestold to workers can havea positiveeffecton them,particularly thosen'orkers with a negativeor destructive outlook, asfar asthe future ofthe corpurationi' concerned.lf, alter hearinga story,the listenerbecomesenlightenedby this expe ence,he rvill feelproud, and his inner tensionsreleased.A negativestory, when told and retold,canhavedire effects on corporateperformance.

Photo and Coffee Ms. Neuhauser presentssix types of positive stories,illustrated with actual "Hero r-Wril'. f,"ltrut, Atntl Ref(rence.:Btrrirt, People like stories cases. One type is Stories." Hill Busirri,ss Like other communication tools, sto- Arnold, Presidentofthe CentennialMedir v l c l l i n gh a . p , ' t e n l i , rP l . c o p l el i l e . t o r i e s . calCenter(CMC),in Nashville,Tennessee, lor good storiesaresourcesofinformation saw how workers perseveredon the conrvhich are easilvremembered,and if thev struction of his hospital, rvorking in cold makescnsc,becomemorecredible. conditions.After greetingthe workers,he Indeed,storiescan be trvo-faceted.As askedthe projectleaderifthe workers had China a c o m m u n i c a t i o nt o o l , r v r i t e sP e g C . been given hot coffee."No, Mr. Arnold," Merchandise Exports 73.4 Neuhauser,"a storv can help vou fulfill the supervisoranswered.Severalhours (US$billion) vorrrmi.\ron with r err g,ootlre.ults,im- later,a truck came,bringing coffeefor the prove the morale of vour u'orkers,and u,orkers.For everv evening after that, T"changcovcr satisfv A story canalso Arnold sent hot coffee with a note: "To vour customers." ycar previous +5.5 bring about dreadful consequences and warm you on a cold night." In gratitude, MerchandiseImports thereforcdestrov its user. "lt all depends the workers sent a large picture of themUS$billion 82.5 on the intention of the storyteller,as well selvesto Arnold as a souvenit with the as on the messagehe lvants to impart," building as a backdrop,and signed bv all % chanp;eover continues the authot founder Presiand the workers. The photo now hangs on previous year +28.1 de.ntof PCN Associates, a management Arnolci's wall, and he alwavstellsthe storv Sour.. Th. AfTA Nlonit(r, l7 /\uA!d i'r!rl "photo ancltrainingconsultingcompanv of the and hot coffee" to visitors. Storytelling in corporations has two Prof.Alejandritto objectives: I. Fcrrtrinis tk Bnnkof Slorytelling in an organlzatlon . To explainprincipal values(groundAtnericnProfessor oi Busirttss Mntrrrgotrtut , Ms. Ncuhauser'sbook , "Corporate ntrdis Associste Dea ol Dctektpnncnt Mnn Legendsand Lore," discusscsthe role of rng) (DMP).Ht l:,r's . To shor'r'corporateproceduresand ngetcnfPr()grant ittteresl itt storvtcllingin an organizatjonora corpothefieltlof Producflou, Annltl- ration, and its abilitv to t'nrich the culture practice(instruction) Qunntifntitr: sis,IlT,nndDetcloptnutt Mauagtnvnl. C,tuliwttdr,n yng ,14 a n d i m p r o v e t h e e n v i r o n m e n to f t h e

Summary of Trade

Activities,1992

Octosrn -NovrMrrr1994. THEAslANMA\ACER

he C Alphabetis a spectrumof leadership styles,rvhere stylesthat provide moredignitv and self-esteemto people are rewarded with higher productrvltv. Since the start of civilization, slavery had beenused to attain production goals.From the pyramids of Egypt to the cotton fields of the American reSouth,its cost-effectiveness sultedin an entrenchedculture that took wars to shatter its roots. Somewherein the costbenefit analysis,someoneforgot to input the costsof human lives and human rights. Management conceptsof human behavior were non-existent; meret'ishes ofrulers and ownerswere followed without questionand at all costs. With that cxaggerated backdrop on leadershipstvle, the G-alphabetleapfrogs into the 20th century. ln the 1920s, Alfred Sloan of Ceneral Motors formalized the conceptoI He organized decentralization. GM bv divisions,similar to the strategicbusinessunits of today. Increasesin productivity resulted, and CM prospered. Still, autonomy belongedonly to the divisions and not to individuals. Up to the 1950s,the conventional managementwis"the assumption of dom rvas the mediocrity of the masses." MIT professor Douglas McGregor listed the assumption's tenetsasihe individual's inherent dislike for rvork, a desire to avoid responsibilitv, and the resultingneedfor people lo be coerced,controlled, directed,and threatenecl,to increaseproductivitv Theory X u'as born in McGregor'sTftc a blisHunnn SidtofEnterprisr, tering attackon the commandand-controlview of the world. McCregor complemented Theory X with his own beliefs,

which he calledTheorvY lts tenetswerethepolar0ppositcs of TheorvX. With one of his DavidSwanson neu'disciples, of Procter& Camble,theydesigneda TheorvY plant in P facilities. Bvthe & G'sAugusta midl960s,theAugustaplant wasabout3091moreproduct i v e t h a n a n v o t h t ' rP & C plant.Expectati0n of change $'asbuiltintoiheorganization, andits peopleiveretrainedto think broadly and move quicklvon anv nervdevelop-

Aside mentsin their business. from efficiency, effcctiveness n,asalsoon the upsrving. l n 1 9 8 2 ,W i l l i a m O u c h i cameout with his book Ifti otr1 Z, rvhich espousedthat involved r'r'orkersn'erethekev to productivitrr It highlighted organizations that de\,eloped naturallv in the United States, but rvith many charactcristics similar to Japanesefirms. The rvorld was now rvakingup to a J a p a n e s es v s t e m w h e r e i n volved rcorkersmade a differ-

If "THrNKAsour

encein the organization'ssuccess. S o o n . l f t e r w a r d s ,m a n y books on Total Quality Managementsurfaced,but these of the nere basicallyrehashes Total Qualitv Control of the Japanese.TQM was a peoplefocusedmanagementsystem t h a t a i m e d a t c o n t i n u a li n creaseof customersatisfaction at continuallylorverrealcost. TQM vieweclrvorkersasa key successfactorin strategiccompetlhVeness. Sometime during the "intrapre1 9 8 0 s t, h e $ ' o r d neurship"becamef ashionable. Managersand employeeswere encouragedlo think like entrepreneurs inside a corporate setting. Product champions were the heroesof numerous war stodesthat transformed companiesinto $'orld-beaters. "intrapreneurBut the word ship" died a suddendeathas soon as the next letter of the C Alphabetcameinto focus:Efor empowerment. Emporvermentis still in vogue,vearsafter its introduction. With an unleashingof the creativeenergiesof all members pa&e41 Continued011

I G

H U M A ND I G N I T Y

HIGH

OwnershlP Lioeiatlon Empowerment Intrapreneurshlp Management Ouality Total

c Tieory Z TheoryY TheoryX Decenlralizallon

s LOW

HIGH

Stavery B.C.

1994 TrrrAstl\ M,c\ecrn. OcroBtR-NovF\1BER

LOW

1920

1950 '1980

1985

1990

YEAR ThEG ALPHABET

BookReview

manatIBM,hedecided toencourage his peopleto bebraveenoughto question, and notto simplyconformto themanagemenl policiesof WatsonSr.He stressedthis to iris workersmany tirne$H;-.litilil story of the phiiosophJ Kt"*;;;; aboutmanfro*N"*i;i;;.;;#;;;; who had continuously;;;*d il;; flock of geesealway; flew to the south everyye;r; and he ttroughth;rv;;;;il; thegeesea serviceby gi.,7i-ng ;il;;;; his [ond. e, u ..rrrttith;?;;;;; tame,toofat,andtoolazvto'flv;;iliil; essence of the storytr' %;;;;?;;;iil; geese, but you cannever;;i;in"*;;il igain. Tamegeesecan;;;;;;;;i";.'. With thisltory, Watson]r.;;ii;;rhi' IBM needs"wild geeseJ;iliBM,t i;;il; "we will not tame them.,, rn" lgl\a p.ople did not believei^ wrar".;r ia"".'rrir challenge to them,to getih.. ""i ""a r"y "you arewrong, wutron,;."ur;;il;; jok.]rttnoir.r.p"rr"g,lirrr.u dangerous wou'idlater on say:"Lookii;il""i.t"d-j' managers you hav;,wat;;n;;;;;i6' - - ' '-r braveiytookyour challenge."

Continued t'rompage42 Jan Carlzon as a story teller Ms. Neuhauserwrites about Jan Carlzonin his book,"Momentsof Tiuth," asanillushationof grounding.ForCarlzon andtheemployees of theScandinavianAirline System(SAS),thecheck-incounteris a momentof truth.How theyhandlethismomentof tmth caneitherimproveor deshoy the SASreputation.The SASkey value is to provide the bestairline servicein the world to the businesscommuniW,which oftentravelsby plane. In the first pageof his book,Carlzon statesthecorevalueof SASin his story.A businessman approached the SAScheckin officerand told him that hehadleft his ticket in the hotel. "|ust relax, Mr. Petersen,"said the officer,while issuing the businessman a temporaryticket.The officercontactedMr. Petersen's hotel, retrievedthe ticket,and gaveit backto its owne{,afew minutesbeforetheplanetook off. "Mr. Petersen, hereis youi ticket,"a smilingstewardess told him. Corporate aulture and folklore Carlzontellsthisstoryto everyone,as Corporatefolno...u.iufi;;il;;.r a symbolof valuesthat his corporation undersiand corporate;;l..,.i;il iJJ putsinto practice.Whenmakinguseof a themhow to handle"r;.ud;; *".4;i;_ story that is relatedto corporatevalues, you must identify the significantonesto ations.samKeenusedth;'c;;p;i;h;;; wareand softwaremetaphorto describe useasthestorysetting."No two corporafolklore and thecorporation.Trre;;iki;; tions are exactlythe samein the values is thesoftware,ana tnecor""."ri"^lr iir- closeto their hearts,"writesNeuhauser. hardware. Anotherobjectiveof storytellingis to "I understand thework culhrreandthe teachwork regulationsandprocedures to corporatemanagement;ti;';;;;;;h"i;the listeners.You can issuecorporate man resourcedirector#rr^.J ,rr.In i" guidelinesto workersby memooi direcme in detail,"saida miiia ;;;;;;;i; tives.To relatestoriesthat containgood swA advertisingclientcompany.,,But,I andbadexamples of corporatework pracjust learnedabolutthe dtff..'*?.;; tices,directlyto the workers,is moreefoi;;lt; --'--'/ -fectivebecausethe storiesare easilyre- bverydayto metheinrricacies poraie a;tivities. memberedand are credible.Storieslike As a newcomer/ henow knowswho is thesearemoreusefulthana list of written powerful, who can b" ir";;; ";;:;i: factsand information. i"ugu., the differenceb;;;f-;"ltty A story must inspirethe listener.Stoand th; .";fli;i;;il ries,however,can often be reducedto ani informality, ,,Thisis ";r;;;;;,-i: the workers. propaganda.If the storyis told by a corbooks,"he added. poratemanagerin authority,thelistener's Managementcan use it to improv" responsewill probablybe neutral.Or if the work"ers'morale,implementmanhe knowsthe real situation,he may just agement changes,...# ; ;l;p,i;; shakehis head.Simplybecomes cynical. corporateenvironmena,-""JairJ.".inat; the impactb.fo..;;;;;g;;;;i Ibm Watson as another story teller WhenTomWatson]r., replacedhis fa- Tianslation:EmilyCruz,UPDepartmenf ther,TomWatsonSr.,as the numberone ofLinguistics

Think I AbOUt Continued t'rompage43

of the organ2ation,mostof the excellent companies havelatchedon to thisphilosophy' and theresultshavemoreoftenthan notbeenhighlysuccesstul' Ln1992,TomPeterswroteLiberati,n ^, Management, wherehe espoused the concePtthat peopleshouldnot only be emP,owered/but should alsobe liberated from the clutchesof the headofficeand from bureaucraticentanglements' Peters showedhow liberatedtrailblazingcanresult in world-classperformance in bi' or smallorganizations' Withideassuchasthe eliminationof theheadofficeand middle managers/it is not surPrisingthat few companieshaverallied aroundthe concept' But with Petersvery much in demandin thetalkcircuit'thesecompanies Probablywave the flag of liberation lltt when the emergingneedfor a liberated becomes the rule ratherthanthe :llut"gy t"t;PJ:Tr. Ietterof the G Alphabetwill haveto be O' With technologyaccelerating the needfor individual services,the Zst centurywill mostprobablywitness the growth of one-employee businesses, a world of owners' The skepticsmay saythat the above , d-oes not hold trueinAsia' well, empowermenthasalreadycreptin and,whether liberationmaysucceedor not,theadvent of high technologywill ,ever-cheapening ultimately result in service-oriented economies' This may happena couPleof generations from now but it will happen' what is the lessonhere?In the G Al, phabet' there are no pendulum movements'Leadershipstylesmaycontinueto change,but alwaysto a new drumbeat, n.everto a Previous one' Even the situationalLeadershipmodelof Hershey and Blancharddoesnot negatethis view, sincethebackwardshiftto a taskbehavior modefrom a relationshipbehaviorstyle ls consideredtemporary,brought about onlyby fleetingsituations' sinceeffectivenessandefficiencyhave continuedto riseashumandignityis enhanced'themarchtowardstotalfreedom from bureaucracy will moveon' As new

--- " terthe changes took pia;;ro' fJril."i""*Tilxlff,: flJ*L:l;[li

will continueto resultin victory,until the war is finally won by theOwners. l

Ocronrn-NovrMsrn1994o Tnr AsrANMANAGER

Environmental Management in theAsiaPacific Region BvPnoressoR ErsuINera he United NationsConference on Environment and Develop ment(UNCED)in RiodeJaneiro in June1991markedthe begin ningof aneraof concernfor the

Evenwithoutwdttenpolicies,companiesmaysetspecificgoals,throughtheir linemanagers, to undertakeenvironmentally "benign"operations.Loweringenergyconsumption andreducingemissions environment.The conferencerepresented aretwo majorgoals,althoughthis varies accordingto industry.Reducing solid a shift from mere awarenessof the problems facing the environment,to actionby wasteandrecyclingwereloweron thelist governmentsand privateorganizations.In in the ASEANregion. Japanprioritizes the Asia-Pacific regionmost governments energyreduction,eventhoughthe counattemptedto strengthentoenforcementon try's energyefficiencyis the bestin the world. In general,smallercompanies are environmental laws and regulations. ASEAN countrieshave startedcampaigns ing environmental with recyclingthanlarger management policies lessconcemed for consumer involvement the environones. andpractices.

Doesyourcompnny haae enaironment al policies? It couldbe thekey to competitiueness andthelong-term

suraiaal ot'the firm.

ment. It is possiblethat regionaltrade will soon be subject to non-tariff barriers againstcompanieswho are environmen"unfriendly." For tally example,the purchaseof productsthat violateenvironmental guidelines could be banned or reshicted by some countdes. This report outlines the responsesof corporationsto environmentalissues,and the steps they have taken in implement-

(p€rcantags of respondenls who had esrabllshed such a poricy o. program)

ro 20 30 40 50 60 70 ao s0 r00

Few eornpanies write down envlronmental pollcles-. Writtenpoliciesandreportsto thepublic on environmentmanagement usually indicatea company'scommitmentto environmentalissues.As of 1993,only onethird of the companiesin ASEAN preparedwritten policieson theenvironment. This is substantiallylower than other Asia-Pacific countries, thenextlowestbeing Japan,with about50%. ..$nd lewer report their pracliee The figureson environmentalperformanceasanitemreportedto theBoard of Directorsaresimilar Only 207oof the companies surveyedpublishenvironmental performance reportsto the public.In developedcountdesthereis a move to makethisa requirement, whichwouldalmostcertainlyenhance publicawareness.

. Ocrosrr-Novrvsm 1994 THr AsrANMANAGER

Internatlonal g;uldellnes are not well known To promoteenvironmentally-sound management, variousinternational organizationsand industryassociations publishedenvironmental guidelinesand standards in theearly1970s. On the whole, theseguidelinesand standardswerenot widely usedby the

(psrcenta96 of rcspondonls who pr46r€ l6guler slal€msnls lor lh€ corDorate board)

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ASEAN

IN USE

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respondent companies, exceptfor industry association guidelines.About44Vcof thetotalrespondents saidtheyusedindustry association guidelines. Some38%ofthe respondents reportedthattheywereconsidering lheuseof ISOtechnical environmentalstandards in thefuture.Thismay be due to ISO 9000,which has gained populadtyasa way of improvingquality, and which couldbe usedas a non-tariff barrierfor exportmarkets. Many guidelinesandstandards listed in the surveywereunknown to the respondents. TheseincludeUNEP'sAwarenessandPreparedness for Emergencles at LocalLevel(APELL\program;627ool the respondents saidtheywereunawareof the program.Otherguidelineswerealsonot popularly usedby or known to the respondents.On the other hand,international agreements suchas the Montreal Protocolseemto havebeenmore taken moreseriouslyby companies. A shiftfrom (ODS)to enozonedepletingsubstances vironmentally-friendly materialhasbeen observed in manycompanies, evenin developingcountries. Thisindicates thatthe penalties for not followingtheagreement convinces manycompanies to implement its guidelines.

n use eur ro use

temstheyusedin dayio-dayactivities. We hopedthat this informationcouldreveal cluesfor innovativepractices, so thatthe practices canbe replicatedby othercompaniesandindustries. Control pollullon We investigatedthe extentto which vanoustypesol management practices addressed environmental concerns. Many companies in theregioncited1)pollution control,throughredesigning or installing newequipment,and2)pollutionconhol, throughimprovingexistingequipment,as majorapproaches probto environmental lems.Fewcompanies in ASEANconsider productredesignor raw materialschang-

BDST PNACTICES The research alsoattemptedto identify which aspects of environmental concemcorporations gavethemostattention to, andwhichspecific management sys4b

ing asanoption,perhapsbecause thedesign and R&D for raw materialsare not a maiorpart of theiroperations. In Japan"processimprovementenergy conservation, and recyclingare slightly higherin priority,whilepollutioncontrol throughnew equipment,designchange, or materialschaneeareclosebehind. Taiwanshoweda muchlowerlevelof interestin theseareas,comparedwith the other respondents. [eeyole Theforestproductssectoremphasized recyclingfar morethan otherindustries, with 40%sayingtheyrecycled largequantities.In thePhilippines,for example,there is a shortageof raw materialsand virgin pulp,aslogginghasbeenbanned inmany partsof the country Paperproducersin the Philippinesusemostlyimported,recycledpaper Interviewswith paperproducersrevealedthattheabsence of proper infrastructureto collectusedpapâ&#x201A;Źrin the countryhasforcedthemto dependon imported usedpaper In the past,therewas no problemwith thesupplyof usedpaper, but with heightened environrnmtalconcem in industrializedcountries,moreandmore companieshavebegunto userecycledpaper. This has raisedthe price of recycled paperon the world market. A largemultinationalpetrochemical companysystematized its preparationof environmentimpactassessments andenvironmentmanagement planning,evaluation,andmonitoring.A cementindustry respondentsaid thev usedtheir kiln for

IN USE

PI.ANTO USE

24.11

4r.34 29.33

n.27 ASEAN

15.34 15

3436 24.92 32.50

Ocronrn-NovrMsrn 1994o Tur AsnruMeNectr

(3170). Thisis practicedmoreby theforest productsandpehochemicalsectors.When buyersare environmentallyconscious, theyrequirethe supplier'sstdctcomplianceto their standards.As buyerscan betmonitortheirsupplier'sperformance this mode ter thangovernmentagencies, llave an envlronmental can ofmonitoringand"givingcomments" eudlt system Environmentalauditing systemsof seryeasstrongpressureto the suppliers. evaluatepracticesthat pro- This may thereforebe an effectivealtercorporations mote industrialenvironmentalmanage- nativeto govemmentregulations. an American Led's Philippines, ment. Thesemight include complying requires inclothes maker. ils suppliers. govemment regulations or with applicable compolclutling industrial laundry seruice preventing with companystandards, "green" products, panies, strictlyt0 theelfluent to ndhere lution or developing standards set by Leui's withina specified monitoringsuppliersmonitoring,the no period. Non-compliance means time numberof liability claimsandhackingthe business the suppliers. numberof staffreceivingenvironmental for trainine. Checkingto meettheir own company's Use llfe-eyele analysis reOne-fourthof the respondents environmentalstandards91% of total re (LCA) spondentssaid yesto this item) and com- portedusingthelife-cycleanalysis tool for assessment plying with Govemmentregulations(697o) as an environmental ar€mostcommonlymonitoredin theenvi- over20%of their products.Mostof these werefromtheforestproducts ronmentalaudit systems.The respondent respondents comoanies alsomonitoredmaterialconser- sector,whichcomprise607oof thosewho many forestproduct vadon(66V"),pollution prevention(64%), use LCA, Because with life-cycle companies are concerned and energyconservanon(627"). Sporadicmonitoringof pollutionlev- stages,ftom plantingtreesto haryesting "cradle-toin ASEAN. and processingthem, the els is oftencitedasa weakness in tlvo grave"conceptcanbeappliedto theiropGovemmentregulatoryagencies mean, countdesdo not haveadequatemeasur- erations.Thisdoesnot necessadly decisionsare however,thatmanagement ing equipment,whichis too costly. madebasedon "life-cycleanalysis."In fact,it seemsthat many of the respondlllonltor elalms Also, On theAsiansideof the Pacific,only entsareunfamiliarwith theconcept. a said they a meaningfulanalysisof LCA-requires one-fourthof the respondents of procheckedthe numberof liabilityclaims. greatdealofdataatdifferentstages Little efAlmosthalf saidthatliabilityclaimswere duction,which areunavailable. sucha danotaoplicable or not monitored.Thesitu- fort hasbeenmadeto establish ation iiffered in Australia and North America.Almost 4570in Australiaand aborst707oin North Americacheckedliability claims.Thetrendmay shift in Japan, where a new ProductLiability Law takeseffect,making the manufacturerof I a product responsiblefor any possible i 3 damageit may cause.Onemultinational petroleumcompanychecksnot only the actualclaims,but also possibleliability I claims.This may be due to the punitive nahrreof claimsin the petroleumsector incineratingcertaintypesof waste.Animothercementcompanyis considering porting solid waste from a developed country to useas a heatsourcefor ktln operahons.

or by governtabase, eitherbycompanies ments.In NorthAmerica,Europe,andJaand governpan, industry associations in supplyingrelmentsareinstrumentdl evantdatasothat LCA canbe appliedin thedecisionmakingprocess. T.ACTORS PROMOTING DNVIBONMDNTAL MANAGDDTDNT To promoteenvironmentalmanagewe shouldlearnfromthe menteffectively, experience of the companiesthe factors that tend to promote"environmentally friendly" behaviorin the organization. we shouldavoidfactorsthat Conversely, tend to hinderenvironmentally-friendly efforts. I(ey executives drlve ehange environOnefactorwhichencourages key execuin companiesis mentalconcem gave tives'action(70%oftherespondents of importance) indicators high degree this units and establishingenvironmental (51%),which arerelated.In manycases, getinvolvedin makwhenkeyexecutives ing the companyenvironmentallyconsuPport scious,they give organizational person to a and assignsomeinfluential management. positionin environmental The fate of a company'senvironmental programdependsto a largeextenton the creativityof the individualsassignedto thatthose leadtheprogram.Thissuggests companieswhich are not environmentally-friendlyhaveonly top management to blamefor theirlackof concernandinitlatlve.

llonltor suppllers Suppliermonitoringis conductedeither by checkingthe supplier'senvironpolicies(40%of tomentalmanagernent giving comments or by tal respondents) 1994 THr AsIeNMeN,ccrn. OcroBER-NovEMBER

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Enpocune ol lop managemenl The questionis how to get key executives to commit to environmentaleffort. Attending local and intemationalconferencesthat focuson theenvironmentoften higgersenvironmentalconsciousness. For somecompanies,community pressure andpotentialcompetitionseemed to trigger key executives'action.Oncethe key executivespublicly announcetheir commitment to protectthe environment,outsidegroupsandtheexecutives'peerskeep up the pressureto continuewith the efforts. Somecompaniesare reluctantto maketheir environmentalplanspublic,as they are still in the processof promoting

environmental awareness within the organizahon.

int:oluement asanimportmtlactort'oref. t'ectiaeleadership MitsushitaElectricIrulustrialof IaAceldents and Ineldents pan institufed andinplemenled n policy Accidentsand other incidents that on the enxironmenm t , a k i n ga l l damagetheenvironmentalsoseemto trigMatsushita opernti|ns enair,nmentilly ger environmentalconsciousness. Other conscious andencounging otuseasopernfactorswhich stimulateenvironmental tionstofollowsuit. consciousness are the initiative and enOn theAsiansideof the Pacific,concouragement givenby the respondents' sumer-relatedeventsand legal action parentcompanies. againstthe companywereIE! strongfacAt Molorola, anAmerican eledronks tors to provokeenvironmentalmanagecomryny, eoiluntianUiteria0f theirexment. In North America,on the other " ecutiaes include enaironmental leader- hand,thesefactorshad much morermship"asoneofthekey"initiatiues." AIso, pact. theparertcompany consid.ers employee FACTORS HINDDNING ENVI. RONMDNTAL MANAGDIUDI\TT

Ourrcsearchlookedintothe differcnt guidelines: envinonmental

Someindustry sector-specificguidelinesare preparedby industry associations,suchas "Guidelineson BiologicalImpactsof Oil Pollution" by the InternationalPetroleumIndustryEnvironmentalConservation Association,published in 1991,and"Environmental Guidelines for PulpandPaperIndustry"published by theUnitedNationsEnvironmentProgram,(1982). APEChasotherindustry guidelinesand standards.Someindustriesarein the processof developingone for their area.The InternationalOrganizationfor Standardization(lSO) publishedIntemational Standards for QualityManagement in 1986,madea number of environment-related references. ISOis alsopreparinga new standardfor EnvironmentalManagementwith its ISO14000series. " wasoublishedin 1991 The"Business Charterfor Sustainable Development by the IntemationalChamberof Commerce(lCb). Togetherwith this chartet ICCpreparedan "ICCGuideto EffectiveEnvironmentilAuditing,"whichprovidesspecificstepsto follow for an effectiveenvironmental audit system.The UnitedNationsEnvironnentProgram(UNEP)wasspecifically createdto cope with the issuesof environmentalprotâ&#x201A;Źctionin 1972.In 1975the Indugtry and EnvironmentProgramActivity Center(IEIPAC) was establishedto bdng together.indushy and govemmentsto cooperatein environrnentally-sounddevelopment.Morerecently,UNEP,through iis Industry andEnvironmentOffice, haspublisheda numberof technicalreportsspecificallydealingindustry's responsesto environmentalchallenges.The reportscitesactualcases.Otherpublicationsfrom UNEPcovera wide rangeof environmentalconcerns. Arnong LINEP'spublications,"Awarenessand Preparedness.for Emergenciesat LocalLevel"(APELL)waspublishedin 1988asa handbookfor industry, Although initially APELL drew lessonsfrom the chernicalindustry, the handbook appliesto almostany industry and community.The IntemationalLabor Office (lLO) published "Tripartite Declarationof PrinciplesconcemingMultinationalEnterprisesand SocialPolicy" in 192, to which the section,,OccupationalSafetyandHealthandWorkingEnvironment"wasaddedin 1981.Also, ILO publishedin 1991rnoredetailedguidelinesentitled, "Preventionof Major IndushialAccidents." In 1991,theOrganization for Economic Cooperation and (OECD)addedin its "Declaration Development andDecisions on intemational Investmentand Multinational Enterprises"a new chapterfor environmentprtr tection.The Food and Agriculture Organization(FAO)of the United Nations hasa codefor the safemarketingand useof pesticideswhich providesguidelines for agriculhrre-based products.

Lack of regulatoryenforcementand no pedormancetargets Thereis no singlecommonfactor which hindersthe incorporationof policieson the environment.The desreeof regulatoryenforcement, or consistency of enforcement,is perceivedto have the greatestimpact,with nearly40%of the totalrespondents ratingit asanimportant hindering factorAlso,wheretheenvironmentalobjectiveis not a part of theoperatingperformance plan,theimpactis relatively high,with 39%of therespondents sayingit impodant. Other hlndranc"es Othercommentsreferredto theinadequacyofgovernmentsupportto companies' environmentalprograms.The fact thathightariffsareleviedon theimportation of new pollutioncontrolequipment hindersinvestments in this area.On the other hand,a weakgovernmentmonitoring systemand smallpenaltiesleviedon "polluters"encourage companies to pay the penalties,ratherthan investin antipollutionequipmentandprocesses. While governments havestartedto implement majordrivesfor cleanerenvironmentin all the ASEANcountries,executives in the privatesectorsharedsimilarviews: "financingavailabillackof "incentives," "unrealistic ity," levelof regulation, without regardto theprocesstechnology,"etc. Thelastpoint will bea seriousconcem. Thepredominantcompanysizein developingcountriesis smallor medium-scale. Incentivesand financialschemes may haveto bedevisedto makeenvironmeniOcrorsr-Novsrsrn1994r Tm AsraNMlrr:ecer

ment practices,choseto get guidelinesand training programs. Outsideand in-houseseminars and newslettersare the DItr'FUSION OF DNVI. most commonly usedmediafor MAN. NONMDNIAI mandiffusing of environmental AGDMDNT PNACTICES practices. Because enviagement requires ronmental management Sincemany environmental an attitudinal,as well as value managementpracticesare still a sinshift in the organization, new in Asiandevelopingcounmay beingle mode of diffusion tries,companiesmust diffuse Recognizing shortadequate. both internaland externalinnocomingsof eisting systemsand vationsand experiencesto emis theonlywayto learn practices therefore, ployees.Theresearch, ideas andto innovatethem new tded to identifythe morepopufriendly haa e managanort anics in an environmentally comp Shell lar mediathroughwhichcorpoTo that end, companies' manner. rationscould learn about,or benelmarkstomotitor effortsare directedat making shareknowledgeon, environthc enztironmmt. employeeslearn by multiple mentalmanagement. (ShellSarawak Bhdoil platforms) openmethods. More greater willingand mindedness Internal sourees of asnbenchmark nessto sharethe learningexperiencewith pfaellces ny'sperformance endronmental , seruing ondencounig- otherorganizationsandcompanies,either atmannmongtheShellat'filiates usedpresentations Companies within the indusiry or amonga group of to ottentiotl topayclose ingmanageflent agementmeetingsand producedcomcompanies,seemto be the characteristics why it. Thismaybeoneol thereasons pany newsletters.Somedivisions preneededto createa moreenvironmentallythe rctei environSheIIhasthelluest^ccident sentedto othe$ to disseminate friendlymanagement. practicesintemally. industry. mentalmanagement and annual Videoand film preparations lqnM as competltlve edge for Dxtcrnel soureâ&#x201A;Źa of reportswereseldomusedaschannels Many proactivecompaniesinvariably A closerlook envlronrnenlal pracllees informationdissemination. and point out thatenvironmentalmanagement Outsideseminarsandconferences revealsthdtcompanies at the responses coursesweremeth- is a nahrralextensionof TotalQualityManusemultiplemediafor thedissemination industryassociation of experiences. Somecompaniesusedfour odsmorefrequentlyusedby the respond- agement.Environmentalmanagement,if sectorhasa 100% pursuedseriously,couldprovideopportuor five differentmodesextensively,while ents.Theforest-products othersusedvery little of any media.Un- rate of usageof industry association nitiesto reducewasteandmaximizemate which indicatesstronginitiahve rial usage,which would in tum mean with more courses, largercomPanies, derstandably, which weremorelikely to use andparticipationamongmembersof the higherproductivity Thecornpanies than employees "environtowards which weresub- startedtomoveforward An inter- association. Respondents variousmodesof dissemination. nal audit systemis widely practicedfor sidiariesand ioint venturesusedstudy mentally friendliness"considerit to be a competitiveedge.Wthout environmental by largercompa- toursof othercompanies. purposes dissemination Companiesthat had not startedanY friendliness,companiescannotsurvive in nies,thanby smallandmediumfirms. manage- the liberalizedmarketsof AFIA. with otheraffiliatesof majordriveson environmental Benchmarking helpsdiffuthesamegroupofcompanies sion.Manymultinationalshavetheadvantageof accessto informationto benchResearchBackgrcund mark. ItJle ol f,eeoarch: Policy and practiceof envionmental managementin the Asia policystates thqt world-wide Shell's PacificRegion. offier must fhecompany chielexecutiae tvhen Condnctcdl July 1993 Partlec lnclnded: A joint researchconductedunder theAsia PacificEcononicCoop n reryft the of to London to latality fty ManagementNetwork (HRD DevelopmenFBusiness eration(APEC)Hurnan Resources in an regular0r clntractstallinaolaed BMN).Paftne$ arethe ConlerenceBoardof Canada,the lnstitute of IntemationalStudies accident . In thePhilippines , fieldor conand Trainingand SanwaResearchInstitute in JaPan,China Muctivity Centâ&#x201A;Źrin Taitroctormqnngerc arcreguiedfo appeqr wan, the ReiearchInstitute for Asia and the Pacfic, SydneyUniversity in Australia, and to reryrtafly before seniotmanagement the Asian Instihrteof Manaeementin ASEAN. Brlel DlethodotogJi,: Over 1,000mailedin questionnaircsweresentout to comPani-es usea uniform rccident. Shellcompanies in 7 counhies.The c6mPanieswerc selectedrandomly for 5 industries- Petroleum,CerEott, andEnrironment HealthSat'ety ment.Woodbased,Textilesand electronics. pe(ormance table.The asat'ety containing compatheoperating tablesummarizes related investment more attractive and affordable to smaller companles.

. Ocrosrn-Novrvnsn1994 THEASIANMANAGER

(Our entrepreneur's ent repreneur,BobChandran,wasfeeling poeticand pensiue,as he sentin thisarticle.lMy not? Poetrybringshomehis point soforcefully- Eds.)

tion is the first to recognize marketchanges and thus,is thefirst to ring thealarmbells in theorganization. Theinquiring organizationalwaystdes to understandcompetitor's actionssearches for reason. rowth bubbles FreshMBAgraduates need eternalfrom the to playthisrole.Theybringthe s p r i n g o f h o p e classroom casediscussion and and aspirations. analyticalskills to the corpoG r o w t h i s a s rateworld.Theyalsobringan natural as rivers flow from the inquiringattitudeto thecorpomountains to the seas. If ration.

organization'sfocusto the disciplines of personal mastery, mental models, and system thinking, Learning in the organizationmeansthe continuous testing of experience,and the transformation of that experience into knowledge-accessibleto the whole organization," says Peter Sengein the book Fifth Discipline. Managing the growth organizationrequiresa different tact and style. Conventional

growth is the natural order why then do companiesstagnate and die? Mostly it is because they lose sight of their goals and lack the drive to move forward. They getstifled by the weeds of bureaucracy. Market changesand financial decline often lead the company on a downward spiral. When this happens,the momentum neededto come out of its dive is difficult to achieve.What is best thereforeis to avoid this. And building a growth-oriented organizationis key. Inherent qualities of growth-orientedcompanies: l. Passion In companies that have passion,thereis a greatdeal of corporate pride. These are companieswith an ego, companiesthat go after every little thing with gusto. There is almost always a passionate leaderwho believesin a better tomorrow and that he can make a difference.As Steven "The Covey says, key to the fire within is our spiritual need to leavea legacy." 2. Curiosity Corporate curiosity is the basis for an inquiring organization.Theinquiring organiza-

3. Value Syslem management systemsale a "True North," as Covey problemand hierarchydoes termsit, is doing the right notwork.Peopleearntheirrethingsall thetime,rather like spectbecausethey can make a magnetalwayspointingto things happennot because the North. Illegalactivitiesin they are promotedto a posithe nameof corporateprofit- tion. Here are somethings I ability is like a killing poison havefoundeffective. to corporategrowth. A, Corporationis runasan openbook.In my own com4. Learning in pany,ChemOil,you will find Corporallons thatanyonecangetholdofour This is about shifting the monthlyfinancialstatements.

They can ask any question, they can walk into my office any time.I continuouslylook at everypossibleway to open communication lines. B . C o m p a s s i o nI .f y o u want to fire someone, please providethe emploveetime to find a new job. Help with placement andreasonable severance.I haveasimplepolicy: "l will notgiveyou a reason to hateme." C.Negotiating Skills. Thrs is a skill that doesnot come naturally.Peoplewhoarepoor at it havea hellof timegetting things done as they have to c o n v i n c es o m e o n et o h e l p them.I would ratherteachthe skillsof negotiationto everyonein theorganization. D. LongTermOutlook.Enter into a partnershipasif it is goingto last a lifetime.The notionof "l" disappears andis replacedby "us." It puts everyoneat ease,and everyone pullsfor commongood.In focusingon the long-termyou tendto overlook shorttermreversalsand focuson building a groupthatwill passthe test of time. E. Be Generous to theEnployees,We areall taughtthe skillsto buy cheap,andunfortunately, we havechosento applythis conceptto our employees.Eachmanagerasks, "WhatcanI get awaywithout paying?" But why not try the opposite? Payyouremployees well and you canexpecttheir best. It is a greatthdll to drivea carat breakneck speedandyet be in control.But it is doubly thrilling to headan organizationthatisdedicated to growth a n d w i l l a c h i e v eg r e a t e r heightsevervyear

"A Roseonly becomesbeautiful and blessesotherswhen it opensup and blooms.Its greatesttragedyis to remaina tiglrtly-closedbud, neaerfulfilling its potential." 50

Ocrosrn-Novrvsrn 1994o THt AsrauMlruecrn

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