Photo credits: Financial Times. Tencent is a Chinese multinational investing in internet services and products, entertainment and AI.
Since the end of World War II, globalization has transformed the international system. With it has come the demand of advancements in a vast array of social, economic and political areas. Technology, in particular, has been a consistently positive force in the reimagining of the global order – and nowhere more so than in Asia, where technological advancements have not only enabled states to only keep up with the pace that globalisation has thrust onto the international system, but to thrive in it. As such, Western states could, and should, be doing more to encourage and sustain this development.
Globalisation still poses a threat to Asian states. Its economic interconnectedness and liberalisation contradicts the generally state-led economic policy that pervades the region. The advancements being made through such liberalisation threatened many Asian states with being left behind. However, due to the acceleration of technological infrastructure and innovation, Asia not only coped with a globalised international market, but they have revolutionised their economies to such an extent that they offer extensive investment opportunities to the international community.
Note Singapore. Penelope Prime, the founding director of the China Research Centre, notes that Singapore’s technological manufacturing exports as a share of overall exports increased from just under 30% in 1970 to a high of 85% by 2000, and of all manufactured exports, more than half were classified as high-technology by the 1990s. This acceleration of Singapore’s mastery of technological trade enabled them to stay competitive in the new global market and attract vast investment. As a result, in the last decade, Singapore has consistently ranked in the top five locations for amount of Foreign Direct Investment (FDI) globally, with tech being the most heavily invested in area. The Singaporean state’s acceptance of the necessity for technological advancement and subsequent action to prioritise the manufacturing and exportation of technological goods allowed Singapore to grow its economy through the industries that the modern world values. This has had the secondary benefit of yielding sizeable returns on investment from foreign countries; as technology continues to evolve, so do its returns grow.
This was also seen in Taiwan, where technology has been one of the most salient forces in their continued economic development. Bright young Taiwanese students moved to the US in the 1980’s and 1990’s. They gained an excellent education and useful work experience in Silicon Valley. As detailed by Annalee Saxenian; they then moved back to Taiwan, lured by government incentives and the chance of making a real difference in a less developed country – and the rest is history. Chen Po-Chih, the Taiwanese Minister for Economic Planning and Development, describes how technological advancements have facilitated their development of a ‘knowledge-based economy’, whereby it advanced its education, industrial and financial sectors in order to attract foreign involvement to sustain their growing economy. Taiwan later moved towards Import Substitution Industrialization (ISI) policies, which replaced foreign technology imports with domestically manufactured tech. This initiative strengthened Taiwan’s economic hold on technological manufacture and innovation. Henry Wai-Chung Yeung notes this was quickly recognised by foreign nations, seen by the US investing US$3 billion in Taiwanese ISI programmes in the first decade of their existence.
In China, Alibaba is matching investment by Amazon in India. So far the two e-commerce giants had largely stayed out of each others ways, with Alibaba investing mostly across South-East Asia and Amazon in Europe. But that is set to change. Nor will its expansion plans focus solely on e-commerce. Alibaba is developing an online payment system, is willing to offer travel services, and its CEO aims at matching or surpassing Amazon Web Services as a Cloud-services provider by 2019 – not just in China, but globally. Other large Chinese Cloud technology firms are also looking to gain a stake in the global market, including China Telecom and Tencent. A large home market with cumbersome regulation that makes life difficult for foreign firms, and President Xi Jinping’s Belt and Road Initiative – are all on their side. Bike-sharing – Ofo and Mobike – and ride-hailing – Didi Chuxing – startups also abound. Some $77bn of venture-capital investment was poured into Chinese firms from 2014 to 2016, up from $12bn between 2011 and 2013. China is also far ahead of America in renewable energy and electric-vehicle registrations. If you think that, in China, innovation means just cheap copycats and counterfeit – think again.
In Asia, more than anywhere else, technology has been the economic leitmotif of globalisation’s script. It is fundamental to Asian states’ ability to survive in an ever more globalised economy and encourages extensive foreign investment in an area which will be consistently lucrative for years to come.
This profitability has been duly exploited. Since the 1980s, FDI has steadily risen into Asian, particularly East Asian, countries. However, in recent years, FDI is showing signs of deteriorating. According to the United Nation Conference on Trade and Development, FDI inflows into developing Asia fell by 15% in 2016, with South-East Asia suffering the most with a 20% reduction in FDI.
Should we, Westerners, be happy to see investment money slipping away from a region so vital to our economic and strategic interests? No. This deterioration should be resisted and addressed on two plains. Firstly, technology has revolutionised the economies of many Asian states. It has proved it is worthy of FDI due to its vast economic potential. This facilitates the second point that, in order to sustain a more integrated and interdependent global economy, countries must keep developing their technological capabilities. As Nobel Prize winner for Economics Joseph E. Stiglitz argues, “what separates developed from less developed countries is a gap both in knowledge and in technology”, as such, “one of the major responsibilities of international institutions and the international community, is to close that gap”.
The advancement of technology, especially in Asia, is a positive force. It has facilitated Asian states’ ability to sustain participation in a global market, and further integrate them into a more interconnected economy. It has opened up Asian markets due to trade liberalisation and has prevented regional economic and political isolation. And it has reduced the social and economic inequality in the region as a result of widespread government investment that has been a result of FDI in Asia tech potential. The support it gets from the international community must not continue on its current downward trajectory. It has revolutionised economies and brought countries into a global market when otherwise they would have been left behind. As such, the international community has a responsibility to continue investing in it, in order to continue these states’ development and to sustain the global economy.
By Leo N. Barnes