The Economist 07Dec2019

The EconomistDecember 7th 2019 Special reportAsian tigers 7

Taiwan, up from 41% in 2005. Singapore has created a large de-

monstration factory that givessmes access to state-of-the-art 3d

printing and robotic equipment. Similar facilities exist in Hong

Kong. If an entrepreneur has a brilliant idea, they no longer need a

giant dollop of capital to bring it to life.

Nevertheless, the tigers’ officials also know their limits. The big

decisions these days are made in corporate boardrooms: Sam-

sung’s bet on foldable screens;tsmc’s huge investment in capacity

in Taiwan; the rise of startups like Sea in Singapore; the Hong Kong

Stock Exchange’s quest to remain Asia’s premier financial market

(even if its bid for the London Stock Exchange was ill-fated). Eco-

nomic technocrats now lead from behind.

The tigers have also started to concentrate on the parts of their

economies that remain far behind the technological frontier. De-

spite their flair for manufacturing, their service-sector productivi-

ty is little more than half that of America, according to some esti-

mates. Part of the reason is the tyranny of small markets: a retail

chain in a country of 6m people is more constrained than one in a

market of, say, 1.3bn. But partly it is self-inflicted. South Korea im-

poses high regulatory barriers on its service and network indus-

tries—higher than in any otheroecdmemberexceptBelgium.

Singapore has been the boldest in trying to whip its service sec-

tor into shape, from its restaurants to its construction firms. It has

refined its gauges for measuring productivity (for example, floor

area completed by a construction worker each day). It identifies

promising companies and offers help: developing new business

plans, say, or guiding them abroad to expand. Edward Robinson,

chief economist of the Monetary Authority

of Singapore, believes that rich Asian

countries ought to have an advantage in

modernising their service sectors. Given

that so many of their people are trained for

high-tech work, they are well-placed to de-

ploy digital tools to serve the population

more efficiently.

Not keeping up

In Hwaseong, 35km south of Seoul, a newly

built village enjoys 5gnetwork speeds that

would be the envy of any city. Visitors will

find other essential amenities, such as a

school, a car wash and a restaurant offering

chicken’s feet. But lest it sound too appeal-

ing, be warned: the buildings are all fakes.

The counterfeit town, built by the Korean

Automobile Testing and Research Insti-

tute, is used to test autonomous vehicles,

like the Kia car that successfully completed

a circuit one recent afternoon. Reaching

speeds of almost 70kph, the car coped with

flashes of dazzling sunlight and road-

markings that can confuse computer vi-

sion. The technician in the driver’s seat

kept his hands on his chest as the wheel

turned itself.

South Korea has some of the best infra-

structure in the world for autonomous ve-

hicles, including world-class chipmakers

and carmakers, as well as a growing 5gnet-

work. The government is supportive, per-

mitting tests on real roads for vehicles that

prove themselves at test sites. Why then is

South Korea ranked only 13th by kpmg, a

consultancy, on a list of countries best pre-

pared for autonomous vehicles?

One reason is the country’s ambivalence towards other related

technologies, such as ride-sharing apps. A popular version, Kakao

Mobility, was vociferously opposed at rallies in Seoul by the driv-

ers of traditional taxis. In protest at the emergence of such apps,

four older drivers have set themselves on fire.

Innovation, though glorified by businessmen and policymak-

ers, adds nothing to an economy’s productivity until it is widely

adopted. As Paul David of Stanford University long ago pointed

out, it was not until the 1920s, four decades after Thomas Edison’s

first power station, that manufacturers embraced a killer app for

electricity, designing factories to accommodate dynamo-powered

assembly lines.

South Korea’s wariness towards ride-sharing apps highlights

the infrastructure in which the tigers are most lacking: well-func-

tioning social-security systems. The key to progress in a new tech-

nology, like autonomous vehicles, may not

be a better 5gnetwork but a better pension

system. Without a cushion for those left

behind by technological progress, it is

harder to marshal support for that progress

in the first place.

The tigers have always been good at mo-

bilising resources quickly. They are becom-

ing better at allocating them creatively. But

as recent signs of social discontent attest,

some of them now struggle to muster pub-

lic support effectively. 7

Durians and flying taxis in the Lion City

The big decisions

these days are

made in

corporate

boardrooms

2