The Economist - USA (2019-12-07)

The EconomistDecember 7th 2019 Special reportAsian tigers 7

Taiwan,upfrom41%in2005.Singaporehascreateda largede-

monstrationfactorythatgivessmes accesstostate-of-the-art 3 d

printingandroboticequipment.SimilarfacilitiesexistinHong

Kong.If anentrepreneurhasa brilliantidea,theynolongerneeda

giantdollopofcapitaltobringit tolife.

Nevertheless,thetigers’officialsalsoknowtheirlimits.Thebig

decisionsthesedaysaremadeincorporateboardrooms:Sam-

sung’sbetonfoldablescreens;tsmc’s hugeinvestmentincapacity

inTaiwan;theriseofstartupslikeSeainSingapore;theHongKong

StockExchange’squesttoremainAsia’spremierfinancialmarket

(evenifitsbidfortheLondonStockExchangewasill-fated).Eco-

nomictechnocratsnowleadfrombehind.

Thetigershavealsostartedtoconcentrateonthepartsoftheir

economiesthatremainfarbehindthetechnologicalfrontier.De-

spitetheirflairformanufacturing,theirservice-sectorproductivi-

tyislittlemorethanhalfthatofAmerica,accordingtosomeesti-

mates.Partofthereasonisthetyrannyofsmallmarkets:a retail

chainina countryof6mpeopleismoreconstrainedthanoneina

marketof,say,1.3bn.Butpartlyit isself-inflicted.SouthKoreaim-

poseshighregulatorybarriersonitsserviceandnetworkindus-

tries—higherthaninanyotheroecdmemberexceptBelgium.

Singaporehasbeentheboldestintryingtowhipitsservicesec-

torintoshape,fromitsrestaurantstoitsconstructionfirms.It has

refineditsgaugesformeasuringproductivity(forexample,floor

areacompletedbya constructionworkereachday).Itidentifies

promisingcompaniesandoffershelp:developingnewbusiness

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?

Onereasonisthecountry’s ambivalence towards other related

technologies,suchasride-sharing apps. A popular version, Kakao

Mobility,wasvociferously opposed at rallies in Seoul by the driv-

ersoftraditionaltaxis. In protest at the emergence of such apps,

fourolderdrivershave set themselves on fire.

Innovation,though glorified by businessmen and policymak-

ers,addsnothingtoan economy’s productivity until it is widely

adopted.AsPaulDavid of Stanford University long ago pointed

out,it wasnotuntilthe 1920s, four decades after Thomas Edison’s

firstpowerstation,that manufacturers embraced a killer app for

electricity,designingfactories to accommodate dynamo-powered

assemblylines.

SouthKorea’swariness towards ride-sharing apps highlights

theinfrastructureinwhich the tigers are most lacking: well-func-

tioningsocial-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

DuriansandflyingtaxisintheLionCity

The big decisions

these days are

made in

corporate

boardrooms

2