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Cover Story

How The Asian Way Shows The Way

Issue Date - 13/10/2011
Some of you; actually many of you who might have spared a glance or two for the visuals in this page must be wondering if some madness has crept over me. This is supposed to be a special package for Indian PSUs. Then what in God’s name are logos of celebrated private sector companies and multinationals like Toyota, Honda, LG, Samsung and many others doing here? And what possible connection could these private sector behemoths have with Indian PSUs?

The answer is quite simple, actually. For close to forty years, the stupendous success of the Asian way has been staring Indian policy makers in the face; to be largely ignored. Not many would now be familiar with the acronym MITI. But for those who followed the media and the academia in the 1970s, 80s and 90s, MITI was probably as well known, if not better known, than acronyms like IMF, ADB and UNICEF. It was the Japanese magic wand that triggered fabulous GDP growth rates for decades after the Second World War and played a key role in the emergence of world beating multinational brand names like Sony, Toyota and Honda. The Ministry of International Trade and Investments in Japan did what the Planning Commission in India has never been able to do successfully: Think about 20 years into the future and try to implement a set of policies that would lead Japanese companies and the economy to that desired destination 20 years down the road. Sure, the Japanese companies in question were completely owned and managed by private sector players, but the Japanese State – through MITI – and the private companies shared a strong vision about the future and how to go about realising that future. The Japanese economy has lost much of it’s sheen after two decades of stagnation. But the public private partnership forged there has delivered unparalleled prosperity to Japanese citizens. Something similar happened with South Korea starting in the late 1960s. Incidentally, South Korea was a de facto colony of Japan for much of the first half of the 20th century. In the 1960s, the per capita GDP of South Korea was lower than that of India. It was then that the guys who ruled South Korea thought that their best bet lay in imitating their erstwhile colonial masters Japan. The state offered unprecedented support through cheap loans, capital infusions, high tariff barriers and export subsidies to then unknown entities like Samsung, Hyundai, LG, Daewoo, Pohang and Posco. Even the most prescient analysts of that era had not envisaged that brands like Hyundai, Samsung and LG would be world leaders and steel makers like Pohang and Posco would one day be the most technologically advanced and cost efficient steel makers in the world. No doubt, the entrepreneurs behind these multinationals were dynamic enough to capitalise on emerging opportunities. But even they would not deny that all the success they achieved happened primarily because the State gave them unstinted support during their formative years.

History – sometimes of the successful variety – often repeats itself. What the Japanese did first and then the South Koreans did later became the drawing board for China after the regime under Deng Xiao Peng ushered in an era of market friendly policies back in 1978. This unique version of socialism practiced by China too has led to unprecedented success. To give you just a few examples, the steel output in China was less than that of India in the late 1960s. Now it is more than 15 times as much. Today, China sells more than 10 million four wheelers every year, more than five times that of India. And of course, who can forget that China is now the second largest economy in the world and breathing down the neck of the United States. And mind you, unlike Japan and South Korea where private sector companies have played a key role, it is State owned entities in China that have been the drivers of growth and prosperity. China often practices the most predatory form of Capitalism and the labour policies it follows could prompt comrades like Prakash Karat to rise up in revolt. And yet, the State has been relentlessly pursuing the vision that became the mantra more than thirty decades ago.

The obvious question that needs to be asked is: If Japan, South Korea and China can achieve unprecedented growth and prosperity by being smart enough to nurture a strategic partnership between the State and capital, what has stopped India from doing the same? There is no dearth of world class public sector companies in India. Many of them have survived the brutal onslaught of global competition. Then why is there no visible strategic partnership between them and the Indian State? If you can answer that question, you could unlock the key to eliminating poverty from India in less than two decades.
Sutanu Guru           

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