Monday, January 16, 2006

Lee Kwan Yew on India

Hat tip to Atanu Dey at Indiaeconomy. Lee Kwan Yew might as well be talking about the Philippines. It's a classic. Consider:

Like Nehru, I had been influenced by the ideas of the British Fabian society. But I soon realised that before distributing the pie I had first to bake it. So I departed from welfarism because it sapped a people’s self-reliance and their desire to excel and succeed. I also abandoned the model of industrialisation through import substitution. When most of the Third World was deeply suspicious of exploitation by western MNCs (multinational corporations), Singapore invited them in. They helped us grow, brought in technology and know-how, and raised productivity levels faster than any alternative strategy could.

Who says free market economics is all theory? This is economic theory in practice. Correct theory, that is.

The World Bank has also done its own study. It found that in India it can take a decade to close a business through insolvency proceedings. It also found, among other things, that official fees amount to almost 13 percent of a property transaction in India as against just over 3 percent in China.

Ever tried to get your property titled in the Philippines? Hah!

My secretaries asked Singapore businessmen with investments in India what, apart from infrastructure, they found as major constraints. To a man, they replied it was the bureaucracy. They believe it is a mindset problem. The average Indian civil servant still sees himself primarily as a regulator and not as a facilitator. The average Indian bureaucrat has not yet accepted that it is not a sin to make profits and become rich.

Regulator rather than facilitator. Spot on. Sin to get rich? Here it is more of a balato mentality - gimme a share or else!

The average Indian bureaucrat has little trust in India’s business community. They view Indian businessmen as money grabbing opportunists who do not have the welfare of the country at heart; and all the more so if they are foreign usinessmen. Deng Xiaoping said at the start of China’s open door policy, it was glorious to be rich. The sequel is reported in Forbes Asia, November 14 2005, where it listed over 300 China’s richest, 40 of them with thumbnail CVs in a centre -fold. All are new entrepreneurs creating jobs and spreading wealth. Now, after private enterprise and the free market have generated wealth in the coastal provinces, China’s leaders have concentrated on spreading growth to the inland provinces by building infrastructure and offering generous economic incentives for investments.

Listen folks: without ambitious and talented men and women dreaming of wealth and security and prosperity, pupulutin tayong lahat sa kangkungan (they'll be picking all of us up from the canal.) And see what China is doing: bake the cake first. You can start distribution when there's something to distribute. And in fact what you can distribute first are the tools and equipment - and skill - to bring the laggards up to par.

One Singapore businessman told me this story. He entertained a former senior Indian civil servant to lunch in Singapore. Some months later when he was in India, the former civil servant reciprocated by hosting a dinner at which severa l other guests were present. His host made this surprising comment that he was amazed to see that in Singapore, a business could be successful without being dishonest.

No comment necessary.

Please read Atanu Dey's commentary also. A good explanation of why politicos keep their blinkers on.


mell ditangco (this is my pseudonym) said...

Here is the big problem in the Philippines, established businesses that are owned by influencial families/MNCs squash their competition through influence. These established businesses/MNCs may not be the best, but they remain on top by having the government harass everyone else trying to put up a business. this is especially true in the provinces.

In theory I truly believe in a free market... but rarely is the market truly free, especially in the Philippines.

See my post below and see what I mean:

Amadeo said...

Good analysis and analogy.

Used to live in a city, peopled predominantly by our own compatriots but have now moved southeastward into a newly-developed community, quite small and perimetered by a fence.

But now peopled predominantly by Indian immigrants.

May already have anecdotal insights into the similarities and differences between the two ethnic groups transplanted to an entirely different cultural and political environment.

Like most first generation immigrants, my present neighbors cling tenaciously to old homeland habits such as manner of dressing and speech. And still very clannish and clique-ish.

But unlike many including our compatriots, many are engaged in their own businesses whether they be in retail or service industries such as landscaping and construction.