Creative Reinvention: The Way To Survive The Chindian Challenge

Small to medium sized Asian economies such as Malaysia, Thailand and other emerging economies which do not have the benefit of China's vast population as a source of domestic demand nor India's head start in information technology have to innovate their ways out of their caught-in-the-middle economic dilemmas.

If these smaller countries do not manage to build a new competitive edge, they face the danger of being peripheral nations whose business cycles depend on China and India's economic engines. Where will the next generation of jobs and domestic economic growth come from? If they can't compete in the manufacturing sector, then they have to compete in services, which is high quality human capital intensive rather than low skilled labour intensive.

The next growth areas in Asia will come from innovation and high-end services such as education, financial services, health care and consumer branding. To generate the next generation of thinkers, innovators and leaders, the education system of Asia needs to be refocused towards creative thinking. Joseph Schumpeter's idea of creative destruction is the answer to Asia's tendency to build a symbiotic relationship with the US. If this traditional relationship continues, the economic decline of the US will bring these Asian economies down with it. Conversely, desperate attempts to ride on the Chinese dragon or the Indian elephant can also backfire.

In fact, China's fledgling attempts to diversify out of the U.S. export market and build up its own domestic demand market have yet to bear fruit. The robust growth of 2009-2010 will continue to be driven by infrastructure spending, which has strong spill-over effects on consumer incomes but which is not sustainable over the long-term. So China, too, has to innovate its way out of its unbalanced relationship with a deleveraging and over-indebted US consumer.

The Chindian challenge is this: if Asia follows China's economic structure, they will be competed away because they can't catch up with China's leap into producing engineering talent. If they follow the Indian model, they also need to start from scratch not to speak of the lack of an English proficiency advantage.

So what can Asia do to stand out of the shadow of the two emerging economic giants? The dependence of the global economy on the vibrant health of emerging countries is both a blessing and a source of future economic trouble. Blessing because if Asia stands up to the challenge of innovation and creative reinvention, it will be able to rebalance the current global imbalances which depend on the developed nations's ability to rescue themselves from rising debt levels. If it fails in the latter, then continued dependence on developed nations' weakening appetite for consumer goods coupled with the potential of sovereign default of developed nation's debt suggests a more polarised and protectionist economic world.

Getting On The Innovation Highway With A Nation-wide Contest System

I think there are broader benefits of promoting open science forums in Msia across all sectors of the economy. The call for open science comes from Dr Lim Teck Ghee's article, "Positioning Malaysia for open science: Any takers?" (http://english.cpiasia.net/)

The government and private sector can embark on a nation-wide knowledge innovation competition for each sector of the economy ranging from tourism, education to financial services.

The award will be on a quarterly basis and participants can submit their research work anonymously (you know how humble most Msians are when it comes to having a high profile) which focuses on raising productivity and innovation in their industries.

The government should have a grant to promote ideas that will benefit the entire industry and raise global competitiveness. The aim is to raise the productivity of the nation from the bottom-up rather than the top-down.

What are the incentives? The quarterly award could be RM5,000 each for three top prizes for each industry sector. Assuming six sectors, the annual prize money may cost RM360k, which will be subsidized by both the private and public sector. This is not costly in view of the unquantifiable external benefits for the country (excluding advertising and campaign costs.)

Who will be the judges? Like American Idol, the expert judges will be drawn from a panel of industry leaders as well as registered voters from the public through an online poll.

What are the benefits? It will promote out-of-the-box thinking and problem solving skills to short-term and long-term challenges in every industry.

How will it be executed? The biggest challenge will be to standardize the platform/format for the different issues facing 6-7 key industries. For instance, the finance industry will address issues of how consumers/investors can be encouraged to mobilise their savings without taking unwarranted risks, the tourism industry can tackle issues of how tourists can return to Msia in droves without spending too much on new tourist attractions. Simple value-enhancing ideas such as clearer signboards in English or touch screen information counters in hotels showing all the tourist hot spots, etc.

We know that often what benefits the consumer may not benefit the producer. However, competition, local and global, will ensure that both their interests are more aligned.

If done smartly, this innovation competition will put Msia on the map of high income, high productivity nations. Let the politicians handle their corruption problems with debates about the open tender system, we the rakyat need to move fast on the innovation highway and come up with an open innovation system that benefits both consumers and producers alike.

In fact, if the government lacks the initiative, internet bloggers can jumpstart this idea on an Asia-wide basis starting with the more English-literate countries such as Singapore, Hong Kong, Taiwan and Australia. Malaysia is well positioned to be a thought leader due to the potential of its English-speaking population notwithstanding the recent decline in English standards.