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Obama eye’s off Asia’s real prize

Obama eye’s off Asia’s real prize

Obama’s mission to Asia—India, Indonesia, South Korea and Japan—reportedly earned its keep. Singularly highlighted by the media were the 50,000 jobs created by deals signed in India, where Indian companies were buying American products, for example, turbines for power plants, jet engines, etc. Many of these deals had been under way prior to the visit, of course, but, no matter the upbeat symbolism serves a vital purpose.

To others, the presidential mission missed the mark. The failure to get a deal signed in South Korea and to bend the trade negotiations to cater more to American needs rankled some in the West.

But, to my mind, the mission missed a point bigger than the recalcitrant maintenance of trade barriers. Of course, there is short-term advantage in selling to Asian companies and sourcing from them, and much of this is under way, but the real long-term lesson is learning from the fast growing Asian companies in the region, since their business models are novel, contrary to the median Western viewpoint that views them as copycat, unethical and subsidized.

Just restricting myself to some of the countries on the presidential tour, I am thinking, for example, of Megastudy’s education model in South Korea, Narayana Hospitals’ methods of paediatric cardiac surgery in India, and Wilmar’s South-East Asian agribusiness empire. These are not household names in the West, yet, and might never be, but they already have something to teach us in education, healthcare and the like, areas where we have no monopoly on wisdom.

From Megastudy in Seoul we can rethink the provision of incentives to our teachers, so that the better ones get more attention and the underperforming ones understand how they must improve.

Megastudy’s core idea is that good teachers are videotaped, and then others can subscribe to their lectures via online access to the videos. Good teachers keep a substantial share of incremental revenue, and the best are compensated at superstar Wall Street-like levels, while mediocrity is penalized (the poorest performers earn less than the median Korean college graduate). Measurement is taken seriously, so that the effort is not inadvertently rewarding only rote learning. And relatively simple online technology magnifies these incentive effects.

Of course, Megastudy’s is not the only solution to poor incentives. The charter school model under way in the US is another interesting experiment, but no reason not to let several proverbial flowers bloom on this front. Education in the West deserves introspection.

Why did this originate in Seoul, and not elsewhere? Two reasons suggest themselves immediately and suggest a broader point, that innovation is context-specific. Koreans are fanatic about education, so there is receptive demand for experiments. And Korea is among the most wired societies in the world, so technological multiplier effects are easier to access than elsewhere.

The good news for the world economy is that, with economic development occurring in a more dispersed fashion, experiments are under way in more diverse institutional settings than ever before. So, with the right attitude and mindset we should expect to see the emergence of neat models from all over.

That’s the same reason why some of the best paediatric cardiac surgery has emerged in Narayana Hospitals in Bangalore, at the hands of Devi Shetty, who has done for cutting-edge surgery what mass production did for everyday manufactured items decades ago—think Henry Ford and the mass-produced automobile. Shetty’s insight builds on the power of economies of scale—a staggering number of Indians are predisposed to heart disease thanks to an unfortunate draw of the genetic lottery—and on so-called economies of learning, jargon for the idea that you just get better at things through repetition and incremental improvements over tens of thousands of tries. Now this model is coming to the Cayman Islands, Africa, South-East Asia, in an attempt to Walmart-ize healthcare—the reference is to making this service super affordable—in even the most healthcare reform-resistant locales. Do think of the US here.

Even some companies that receive bad press on occasion are worth learning from. Wilmar is one of the world’s biggest palm oil producers, vertically integrated from plantations in Malaysia, Indonesia and elsewhere to branded, bottled cooking oils in China, India, South-East Asia and beyond. The market values Wilmar at over $30 billion (Rs1.4 trillion), this for a company less than two decades old. Decatur-based ADM in contrast is a century old and then some, and valued at much less; ditto New York Stock Exchange-traded Bunge. Western firms are tempted to write off Wilmar’s success as something to do with the idiosyncratic Asian context, a view exacerbated by the complaints made by environmentalists about Wilmar degrading the environment. The latter might well be true, but it is unlikely that there are no lessons to be learnt from Wilmar’s aggressively entrepreneurial slant.

It’s an irony that poorer locales are being asked to make up for growth slowdowns in the rich world. But the longer run adrenalin shot that can come from these locales isn’t what President Obama was selling, it’s a more subtle way to free-ride on the ideas emanating from the world’s newfound economic petri-dishes. A good start would be to abandon shibboleths regarding emerging markets and recognize the expanding patches of innovation emanating from them.

The author is director of the South Asia Initiative and Jorge Paulo Lemann Professor at Harvard University. He will write a regular column of indeterminate frequency in Mint, focusing on larger issues to do with strategy, innovation, and emerging markets.

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