Small is Beautiful Among Globalization's Top Dogs

For the last 7 years Foreign Policy magazine, in partnership with A.T. Kearney, has published the Globalization Index rankings. The wonderful part about these rankings is that they reflect quantitative figures on trade and FDI, but also some less easily measured "globalization variables" like technological connectivity, political engagement and remittances. Any attempt to measure this complex process should include a qualitative component. Globalization is about removing barriers to the movement of goods, services and people across borders. The first two are easy to measure. It's the people part that often gets lost in the mix.

The top ten most globalized countries this year (drawn from 2005 data - the latest available):

1. Singapore
2. Hong Kong
3. the Netherlands
4. Switzerland
5. Ireland
6. Denmark
7. United States
8. Canada
9. Jordan
10. Estonia

As the accompanying story points out, the countries on this list are notable for their size (or lack of it). These are very small countries.

"And if you’re living in a small country, reaching out beyond your country’s borders may be the only way to find new opportunities. Not surprisingly, six of this year’s tiny globalizers also ranked in the top 10 on the personal dimension of globalization, which measures international phone calls, travel, and remittances. People in small countries boosted their countries’ rankings by chatting it up on the phone, or in the case of Jordan, by sending large sums of money home. It all goes to show that mini can be mighty."

And that globalization isn't just about reciprocal concessions, non-tariff barriers and structural adjustment. It's also about people.

CSR on the (Elite) Mind in East Asia

I am in the Singapore airport bound for Shanghai, reflecting on my visits to Manila, Jakarta, and Singapore. Three policemen armed with automatic weapons just walked by the free Internet stall to take the escalator downstairs.

I don't want to get carried away, but I am happy to say that issues such as the environment, human rights, and good governance are not confined to conversations in California, Washington DC, New York, Europe, and Japan. Every day, the local newspapers ran at least one article about the environment, climate change, and their popularization in ASEAN.

I read about an eco beauty pageant in Manila and about how Bangkok shut off its lights a couple of days ago to promote eco awareness. On the TV, I saw an ad in Manila (sponsored by the UNDP) against corruption and a music video in Jakarta promoting energy efficient light bulbs. In the cab ride the the airport this morning, the driver spoke about the environmental problems in Southeast Asia broadly, and said that he has never seen such bizarre weather in Singapore. Every businessman, scholar, and government official we interviewed acknowledged the importance of eco and human rights leadership in the world economy.

Now, I don't want to overstate the case. Clearly, the biggest problems facing many countries in ASEAN are poverty and political stability. I understand that I was reading newspapers in English, the TV was in English, our interviewees were elite, and the taxi driver was in fact from a highly educated family. But we should not forget how human rights abuses and environmental degradation can conflate with terrorism, corruption, and instability. The perfect storm could go something like this:

Imagine an area saturated with corruption (which is seen by investors as the number one problem in the Philippines). Officials take bribes from criminals, and gangs are allowed to arm undisturbed by law enforcement. They are able to prosper by engaging in illegal activities such as piracy or smuggling. Lack of equity creates resentment toward more successful groups in the society. An environmental disaster, such as a flood, destroys homes and makes people more receptive or vulnerable to a strongman. Gangs seize the opportunity to overthrow the local government. Martial law is declared, rights are curtailed, foreign direct investment flees, and a downward spiral of poverty and violence ensues.

It isn't that far fetched. All these issues are related.

Singapore's Brand: Technology Leapfrog

A few weeks ago, I was asked to guess when Chinese enterprises would be forced to respect human rights when they did business abroad. My answer was that it depends on the emergence of a brand and its accompanying vulnerability. I read recently that the majority of corporate value is tied up in intangibles such as brands.

Right now, we are seeing the beginnings of "China" as a country brand. Rather than reject UN declarations on human rights and other norms, China has sought to portray itself as an unlikely defender of human rights and shifts the focus on the human rights record of the United States. China is embracing and shaping international institutions, not rejecting them.

My guess is that Chinese enterprises will become more sensitive to human rights issues when recognizable Chinese corporate brands enter the scene. Sure, cheap Chinese cars are making headway in low-end markets. Chinese business standards will improve when customers demand an improvement, including in supply chains.

This week I am in Singapore and I got a detailed explanation of this state's brand a couple of days ago at the Singaporean Chamber of Commerce. Singapore's brand is to be the best environment for foreign direct investment (FDI). Its Economic Development Board uses its international connections and intelligence to identify the Next Big Thing and figures out how to make Singapore an attractive nest for that Thing.

Singapore looks for the top partners on the planet for the projects. In other words, if they want to get high finance, they do not look for the managers of funds, rather they look for the people who advise the managers. The very top.

The Next Big Thing now is water technology, digital media, and biotechnology—Singapore attracted the Dolly guy. A gleeful article in the Straits Times yesterday captures this attitude. The top headline was "US business, political elite upbeat about S'pore: PM," and the piece started out with this:

"America's movers and shakers are upbeat about Singapore and that, to Prime Minister Lee Hsien Loong, is one sign it is doing the right things."

Singapore is doing the "right things"—to leapfrog the region in technology. The other interesting thing is that Singapore draws on national pride to abandon bad projects, instead of holding on and bleeding resources: Think of the Malaysian Proton car. A great strategy, but ASEAN resentment or jealousy toward Singapore is understandable, especially since the common wisdom in the region was that Asian economies would follow an orderly flying-geese pattern of economic development.

Not only has Singapore's success created distrust, the state is too small to lead Asian regionalism. Thailand's leadership prospects have been put on hold by the coup. The Philippine economy is too weak. That leaves Indonesia or possibly Malaysia as candidates.

–Devin Stewart

A New Day for ASEAN?

I woke up today at dawn to the morning call to prayer in Jakarta.

Carnegie Endowment scholar Joshua Kurlantzick and I are traveling through Manila, Jakarta, and Singapore, asking businesspeople, government officials, journalists, and scholars what China's rise means for the future of ASEAN and business and human rights norms. The subtext is that China and Japan are trying to outdo one another in creating goodwill in this battleground for influence.

The topic of China's relationship with the developing world is very timely. I spoke at the New School's Project Africa program and at Wellesley College on the same subject last month. Kurlantzick also just published a book on China's soft power in Southeast Asia called Charm Offensive, and UCLA scholar Josh Eisenman will be presenting his new book on China and the developing world at the Carnegie Council this May.

In my mind, the question is: What will China's economic weight and activity do to business, environmental, and human rights norms around the world? Particularly since state to state war seems less and less likely in East Asia (or "unthinkable" as ASEAN puts it), rivalry between big powers falls into the more nuanced games of economic diplomacy, investment, institution building, and fighting nontraditional global security threats, such as climate change, pandemics, and piracy.

It could turn out to be a net positive in which China keeps trying to attract markets and business partners in areas previously believed to be the domain of Japan and the United States, such as Indonesia or Philippines. China may also build ties in areas in which the West will not go, such as Sudan. Or the story could end up in nasty rivalries, rampant suspicion, and a virtual cold war. But so far the tone is positive.

ASEAN is courting anyone who will dance—the United States, Japan, and China—in what some call "promiscuous diplomacy." Whether ASEAN can be the hub for a vision that increasingly seems to appreciate the importance of social responsibility at the upper levels will depend on whether ASEAN can become a more coherent, political entity. That in turn will depend on ASEAN resolving major debates on the noninterference principle and on decision-making by voting. It will also mean gluing together the world's largest Muslim democracy with tenacious Communist states, and exemplar market economies.

Whatever the outcome, ASEAN is waking to a new reality.