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CIAO DATE: 2/00
“Leadership” at the Capital Markets: Regulations and Investment Roundtable
9th Annual Corporate Conference
May 8, 1998, Hong Kong
I’ve always maintained that talking about “Asia” as if it were a single entity is an exercise in futility. Addressed in the usual senses—language, culture, politics, and economy—the nations of Asia are as diverse as any on earth.
Yet, throughout the emerging economies of Asia, I see some similarities.
Every country’s leadership is working for progress and economic growth. If there is one issue which binds the emerging economies of Asia today, it is this: “How can the leaders of these economies best steer them to a strong recovery?”
We cannot completely answer that question this morning, but we can identify at least one of the tools which can help. That tool is major industry.
The auto industry is one of several major industries—such as electronics, telecommunications and appliances—which have far–reaching multiplier effects on economic growth, employment and technical progress.
I don’t believe that automotive, or any other single industry, is the panacea for all of Asia’s ills. But I do have some statistics you might find thought–provoking.
Worldwide automotive production last year was approximately 50 million units.
Of those 50 million cars and trucks, 90 percent were sold in North American, Europe and Japan. Only 8 percent were sold in all of the emerging economies of the world, and the emerging markets of Asia were just a fraction of that.
But traditional markets, while strong, are now nearly saturated. The United States, for instance, currently has 75 motor vehicles for every 100 people.
Yet, the industry generally predicts that there will be ten million units of growth over the next decade.
Where will it come from? I believe the majority of that growth will occur right here, in the emerging economies of Asia.
Thailand, one of Asia’s more advanced automotive economies, has only 12 cars or trucks registered per 100 people. And in China and India, the figure is considerably less than one.
But by 2010, we predict that China will be the fourth largest automotive market in the world, with annual volumes of between five and six million vehicles. India also stands to become a major market and there is great potential for growth throughout Asia.
But even at those volumes, China will still have only 4 cars or truck registrations per 100 people in 2010. Obviously, Asia’s automotive markets can grow well through the next century.
So how do we get there from here?
I believe that will take cooperation between the emerging markets and today’s leading industrial economies.
From the U.S., Europe, Japan and Korea, it will require a commitment to a long–term presence in these markets, to partnership with local companies, to integration of local people into all processes.
Far–sighted automakers are already doing this. It’s necessary; one must be here to sell here.
Products sold in Asia need to be designed with local markets in mind, and supported by substantial parts and service networks.
Again, the most responsible companies are doing this.
I know some Western companies might be hesitant to commit here because of perceived political barriers. But I believe that, if business takes the lead, legislators will follow.
The U.S. annual debate on MFN for China, for instance, is becoming increasingly difficult to justify, given the trust and understanding shared by Chinese and American businesses.
The confident presence of Western and Japanese companies here in China—together with last year’s successful transition of Hong Kong, and the success of President Jiang Zemin’s North American Summits—sends a strong signal that it is time for congress to move toward permanent Most Favored Nation status for China.
And it is time for China and WTO members nations to reach meaningful agreements and have China enter the World Trade Organization on commercially acceptable terms.
In Asia, it is time for all nations to realize that protectionist “national car” programs are anachronisms which can only hamper regional industry. The only logical long view here is one which includes open trade, particularly among APEC members.
In times when currencies have devalued, it may be difficult to think about investment. But I believe all the panelists here will agree that it is impossible to save one’s way out of a recession.
Investment is necessary, and investment in solid industries with great growth potentials is a wise step.
These emerging markets, of course, are not operating in a vacuum. Additional elements will effect recovery. Japan, for instance, will need to carefully watch its domestic economy in the coming months, and stimulate it as needed, to avoid an additional downturn which could throw the entire region into a tailspin.
We need to encourage Japan to safeguard its economy. But urging action on their part does not preclude ongoing action on our parts.
There are many things that government, working with leading industrial powers, can do to expedite growth:
Toward this last end, open markets are key. In the mega–markets of North America, Europe and Japan, it is now common to manufacture a component in one country, and see it assembled into a vehicle in anther.
The domestic auto industry is giving way to a global industry.
Asia’s auto industry will grow more quickly if the emerging economies recognize this and do not feel to fetter themselves to a domestic phase. Again APEC provides a ready mechanism for such growth.
Put your capital where your strengths are... Invest in those strengths... And remove regulations which hamper those strengths. That is what I would urge the emerging economies of Asia to do.
Put your technology where your future is, become part of your future markets, and campaign for a level playing field for your allies—that is what I urge established global industry to do.
Great growth here is possible.
And in the auto industry, it is inevitable.
It will happen best with continued, responsible leadership.
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