EDITORIAL: Why the Asia Pacific Matters
Strategic Dimensions of Organizational Change
and Restructuring in the Asia Pacific:
Issue 1, Strategies for Foreign Investors
Journal of Organizational Change Management, Volume 11, Issue 4, 1998
Dr. Usha C. V. Haley, Guest Editor/Regional Editor (Asia Pacific)

Tokyo, 1989. The Nikkei Index hits 39,000. Japanese newspapers hail a new era, predicting when Japan's Gross Domestic Product (GDP) will overtake the USA's. Japan's revered bureaucrats send missions to teach others in the Asia Pacific how to replicate the Japanese model of capitalism. The country's enormous banks, flush with cash, extend their global reach with huge loans abroad. Restaurants sprinkle sushi with gold leaf. Japanese leaders sternly warn the USA that its lazy workers and huge deficits threaten the world's economy. New York, 1998. The Dow Index hits 9,000. The Wall Street Journal's Op-Ed Page hails a new era as old measures of market risk no longer apply. Alan Greenspan, the Federal Reserve Bank's Chairman, says the Japanese model of capitalism is dead. Citicorp and Travelers announce a megamerger to extend their global reach. Manhattan restaurants charge $4000 for a $1500 bottle of wine. President Clinton sternly warns Japan that its political paralysis and inadequate economic initiatives threaten the world's economy. The more things change, the more they remain the same. In the throes of the Asian financial crisis, a special issue on strategies for investors may appear ludicrous. The interconnected Asia Pacific economies are faring badly. Since 1990, Asia accounted for two-thirds of global GDP growth; in 1998, because of the crisis, most estimates have the Asian economies experiencing a recession, perhaps even a depression. Japan, which exports about 4.4 percent of its GDP within Asia, is already in recession. Australia and New Zealand, with Indonesia and Japan as major trading partners, and which export about 12 percent of their GDP to Asia generally, will probably dip into recession. Researchers and policy makers no longer talk glowingly about Japanese management or Asian values; and no one is alluding to the Pacific Century as this millennium was going to be called. Now, the Asia Pacific limps to the 21st century with weak banks, beleaguered currencies and looming national deficits; while, in the West, the traditionally dominant economies stride buoyant, strong and confident. The USA, in particular, is experiencing a seven-year boom, with its first budgetary surplus in a generation, unemployment at its lowest in over two decades, a very strong currency, and more citizens expressing hope for the future than in the last 40 years. No wonder that Western analysts and journalists have labeled the Asian financial markets' collapses as the Asian Contagion; and, they now sneeringly refer to a once-vibrant Asia Pacific region as Asia Pathetic. The West can indulge in this emotional gratification for one moment -- but, not unscathed, for two. The Asia Pacific remains central to the West for three primary reasons: the sources of self-renewing growth and market potential that Asia offers Western manufacturers; and the alternative models of development and change that the Asia Pacific presents for global competition. The recent, much-publicized economic and organizational failures do not alter these fundamentals for strategic decision-making and investment. Sources of Growth: In recent years, the Asian developing countries have been net consumers, making them the only parts of the world, besides the USA, to run trade deficits. Asia fueled global GDP growth by providing markets for foreign manufacturers' products. In Asia, competition between US and Japanese MNCs fanned regional growth and provided avenues for many corporate innovations and changes; and, Asia's emerging markets provided channels for corporate investments when growth prospects looked bleak in developed markets. Increasing Asian demand concurrently increased production and investments in several foreign countries including the USA, Japan, New Zealand and Australia. However, this situation will probably change as the Asian economies try to export their way out of trouble. For example, after the Mexican peso's devaluation in 1995, cheap Mexican exports jumped by 30 percent in most industries, turning Mexico from a net consumer to a net exporter. As financial issues resolve, cheap Southeast Asian exports will probably flood the USA's and Europe's markets. Market Potential: The West accounts for around 45 percent of the world's GDP with 13 percent of the population. Successful changes in the Asia Pacific, within open, market-based economies, will probably reduce the West's share of GDP in three decades to around 30 percent, while Asia's may rise to around 58 percent. These predictions rest on the reasonable assumption that three of the four most populous countries in the world -- China, India and Indonesia -- with about 41 percent of the world's population -- achieve per capita average growth of five percent or more for the next 30 years. Growth rates tend to fall as developing countries close income gaps with the USA (at about US$27,000 per capita). While all of the Asia Pacific has continued room for significant growth, the high-income East Asian countries, as well as Australia and New Zealand with developed economies, will grow much more slowly in the next 30 years because of capital deepening and aging populations. Through institutional and political changes, managerial training and policy reforms, Indonesia and China, with low incomes and young populations, should continue to grow at least five percent. With policy reforms, India should surpass its previous growth rates as demographic changes favor higher savings and greater consumption. Alternative Models of Development & Change: Many of the Asia Pacific's countries lack the West's corporate structures and sophisticated markets. For example, much of Asia's human capital lay in its governments and so state planners led the way in developmental efforts. These alternative models of change and capitalism resulted in enormous, unthinkable successes. With the leap-frogging of technological and developmental cycles, Singapore, Hong Kong and Taiwan blazed an array of changes to approximate developed-country status in a little over two decades. The Asian high-flying economies achieved rapid export growth, followed wise fiscal policies, controlled population growth, encouraged savings, education and basic literacy, and continued to support agriculture. These Asian achievements often drew on alliances between local governments and foreign multinational corporations (MNCs). Something went very right in the Asia Pacific: No region sustained such high growth rates for that long -- providing some validity to these models of development and change. Something also went very wrong in the Asia Pacific. The dean at my former business school, the National University of Singapore, once told me that at his university, and in the Asia Pacific's organizations generally, process (or how one interacts within the system) assumes more importance than the bottom line (or what one actually achieves). Singapore remains one of the least-corrupt countries in the world. Yet, in the Asia Pacific generally, without public scrutiny, the iron triangle of the three b's, businessmen, bureaucrats and bankers, led to the insidious three c's of complacency, corruption and cronyism. Private bankers and organizations neglected global standards when assessing investments; the investors relied instead on personal judgements or on personal connections. Spectacular regional growth and churning regional change obfuscated most bad business decisions; yet, these decision-making models had disturbing repercussions. In financially-troubled Korea, for example, of the 30 top industrial corporations, 25 carried debt-to-equity ratios of between three-to-one and eight-to-one; one-to-one serves as the norm in Western economies. None of Korea's major trading partners (such as Singapore) or business partners (such as the Australian or US MNCs with joint ventures) knew of these business decisions. Similarly, by some estimates, East Asian banks' bad loans now account for about 20 percent of their total loans in contrast with one percent for the USA's banks. The changes in the Asia Pacific have realigned coalitions and redistributed benefits and costs among stakeholders. Consequently, this constitutes a propitious time to shed light on the region's importance to investors and the major stakeholders' attempts to navigate and to harness change. Indeed, the regional countries' currency devaluations in the last year against the US dollar, from about 20 percent (for the Australian and Singaporean dollars) to over 90 percent (for the Indonesian rupiah), have whetted Western investors' efforts to snap-up bargains. Theory development is desperately needed in this region to guide future investment and to influence present business operations. We received so many articles in response to our call for papers that we have an acceptance rate of less than 5 percent for this issue (dealing with strategies for foreign investors) and the succeeding one (dealing with concerns of local stakeholders). All the chosen articles draw on varied levels of analysis to explore organizational strategies of change, and responses to new and diverse pressures, in the rapidly changing Asia Pacific. The five articles in this issue focus on the Asia Pacific's major markets and organizations: they discuss the effects of some of the large-scale changes in the Asia Pacific on organizational stakeholders, propose implications for successful and effective organizational restructuring in the Asia Pacific and thereby have implications for further research on the region. The authors trace some of the innovative restructuring strategies undertaken by MNCs (such as Taiwan's Acer, a major investor in the Asia Pacific, whose founder Stan Shih used the metaphor of fast-food preparation to change his organization's operations); they profile unfamiliar local stakeholders with which foreign investors have to deal (such as unproductive Chinese employees, the proactive Singaporean government, uncooperative Vietnamese managers, and inscrutable Overseas Indian and Chinese networks) and they offer suggestions for investors on successful change management. For countries and organizations, long-lasting prosperity relies on analyzing historical factors for successes, and in controlling them for effective change, rather than in wholesale condemning or abandoning of the past. Some mistakenly equated the Asia Pacific economies' past successes with their models' and values' absolute superiority; analogously, the West should avoid mistakenly equating the Asia Pacific economies' present troubles with their models' and values' absolute inferiority. Unlike the Mexican case, the Asian crisis reveals that private organizations and banks, rather than just the governments, made large-scale, faulty investments and strategic decisions that cast a shadow over Western investments. However, in the Chinese alphabet, the character for crisis also serves as the character for opportunity. With effective intervention, the millennium will yet prove to be the Pacific Century. The jury remains out as to whether the elites, both in the Asia Pacific and in the West, can understand and make the necessary changes in their decision-making. Usha C. V. Haley Associate Professor, New Jersey Institute of Technology & Research Associate, Australian National University

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