TECH TALK: India’s Next Decade: The Difference A Decade Makes

Consider what a difference the past decade has made in the fortunes of two Asian countries – Japan and China. Ten years ago, it looked like Japan would conquer the world. Writes John Grimond in The Economist in a recent survey on Japan (April 18, 2002):

In the late 1980s, after all, Japan invested $650 billion abroad, nearly half of it in the United States, where such icons as Columbia studios, Pebble Beach golf course and Rockefeller Centre in New York fell into Japanese hands. Americans had already become used to the idea of “Japan as Number One”, as the title of Ezra Vogel’s best-selling book put it in 1979. By the late 1980s, with companies such as Sony, Honda, Toyota and Toshiba sweeping all before them, Japan Inc truly seemed invincible.

Today, the calm exterior hides the internal crisis across the economy. Writes Grimond:

Imagine a country where the streets are clean, drugs cause few problems and muggings are almost unheard of. Imagine further that the trains run on time, most people are well dressed and many-at least to judge by the giggling girls shopping in the capital’s swankiest area-are able to afford the most expensive trifles that money can buy. In such a prosperous country, life would be long, taxes modest and unemployment certainly lower than in Europe, probably even than in America. People would be polite, thrifty and unbelligerent. Rather, they would be munificent givers of foreign aid, vigorous investors abroad and profuse lenders. Such a country is Japan, and to many it might seem paradise. Yet open a newspaper and you will see that this is a country in crisis.

Unemployment stands at 5.3%, just below its recent post-war record of 5.6%-and the official figure, because it excludes those too discouraged to register, understates the true picture. Electronics giants such as Fujitsu, Hitachi and Toshiba have been laying off workers in droves. Supermarkets, such as the huge Mycal chain which went bust last September and even bigger Daiei which was bailed out in January, are shedding jobs all the time, as are building companies such as Aoki and Sato Kogyo, which collapsed in December and February respectively. The number of bankruptcies last year had been surpassed only once since the war, in 1984.

Consider the changing equation between Japan and China. Writes James Brooke in the New York Times (April 21, 2002) in an article entitled, “Japan Braces for a ‘Designed in China’ World“:

In recent decades, Japanese companies invested to make China the “factory to the world.” In recent months, Japan’s blue-chip manufacturers announced investments to make China the “design laboratory to the world.”

The crumbling of an informal wall that long kept assembly in China and research [in Japan] may spell the end of Japan’s last great competitive advantage over its low-wage neighbor. And it is yet another step in China’s rise, one that means both new opportunities and wrenching change for Japan, which has lately been coasting on wealth built up in earlier, high-growth decades.

Today’s young Japanese have grown up in affluence, taking for granted high wages and their nation’s status as the world’s second-largest economy. But older Japanese returning from visiting Chinese factories and laboratories report that the hard-working, self-sacrificing Chinese workers remind them of the Japanese workers of the 1960’s.

As more and more Japanese manufacturing migrates to China, the research and development activity is gradually following, to be close to production.

“China is quickly becoming a country of low wage and high tech,” Yotaro Kobayashi, chairman of Fuji Xerox, warned recently, echoing the spreading insecurities in Tokyo. “They are going to prove to be extremely competitive with Japanese companies.”

It is not just companies and industries where leadership can change – even countries can rise and ebb.

Indians need to invent the future, not just be the plumbers and electricians in that world. From where we are, even doing the plumbing may be much better since we’ll probably get paid in dollars. But, from where I see, there’s a new technological future which can be built in which India has the opportunity to lead and be the anchor store, not a discount outlet.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.