Far-- From What? East --of Where?

Wriston, Walter B.


All of us are the product of our environments -- physical, intellectual and emotional. The environment in which most of us grew up has not generally produced the kinds of experience which readily allow us to orient ourselves toward the problems, the peoples and the opportunities in the Far East. Our lives have been shaped by the ideas of Western culture. Our educational curriculum is designed to teach us about the Battle of Waterloo, but usually omits even the result of the Battle of the Talas River. The wisdom of Aristotle we are taught to take seriously, but the sayings of Confucius we make into jokes. The same kind of comment could be extended to the fields of art, music and literature. The names of Beethoven, Michelangelo and El Greco are known by all, but many of us would be hard pressed to describe in any detail the treasures of the Sung Dynasty, which produced one of the greatest outpourings of man's creativity in history. And finally our Judeo-Christian tenets set us apart from the dogma of Hinduism and Buddhism and, although the great religions of the world have many similarities, it is the differences which we stress in thinking about the Far East. Our habit of referring to the Orient as the Far East -- which for Americans is to the West or over the Pole -- reflects thinking of an earlier day.

Against this background it is not surprising that we easily accept a concept of a Far East that is mysterious and not quite in the mainstream of our thinking. The ancient story about the Army mule skinner teaching a raw recruit about how to drive a mule is illustrative of my point. You recall that the mule skinner picked up a two-by-four and swung accurately at the mule's nose, explaining to the recruit that first of all you have to get his attention. The thing that got our attention happened on December 7, 1941, and during the course of that war many of us came to learn geography the hard way. It is interesting to reflect that there were hundreds of books and articles about the rise of Nazi Germany which received wide attention but relatively little was written about the threat in Asia. It was only later that a few soldiers and scholars remembered the remarkable predictions of Homer Lea in his book, "The Valor of Ignorance."

After the war, the Arc of Asia tended to slip once again to the back of our consciousness, and I dare say that if a group of experts had assembled at a high-level conference in 1946 to predict the countries of the world which would have the fastest growing economies in the postwar period, not one, I am sure, would have mentioned Japan. It was widely believed that her economy was destroyed, her currency worthless, her labor forces scattered and her will to survive destroyed. Hong Kong would have been dismissed as "economically unviable." Despite the general lack of interest about the Pacific Basin, at least on our East Coast, the Orient once again got our attention when we awoke to find our markets, both at home and abroad, flooded with products of a quality and workmanship comparable to ours. Nothing gets our attention as businessmen any faster than the appearance of a new product in our market at a price lower than we can afford to sell it.

By any economic yardstick, the growth of the economies in the great Arc of Asia has been extraordinary, and the potential for your business in that area is as great or greater than in any other part of the world. The real question is, can the United States businessman, who has been oriented all his life toward the Western World, reshape his thinking to understand and share in the growth of the countries of the Far East? The adjustment that we have all made to revolutionary technology in American business is dramatic proof that businessmen can and will learn new technology, skills and perspectives. It is interesting that in Citibank the advent of electronic data processing has forced us to change almost every bookkeeping record in our bank in the last five years. Manufacturing concerns have made even more startling changes. To orient oneself in a new area of interest in the world is not nearly as difficult as comprehending the immense expansion of man's knowledge in the changed world that was signaled by Major Gagarin's spaceship flight in April, 1961. We have researched, innovated and worked, driven by the sheer necessity of survival in a competitive world. To exploit our opportunities in the market place in the Arc of Asia we must develop new perspectives to go with our new skills, and it is well within our capabilities to orient ourselves in the changing world to understand and move with the extraordinary revolution which has changed the face of the Far East.

In order to achieve this perspective we might first define the area we are talking about which is the great Arc surrounding mainland China. The chain starts out in the north with Japan and Korea, moving southward through Taiwan, Hong Kong, the Philippines and Indonesia and then to the mainland of Cambodia, Vietnam, Laos, Thailand and through Malaysia, Burma, Ceylon, India and Pakistan.

Our earliest description of part of this area was written by Marco Polo and grandly entitled "A Description of the World." Very few people in the West believed him at all, although Columbus took along a copy of his book on his voyage of discovery. While there is increasing interest in the area, relatively few people today are aware of the incredible changes that have taken place since the war. At the end of the Second World War there were only three sovereign states in the entire area. Mainland China was still free; India, Pakistan, Ceylon, Burma, and what is now Malaysia were under British control; Indonesia was still Dutch; and the Philippines had not yet become fully independent. There are now seventeen sovereign states and fragmentation of the old areas in response to the growth of nationalism has been exceeded only by the emergence of new countries in Africa.

In the surge of enthusiasm for nation-building that came with postwar independence, ambitious plans for industrialization were laid in many Far Eastern countries. For the most part these plans were undertaken almost unnoticed by the Western World. Some of them were successful and some floundered through bad planning and implementation. Out of this experience with centralized planning there is gradually emerging in some areas recognition that government alone cannot satisfy the needs and wants of a growing population. There is an increasing awareness of the role of private enterprise, and in many areas factors which produce a favorable investment climate are being strengthened. We cannot talk about the 1.8 billion people who live in the Far East as if they were one national unit any more than we can talk about Latin America without delineating the national aspirations of the different peoples. There are, however, some general guidelines which may be useful in appraising the business opportunities in this huge area called by some geographers Asian Asia.

In thinking about doing business in Far East, it is useful to examine briefly those elements you look for in deciding whether or not to invest abroad or enter the market. First of all, the size of the area in which free enterprise is allowed to operate is still very wide-wider than in many other areas of the world which are generally regarded as good places for investment. In France and Italy, for example, the public sector is huge: all the largest banks are nationalized, all the railroads are state owned, the airlines fly on state command, the petroleum business is state controlled and anyone who has ever tried to make a telephone call in these countries knows that they are not operated by efficient private enterprise. If you add it all up, it is fair to say that over 40% of the gross national product of Italy is produced by enterprises owned by the government, while in the United Kingdom the figure attributable to nationalized industries approximates 20%. This swollen public sector is not so generally the case in the Far East. In Japan, Hong Kong, Malaysia, Thailand and Pakistan almost the entire industrial sector has been left to private enterprise. The business income tax in Hong Kong is only 12 1/2%, while in Japan, taxes have been reduced in thirteen out of the last fourteen years. There are, of course, exceptions to every rule and Indonesia has drifted from bad to worse down the road to dictatorship and a completely regimented economy.

To say that the area for your enterprise is wide is not to say that it is easy. No foreign firm which has set up shop in the United States regards our market as any easy one either. The facts are that doing business in the Far East is no more difficult than in any other part of the world -- it is just different. If the bureaucratic impediments seem frustrating in the extreme, reflect upon the number of reports your business here files with local, state and federal agencies and departments, or that a federal regulatory body in Washington can take years to study a railway merger that is clearly the only way out of predictable bankruptcy. All of us operate our businesses in the most complex legal, accounting and tax jungle in the world, but it is our jungle and we understand it. The Far Eastern complex of law and mores can be mastered if we take for our text the famous song from , "You Got to Know the Territory." If you know the territory things don't get any more simple, but your life becomes easier.

Another factor that we must take into account is the stability of money. How goes the battle against the perpetual phenomenon called inflation? Our bank's score sheet shows that the currencies in this area have not fared too badly in the world's markets, and a few of them have held up remarkably well. Our bank's figures show the decline in purchasing power of money in the decade ending 1963 and are expressed as compound annual rates of depreciation. There are seven nations in this area whose battle against inflation has been a good deal better than average. This group includes Malaysia, Ceylon, Burma, Pakistan, Philippines, India and Thailand and until very recently Japan. There are some countries in which inflation has run at more than an average rate, and in this group we must place Vietnam, Taiwan, Korea and Indonesia. All the countries in the first group, for example, have currencies which have held up about as well as, and in some cases better than, the currencies in the European Common Market.

Another element in deciding on whether to put your money into a foreign land is, of course, the availability of trained labor and the depth and breadth of the reservoir of management talent. Some people are startled to learn, for example, that there are more men and women attending college in the Philippines than in the whole of the United Kingdom on an absolute basis and at least twice as many on a per capita basis. The ability of American companies to attract and hold good local management is a difficult but not insoluble problem. It is no more difficult than dozens of other management situations that must be handled in your daily work. The labor situation in the Orient is often more stable than in other areas, and Japan's labor force has one of the lowest turnover rates in the world.

All of these elements that go into your decision-making process vary from country to country, but on balance are favorable enough to command your serious consideration.

The other side of the investment coin is the price of failure to know the territory. The competitive pressure of goods from the Far East in our market has forced us all to look to our costs and our quality. Although the pressure is uncomfortable in the extreme, tears and tariffs are no substitute for capital expenditures and hard work. The pressure helps keep our production costs down which is what makes us competitive in world markets, and our ability to be competitive is the main hope for bringing our balance of payments into equilibrium and thus insuring the viability of the world's monetary system.

It would be unrealistic to pretend that this area does not have enormous problems. It does. Not the least of these problems is the impact of a now nuclear China. Red China is selling the Marx and Lenin dogma of forty years ago, because it has insulated itself from the world around it, and has not caught up with the change in the economic facts of life. The failure of the great leap forward to transform rural mainland China into a modern industrial state overnight has not been lost upon the rest of Asia. Despite its failure, we cannot forget that each year in Red China fifteen to twenty million people are added to the population. Many years ago our nation advocated an "open door" policy in China. While this policy cannot be recommended at this point in time, I commend to you an "open mind" policy, because one day the economic facts of life will bring pressure on Mao's outmoded dialectic as it has upon Russia, and we may live to see a change in attitude on Red China's part.

We have been talking about an enormous area containing about half of all the people who share this planet. The wisdom and opportunities in the world are not the exclusive province of the West -- we have much to learn from the Orient.

One of the keenest observers of the broad sweep of world affairs, Arnold Toynbee, makes this point strongly; he said,

"The paradox of our generation is that all the world has now profited by an education which the West has provided, except ... the West herself. The West today is still looking at history from that old parochial self-centered standpoint which the other living societies have by now been compelled to transcend. Yet, sooner or later, the West, in her turn, is bound to receive the re-education which the other civilizations have obtained already from the unification of the world by Western action."

Traders and businessmen have profited from this lesson for centuries. The American clipper ships found the way to trade with the Orient long before the thinking of the rest of the Western community understood the opportunities. In 1853 Commodore Perry carried with him on his voyage to Japan instructions which described the increasing relationships between the United States and the Far East and predicted that "no limits can be assigned to its future extension." The future is here and the markets are waiting for those with the energy, imagination and skill to capture them.

  • The document was created from the speech, "Far--From What? East --of Where?," written by Walter B. Wriston for the 69th Annual Congress of American Industry on 3 December 1964. The original speech is located in MS134.001.001.00023.
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