Kenichi Ohmae on Goldsworthy report

[Glen Turner]

The following article may be of interest to linkers
following the Goldsworthy Report and other IT-industry
development programs.

 http://www.afr.com.au/content/971014/feature/feature1.html

The best bit is:

> And there is a place for positive government activism: "If
> I were in Australia, I would emphasise the
> knowledge-intensive tertiary sector like
> crazy. Value-added IQ is the future of this country.
> 
> "Australia should be an Asian centre for the information
> technology industry -- you have unique strengths. You are
> the biggest English-speaking country in Asia, you have a
> long history of market democracy, you have a large
> population of people who are networked already, you have
> an excellent education system, and a high-quality
> workforce.
>
> "Australia's biggest resource is its people.  Let me tell
> you something. I was the chairman for McKinsey's in the
> Asia-Pacific. When I had the toughest problems in the
> region I usually went to one of the Australian associates
> for a solution.
> 
> "Your people are creative, good quality, low cost --
> frankly -- and hard working. 


Since we are paying Fairfax their pound of flesh for
tertiary institution reproduction rights, the entire article
follows:


Australian Finacial Review
14 October 1997

Australia: 'The brains trust of Asia'

By Peter Hartcher, Asia-Pacific Editor 


The man who conceived the world's first Cybercity --
Malaysia's $20 billion multimedia supercorridor, or "Xanadu
for nerds" as Wired magazine calls it -- has some free
advice for Australia.

Like many of the main players in the Malaysian high-tech
vision, its conceptual architect is not Malaysian. He is a
Japanese, Kenichi Ohmae, one of the world's best-known
management consultants.

Dr Ohmae, former nuclear physicist, founder of McKinsey in
Tokyo and one of the high priests of globalisation, says
Australia has a brilliant future in information technology
-- "Australia can be the brains trust for our part of the
world".

Australians think their country's strongest comparative
advantage is in minerals and agriculture, says Dr
Ohmae. "But you are wrong. Your greatest competitive
strength is your human stock."

But at a time when the Howard Government is planning a
national information technology statement, Dr Ohmae advises
that Australia's strategy should be quite different to the
one he devised for his longtime friend Mahathir Mohamad.  He
urges Australia to ignore the chorus demanding subsidies or
tax holidays or other Malaysian-style cash incentives for
potential investors, a clamour whose loudest voices are
those of the Government's own advisers -- the Mortimer
report and the Goldsworthy report.

"Australia is inherently very, very attractive and I have
never seen any need for subsidies or special tax
incentives," says Dr Ohmae.

"In Malaysia, there was no confidence that multimedia
investment had a long-term future. And although Mahathir is
very strongly committed to it, what happens if he he goes?
So Malaysia needed a 10-year timeframe (of zero taxes for
new investors)."

But this does not preclude the need for government action in
Australia altogether.  On the contrary, Dr Ohmae suggests
several directions for policy.

"Australia does have disincentives to investment. Rather
than giving companies subsidies or other incentives, you
need to remove some of the disincentives. That's what you
need."

And there is a place for positive government activism: "If I
were in Australia, I would emphasise the knowledge-intensive
tertiary sector like crazy. Value-added IQ is the future of
this country.

"Australia should be an Asian centre for the information
technology industry -- you have unique strengths. You are
the biggest English-speaking country in Asia, you have a
long history of market democracy, you have a large
population of people who are networked already, you have an
excellent education system, and a high-quality workforce.

"Australia's biggest resource is its people.  Let me tell
you something. I was the chairman for McKinsey's in the
Asia-Pacific. When I had the toughest problems in the region
I usually went to one of the Australian associates for a
solution.

"Your people are creative, good quality, low cost -- frankly
-- and hard working. I'm a director of Nike and I work
closely with a number of major [multinationals] based in
the US and Europe. They all have Australians at the top
level or as the heads of marketing or sales for the
Asia-Pacific.

"So, based on the quality of its people, there is no
evidence that Australia has any trouble with being a leader
in the Asia-Pacific."

But Dr Ohmae -- who has been visiting Australia annually for
many years -- believes Australia does have a mindset to
overcome if it wants to capitalise on its strengths:

"Australia is paranoid about Asia and you need to be more
open to the world. Wealth is created in the market, and
unless you understand the market and get out into the world
marketplace, you will always be limited to only 5 per cent
of the global value chain."

Australia should not try to compete head-to-head with the
US, Japan or Malaysia but should play to its unique
strengths:

"Don't concentrate on databases or networks -- you don't
have to have these because you can buy them anywhere --
concentrate on software, on educational content, on medical
content."

There should be initiatives by regions in Australia to build
up the nation's software strengths and to create critical
mass: "I think it probably needs to be done at the State
level."

The proposition that Malaysia confronted was dramatically
different. The task for Australia is to bring to bear all
its existing advantages and to build them up. In Malaysia's
case, the Cybercity was created partly to help it escape its
national disadvantages.

Dr Ohmae explains: "To get the right conditions for a
successful IT sector in Malaysia, you'd have to change the
whole country in a way that would create huge problems
nationally. Instead, Malaysia has set up a country within a
country to get around that."

For instance, as a result of violent ethnic clashes,
Malaysia introduced quotas that specify how many bumiputera
-- native Malays -- a firm has to hire in proportion to
Chinese Malaysians and Indian Malaysians. That law is to be
suspended in the Cybercity.

Malaysia does not generally allow foreign investors to own
100 per cent of a venture.  That, too, does not operate in
Nerd Heaven.

There are tough restrictions on the use of foreign workers
-- but there is no limit on the number of foreign nerds who
can be brought into the Multimedia Supercorridor.

Asia's unfolding economic crisis has forced Dr Mahathir to
postpone a series of his boldest and most cherished projects
-- the $6 billion Bakun hydro-electric dam, a new
international airport planned for northern Malaysia, the
Linear City scheme and further stages of the administrative
city, Putra Jaya.

But it is telling that he has preserved the Cybercity
project, which is already under construction and has strong
support from the world's leading IT companies. Why has the
Cybercity survived while other grand projects have been
sacrificed?

"The simplest explanation," says Dr Ohmae, "is that if
Malaysia sticks with its current manufacturing industrial
society, eventually the country will fail.

"They are making cars and semiconductors but if Vietnam or
China enter these markets they have wages one-tenth those of
Malaysia and Malaysia would not be able to compete. The
country needs to move to a new paradigm of adding value."
Australia should not envy Malaysia its Cybercity, says Dr
Ohmae: "It's one experimental bed for the future of
value-added IQ industry. We need many, many
experiments. Some will fail. Some will succeed. We are
talking about moving the whole industrial structure from one
paradigm to another."

Indeed, Dr Ohmae's first plan for a multimedia supercorridor
was not going to be in Malaysia at all.

"When I was running for election as governor of Tokyo, I
developed this idea as a plan for Tokyo, as part of my
election campaign.

"Mahathir said to me, 'Ken, you will not make it to governor
of Tokyo. Believe me, I know because I'm a politician and
you are not a politician. But when you lose the election,
come to Kuala Lumpur because we would love the multimedia
supercorridor for Malaysia.'

"Well, he was right. I lost the election but then I
developed the concept for Malaysia."

Dr Ohmae has done consultancy work for the Malaysian Prime
Minister on other occasions, too. He was the author of Dr
Mahathir's famous Look East policy, an approach that
encouraged Malaysians to study not only the US but also
Japan for ideas for industrial development. 

But this time there is nowhere to look, no models to
follow. This is frontier country. As Dr Ohmae says, "The
beauty of this, the reason that it's so much fun, is that
no-one knows the solutions."

-- 
 glen.turner@itd.adelaide.edu.au    Network Support Specialist
 Tel: (08) 8303 3936           Information Technology Division
 Fax: (08) 8303 4400            University of Adelaide SA 5005